High Fines for a Cartel Related to the Railway Crossing Security Tender

2023-09-20
The Office for the Protection of Competition (hereinafter referred to as "the Office") imposed fines in the total amount of CZK 51,522,000 on the undertakings AK signal Brno a.s., SIGNALBAU a.s. and STARMON s.r.o. for the participation in a cartel agreement in public procurement (bid rigging).

The parties to the proceedings fulfilled the conditions for a settlement procedure and pleaded guilty, however two of them lodged an appeal against the fine. This is the first of a series of cases being investigated in this area.

The undertakings in question infringed the Competition Act while they coordinated their participation and bids in the award procedure for the public contract "Increasing safety at railway crossings in the section Vrané nad Vltavou (outside) - Dobříš", which was awarded by the Railway Infrastructure Administration (today's Railway Administration) in April 2015. The cartel aimed at submitting the most advantageous bid by the association Společnost "Vrané nad Vltavou - Dobříš", of which the undertaking AK signal Brno a.s was the leading member. The bids agreed by the cartel members were subsequently submitted.

In the course of the administrative proceedings, the Office proved, through a detailed analysis of the bids, that these undertakings had acted in a concerted manner contrary to the Competition Act; thereby, affecting the result of the tender and distorting competition.

The amount of fines imposed in this case is not based on the turnover of the undertakings involved the cartel, but on the value of the tender concerned, i.e. CZK 210,477,375 in total. However, the Office took into account that the parties had enhanced their competition compliance programmes and satisfied the settlement conditions. The final penalties thus amounted to CZK 17,174,000 for each cartel member. The parties AK signal Brno and STARMON lodged an appeal against the amount of the fine.

Bid rigging is a type of cartel agreement concluded in connection with public or private contracts. Instead of competing, the tenderers enter into an agreement with each other to ensure that a contract is awarded to a pre-determined member of the cartel, or to achieve an increase in the bid price at the same time. Other bidders submit so-called cover bids to maintain the impression of fair competition. Bid rigging is illegal because it distorts the principles of fair competition and results in higher prices set for contracting authorities.

Press Unit of the Office for the Protection of Competition
23/126 – S205/2021

 

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