Colombia: Superintendency of Industry and Commerce

During the past year, the Superintendency of Industry and Commerce (SIC), as the Colombian competition authority, has sanctioned several cartels in relevant markets and has conducted important investigations with an evident focus on bid-rigging practices and behaviours affecting public procurement.

It is worth remembering that, in 2017, the SIC created an elite and multidisciplinary task force to fight bid-rigging. This specialised group is composed of 55 professionals (28 lawyers, eight forensic computer scientists, six economists, four accountants, three business managers, two civil engineers and four assistants) who are dedicated to investigating bid-rigging practices and other anticompetitive behaviour that affect public procurement. The functioning of this group is supported by a government investment of US$2 million.

The following sections will describe the main cases the SIC has decided recently (regarding different anticompetitive practices), and the most important investigations that are being conducted (especially on behaviours affecting public procurement), which for sure will lead to important decisions in the near future.

Recent decisions on important economic sectors

Cement (price fixing cartel)

On 11 December 2017, the SIC sanctioned Argos, Cemex and Holcim – the three largest Colombian cement producers – and six senior managers of these companies, with fines worth US$70 million, for setting prices of ‘Portland Type 1’ gray cement in the national market. The price fixing agreement was implemented in the modality of ‘conscious parallelism’, and the period of the investigation was January 2010 to December 2012 (three years).

During the investigation, the SIC could establish that:

• the prices of Portland Type 1 gray cement in the national market had a marked parallel behaviour (price parallelism) between January 2010 and December 2012;

• Argos, Cemex and Holcim did not offer an economically reasonable or truthful explanation that justified such price parallelism, nor the way in which the prices were fixed within the said companies;

• the characteristics and structure of the cement market in Colombia make this market a scenario highly prone to collusion or business cartelisation, in accordance with markers proposed by Posner, Harrington, Kovacic and the Organisation for Economic Co-operation and Development; and

• the investigated companies, during the period under investigation, maintained a collaborative, non-competitive and collegial environment, which showed that they abstained, in a conscious and coordinated manner, from competing effectively.

The SIC found that prices of Portland Type 1 gray cement in the domestic market, during the investigated period increased 29.9 per cent, while the inflation caused in the same period was of 9.3 per cent (meaning that the price of cement increased more than 20 per cent above inflation).

It should be noted that this case adds to multiple investigations and sanctions that have been conducted and imposed in more than 30 countries against cement companies for incurring in cartelisation, such as the European Union, Spain, India, Poland, Germany, Brazil, Argentina, Australia, the United Kingdom and Belgium, among others.

The Superintendent, by means of a resolution issued on 6 April 2018, solved the reconsideration petition filed by the sanctioned parties and confirmed the fines imposed.

Block water (abuse of a dominant position)

On 20 March 2018, the SIC sanctioned the Aqueduct and Sewerage Company of Bogotá and two directors linked to such entity, with fines worth US$6.8 million, for abusing its dominant position in the block water supply market in Bogotá. The SIC found that such company discriminated and thus obstructed the activities carried out by Coopjardín – a water treatment and distribution company – in the related market of commercialisation of drinking water in the north area of Bogotá.

The abusive behaviours were conducted through the installation of flow and pressure reducing valves in the connection tubes of Coopjardín. With the installation of such devices, the Aqueduct and Sewerage Company of Bogotá supplied block water to Coopjardín under different and unjustified conditions than it offered to other buyers, and effectively obstructed the activity of such company, affecting drastically the conditions in which its final users received drinking water. Several schools, universities, associations and residential condominiums located in the north of Bogotá were affected by this anticompetitive behaviour.

Due to the seriousness of the case, the SIC ordered precautionary measures in 2013 aimed at the removal of the devices installed.

The reconsideration petition made by the sanctioned parties is still pending to be solved by the Superintendent.

Bureau Veritas (general prohibition: anticompetitive practices within a public procurement process)

On 15 June 2018, the SIC sanctioned Bureau Veritas Colombia and Tecnicontrol and its two legal representatives, with fines worth US$4.7 million, for engaging in a restrictive practice within a contracting process conducted by Ecopetrol – the Colombian Oil Company, which has a majority state share. The objective of the contract was to hire health, safety and environmental (HSE) consulting services, and its budget was US$9 million in 2013.

The SIC found that Bureau Veritas Colombia and Tecnicontrol imitated being autonomous and independent competitors during the contracting process, when in fact they acted in a coordinated and concerted way, for the benefit of Bureau Veritas International Group, to which both companies belong. Thanks to this behaviour, such companies increased the probability of being awarded the corresponding contract (Bureau Veritas Colombia effectively
won).

It was also established that Bureau Veritas Colombia and Tecnicontrol, at least during 2013, coordinated their behaviour on relevant aspects in all the selection processes in which they participated.

The reconsideration petition made by the sanctioned parties is still pending to be solved by the Superintendent.

Relevant cases under investigation (alleged bid-rigging cartels)

Aerocafé

On 30 March 2012, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against six companies and five individuals to determine if they engaged in bid-rigging practices in two merit contests conducted by the Airport of Coffee (Aerocafé) – located in Manizales city – whose objective was to hire technical, financial and administrative audit services for some infrastructure projects.

