Vj-27/2003/16

Vj-27/2003

Cartel of the motorway constructing undertakings

(restrictive agreement)

Summary: By its decision dated 23. 7. 2004, the Competition Council of the Gazdasági Versenyhivatal (GVH) established that the undertakings which submitted bids as a response to an invitation to tender issued in 2002 in the frame of public procurement pocedures, previously agreed between them about the identity of the bidder acquiring the construction works contract for the particular motorway-sections. In some cases they even agreed that the winners would let the others in as subcontractors. Every large undertaking that could be expected to meet the conditions to be fulfilled by candidates set out in the invitation, was party to the cartel agreement. The total of the fines imposed amounted to HUF 7,04 billion (equal to EUR 28,2 million)

Facts of the case (in chronological order):

10. 7. 2002: motorway construction works for a total length of 59,91 km put out to tender by the National Motorway Co Ltd (NM) (restricted procedure with invitations), bids opened on 22. 7. 2002, tender declared ineffective on 23. 7. 2004

Diagram 1: July 2002 tender of the NM

motorway section put out to tender

bidder

members of consortium bidding

net price offered, billion HUF

M3 (Polgár-Görbe-háza)

M3 Görbeháza con-sortium

EGÚT Ltd- D-Profil Ltd

15,85

Bihar consortium

Strabag Ltd-Hoffman Ltd

16,95

Tiszántúl Motorway Constructing consor-tium

Betonút Ltd-Kutas BB Ltd

18,11

M7 (Balatonszárszó)

M7 Balaton con-sortium

Hídépítő Ltd-Strabag Ltd-Penta Ltd

54,65

M7 Balaton 2002 consortium

EGÚT Ltd- D-Profil Ltd

60,00

Balaton Motorway Constructing consor-tium

Betonút Ltd-MÁV Hídépítő Ltd

62,97

M7 (Becsehely)

Adria Motorway Constructing consor-tium

Betonút Ltd-Kutas BB Ltd

14,55

M7 Zala consortium

Strabag Ltd-Kaiser Ltd

15,14

M7 Határ consortium

Hídépítő Ltd-Penta Ltd-Via-dom Ltd

15,00

M70

M70 Mura con-sortium

Strabag Ltd- Hídépítő Ltd-Hoffman Ltd

24,36

Zala Motorway Constructing consor-tium

Betonút Ltd-Mélyépítő Buda-pest Ltd

25,11

M70 Letenye 2002 consortium

EGÚT Ltd- D-Profil Ltd

26,31

26. 8. 2002: motorway construction works for the same total length of 59,91 km put out to tender by the NM (open procedure with a qualitative preliminary selection of the candidates), bids opened on 5. 12., 25. 11. and 9. 12. 2002, respectively, contracts subscribed with the winners on 23. 12. 2004 (apart form the price as the main aspect the conditions offered in respect of guarantees, advance payments and contract penalties were also taken into consideration at the evaluation)

Diagram 2: August 2002 tender of the NM (the bids winning in italics)

motorway section put out to tender

bidder

undertakings

net price offered, billion HUF

M3 (Polgár-Görbeháza)

M3 Görbeháza 2002 joint undertaking

EGÚT-DEBMÚT

18,06

M3 consortium

Hídépítő-Betonút

18,67

Strabag

Strabag

18,98

M7 (Balatonszárszó)

Szárszó consortium

Hídépítő-Betonút

65,16

Strabag

Strabag

69,11

M7 Balaton joint undertaking

EGÚT-DEBMÚT

70,70

M7 (Becsehely)-M70

Strabag

Strabag

44,88

Országhatár consortium

Hídépítő-Betonút

47,24

M7-M70 joint undertaking

EGÚT-DEBMÚT

47,53

18. 2. 2003: ex officio proceedings of the GVH commenced in order to establish whether the bidders in the August 2002 tender colluded concerning the bidding process (Art. 11 (2) e) of the Competition Act (CA))

15. 9. and 30. 10. 2003: inspections of the GVH (Art. 65/A. CA) at Strabag and Hídépítő in Budapest, respectively

