Hungarian Competition Authority

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

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)

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

Diagram 4: Setting the fines

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

July 23, 2004. Budapest

Footnotes

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

• 

  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

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