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Construction cartel: AFCA files application to impose fine on SWIETELSKY

Application filed to fine SWIETELSKY

The Austrian Federal Competition Authority (AFCA) will make another application for the imposition of a fine as part of its investigations into the Austrian construction industry. The application concerns SWIETELSKY AG and two of its subsidiaries (hereinafter “SWIETELSKY”) and is for a fine of EUR 27.15 million.

Following initial investigations SWIETELSKY promptly approached the AFCA in the summer of 2017, the second Austrian construction company that has done so. SWIETELSKY has since cooperated continuously and fully under the leniency programme, allowing the complex and comprehensive facts of the case to be processed better and faster, also in relation to several other companies in the construction sector. SWIETELSKY conducted a large number of internal interviews with its employees, internally examining new facts and suspicions immediately and fully, as well as handing over the results of these internal investigations to the AFCA in a timely fashion. SWIETELSKY also introduced a certified compliance system to effectively avoid any breaches of cartel law in the future.

In addition, as part of its cooperation with the AFCA, and with the involvement of the Federal Cartel Prosecutor, SWIETELSKY has fully acknowledged the breach for use in proceedings before the Cartel Court. All of these circumstances have contributed to the setting of a lower fine.

“This is another milestone in terms of resolving the largest cartel ever uncovered in Austria,” explains Acting Director General Natalie Harsdorf-Borsch.

Background information

In spring 2017, the AFCA carried out dawn raids together with the Central Public Prosecutor for Economic Crime and Corruption (WKStA) as part of its investigation into alleged concerted practices among construction companies, in the course of which it also impounded large amounts of data. The uncovered cartel relates to the construction industry, comprising nearly all segments in building construction and civil engineering, and was focused in particular on road building projects.

The breach covers the entire Austrian territory, albeit to varying degrees depending on the company involved. Numerous public and private clients were affected by these practices, as well as a large number of construction projects. The AFCA is still investigating the majority of the companies with alleged involvement. SWIETELSKY has acknowledged its involvement in the breach, committed by more than thirty companies, between July 2002 and October 2017.

The companies involved in the cartel engaged in concerted action with the intent of reducing or excluding competition, helping each other to win construction contracts and thus securing market shares. To reach this common goal, they engaged in illegal price fixing and market divisions, exchanged competitively sensitive information, relating for example to agreements on future collusive bidding behaviour regarding the submission of tenders, and formed anti-competitive working groups and bidding consortia.

They agreed on the price to be offered and the submission of bogus offers (which were “flagged”), as well as arranging that certain competitors would not submit any offer at all. Competing bidders also agreed among themselves which company should win the respective tender. Arrangements for such bogus offers were made in the course of rounds of talks amongst the competitors or during bilateral meetings. Contracts were sometimes distributed using a fixed ratio, which was based on historically grown market shares and reflected the number of construction projects a company should be awarded.

Some of the anti-trust breaches also involved consideration for refraining from submitting tenders, such as exchanging contracts, subcontracting, supplying or accepting services under preferential terms and conditions, etc. Instead of or in addition to these balancing measures, competitors sometimes also applied a points system, in which points were added (“credited”) or subtracted (“debited”) depending on the described consideration. In some cases, bidders also disclosed their calculations to each other before actually submitting tenders (“internal submission”), to be able to agree on the party that should be awarded the contract.

Fines for cartels

The Austrian Federal Cartel Act prohibits any behaviour that prevents or distorts competition. This covers price fixing agreements or the division of markets or territories. At the AFCA’s request, the Cartel Court may impose fines of up to 10% of an entity’s total turnover generated in the preceding business year if that entity is found to have breached the rules banning cartels. Fines are assessed on the basis of the gravity and duration of the breach, the degree of fault, and the economic strength and cooperation of the company concerned.