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Cade investigates bid rigging on the acquisition of trains and construction of metro lines

Cartel

Antitrust agency carries out dawn raids in 13 companies in São Paulo and Brasília
published: Jul 04, 2013 10:00 AM last modified: Apr 12, 2016 11:00 AM

The General Superintendence of the Administrative Council for Economic Defense – CADE carried out, this Thursday (4), dawn raids at the headquarters of 13 companies located in Brasilia (DF) and in Diadema, Hortolandia and São Paulo (SP). "Operation Cross-Line" includes investigations of alleged bid rigging on the acquisition of train wagons, and on the maintenance and construction of rail and metro lines.

The searches were judicially authorized because of consistent evidence towards a cartel formation. The investigation conducted by Cade's General Superintendence started from a leniency agreement. This type of agreement gives administrative and criminal immunity to the cartel participant that denounces the anticompetitive practice to the antitrust authority and cooperates with the investigation.

The General Superintendence investigates whether companies participated in various anticompetitive contacts and agreements in bids for subways and trains and auxiliary systems in Brazil. The collusion may have occurred in various forms, always aiming to distort free competition. The alleged illegal combinations may have resulted in contracts with prices higher than those that would be maintained if companies were in a normal competitive environment. According to the Organization for Economic Cooperation and Development - OECD, cartels generate an overpricing estimated between 10 and 20%. This type of anticompetitive conduct, when it occurs in public bids, reduces the efficiency of public spending and generates additional profits for the cartelized companies.

"Operation Cross-Line" is held in conjunction with the Federal Police – FP in order to collect evidence that may elucidate the investigations. The operation relies on the work of 139 technicians, including bailiffs, servers of Cade, marshal and agents of the FP. The documents collected will be analyzed by Cade's General Superintendence. If the evidence is confirmed, an administrative process will be opened.

At least the following bids may have been targeted by the alleged cartel:

a) Construction of Line 5 (phase 1) of the São Paulo Metro;

b) Bids for train maintenance of the Series 2000, 3000, and 2100, from the Metropolitan Trains' Paulista Company- CPTM;

c) Maintenance of the Federal District's Metro;

d) Extension of Line 2 of Sao Paulo's Metro;

e) Project "Boa Viagem" from Metropolitan Trains' Paulista Company – CPTM, aimed at the reform, modernization and maintenance of trains;

f) Bids for purchase of train wagons by Metropolitan Trains' Paulista Company – CPTM, with the objectives of developing systems, training the staff, and giving technical support and complementary services.