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Construction cartel UPDATE – AFCA files application for a fine on Pittel + Brausewetter and for findings on Kostmann

In the course of its investigations into the Austrian construction industry, the Austrian Federal Competition Authority (AFCA) filed another application on 21 February 2023 to impose a fine of EUR 4.81 million on Pittel + Brausewetter and to find that the company Kostmann, currently under the leniency programme, committed an infringement.

Pittel + Brausewetter: application for a fine

The AFCA filed an application with the Cartel Court to impose a fine of EUR 4.81 million on the company Pittel + Brausewetter Gesellschaft m.b.H. The cartel law infringement comprises illegal price fixing, market divisions and the exchange of information with competitors in relation to public and private tenders in the sector of building construction and civil engineering, particularly road building, in Austria.

The AFCA served its statements of objections on Pittel + Brausewetter in September 2022. Pittel + Brausewetter has now acknowledged the facts. The company indicated it would be interested in a speedy conclusion of proceedings, fully acknowledging the infringement for use in proceedings before the Cartel Court. The AFCA therefore applied for a reduced fine of EUR 4.81 million, with the involvement of the Federal Cartel Prosecutor. The company accepted the amount as proportionate. In setting the amount of the fine, the AFCA also took into account the introduction of a comprehensive compliance management system.

Kostmann: accepted as principal witness
In relation to Kostmann GesmbH, the AFCA filed an application with the Cartel Court to find an infringement. Kostmann applied for leniency during spring 2017 and has since cooperated continuously and fully with the AFCA, which is why the Authority subsequently dispensed with the fine completely.
Kostmann was the first company to submit information and evidence that enabled the AFCA to expand its investigations. The AFCA may refrain from imposing a fine if the company complies with the leniency programme’s criteria, which Kostmann did. The Authority therefore only applied for a finding by the Cartel Court that the company had participated in the cartel. Kostmann also acknowledged the AFCA’s legal assessment of the case during its cooperation with the Authority. The company implemented a comprehensive compliance management system in order to avoid cartel infringements in future.
The infringement involved illegal price fixing, market divisions and the exchange of information with competitors in relation to public and private tenders in the sector of building construction and civil engineering in Austria.
“Our leniency programme in cartel law works well, even in cases of concerted practices in relation to tenders. Principal witnesses help us uncover secret agreements from the inside. As of today, the AFCA has received approximately 120 applications for leniency since 2006,“ adds interim Director General Natalie Harsdorf-Borsch.

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 investigations into 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 infringement 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 many of the companies with alleged involvement. Some of the proceedings have meanwhile been finally concluded.
The companies involved in the infringement engaged in concerted action in order to help each other to win construction contracts, thereby securing market shares and utilising their capacities accordingly. 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 behaviour when submitting bids – and in some cases they formed anti-competitive working groups and bidding consortia.
Among other things, the involved companies agreed on which bidder should win the contract, the price to be offered and the submission of bogus offers, as well as arranging that some competitors would not submit any bid at all. The arrangements for such bogus offers were made during rounds of talks among the competitors or at bilateral meetings.

FAQ Construction cartel update February 2023
For further information on and developments in the construction cartel, please refer to our FAQ Construction cartel UPDATE February 2023 (only in German available).

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.