Colombia: Superintendence of Industry and Commerce
During the past year, the Superintendence of Industry and Commerce (SIC), as the Colombian competition authority, has increased its efforts in preventing anticompetitive practices, has worked in the promotion and dissemination of the leniency programme, and has strengthened its fight against bid-rigging practices.
The following sections will describe the main cases the SIC has sanctioned recently, the most important investigations that are being conducted now and the way these activities are linked to the abovementioned commitments, which have determined the current focus and trends of the entity.
Recent decisions in important economic sectors
‘Ruta del Sol - Tranche 2' (injunction/precautionary measure)
On 16 February 2017, the Superintendent of Industry and Commerce issued an injunction - or precautionary measure - with the purpose of suspending the illegal effects of an alleged anticompetitive conduct that would have taken place with the subscription of the public contract known as ‘Ruta del Sol - Tranche 2'. The alleged anticompetitive behaviours were conducted by former officials of the National Institute of Concessions (INCO) - today known as the National Infrastructure Agency (ANI), and the concessionaire Ruta Del Sol SAS, which includes ODEBRECHT companies.
According to the evidence collected, during the public procurement process for the award of the road construction contract Ruta del Sol - Tranche 2, bid-rigging practices may have occurred.
Because of that, the Superintendent ordered ANI - formerly INCO - to terminate immediately the contract, along with its modifications and additions. Moreover, in order to restore free competition in the market, the SIC ordered the structuring and launch of a new public tender guaranteeing the transparent participation of various market players. This new contract is expected to ensure the execution of the contractual object and prevent unfinished works.
It should be noted that these kinds of measures are exceptional - the SIC has only issued three injunctions in competition cases. Furthermore, this case is very important because this is the first time the SIC has used its injunction powers to order the termination of a public contract.
Scholar notebooks (price-fixing cartel)
On 18 August 2016, the SIC sanctioned Carvajal Educación SAS (Carvajal), Colombiana Kimberly Colpapel SA (Kimberly) and Scribe Colombia SAS (Scribe) for engaging in price-fixing conducts in the market of production, distribution and marketing of scholar notebooks in Colombia. The SIC also sanctioned violations of the general competition prohibition that took place by the performance of other illegal conducts, such as exchanges of financial information that influenced the portfolio strategy of the companies.
Specifically, the SIC found that Carvajal and Kimberly, since 2001, and Carvajal and Scribe, after 2011, fixed prices of notebooks - especially in premium segments, coordinated marketing policies and restricted the supply of these products. The cartel had detrimental effects on the market because it prevented free competition in Colombia for more than 13 years (2001-2014). Moreover, as the anticompetitive behaviours covered low-cost notebooks, nearly 6 million Colombian families, including population of the lowest social strata (0, 1 and 2), were affected by the conducts.
Kimberly was fined 29.6 billion pesos, Carvajal 14.8 billion pesos, and Scribe 11.7 billion pesos. However, Kimberly and Scribe were exonerated from the payment for cooperating under the SIC's leniency programme. Carvajal, for its part, did not recognise the competition violation, despite the fact that the SIC found it performed a leading and active role within the illegal agreement.
Twenty-four individuals were also sanctioned for collaborating, authorising, tolerating or facilitating the anticompetitive behaviours. Fines for individuals reached 2.8 billion pesos (approximately), but considering the benefits offered to Kimberly and Scribe under the leniency programme, only the fines imposed on Carvajal's employees (12 individuals) were effectively charged.
The decision of the Superintendent was confirmed on 29 December 2017, with the resolution that solved the reconsideration petition filed by Carvajal and some of the individuals linked to this company.
Private security services (bid-rigging cartel)
On 24 April 2017, the SIC sanctioned seven private security services companies (Guardianes, Starcoop, Cobasec, Centinel, Expertos, Insevig and Security Management Group), and 17 senior directors linked to them, with fines exceeding 26 billion pesos, for violating free competition in public procurement processes (ie, bid-rigging).
The SIC found that these companies formed a ‘de facto' business group called ‘Grupo SMG', through which they manipulated numerous contracts with different public entities. Between 2009 and 2012, the companies presented themselves as independent competitors in public tenders worth 70 billion pesos, when, in fact, they acted in a coordinated and concerted way and under the direction of a hidden controller, deceiving various contracting public entities through this conduct.
Some of the public entities affected by the bid-rigging conduct were the General Attorney's Office, the Colombian Institute for Family Welfare (ICBF), the Administrative Sport Department (COLDEPORTES), the Colombian Airforce, the National Learning Service (SENA), the district of Bogotá and several municipalities of the country.
