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Superintendence recommends condemnation of bid rigging cartel on orthosis and orthopedics prosthesis market

Cartel

The cartel affected public bids organized by the National Institute of Social Security (INSS for its acronym in Portuguese) in the State of São Paulo.
published: Feb 24, 2014 03:40 PM last modified: Apr 12, 2016 02:59 PM


The General Superintendence of the Administrative Council for Economic Defense - CADE recommended in opinion published in the Official Gazette, the condemnation of eleven manufacturers of orthopedic prosthesis and orthosis for cartel behavior in public bids organized by the National Institute of Social Security (INSS for its acronym in Portuguese) in the State of São Paulo. The opinion also suggests administrative penalty to the Brazilian Association of Technical Orthopedics (ABOTEC for its acronym in Portuguese) for producing and publicizing a price table to be followed by companies in the sector in public tenders. The case now is to be judged by CADE’s Tribunal.

The Administrative Proceeding (PA no. 08012.008507/2004-16) was introduced from the complaint presented in 2004 by the Regional Management of the INSS in Bauru (São Paulo). The INSS’ Federal Attorney in the municipality pointed in its opinion evidence of violations of the economic order after checking identical proposals from companies that participated in the bidding process.

According to CADE’s Superintendence, there is evidence that manufacturers have arranged a rotation method, previously defining the winners of bidding processes organized by the INSS - which configures cartel behavior. The biddings were held for the purchase of orthopedic materials for Regional Offices of the INSS in the State of São Paulo.

The Superintendence has also identified that ABOTEC prepared a table of minimum prices of products and orthopedic services which was used as a parameter for setting the amounts charged by the manufacturers participating in the biddings conducted by the INSS.

According to recent decisions of CADE’s Tribunal, the production and disclosure of a minimum price table, even if merely suggestive, work as a mechanism of price standardization with the potential to harm competition, generate inefficiency and cause the adoption of prices above charged in a competitive market. The General Superintendence has followed the understanding of CADE’s Tribunal, which considers that the production and disclosure of price tables by associations and unions constitute a serious violation of competition and consumer rights.

If condemned, companies could face fines up to 20% of its turnover in the year previous to the opening of the proceeding. The association is subject to a fine between BRL 50,000 and BRL 2 billion.