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Fines catch up with builders
13 Jan 2014 Jana Liptáková Business
THE SUPREME Court has upheld an Antitrust Office verdict finding six construction companies in Slovakia guilty of forming a cartel when competing for a highway construction order in a public tender. The companies involved must pay an aggregate fine of nearly €45 million.
While some of the firms involved claim that the fine might actually ruin them financially, the question over how the final verdict will impact their participation in future public tenders remains open. Given that the case involves major construction companies which are currently building highways in Slovakia, the verdict may influence who will compete for subsequent highway construction orders worth tens of millions of euros.
“We expect a methodical instruction from the Office for Public Procurement,” Marcel Jánošík, spokesperson for the National Highway Company (NDS), the highway construction investor, told the Sme daily.
The parties involved in the case are waiting to receive the official Supreme Court verdict. The court has 30 days to write the verdict down and send it to the companies.
The case goes back to a 2004 tender to build an eight-kilometre stretch of the cross-country D1 highway between Mengusovce and Jánovce in the north of the country. The predecessor of the NDS, the Slovak Administration of Roads, received three bids to construct the highway from two consortiums and one individual company. Because the bids significantly exceeded the estimated costs and since the administration considered the differences between the individual bids to be too low, it cancelled the tender altogether and brought the case to the Antitrust Office (PMÚ).
In 2006 the PMÚ ruled that construction companies Strabag, Doprastav, BETAMONT, Inžinierske Stavby, Skanska DS and MOTA – ENGIL, ENGENHARIA E CONSTRUCAO, S.A. concluded a cartel agreement and thus violated the provisions of the Law on the Protection of Competition and the Treaty on the Functioning of the European Union.
The PMÚ had a closer look at the bids submitted by the consortium of Strabag, Doprastav and BETAMONT, the consortium of Skanska and Inžinierske Stavby and Portuguese company MOTA – ENGIL, ENGENHARIA E CONSTRUCAO. After comparing the aggregate prices and the unit prices for the individual works, it found that the ratios of the proposed prices were constant, the Trend economic weekly wrote in January 2006.
“The mutual ratio of price offers for individual items between all the participants is extremely constant,” the PMÚ wrote in its verdict, as cited by Trend. “It is impossible that among three independent participants of a tender that such an accord of offered prices occurs without any mutual coordination.”
The PMÚ slapped the construction firms with the highest fines in Slovakia’s history. The companies challenged the verdict and the Regional Court in Bratislava overturned the PMÚ verdict in December 2008. The Supreme Court verdict from late December 2013 rejected all legal actions of the construction companies and thus upheld the original PMÚ verdict without offering any other legal options.
Strabag is to pay a fine of €12.2 million, Doprastav almost €6.6 million, BETAMONT about €130,000, Inžinierske Stavby €3 million, Skanska €9 million, and MOTA – ENGIL, ENGENHARIA E CONSTRUCAO, S.A. will have to pay €13.9 million, the SITA newswire wrote.
The fine surprised Dušan Mráz, co-owner of Doprastav, a company which was on the brink of bankruptcy in the summer 2013, claiming that the fine might ruin the company.
“We certainly will have [the money] to pay the fine,” Mráz told the Sme daily.
Impact on future tenders
It remains to be seen what kind of impact the Supreme Court verdict will have on the participation of the companies involved in future tenders, as the law on public procurement bans a company found guilty in a cartel case in the last three years from taking part in tenders for state orders.
But Viliam Karas, partner of law firm Maple & Fish, told Sme that the ban does not apply to cartels existing before July 2008, which fall under the valid law from that time. Based on that law, such companies cannot participate in a tender if they took part in cartels in the last five years, regardless of when the courts confirmed the existence of the cartel. Since this case occurred nine years ago, the five-year limitation period is already over.
Contrary to this, Andrej Leontiev, partner of law firm Taylor Wessing e/n/w/c, maintains that the law, whose wording was valid when the cartel allegedly occurred, was based on the principle that the ban on participation in tenders will become effective only when the verdict of the court becomes valid. Subsequent revisions to the law only refined its wording, but did not change the principle, according to Leontiev, Sme wrote.
The NDS, as the investor of the highway’s construction and the announcer of the tenders, has not yet received the Supreme Court verdict and wants to consult on the matter.
The Transport Ministry has indicated that a ‘blacklist’ of companies that participated in cartels will be created. Minister Ján Počiatek noted for the public broadcaster Slovak Radio on January 3 that the Office for Public Procurement had already responded to the case in 2006 when it issued an instruction to ban these companies from participating in public tenders. Počiatek expects that the office will issue a similar instruction.
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