The SIC also sanctioned the hidden controller of the SMG Group, as well as several of their relatives and other senior executives of the companies involved, for having collaborated, facilitated, authorised, executed or tolerated the anticompetitive conducts.
This decision is part of the national front's fight against corruption - in this case, ‘private corruption', since the investigated conduct did not involve the behaviour of public officials.
The reconsideration petition made by the sanctioned parties is still pending resolution by the Superintendent.
Cattle auctions cartel (price-fixing cartel)
On 10 February 2017, the SIC sanctioned the Colombian Association of Cattle Auctions (ASOSUBASTAS) and 16 of its affiliates for engaging in price-fixing on the commission charged to cattle buyers.
The decision was based on relevant evidence found by the Deputy Superintendence for Competition Protection, such as:
- minutes of the general assembly of shareholders of ASOSUBASTAS, in which it was agreed to charge a commission to cattle buyers in cattle auctions;
- the issuance of the ‘Regulations for the Commercialization of Cattle in Auctions', which established the policies and rules that should be followed within these processes; and
- minutes of the board of directors of several cattle auctions that proved the performance of the price-fixing agreement in the market.
The fines imposed on the 17 legal persons exceeded 2,692 million pesos. The SIC also sanctioned the 17 legal representatives of these companies, who collaborated, facilitated, authorised, executed or tolerated the anticompetitive behaviours. The total amount of the fines on individuals was 339 million pesos.
The Superintendent, by means of a resolution issued on 14 June 2017, resolved the reconsideration petition filed by the sanctioned parties. Fine reductions were granted to three legal entities and two individuals.
Relevant cases under investigation
Private security services: new case (alleged bid-rigging cartel)
The Deputy Superintendent for Competition Protection, on 14 June 2017, issued a statement of objections against eight private security services companies (Guardianes, Starcoop, Cobasec, Centinel, Expertos, Insevig, Sejarpi y Security Management Group) and 13 senior directors linked to these companies, for engaging in alleged bid-rigging practices in at least 26 public procurement processes, between 2012 and 2015. The public tenders' value is estimated at 30 billion pesos.
According to the evidence collected, these companies probably created and operated a strategy to limit competition by participating in public procurement processes pretending to be independent and autonomous competitors, when in fact they shared the same interests. Allegedly, their strategies were coordinated under the direction of a hidden controller in order to increase, in an artificial way, their chances of being awarded the contract.
The statement of objections also covered the alleged hidden controller, as well as other senior executives of the investigated companies, for allegedly having collaborated, facilitated, authorised, executed or tolerated the anticompetitive behaviours.
This new investigation represents a possible continuation of the anticompetitive practices performed by the private security companies sanctioned by the SIC in April 2017. The public entities that were allegedly affected in this new possible cartel were the Colombian Institute for Family Welfare (ICBF), the Superior Council of the Judicature, the Ministry of Transportation, the Secretariat of Education of Bogotá, and the Ministry of Labour, among other entities on a national and territorial level.
Concrete pipes for sewerage (alleged price-fixing and customers' distribution cartel)
On 11 May 2017, the Deputy Superintendent for Competition Protection issued a statement of objections against American Pipe and Construction International (the Colombian branch of a foreign company), Manufacturas De Cemento SA (TITÁN), Prefabricados De Concreto Tubox SAS, and seven individuals related to these companies, for participating in alleged cartels in the market of concrete pipes for sewerage.
Two charges were included in the statement of objections. The first charge consisted in an alleged cartel for the artificial price fixing of concrete pipes for sewerage; the second charge referred to an alleged cartel to distribute potential customers, by which competition would have stopped for more than a decade (2004-2014). The three investigated companies would have had sales in the Colombian market of concrete pipes for sewerage worth over 250 billion pesos during the period investigated.
The Deputy Superintendence collected evidence such as statements, emails, appointments for meetings and digital files that contained information about the way the alleged cartels were executed; the places where the structuring, monitoring and execution of the alleged anticompetitive agreements were allegedly carried out; and the way in which senior executives may have agreed to eliminate traces of their behaviour.
The proceeding started thanks to the cooperation of an investigated company that applied to the leniency programme and denounced the existence of the alleged cartel, providing evidence of its functioning and the participation of other co-cartelist companies. The identity of the whistleblower is being kept confidential and will only be disclosed when the reasoned report is issued by the Deputy Superintendent.
Contact lenses (alleged unfair competition)
On 25 October 2016, the Deputy Superintendent for Competition Protection issued a statement of objections against the Colombian Federation of Optometrists (FEDOPTO) and nine individuals related to such federation, for alleged anticompetitive behaviours related to discrediting acts and inductions to contractual breaches (unfair competition practices).
