CADE signs leniency agreement in cartel in public bidding of Angra 3 nuclear power plant
The General Superintendence of the Administrative Council for Economic Defense – SG/CADE signed, on 31 July 2015, a Leniency Agreement with Construções e Comércio Camargo Correa S/A (CCCC for its acronym in Portuguese) as well as current and former employees of the company, including Mr. Dalton dos Santos Avancini, its former President. The agreement was signed conjointly with the Federal Public Ministry of the State of Paraná – MPF/PR (“Car Wash Operation Task Force”).
In the agreement, the signatories confess their participation in the conduct, provide information and evidence aiming at cooperating with the investigation of the alleged cartel in the public bidding for electromechanical assembly work of the Angra 3 nuclear power plant, held by Eletrobrás Termonuclear S/A – Eletronuclear between 2013 and 2014.
In addition to the MPF/PR negotiating the collaboration in exchange for criminal immunity with the CCCC’s current and former employees, in the scope of the criminal action in course in the Curitiba Federal Justice System, CADE’s General Superintendence initiated the negotiation of the Leniency Agreement proposal approximately four months ago. The Leniency Agreement was signed in the scope of articles 86 and 87 of Law No. 12.529/2011 (Brazilian Competition Law). The agreement only comprises cartel behavior, conduct within CADE’s jurisdiction.
The agreement is accompanied by a “History of Conduct”, which is a document of CADE’s General Superintendence where it is described in detail the anticompetitive conduct as reported by the signatories and supported by the corroborating evidences presented by them. In full agreement, CADE, the MPF/PR and the signatories partially waived the confidentiality of the Agreement and its annexes. In the interest of the investigation, some documents and information are maintained under restricted access for the time being. Click here to access the public version of the “History of Conduct”, in Portuguese only.
Competition infringement – The companies identified as being party to the alleged anticompetitive conduct are Construtora Andrade Gutierrez S/A, Construtora Norberto Odebrecht S/A, Construtora Queiroz Galvão S/A, Construções e Comércio Camargo Correa S/A, EBE – Empresa Brasileira de Engenharia S/A, Techint Engenharia e Construções S/A, and UTC Engenharia S/A. In addition, at least twenty-two individuals among current and former employees of these companies are also identified as participants.
The Leniency Agreement presents evidence, including e-mail exchanges between competitors, scheduling of meetings, phone calls records, and suspicious bids in the tender by consortium UNA 3 (which were comprised of the companies Andrade Gutierrez, Odebrecht, CCCC, and UTC) and ANGRA 3 consortium (consisting of the companies Queiroz Galvão, EBE, and Techint). UNA 3 and ANGRA 3 entered into an agreement among themselves called the “Big Group” or the “Big Council” to agree on fixing prices and conditions, and dividing the market to override the competitive characteristics of the Eletronuclear Tender Notice No. GAC.T/CN-003/13. The rules of the tender foresaw two packages: one for associated services to the primary reactor circuit (nuclear), and one for the secondary circuit (non-nuclear).
The companies of the alleged cartel would have decided that, instead of competing freely among themselves, the UNA 3 consortium (also referred to as the “G4”), would win both packages by offering previously fixed prices with the parties. The ANGRA 3 consortium would present the covering bids. Following that, the UNA 3 consortium would renounce one of the packages in favor of the ANGRA 3 consortium. There is evidence, yet, that after the proposals were disclosed, during the contract negotiation period of Eletronuclear with the consortia, the competitors would also have articulated among themselves to avoid high discounts.
The material obtained through the Leniency Agreement will support CADE’s investigations together with other evidence and measures. These include requests of access to information resulting from criminal investigations and actions within the Federal Justice System of Paraná, and the seized information resulting from a dawn raid carried out by the Federal Police and MPF/PR in the “Radioactivity” Operation, on 28 July 2015. Also, the information obtained through the Leniency Agreement, as well as further information collected by SG/CADE, may be used by the “Car Wash Operation Task Force” to support the criminal proceedings.
Based on the Leniency Agreement and on other materials, CADE’s General Superintendence will decide on the opening of an administrative proceeding, in which the evidence of an infringement to the economic order and the charged individuals and companies are formally accused. Following the opening of the proceedings, the charged parties will be notified to present their defense. At the end of the evidentiary stage, the General Superintendence will issue an opinion for the condemnation or filing of the case in relation to each party. The conclusions are forwarded to CADE’s Tribunal, responsible for the final decision.
Petrobras’ big rigging cartel investigation – On 19 March 2015, CADE’s General Superintendence signed a Leniency Agreement with Setal Engenharia e Construções, SOG Óleo e Gás, as well as with current and former employees of the companies within the group, in the alleged cartel in public procurement for Petrobras’ onshore industrial assembly construction projects. The Agreement was signed conjointly with MPF/PR (“Car Wash Operation Task Force”).
The Leniency Agreement signed with Setal Group concerns the alleged cartel in public procurement for Petrobras’ onshore industrial assembly construction projects, which operates in the oil and gas market. As for the Leniency Agreement signed with Construções e Comércio Camargo Correa S/A, it concerns the alleged cartel in public tenders for Eletronuclear’s electromechanical assembly work, more specifically the Angra 3 nuclear power plant, which operates in the nuclear energy generation market. Both cartel investigations have distinct objects, participants and operating methods. Thus, CADE is investigating them in different administrative proceedings.
Construções e Comércio Camargo Correa S/A reassured CADE of its commitment to cooperate with the investigation, as well as to maintain its efforts in enhancing its internal compliance mechanisms.
Cartels – As established by Article 36 of Law 12.529/2011, cartels are agreements among competitors aiming at fixing prices and supply structure, market division and other significant variables for competition. In bid rigging cartels, competing companies that provide the service or product acquired by the public body or company agree on conditions that can result in higher prices, fewer supply options, less incentives to innovation, among other negative effects. Thus, it causes losses to the public money and, ultimately, damages the final consumer.
Leniency agreements at CADE – As established by Law No. 12.529/2011, the Leniency Agreement aims at obtaining information and documents that prove the existence of a cartel, as well as at identifying the other participants of the conduct. The agreement can be signed in cases in which, at the time of the proposal, CADE has not yet opened an administrative proceeding to investigate the conduct and does not possess enough evidence to assure the condemnation of the involved parties.
Leniency is signed only with the first company (or its economic group) to apply, which must cease its involvement in the conduct, confess the infringement and fully and permanently cooperate with the investigation, identifying the other involved parties and presenting relevant proofs and information. Leniency benefits the signatories with immunity or a two-thirds reduction of the sanctions within the administrative proceedings. The agreement is signed together with the Federal Public Ministry and also benefits the signing parties with total or partial criminal immunity.
The leniency agreement is a tool used by competition authorities in many countries to unveil cartels. Since 2003, CADE signed 45 leniency agreements.