Press Release
C. 04-13 th
El Salvador, February 28 , 2013.
CS sanctions bid rigging in procurement process launched by ANDA The Board of Directors (BD) of the Competition Superintendence (CS) sanctioned two companies for bid rigging in a public procurement procedure carried out by the National Administration of Aqueducts and Sewage System (ANDA, its acronym in El Salvador). Bid rigging harms competition and creates obstacles to the Government´s capacity of obtaining services at competitive prices. “Public procurement officers must pay attention to the existence of indications of anticompetitive conducts in procurement procedures which may result in higher costs for the public sector”, asserted Francisco Diaz Rodriguez, Chairman of the BD of the CS.
The companies Agua y Tecnología, S. A. de C. V. and Suministro Industrial de Equipo y Ferretería, S. A. de C. V., bid rigged by offering the identical price of US$79.10 per service hour in the public procurement process: “Tow trucks rent service, at a national level, for dismantling and installing electromechanical equipment owned by ANDA”. Due to the fact that ANDA is a governmental institution, the aforementioned bid rigging harmed the State, administrator of the financial resources provided by the Salvadoran citizens through taxes. ANDA might have paid the bid riggers higher price if compared to the real prices under competition conditions. Bid rigging in public procurement procedures is forbidden by Article 25 letter c) of the Salvadoran Competition Law (CL) as follows: “c) Fix or limit prices at auctions or in any other form bidding private or public, national or international, with the exception of the joint bids submitted by economic agents that are clearly identified as such in the documents submitted by the bidders”.
The BD of the CS imposed fines equivalent to fourteen minimum monthly wages for the industrial sector (US$3,070.90), to each economic agent, having considered the severity of the infringement, the damage caused, the effect on third parties, the duration of the practice, the size of the market, and no recidivism, pursuant to Article 37 of the CL. Internationally, the Organisation for Economic Co-operation and Development (OECD) recognizes that “Hard core cartels, or agreements among competitors fixing prices, rigging bids (collusive tenders), restricting output or dividing markets, are the most serious and harmful violations of competition law. They injure consumers by raising prices and restricting supply. They create market power, waste and inefficiency in countries whose 1 markets would otherwise be competitive”.
1 Organisation for Economic Co-operation and Development (OECD); Policy Brief: “Hard Core Cartels – Harm and effective
sanctions”; Paris, 2002.
Identical prices and co-ordination The above cited bid rigging included the western, eastern, central, and metropolitan zones of the country and the price agreement per hour of rendered service of each participating agent was identical to the cent; notwithstanding the geographical zone. Furthermore, the companies filed allocated economic bids: that is only in two of the four geographical regions: one of them offered in the central zone and the other in the western zone; hence, eliminating possible rivalry (to compete) for said regions. None of the two companies filed a service bid for the eastern zone: they competed only in the metropolitan region. With respect to the identical bids, it is very unlikely, from an economic view point that two independent economic agents had determined exactly identical prices for the same service in two different regions, considering the fact that the estimation of these bids should take into account, under rational criteria, amongst others, transportation costs from one zone to another, as well as any other particular variable in each of the geographical zones. Independent economic agents have different financial structures, costs, and installed capacity, amongst others. These differences result in different prices of the goods and services each company offers, even if said goods and services are homogeneous. In addition, the BD of the CS proved that existence of binding elements and of co-ordination between the sanctioned companies such as: similarity in the defense arguments alleged by both economic agents; collaboration and co-operation between both companies to rent from each other tow trucks; communication and co-ordination resulting from their joint participation in a different public procurement procedure; and, relationship amongst the founding shareholders of the investigated economic agents and their legal proxies. Background In 2009, the CS sanctioned four travel agencies for bid rigging in public procurement process launched by the Ministry of Economy and by the Salvadoran Tourism Corporation, for having agreed prices of the fees charged for the issuance of airplane tickets. The fines imposed to these four economic agents totaled US$21,325.50.