Hypothetical case
Bid-rigging
Sofia Competition Forum 7 November 2013
Disclaimer: The events depicted in this case are fictitious. Any
resemblance to real persons, companies or pending cases is
purely coincidental.
1. After the accession of Bulgaria to the EU, the construction of highways in the
country has reached very high levels and has become one of the national
priorities. Along with the need for improving the road infrastructure of the
country, the access to EU funds, used as a co-financing instrument, contributes
to the intense construction work.
2. In this regard, an official letter from the Chairman of the Road Infrastructure
Agency (RIA) was received by the Bulgarian Commission on protection of
competition (CPC). The letter states that RIA conducted a public procurement
procedure for choosing contractors for two lots (Lot 1 and Lot 2) of the
upcoming highway “Nadezhda”. On the 1st of February, the Agency published
the request for bids for Lot 1 containing the requirements for the applicants and
the deadline for submitting their offers both on its website and in the Public
Procurement Procedures Register. Bids were due by 5:00 pm on March 15. The
assessment criteria for winning the tender is the lowest offered price.
3. On the 1st of April the offers for Lot 1 were opened at the premises of RIA. The
ranking of the submitted offers was as follows:
Rank
Contractor
Price per km
1.
Consortium
“FAVOURITE”
“STRUMISHKA BUILD” Ltd
2.
“DRUMI” Ltd
€ 2 100 100
3.
“ROADEXI” Ltd
€ 2 100 200
4.
"STROIKOM” Ltd
€ 2 100 300
5.
“ARENA HR” Ltd
€ 2 730 000
Ltd
and € 1 912 000
1
4. In RIA’s letter, the Agency expresses its concern about potential manipulations
of the submitted bids and the prices offered by the participants. It suspects an
infringement of the free and fair competition and requests the CPC to conduct
its own investigation. As evidence, RIA points out the similarity in the offered
prices of some of the bidders and the fact that three days before the deadline, an
employee of “DRUMI” Ltd. personally carried the offer of the company, as
well as that of “ROADEXI” Ltd. to RIA’s premises.
5. RIA’s letter served as a ground for opening a proceeding before the CPC.
6. On the 5th of April Ms. Katya Dobreva voluntarily came to the competition
authority and made an oral statement to the CPC:
6.1.
6.2.
6.3.
“I worked at “FAVOURITE” Ltd as a personal assistant of the general
manager and majority shareholder in the company – Mr. Balkanski – from
May 2006 until February 2013 when I was illegally fired. To my surprise I
was replaced by a young graduate with no relevant work experience. I
believe my former boss committed some illegal activities and I want to
report them to the Commission. I remember how terrified Balkanski was
when your staff dawn raided our office in Sofia and this is the reason why I
am here - to get some justice.
As an assistant one of my responsibilities was to daily monitor the Public
Procurement Procedures Register and to inform my former boss about any
tender that might fall within our field of activity – constructions of roads
and the adjacent infrastructure. When the tender for the construction of Lot
1 of the highway “Nadezhda” was published, Balkanski told me that the
company must run for it despite the fact that the company could not fulfill
some of the technical and financial requirements. As a matter of fact the
company was experiencing serious financial challenges including delays in
the payment of our salaries. Then Balkanski told me that he was going to
make an arrangement with another company. On the 15th of February I
travelled with him to Ohrid, Macedonia, where he met with Mr.
Alexandrovski, the general manager of a big company specialized in the
construction of highways – “STRUMISHKA BUILD”. They agreed on
running together for winning the tender for Lot 1, and signed a secret
agreement in which they allocated the different construction works to be
performed and determined the price per km to be submitted in their offer- €
1 150 000.
The following week during the yearly meeting of the General Session of the
Public Construction Companies Association in Western Bulgaria, I heard
Balkanski bragging to other members that he was holding the winning bid
for the construction of Lot 1 as he had established a strategic partnership
with a foreign company with vast experience in the road construction sector.
During one of the breaks I attended a meeting between Balkanski and the
managers of “DRUMI” and “ROADEXI” where he told them that when he
gets the contract for Lot 1 he will still need to subcontract some of the works
2
6.4.
6.5.
and that this time it is their turn to submit higher bids. After the meeting we
went to inspect the rehabilitation works of the road between Sofia and
Pernik, where “FAVOURITE” was providing transportation services to
“DRUMI” and “ROADEXI”, which have formed a consortium for that
particular project.
Up to that moment the daily activities in the company were running normal,
until one morning I was unexpectedly told by the financial director that I
would have to leave the company. No reasons were mentioned.
Finally, I’m submitting to the Commission a copy of the secret illegal
agreement signed between Balkanski and Alexandrovski. In addition I’m
requesting protection of my identity in accordance with the rule of Art.
49(3) of the Bulgarian Law on Protection of Competition (LPC).”
7. After Ms. Dobreva’s statement, the CPC officials consulted the Public Register
of the Commission and found out that in 2010 “FAVOURITE” Ltd was fined
by the CPC for abuse of dominant position on the market of construction
equipment.
