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CADE’s investigation indicates evidence of cartel in public tenders for trains and subways in five states


The evidence collected in a search and seizure demonstrates that the supposed cartel allegedly operated in 15 public tenders which sum BRL 9.4 billion.
published: Mar 21, 2014 10:00 AM last modified: Apr 12, 2016 02:46 PM

The General Superintendence of the Administrative Council for Economic Defense – CADE, opened an administrative proceeding (PA 08700.004617/2013-41) to investigate alleged cartel behavior in train and subway procurements carried out from 1998 to 2013, in the Federal District and in the states of São Paulo, Minas Gerais, Rio Grande do Sul, and Rio de Janeiro. In total, 18 companies and 109 employees are accused of participating in the cartel.

The evidence collected in a search and seizure operation, performed by CADE in July 2013, demonstrates that the supposed cartel allegedly operated  in 15 public tenders, subjected to a bidding process, of Companhia do Metropolitano de São Paulo – Metrô SP, Companhia Paulista de Trans Metropolitanos – CPTM, Companhia do Metropolitado do Distrito Federal – Metrô-DF, Empresas de Trans Urbanos – Trensurb, Companhia Brasileira de Trens Urbanos-CBTU, and Secretaria de Estado de Transportes do Rio de Janeiro. The contracts of these  public tenders totaled BRL 9.4 billion.

Operation – The cartel participants allegedly divided the tender procedures amongst themselves and simulated competition in the procedures by, for example, previously agreeing on the prices of the bids to be presented by the competing companies and consortia. In implementing their anticompetitive strategies, the companies allegedly used legal means, such as forming consortia and subcontracting, in order to give the appearance of competition between them.

Cloaked by the use of consortia, the accused companies allegedly adopted various anticompetitive strategies. These included the prior definition of which companies would take part in a given consortium and which of them would participate in the tender, only to then present higher bids aimed at purposefully losing the tender. Another allegedly adopted behavior included defining that only one consortium would compete in a given procedure, with compensation for the companies left out of the consortium.

Furthermore, promises to subcontract were also allegedly used in order to preemptively eliminate competitors and to reward those who were party to the alleged cartel, having, for example, withdrawn lawsuits or administrative appeals against the participants.

Investigation – The case began in May 2013 following a leniency agreement signed between Siemens, who denounced the cartel, CADE’s General Superintendence, the Federal Prosecutor’s Office – MPF and the São Paulo State Prosecutor’s Office – MP/SP. In a leniency agreement, a cartel participant denounces a cartel to which it has been party and collaborates with the authorities during the investigation, in exchange for immunity from or reduction of the applicable fine.

Based on the evidence provided by Siemens, CADE obtained a judicial warrant to carry out a dawn raid on 4 July, 2013, at the headquarters of 13 companies that were allegedly part of the cartel. The Federal Police also participated in this operation.

The analysis of the seized material– more than 30 terabytes of electronic records and physical documents – resulted in the openning of the administrative proceeding 08700.004617/2013-41.

The evidence collected has already been shared with the Federal Police, the Public Prosecutor’s Office and the Prosecutor’s Office of the State of São Paulo, in November of last year, in light of the competence of these authorities in the criminal prosecution of cartels.

CADE will refer copies of the investigation to the Attorney General’s Office, the Federal Prosecutor’s Office, the Prosecutor’s Office of the State of São Paulo and of the Federal District, and to the Disciplinary Board of the Administration of the State of São Paulo. CADE will also communicate the opening of the administrative proceeding to the Office of the Federal Comptroller General, the Prosecutor’s Office of the State of Rio de Janeiro, and the Secretariat for Transparency and Control of the Federal District.

Next steps – After the opening of the administrative proceeding by CADE, the accused parties will be notified to present their defense. Once the investigation is complete, the General Superintendence will render an opinion for the condemnation or filing and will submit the case to be judged by CADE’s Administrative Tribunal, responsible for the final decision.

In the administrative sphere, cartel behavior can lead to fines of up to 20% of a company’s turnover. The conduct is also a crime. The Federal Prosecutor’s Office is responsible for criminal prosecution. 

Anti-Cartel Enforcement – Cartels are the most serious form of harming competition. Deterring and punishing this type of illicit behavior is a priority for CADE. In 2013, CADE issued 13 condemnations in cartel cases, applying BRL 483 million in fines, and opened approximately 10 new investigations of alleged collusion.

Click here to read the General Superintendence’s technical note setting out the reasoning underlying the opening of the administrative proceeding (Portuguese only).