According to an analysis carried out by the SIC, the purchase of contact lenses in Colombia is possible through (i) traditional channels, in which all types of contact lenses can be commercialised (in series and customised), and (ii) non-traditional channels, in which sellers are located on the internet and where it is possible to acquire contact lenses of series production.
Among other behaviours, FEDOPTO allegedly deployed a campaign to disseminate information against the commercialisation of mass-produced contact lenses online, arguing the existence of unreal restrictions in the Colombian legal system that supposedly prevented such activity.
Likewise, FEDOPTO may have pressured and misinformed the visual health community in order to avoid alliances with the online sellers of these medical devices. At the same time, FEDOPTO may have executed a series of behaviours to prevent Colombian consumers from acquiring contact lenses through the internet, alluding to alleged affectations to the ‘consumers' health and safety' that, in fact, were not true and were possibly aimed at maintaining the commercialisation of such devices in traditional channels.
The proceeding was initiated as a result of a complaint filed in February 2014, which reported the alleged obstructions and unfair behaviours against the online non-traditional channels of contact lenses in series production.
FONADE 1 (alleged bid-rigging cartel)
On 9 August 2016, the Deputy Superintendent for Competition Protection issued a statement of objections against six individuals and the company Castañeda Rodriguez Ingenieria & Arquitectura Ltda, for allegedly engaging in bid-rigging practices in two selection processes conducted by the Financial Fund for Development Projects (FONADE). The objectives of the selection processes were the validation of studies and designs for complementary works of a stadium located in Pijao (Quindío Department), and the improvement of housing in Condoto (Chocó Department).
According to the evidence collected by the Deputy Superintendence, these bidders may have prepared their proposals jointly, since they presented (i) similar formats and documents, (ii) joint and simultaneous requests for insurance policies, and (iii) identical symmetrical differences in the estimation of unit costs and prices.
The conduct of the investigated parties could possibly be aimed at distorting free competition in the contractual selection processes, in order to obtain the award of the respective contracts.
The proceeding started with a complaint filed in April 2014 by FONADE, in which this fund reported the events and inconsistencies that occurred in the selection processes.
FONADE 2 (alleged bid-rigging cartel)
On 7 September 2016, the Deputy Superintendent for Competition Protection issued a statement of objections against Consorcio Edificaciones 2014 and Consorcio Obras 2014 for their alleged participation in bid-rigging practices in a tender conducted by FONADE. The objective of the contract was to adapt school classrooms in Cocorná (Antioquia Department). The statement of objections also covered four individuals linked to the referred consortiums.
The companies and individuals belonging to the aforementioned consortiums may have presented proposals with a high degree of similarity, both in form and in structure, apparently to distort competition and obtain the award of the contract.
In addition to the suspicious similarities between the proposals, the insurance policies were issued by the same insurer, on the same date and in the same branch. Moreover, the two proposals were found on the same computer.
Neither of the investigated consortiums were awarded the contract.
This proceeding was initiated ex officio by the SIC, on 13 April 2015.
The most recent competition cases the SIC has decided and investigated are particularly linked to its commitment to preventing anticompetitive practices, promoting the leniency programme and fighting bid rigging and corruption.
The prevention of behaviours contrary to competition is being fostered by the imposition of exemplary fines, the publication of the sanctions imposed in the media, and the explanation to the public of the detrimental effects of these illegal conducts in the decisions issued.
The improvement of the leniency programme represents a priority for the SIC. Therefore, the SIC has effectively provided important benefits to whistleblowers who have cooperation with its investigations, and has imposed strong measures on those agents who do not provide such cooperation and support during the competition proceedings.
The SIC's efforts in promoting and disseminating the leniency programme have shown results, since new alleged cartels in major economic sectors have been detected thanks to this tool. However, the SIC is still working on explaining its benefits to the society and letting people know more precisely how it operates.
Finally, there is an evident focus on bid-rigging practices, which sometimes are linked to corruption situations. Most of the current investigations are intended to safeguard free competition in public procurement processes, in order to protect the right of the Colombian state of contracting the best bidders and proposals, under the best conditions, and with the highest degree of efficiency for the benefit of public resources.
In order to enhance its fight against bid-rigging, the SIC created, in 2017, an elite and multidisciplinary task force to fight bid-rigging, which is dedicated to investigating this particular behaviour and works in permanent coordination with the General Attorney's Office. The task force will operate during the period 2017-2019.
The aforementioned actions are in accordance with the SIC's purposes of fostering confidence in the Colombian markets, promoting transparent behaviours among economic agents, and consolidating an effective and reliable competition policy, for the benefit of consumers, the general interest and the competitive process itself.