28. 1. 2004: GVH-proceedings extended to cover July 2002 tender of the NA

13. 5. 2004: preliminary position (Art. 73 CA) of the Competition Council of the GVH (CC) sent to the respondents; it was complemented on 5. 7. 2003

17. 6., 29. 7 and 22. 7. 2004: trials of the CC with the decision on the substance of the case reached in the third of them

Legal assessment: Based on documents such as a copy of handwritten notes of an executive of Strabag (found by an inspection carried out on 28. 10. 2002 at Strabag Budapest in case Vj-138/2002), memos, the contracts concluded and statements, the CC established that the undertakings previously agreed between them about the identity of the bidder acquiring the construction works contract for the particular motorway-sections and of the bidder to which they would, in their capacity as general contractor, subcontract part of the construction works. It did not accept the defence of the respondents that market circumstances (capacities, location of the construction facilities, work experience, etc.) enabled them to almost exactly predict the outcome of the particular tenders and the documents referred to above reflected this situation rather than any collusion/concertation between them.

After the first procedure was declared ineffective, the unity of the tenderers` wills manifesting in price concertation, market allocation and bid rigging (Art. 11 (2) a), d) and e) CA respectively) remained unchanged for the repeated procedure too, the CC stated. Cartels of this type are considered by the established supervisory practice in the European Union as such to be sanctioned in the most severe way for they distort directly and fundamentally the efficient allocation of resources and result in an increase of the prices.

The market distorting effect of the collusion was significant since every large undertaking that could be expected to meet the conditions to be fulfilled by candidates set out in the invitation participated in it. The prices which came into existence under noncompetitive circumstances influenced for years the motorway construction works in Hungary.

Sanctions: The CC imposed fines on the undertakings which infringed the provisions of the CA referred to above. In doing so it followed the aspects set out in Art. 78 CA and in Notice No 2/2003 of the President of the GVH and the Chairman of the Competition Council of the GVH on the method of setting fines in antitrust cases.

For the calculation of the basic amount of the fines the CC took the net price offers made in the winner-bids submitted to the NM for its August 2002 tender (see Diagram 4 below) as starting point of the calculations. No separate fines were imposed for the anticompetitive concertation in the bidding process of the July 2002 tender. Though two public procurement procedures were carried out in the second half of the year 2002 and cartel members needed to agree both times on the alloction of the construction works, there was indeed a uniform restriction of competition which manifested in a single process, the CC underlined.

Diagram 3: Factors of setting the basic amount of fines

A. The gravity of the infringement

Points to be gi-ven as a maxi-mum

Points given

A.a. Threat to competition

30

25
hardcore cartel (market sharing and bid rigging)

A.b. Impact of the infringement on the market

30

20
influencing mo-torway const-ruction in Hun-gary for years

B. Attitude to the infringement

30

5
no organiser found

C. Other considerations

10

5
infringement concerned the utilisation of public means

Total

100

55

Diagram 4: Setting the fines

undertaking

net revenue in 2003,billion HUF [1]

net offer made in the winner-bid,billion HUF [2]

basic amount of the fine,billion HUF [3]

Betonút

38,75

40,23

2,21

DEBMÚT

15,84

9,03

0,50

EGÚT

17,27

9,03

0,50

Hídépítő

28,88

24,93

1,37

Strabag

99,21

44,88

2,47

total

199,95

128,10

7,04

The CC made no further adjustment of the basic amounts calculated in this way.

July 23, 2004. Budapest


Footnotes

  • :: d1e1026

    The maximum fine imposed on undertakings may not exceed 10% of their respective net turnover in the preceding business year (Art. 78 (2) CA).

  • :: d1e1044

    After dividing the offer of HUF 65,16 billion of Hídépítő-Betonút in two parts in proportion 38,26 : 61,74 (the proportion being the same as in the division of work between them according to the consortium agreement they entered into with each other) and halving the offer of HUF 18,06 billion of EGÚT-DEBMÚT

  • :: d1e1062

    basic amount of the fine = (relevant turnover x total number of points) : 1000