CADE launches practical guidelines to help procurement officials prevent and detect cartels in public procurement

On 3 September, the Administrative Council for Economic Defense (CADE) launched the document Combate a Cartéis em Licitações – Guia Prático para Agentes de Contratação (or, in translation, Fighting Cartels in Public Procurement – Practical Guidelines for Procurement Officials). The publication is intended to help procurement officials of every level of the government to promote pro-competitive tenders, detect signs of cartel in public procurement, and report them to CADE.

Cartels in public procurement are agreements between competitors aimed to simulate competition in public procurement by fixing prices, deciding the outcome of tenders, and allocating markets. These serious violations result in government purchases of products and services at disadvantageous conditions. "If there is no free competition amongst bidders of a government contract, there will be higher prices, low-quality products and services, or less innovation and productivity", mentions the document.

In writing the guidelines, CADE intends to provide additional ways to prevent and fight cartels in public procurement and thus sustain a healthy competitive environment in Brazil and ensure public resources are better allocated. Against this backdrop, the publication serve as a reference for officials who work on each stage of procurement processes to know how to prevent cartels, detect signs of collusion, and report them to CADE.

The guidelines lists the main strategies employed by companies in forming cartels in public tenders. Moreover, it highlights aspects of the market and procurement processes that facilitate collusion. For instance, a market with few suppliers and low product and service differentiation may contribute to the formation and maintenance of cartels.

The document also gathers signs of concerted practices between bidders. For example, procurement officials should watch out for bids with identical format, wording, and typographical errors.

In addition, the document includes general recommendations to prevent anticompetitive conduct in various phases of a procurement process, such as in preparing a notice and carrying out the tender. "Experience shows that by drafting pro-competitive tender notices and making the principal procurement requirements less predictable, we can avert and undermine cartels", states the guide.

Finally, the publication addresses the penalties CADE can impose on companies and individuals convicted of a cartel and gives advices on how to file a complaint. In this regard, the guidelines indicate the communication channels employed to report an unlawful practice and how to support the allegations with signs and evidence of collusion.

Training

CADE's efforts towards enforcing antitrust law include the organisation of courses on the deterrence and fight against cartels in public procurement, training procurement officials of different government bodies and entities. As an example, in early August, 65 employees of the Brazilian Transport Infrastructure Department (DNIT) took a course on prevention and detection of cartels in public procurement.

These actions, part of CADE’s educational responsibilities, aim at instructing the public on unlawful practices that may threaten free competition in Brazil. Any public or private institution can contact CADE to ask for this kind of partnership. Send an e-mail to cgaa8@cade.gov.br or call +55 61 3321 8442.

Access the document Combate a Cartéis em Licitações – Guia Prático para Agentes de Contratação (in Portuguese).