The Deputy Superintendent found that the investigated parties coordinated their participation in the contests to favour some market agents, which were the awardees of the selection processes analysed. In addition, evidence showed that, after the awarding, the agents involved made subcontracts between them and applied other types of compensation mechanisms.

The Deputy Superintendent already issued its reasoned report with the results of the investigation in October 2017, and recommended the Superintendent to impose fines on the investigated parties. The Superintendent is studying the case and the final decision is pending to be issued.

Courtyards and cranes

On 16 August 2013, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against five companies and nine individuals to determine if they incurred in bid-rigging practices within a public tender conducted by the District Department of Mobility, whose objective was to hire the public service of courtyards and cranes in Bogotá. Some of the investigated companies are part of the NULE group, a business group that has been sanctioned by the SIC in the past for rigging bids to win public contracts.

The Deputy Superintendence found that the investigated parties executed an anticompetitive agreement aimed at ensuring the award of the contract resulting from the selection process – which effectively happened. It was agreed not to compete within the process in exchange of compensations in favour of whoever was not the successful bidder. Such compensations were made effective through contracts that were granted during the execution phase of the contract.

The Deputy Superintendent already issued its reasoned report with the results of the investigation in November 2017, and recommended the Superintendent to impose fines on the investigated parties. The Superintendent is studying the case and the final decision is pending.

Elenco-Electro

On 10 July 2017, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against four electric engineering companies and four individuals related to such business, to determine if they violated the general competition prohibition within a public procurement process conducted by the Mayor’s Office of Medellín. The objective of the contract was the adaptation and improvement of some facilities.

The Deputy Superintendence found that the investigated parties participated in the Mayor’s Office tender process by acting as independent and autonomous competitors, when in reality they had coordinated their strategy and obeyed the same direction and control. The objective was to artificially increase the chances of being awarded the corresponding contract.

The Deputy Superintendent already issued its reasoned report with the results of the investigation in December, 2017, and recommended the Superintendent to impose fines on the investigated parties. The Superintendent is studying the case and the final decision is pending to be issued.

Supply of stationery products – Ferlag

On 16 February 2018, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against two companies for allegedly engaging in anticompetitive practices during the selection and execution processes of at least five framework agreements, whose object was to hire the supply of stationery products, office supplies, printing products and computers, among others. Such processes were being conducted by the National Public Procurement Agency.

Based on the evidence collected during the preliminary enquiry, the Deputy Superintendency found that, allegedly, the investigated companies had participated in several public selection processes acting as independent and autonomous competitors, when in fact they followed the same direction and obeyed the same hidden controller.

This way, the investigated parties would have adopted behaviours that undermined competition in the framework agreements in which they participated, generating a potential public detriment by reducing the government alternatives within the virtual store of the Colombian state.

This case is particularly important because the Superintendent of Industry and Commerce ordered precautionary measures to suspend or stop the effects derived from the alleged anticompetitive practices. Thanks to this, the investigated parties were excluded from the execution processes in which they were participating.

The investigation is still ongoing.

Supply carousel

On 25 April 2018, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against 23 companies for allegedly having colluded systematically (carousel) in at least 101 public procurement processes conducted by several state entities, between 2014 and 2017. The objectives of such contracts were the supply of construction materials, tools and didactic and professional training materials, among others.

The proceeding began with a complaint filed by the General Attorney’s Office. The evidence collected by the Deputy Superintendency (which involves documents, emails, WhatsApp chats and testimonies, among others), indicates that the investigated parties allegedly structured a systematic mechanism with the purpose of suppressing or eliminating competition within the state procurement processes in which they participated. Specifically, the purpose of the described system would have been to prevent price reductions within reverse auctions, which means that such system would have lead the state to pay more for the same products and services. Moreover, the surcharge was distributed among all the proponents involved in the anticompetitive behaviour.

The 101 selection processes in which the system would have been executed had an official budget that, together, amounts more than US$25 million. Some of the alleged affected entities are the Attorney’s General Office, the National Police, the National Penitentiary and Prison Institute, the Judicial Branch and the National Learning Service, among others.

The investigation is still ongoing.

Food rations for armed forces

On 21 May 2018, the office of the Deputy Superintendent for Competition Protection opened an investigation and issued a statement of objections against seven companies and 11 individuals for allegedly incurring in bid-rigging practices, aimed at manipulating public contracts and altering the prices of food rations contracted by the Logistics Agency of the Military Forces. It should be noted that this investigation does not involve the conduct of any member of the military forces or of any public official – this is a case of private corruption.

Apparently, during the period between 2011 and 2018, in a permanent and uninterrupted manner, in at least 10 advanced selection processes that were conducted to choose the food ration providers required by the Logistics Agency of the Military Forces, the companies and persons investigated could have distributed and manipulated contracts with official budgets that amounts more than US$16 million.

The Deputy Superintendency also established that the companies and individuals investigated could have altered the values of the said rations with artificially high prices, having agreed not to compete and, therefore, resigning to submit downward offers in the reverse auctions in which they participated. The evidence collected indicates that such behaviour could have generated cost overruns of roughly 50 per cent of the value of the products to be hired.

The investigation is still ongoing.