The President of the Office of Competition and Consumer Protection (UOKiK) has once again uncovered a bid-rigging scheme and imposed fines on the companies involved. This time, the case concerns the geodetic and cartographic industry, with a fine of nearly PLN 1.8 million imposed on eleven companies. Additionally, the UOKiK has initiated anti-monopoly proceedings against seven companies offering laundry services. It is worth reviewing these cases to understand what situations should be avoided.
Why was the consortium considered bid rigging?
The decisions made by the UOKiK President are often seen as surprising – consortiums are commonly used to participate in tenders. So why did the President of UOKiK consider this one a case of bid rigging?
In the announcement, the President of UOKiK stated that it had been established that eleven geodetic and cartographic companies were jointly determining the conditions for their participation in public tenders. The companies entered tenders as part of a large consortium, submitting a single joint offer and then dividing the resulting contract between themselves. In practice, this meant that some companies formally participated in the tenders but did not perform any work. According to the UOKiK President, the companies, if operating in smaller groups, were capable of carrying out the tasks assigned in the tenders, and the creation of the consortium was intended to form a bid-rigging agreement and eliminate competition among its members.
Experience shows that there is a long way from a decision by the UOKiK President to the final ruling, and it can end with the decision being overturned. However, this example highlights a very important issue – the decisive factor is the purpose or effect of the agreement, regardless of its legal form. In this case, it was significant that some entrepreneurs did not take part in executing the contract – this prima facie suggests that the purpose of forming the consortium was different from the joint execution of the contract.
The consortium agreement is extremely useful in business transactions – it allows entities to collaborate on achieving a specific business goal, to cooperate in bidding for contracts and executing them. However, if entrepreneurs enter into a consortium agreement only to avoid competing with each other in a particular tender, this initially appears to be bid rigging.
Coordination of bids
The second case concerns the well-known practice of coordinating bid amounts: several companies submit separate bids in such a way that they cover a wide price range. If it turns out that no one else has bid, they withdraw all offers except the highest one (or prevent the contract from being concluded in other ways, such as by failing to provide the required documents). As a result, the entrepreneur who proposed the highest price wins. If a company outside the cartel submits a bid, the companies withdraw their bids so that the one just below the non-colluding company’s bid wins.
The interesting aspect of this case is the evidence – key messages exchanged between entrepreneurs via a mobile app. In these messages, they coordinated the amounts that each would include in their bid. UOKiK obtained access to this correspondence through a search conducted at the companies’ headquarters.
It may be surprising that the bid rigging was not successful – despite the coordination, the tender was won by a company not participating in the scheme. In criminal law, there is a term for this: an unsuccessful attempt.
Fines
It is worth reminding that the maximum fine for bid rigging can amount to 10% of the turnover achieved by the entrepreneur in the financial year preceding the year in which the fine is imposed. Additionally, under Article 6(2), agreements related to bid rigging are null and void by law, and under Article 70(5) § 1 of the Civil Code, the organizer and participant of an auction or tender may request the annulment of the contract concluded in this way. This right expires one month after the party entitled to it learns of the existence of such a reason.
Moreover, bid rigging is a criminal offense. According to Article 305 § 2 of the Penal Code, anyone who, in order to exert unlawful influence on the result of an ongoing or planned public procurement tender or process, enters into an agreement with another person, conveys or disseminates information, or conceals important circumstances to the detriment of the owner of the property, person, or institution for whose benefit the tender is being or will be conducted, or who conducts or is to conduct the procedure, or to the detriment of the public interest, shall be subject to imprisonment from 3 months to 5 years.