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CADE’s General Superintendence recommends condemnation of international cartel in the market of electric power

Condemnation

The conduct occurred in the sector of gas-insulated switchgear electric equipment
published: Dec 31, 2015 12:00 AM last modified: Apr 08, 2016 02:05 PM

The General Superintendence of the Brazilian Administrative Council for Economic Defense – CADE recommended, in an opinion published on December 30th 2015, the condemnation of 11 companies for international cartel activity, with effects in the Brazilian market of gas-insulated switchgear (GIS) electric equipment.      

GIS is a product used to control energy influx in electricity distribution networks, being the main element in a power station.   

The companies are: Alstom Holdings S.A., Alstom Hydro Energia Brasil Ltda, Areva T&D S.A, Alstom Grid Energia Ltda, Japan AE Power Systems Corporation, Mitisubishi Eletric Corporation, Siemens AG, Siemens Ltda, Toshiba Corporation, VA Tech Transmission & Distribuition GmbH & Co, VA Tech Transmissão e Distribuição Ltda. (Administrative Proceeding no. 08012.001376/2006-16).

According to the Superintendence’s opinion, between 1988 and 2004, the companies have coordinated the concession of GIS projects in an international basis, following agreed rules and principles, respecting defined market shares, fixing prices and dividing territories among specific members of the collusion. The objective of the cartel consisted in having its participants obtaining and maintaining predefined market shares.   

The Superintendence also notes that the illicit conduct included geographic market division agreements and price level maintenance, among other sophisticated rules for the allocation of GIS projects, many of them related to Brazilian public procurement processes. 

Contacts occurred in meetings in different levels, called as Working Group, Steering Committee e Job Meetings. There has also been communication by fax, e-mails and phone calls, always discreetly to avoid any authority detection, including the use of initials and codenames. In order to ensure its implementation, the agreement relied as well on punishment and retaliation mechanisms, besides predatory actions against non-aligned competitors.   

The investigation points out that the cartel affected the Brazilian electric system and companies that acquired high voltage GIS product sold in bulk, as well as medium and high voltage equipment to be integrated in power stations (turnkey projects). Among these companies there are power concessionaries, such as Companhia de Transmissão de Energia Elétrica Paulista, Companhia Energética de Minas Gerais, Companhia de Eletricidade do Estado da Bahia, Companhia de Energia Elétrica do Paraná, LIGHT – Serviços de Eletricidade S/A, Eletropaulo, Eletrosul, and others.   

The cartel also affected some companies that acquired the product to build their own power stations, which occurred with Petrobras, Companhia Vale do Rio Doce and Companhia Siderúrgica Nacional. The cartel might have indirectly had impact on one of the elements that compose the cost of electric power paid by Brazilian consumers.          

Investigations abroad – The cartel has been investigated by competition authorities from different jurisdictions, such as the European Union, New Zealand, Hungary, Israel, the Czech Republic and Slovakia.    

The administrative proceeding follows now for judgment by CADE’s Tribunal, responsible for the final decision. If condemned, the companies may be fined in up to 20% of their turnover related to the sector affected by the cartel activity in the year before the opening of the administrative proceeding.