Bid rigging investigations in the Netherlands

1. Bid rigging investigations in the Netherlands ICN Workshop November 14, 2006

2. Outline of presentation • Cause + start of investigations • Selection of targets • Investigation methods • Results of investigations • Characteristics of bid rigging schemes • Market conditions favourable to bid rigging • Lessons learned

3. Cause and start of investigations End of 2001: • whistleblower A; black account • informant B • strong attention politicians and media • pressure on competition authority NMa

4. Selection of targets: analyses + checks • analyses of materials and markets • verify: - is black account authentic?- credibility of informants? - in what markets did behaviour took place? • informants appeared to be insiders • matching statements • road construction market • demand per project: tenders by clients

5. Construction industry attitude “In the branche, we have a new rule of conduct: every whistleblower must swim with concrete boots!”

6. Selection of targets: first line of reasoning Largest companies (5-10) in road construction market: • mentioned far more often than middle sized and smaller companies • seemed involved in - different types of bid rigging- both national and regional collusion - both larger and smaller projects • smaller companies seemed only involved in smaller projects

7. Selection of targets: fixation of targets • main strategy: centralize pressure on leading companies • 5-10 largest companies • focus on limited number of bid rigging occasions • bearing in mind: - likely involvement many other companies - likely existence of bid rigging schemes • bid rigging scheme (system) = connected bid rigging events within one market segment

8. Investigation methods: target persons • identify involved persons (names; positions and roles) • if unknown: assessment of likely involved company officials (key persons, taking decisions on bids) • their right-hand man and/or secretary

9. Investigation methods: sources of information • written sources: notes, agendas, letters, lists • digital recorded information: hard disks, servers, diskettesHow and were to find: company premises • tender information (clients): chronology of tender events

10. Collusion and culture breakdown Early 2004, after 2 years of investigations: • first set of fines: € 100 million • new information • government invitation to apply for leniency • power of the press • company employees felt deceived

11. Construction industry attitude “First of all: I didn’t do anything, and secondly: everybody did the same!”

12. Special leniency approach • wider acceptance of applicants • focus on prove of participation and extensiveness of bid rigging schemes • option for companies for “fast lane procedure”: * no access to file * no individual comment on objections

13. Overall results • 470 companies applied for leniency • bid rigging schemes proven in: - the largest market segments(civil engineering; housing & buildings; installation; cables & pipes) - smaller market segments • also: cartels by producers of construction materials • till now: some 1300 fines have been levied • a few investigations are still in progress

14. Main characteristics of bid rigging schemes • large number of participants and/or some 80+% marketshare • varying group of participating competitors per project(project requirements and/or client determined composition of group) • allocation of works in rotation, under mutual granting of “claims” (future turnover) • claims: collusion debts and credits

15. Market conditions favourable to bid rigging schemes • interdependency * inherent to rotation schemes* parties are each others subcontractors* road construction: larger companies are asphalt producers • market transparency • multi discipline construction companies • low level of innovation • low level of competition from abroad • history; non-competing attitude throughout construction branches

16. Construction industry attitude “Sir, I don’t have competitors, I only have counterparts!”

17. Lessons learned • find the insiders • collusion with dozens of parties do exist • investigations may not be enough to end massive misconduct • dare to take a new approach • knowledge of markets and developments • coherent approach: enforcement strategy (programmes) • clients must play a much more active role