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CADE sentences solar heaters bid rigging cartel

Cartel

Irregularities reached social housing programs. Infringements happened in cities of the state of São Paulo
published: Sep 30, 2015 10:00 AM last modified: May 02, 2016 05:47 PM

The Tribunal of the Administrative Council for Economic Defense – CADE, condemned, on 16 September 2015, six companies for cartel on the market of solar heaters. The bid rigging reached public procurements to build houses to low-income families by the Housing and Urban Development Company of the state of São Paulo (CDHU in its acronym in Portuguese). The fines sum BRL 21.4 million (Administrative Proceeding 08012.001273/2010-24).

The condemned companies are Astéria Incorporações e Construções Ltda, Tuma Instalações Térmicas Ltda., Sol Tecnologia em Energias Renováveis e Obras Ltda. – former Soletrol Tecnologia em Energias Renováveis e Obras Ltda., Bosch Termotecnologia Ltda. – former Heliotek Máquinas e Equipamentos Ltda., Enalter Engenharia, Indústria e Comércio Limitada and Aquecedor Solar Transsen Ltda.
The infringements happened in two public bids, conducted in 2009 and 2010.

According to Commissioner João Paulo de Resende, who issued a review vote on the case, evidence of cartel was found throughout the investigation period. “Among the evidence there are identical offers, lack of competition in the second phase of the public bids, lot division and sub hiring of one competitor by the other.” said the Commissioner.
According to Resende, the similarity among initial proposals given by the companies clearly shows the collusion among the parties. “This similarity was a mechanism of information exchange among the cartel participants, ensuring that the settlement arranged prior to the opening of the procurement would be kept”, explained the Commissioner.

Regarding the participants of the bid that were not part of the group, the practice would also indicate the intention of the cartel members to obtain the lot, discouraging them of an eventual fierce dispute in the bid’s second phase, which could reduce the winner’s final profit.

It was also confirmed that the winners of each lot ended up being those desired by the cartel members, before the logic of the proximity of their head-quarters, and that the bids period was used as a forum of alternating proposals among the companies to simulate a competition that has not really existed.

Another evidence of irregularity was the low dispute in all lots of the first and the second public bids. The companies argued that the demand for a previous experience and the social capital limited the participation of the parties in more than one public bid. The claim was not accepted by CADE, which determined that several companies had the conditions to compete on more than one lot, and some of them were even leaders in their market segment, having opted for submitting a technical portfolio inferior to the capacity they actually had during the proposal analysis process.

João Paulo Resende also explained that the concerted behavior among the parties could have aimed not only imposing monopoly prices to the sector, but also hampering competitor’s prices, causing sufficient competitive damage to the market. Furthermore, the Commissioner stated that the probability of cumulative occurrence of the lot overlaps was very low.

Another irregularity was the need of approval to the participation on the public bid by the National Department of Solar Heating (DASOL in its Portuguese acronym), an association controlled by the cartelist companies. The requirement made the participation of smaller companies in the bid impossible.

Several Cities - The collusion among the companies has affected social housing projects in several regions of the state of São Paul, as Presidente Prudente, Campinas, Arararaquara, Ribeirão Preto, Baixada Santista, Vale do Paraíba, Sorocaba, Maurília, Bauru, Araçatuba, São José do Rio Preto and Taubaté.

“The cartel has created a direct impact in the account of the state of São Paulo, in addition to causing damage to the competition on needed inputs to the construction of households of social programs run by CDHU. The effects of the conduct affected the local budged, resources that would benefit directly the population from the state of Sao Paulo”, said the Reporting Commissioner for the case, Márcio de Oliveira Júnior, on 05 August 2015.

The accusations against the Brazilian Association of Refrigeration, Air Conditioning, Ventilation and Heating (ABRAVA in its Portuguese acronym) and against two individuals were archived. The behavior of the company Wendliz Bernardo ME, which is alleged to have acted together with the condemned parties, will be investigated by CADE’s General Superintendence.