AdC sanctions bid-rigging cartel in the security sector
Press Release 13/2022
July 13, 2022
The Portuguese Competition Authority (AdC) sanctioned a bid-rigging cartel active in the provision of surveillance and security services in public tenders. The cartel involved the 2045 Group, Comansegur, Grupo 8, Prestibel, Prosegur, Securitas and Strong Charon. An ancillary sanction excluding companies from participating in public procurement procedures was also issued (see section on Sanctions, below).
The services provided by these companies were contracted under public procurement procedures by hospitals, universities, government, public agencies and municipalities.
The illegal practice
The AdC concluded that the companies coordinated the participation in public procurement procedures by sharing clients and fixing the price levels of the services to be provided, from 2009 until at least 2020, or 2018 in the case of Strong Charon.
In this cartel, companies maintained a secret agreement according to which they submitted fictitious bids, suppressed bids or even excluded themselves from participating in the public procurement procedures. This was done with the aim of ensuring the hiring of the company chosen among them.
This behavior, which is a violation of Competition Law, leads to less favorable conditions for public purchasers than would result from a situation of effective competition. This translates, in turn, into higher prices, lower quality or less innovation.
Collusion between firms compromises the efficient allocation of public resources and undermines the goal of achieving "more and better for less” in public procurement. Bid-rigging in public procurement ultimately harms both consumers and taxpayers.
The case was opened by the AdC following several complaints submitted by public entities within the scope of the Combatting Bid-rigging in Public Procurement outreach initiative, which the AdC has been carrying out since 2016.
Unannounced inspections were carried out at the companies' premises in 2019, after which the company Strong Sharon required access to the Leniency Program and cooperated with the AdC. This resulted in a partial fine waiver.
A Statement of Objections was adopted on July 16, 2021. All involved companies were given the opportunity to exercise their right to be heard and to defend themselves, providing information which was duly considered in the decision now issued.
Portuguese competition law expressly prohibits cartels, since these are agreements between companies that restrict, by object and in an appreciable manner, competition in all or part of the national market.
Combatting cartels is a priority for the AdC, given the damage they invariably cause to consumer welfare and, when they occur in the context of public procurement, also to the State and taxpayers.
For more information on the case, please see the AdC's website.
The sanctioning decision resulted in a total fine of approximately €41,297,000, disaggregated as follows:
- 2045 Group: €5,960,000
- Comansegur: €1,175,000
- Grupo 8: €5,008,000
- Prestibel: €6,028,000
- Prosegur: €8,127,000
- Securitas: €10,331,000
- Strong Charon: €4,668,000
The fines imposed by the AdC are determined by the turnover of the companies in the affected market in the years of the practice. According to the Portuguese Competition Law, fines cannot exceed 10% of the turnover of the sanctioned entities in the year prior to the date of adoption of the decision.
Additionally, in determining the amount of the fine imposed on Strong Charon, the AdC took into consideration the cooperation provided by the company during the investigation, through the Leniency Program. The use of this instrument was essential for the proof and effective punishment of the anticompetitive behavior.
When setting the fine, the AdC considers the seriousness and duration of the infringement, the degree of participation in the infringement, the economic situation of the companies, among other circumstances (see the AdC Guidelines on the methodology used in fine-setting).
Given the seriousness of the infringements and taking into account the need to prevent them, the AdC has also applied an ancillary sanction to all companies except Strong Charon. This sanction excludes companies from participating, for a period of 6 months, in public procurement procedures related to surveillance and security services, alone or in combination with other services, in all or part of the national territory.
The sanctioning decisions of the AdC may be appealed. The appeal does not suspend the execution of the fines. Affected parties may request the Competition, Regulation and Supervision Court to suspend the enforcement of the decisions if they (i) demonstrate that the decisions cause them considerable damage and (ii) provide an effective guarantee in its place.