8. On the 10th of April a leniency application was submitted to the CPC by the
CEO of “PLOVEDIVSKA BUILD” Ltd. The company statement was as
follows:
8.1. “On the 1st of March the former general manager of “PLOVEDIVSKA
BUILD” – Mr. Popov - was approached by Mr. Balkanski who in a private
conversation told him that it would be better if our company did not submit
a bid for the construction of Lot 1, or if it had already submitted one to
withdraw it. In breach of our Corporate Competition Compliance Program
that meeting was not reported to our compliance officer who otherwise
would have taken the appropriate measures. The company did indeed
withdraw its bid for Lot 1 on the insistence of Mr. Popov.
8.2.
After the outburst of a public scandal with the arrest of RIA’s official - Mr.
Monetarov, vastly reported in the national media, the company conducted
an internal investigation. Mr. Popov stated that he firmly rejected Mr.
Balkanski’s offer because he was well aware that he was breaching the
competition rules. Nevertheless, a few days later Mr. Popov indeed had a
meeting with Mr. Monetarov, at a central city restaurant, where the latter
advised him that “PLOVEDIVSKA BUILD” should withdraw its bid for Lot
1 as there were a better public procurement procedure to be published soon.
This was the real reason for withdrawing our offer for Lot 1.
8.3. However, our internal investigation resulted in concluding that the company
might be involved in an anticompetitive behavior which is the reason for
submitting this leniency application.”
9. For a whole week the headlines of national media and newspapers were
reporting the scandalous arrest of the RIA’s high official – Mr. Monetarov – at
whose home important amounts of cash were found by the Police. According to
the information reported in the media sms messages were found in his mobile
3
phone that had been exchanged with managers of companies competing for
public tenders. In addition, the Police investigation established that on the 3rd of
April, Mr. Monetarov’s daughter, Lyudmila, bought a 150 sq. m. apartment in
down town Sofia from “ROADEXI” Ltd. at a symbolic price.
10. “TATKOVINA” is a national newspaper which reported the content of some of
Monetarov’s sms messages, obtained by a source within the Police.
11. One such sms conversation exchanged between Mr. Monetarov and Mr.
Balkanski reads as follows:
Balkanski: 20.02.2013 07:16
Can you get rid of the Plovediv group for Lot 1?
Monetarov: 20.02.2013 09:00
Since the new law was adopted, the procedures are
very closely scrutinized. Better to have a direct talk
with their CEO.
Balkanski: 01.03.2013 20:59
I spoke to Popov but he made a big scandal. Things are going bad.
Monetarov: 01.03.2013 23:01
I’ll talk to him. But that will lead to a higher
incentive for me.
Balkanski: 01.03.2013 23:02
Do not worry for that. Just do something and let me know ASAP.
Monetarov: 10.03.2013 00:15
The skies are clear, go ahead and don’t forget who
your friends are! 
12. “STROIKOM” Ltd and “ARENA HR” Ltd are subsidiaries registered in
Bulgaria and controlled by the Croatian company – “ZAGREBACKA 2000”
Ltd which holds respectively 60% and 75% of their shares.
13. On the 15th of April “ZAGREBACKA 2000” sold 51% from each of the above
companies to “STRUMISHKA BUILD” Ltd and retained minority participation
of respectively 9% and 24%.
14. On the 15th of September the Croatian Competition Authority conducted a dawn
raid at the premises of “ZAGREBACKA 2000” in Zagreb for a suspected cartel
agreement between public construction companies in Croatia. As a result of the
4
gathered forensic evidence an email exchange between “ZAGREBACKA
2000” and “STRUMISHKA BUILD” was revealed as follows:
14.1. Sender: alexandrovski@strumishkabuild.mk
Sent: Friday 02.03.2013 16.35
To: dragic@zagrebacka2000.hr
Hello Mirko,
Did you send the offers for Lot 1 as agreed? I hope you did not. There is a
change in the price which should not be below € 1 912 000.
Have a nice week-end!
A.
*** *** ***
14.2. Sender: dragic@zagrebacka.hr
Sent: Friday 02.03.2013 17.15
To: alexandrovski@strumishkabuild.mk
Hi,
Still haven’t sent them. The staff in Bulgaria is in charge but I’ll make sure
it will be done in a few days. OK for the price change. I’ll call them
immediately and will get in touch with you as soon as they give me a
feedback.
By the way, the paper work for “STROIKOM” Ltd and “ARENA HR”‘s
acquisition is done and we shall finalize the deal immediately after
submitting the offers for Lot 1.
Enjoy the week-end!
M.
15. The Croatian Authority forwarded this information to the Bulgarian
Competition Authority within the European Competition Network exchange of
information under Art. 12 of the Council Regulation № 1/2003.
16. Meanwhile, on the 30th of May, the Serbian Competition Authority adopted a
decision fining “ZAGREBACKA 2000”, “STRUMISHKA BUILD” and the
Albanian company „KONSTRUKSION MODERNE” Ltd. for bid-rigging
practices in public procurement on the territory of Serbia. The decision is
pending before the review court in Belgrade.
