CADE condemns bid rigging cartel in the market of metal detector security doors

In the judgment session of 10 December 2014, the Administrative Council for Economic Defense – CADE condemned the companies Beringhs Indústria e Comércio Ltda., Ieco Desenvolvimento e Indústria de Máquinas e Aparelhos Ltda., Mineoro Indústria Eletrônica Ltda., and MPCI Metal Protector Ltda. for cartel formation in procurement processes for the supply of metal detector security doors.

The Tribunal also condemned two directors and eight sales representatives of these companies for participating in the anticompetitive conducts. The administrative proceeding (no. 08012.009611/2008/51) was filed in regards to other three companies due to the lack of evidence. The applied fines totalize BRL 12.7 million.

According to the Reporting Commissioner, Gilvandro Araújo, the companies and individuals involved in the collusion divided market and clients, fixed prices, and presented coverage proposals in public and private bids. Thus, it was possible for them to rotate as winners of the bidding processes and it showed an apparent competition among them. These strategies were executed, at least, since 2002 in procurements held in many states of the country.

E-mail transcriptions and electronic conversations, and other documents obtained through judicially authorized dawn raids at the headquarters of the investigated companies are part of the body of evidence.

The dialogues clearly show that the cartel members committed themselves to present higher proposals to guarantee other participant to win the bid. Furthermore, by analyzing the minutes of the bidding processes, it was verified that the employees, in fact, had the exact behavior, previously agreed among them, throughout the whole process.

A minute of a bidding process of Banco do Brasil, for example, showed that the dialogue of two employees took place during the auction for the acquisition of security doors, and that the bids were made at the same time they were agreed in the electronic conversation.

It was also verified that the companies had a rotation system, combining among themselves which would be the winner for each procurement. The strategy included score tables, which organized the cartel participants’ raking, in order to determine the order that each company would win future bids. The market division was also implemented by tables that registered how many products would be commercialized by each member of the collusion.

“There are no doubts that the charged parties shared the market, many times based in the score table. They previously established who would win each procurement process and, thus, artificially defined the market outline”, state the reporting commissioner.

Sanctions – For the anticompetitive practices, the companies were condemned to the payment of fines of BRL 11.7 million in total. The individuals involved in the case must pay fines that totalize BRL 1 million.

CADE’s Tribunal also decided to prohibit the four condemned companies to take part in public procurements held by the federal, state, municipal administration and by the Federal District for a five-year period. Any other company in which one of the condemned individuals own equity interest is also prohibited to participate in the public bidding processes.

The Reporting Commissioner determined yet that the vote must be sent to the Office of Comptroller General to inform about the prohibition, and to Banco do Brasil to adopt the measures it deems necessary.

The investigation began after an anonymous complaint sent to CADE by e-mail. In December 2013, the General Superintendence issued an opinion suggesting the condemnation of the four companies and the ten employees.