5
LEGAL FRAMEWORK:
Article 101 of the Treaty on the Functioning of the European Union
(ex Article 81 TEC)
1. The following shall be prohibited as incompatible with the internal market:
all agreements between undertakings, decisions by associations of undertakings and
concerted practices which may affect trade between Member States and which have as
their object or effect the prevention, restriction or distortion of competition within the
internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading
conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading
parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties
of supplementary obligations which, by their nature or according to commercial
usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be
automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the
case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to
promoting technical or economic progress, while allowing consumers a fair share of
the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not
indispensable to the attainment of these objectives;
6
(b) afford such undertakings the possibility of eliminating competition in
respect of a substantial part of the products in question.
Article 12 of the Council Regulation № 1/2003
Exchange of information
1. For the purpose of applying Articles 81 and 82 of the Treaty the Commission
and the competition authorities of the Member States shall have the power to provide
one another with and use in evidence any matter of fact or of law, including
confidential information.
2. Information exchanged shall only be used in evidence for the purpose of
applying Article 81 or Article 82 of the Treaty and in respect of the subject-matter for
which it was collected by the transmitting authority. However, where national
competition law is applied in the same case and in parallel to Community competition
law and does not lead to a different outcome, information exchanged under this Article
may also be used for the application of national competition law.
3. Information exchanged pursuant to paragraph 1 can only be used in evidence
to impose sanctions on natural persons where:
— the law of the transmitting authority foresees sanctions of a similar kind in
relation to an infringement of Article 81 or Article 82 of the Treaty or, in the absence
thereof,
— the information has been collected in a way which respects the same level of
protection of the rights of defence of natural persons as provided for under the
national rules of the receiving authority. However, in this case, the information
exchanged cannot be used by the receiving authority to impose custodial sanctions.
Article 49(3) of the Bulgarian Law on Protection of Competition
When there are sufficient grounds to assume that disclosure of the identity of
any person, who has given statements or has provided data for an infringement under
this Law may lead to significant adverse effects on his/her activity or on him/her as a
person, the Commission shall take measures not to disclose his/her identity in
accordance with a procedure set out in the internal rules, adopted by the Commission.
ECJ CASE-LAW
It is clear from settled case-law that the conduct of a subsidiary may be imputed
to the parent company in particular where, although it has a separate legal personality,
that subsidiary does not decide independently upon its own conduct on the market, but
carries out, in all material respects, the instructions given to it by the parent company,
having regard in particular to the economic, organisational and legal links between
those two legal entities (Case T-138/07 of 13 July 2011 Schindler Holding and Others
v Commission, paragraph 69)
[…] legal entities which have participated in their own right in an infringement
and which have subsequently been acquired by another company continue to bear
7
responsibility themselves for their unlawful conduct prior to their acquisition, where
they have not been purely and simply absorbed by the acquiring undertaking, but
continued their activities as subsidiaries (see, to that effect, Case C-279/98 P Cascades
v Commission [2000] ECR I-9693, paragraphs 78 to 80). In such a case, the acquiring
undertaking may be held responsible only for the conduct of its subsidiary with effect
from its acquisition if the subsidiary continues the infringement and if the liability of
the new parent company can be established (see, to that effect, Case C-286/98 P Stora
Kopparbergs Bergslags v Commission [2000] ECR I-9925, paragraphs 37 to 39).
However, the former parent also remains liable (usually, jointly and severally)
after the transfer for the infringing conduct of the subsidiary company during the
period of its ownership, should the conduct of the subsidiary be attributed to it in
accordance with the rules governing parental liability (see, to that effect Areva v
Commission [2011] E.C.R. II-633 at [116]–[120].)
According to the case-law, where several persons may be held personally liable
for the participation in an infringement of one and the same undertaking for the
purposes of competition law, they must be regarded as jointly and severally liable for
that infringement (see, to that effect, Joined Cases 6/73 and 7/73 Istituto
Chemioterapico Italiano and Commercial Solvents v Commission [1974] ECR 223,
paragraph 41; Case C-294/98 P Metsä-Serla and Others v Commission [2000] ECR I10065, paragraphs 33 and 34; Joined Cases T-339/94, T-340/94, T-341/94 and T342/94 Metsä-Serla and Others v Commission [1998] ECR II-1727, paragraphs 42 to
44; HFB and Others v Commission, paragraph 122 above, paragraphs 54, 524 and 525;
Tokai Carbon and Others v Commission, paragraph 90 above, paragraph 62; and Case
T-112/05 Akzo Nobel and Others v Commission [2007] ECR II-5049, paragraphs 57
to 62).
8
PARTICIPANT’S LIST OF QUESTIONS:
1. What would be the investigative strategy that you would adopt as a case
handler? Which are the premises / undertakings that you would inspect? Would
you request additional information?
2. What forms of infringements of the competition rules can be established and on
which markets? Which are the undertakings and/or associations of undertakings
involved? Do you think there is a single and continuous infringement of the
competition rules or multiple infringements?
3. What evidence can be extracted from the factual background and be used to
prove the alleged infringements?
4. Which of the undertakings and/or natural persons could be eventually fined for
breaching the competition rules?
5. How would you calculate the amount of the fines imposed? Are there any
aggravating and/or mitigating circumstances under which the penalty may be
increased or decreased and for which undertakings?
9