The Romanian Competition Council (RCC) has issued its first decision in a cartel case which was brought to the RCC’s attention by a leniency application filed by one of the cartelists − a local entity pertaining to the Weatherford group.
This decision, issued in January 2015, is an important breakthrough for the RCC, which in recent years has been strongly promoting the leniency procedure in Romania’s business community. This decision also sends an important message to companies encouraging them to consider applying for leniency, given that the leniency applicant in this case benefitted from full immunity from fines.
The background of the case
The case concerned a cartel among five providers of oil and gas drilling services active on the Romanian market.
Based on the information provided by the leniency applicant, the RCC identified multiple instances of collusion between the cartelists in the interval from June 2008 to October 2009, during which they agreed to submit rigged bids in tenders for drilling services organized by the national company for natural gas (Romgaz, the incumbent producer and supplier of natural gas on the Romanian market).
The aggregated market shares of the cartelists covered approximately 75 percent of the relevant market, with the leniency applicant being the smallest of the five companies.
The actual bid rigging practices which the involved companies resorted to implied agreements prior to each tender organized by Romgaz as to which company would win the respective tender. In order to ensure the desired result was obtained, the other companies either refrained from submitting any bids or submitted courtesy bids which they knew could not be declared as winners.
Evidence considered by the RCC in proving the infringement
The information and documents provided to the RCC by the leniency applicant came into its possession upon the acquisition of control over a Romanian drilling company and the acquisition of another Romanian drilling company’s assets.
Following the acquisition (during what the RCC decision suggests was a post-closing due diligence conducted by the purchaser), indications regarding the potential participation of the companies in an illegal agreement were identified, and in this context the purchaser decided to apply for leniency.
In addition to the evidence submitted by the leniency applicant, the RCC also examined information and documents seized from the offices of the cartelists during dawn raids, which were found to confirm the allegations in the leniency application.
The key documents which substantiated the RCC’s findings were handwritten notes taken by a representative of one of the cartelists during meetings which took place in 2008 and 2009. All the cartelists participated in such meetings, which were aimed at discussing and allocating to each cartelist the tenders expected to be forthcoming from Romgaz.
The RCC also identified enforcement actions taken by the cartelists against each other (in case the order for tender allocation was not observed), with support also from members of Romgaz’s senior management team, which appear to have pressured the leniency applicant into withdrawing offers from tenders he was not meant to win.
Other key points examined by the RCC
In addition to the appraisal of the infringement in light of the information and documents mentioned above, the RCC also touched on two important issues in this case:
- How a company can distance itself from a cartel
The cartel initially involved the president of the board of directors of the company acquired by the leniency applicant. Pursuant to the acquisition, it was decided that the acquired company would participate independently in tenders, without prior coordination with the other cartelists.
At this stage, enforcement actions were taken by the other cartelists. However, the RCC found that this is not sufficient evidence to document the company’s exit from the cartel, considering that (i) no public communication was sent attesting to such exit and (ii) the respective company did not challenge subsequent tenders and continued to expect compensation for withdrawn bids.
- The nature of information exchanged
Whilst the cartelists did not clearly discuss and agree on the commercial terms of each tender (the price to be offered by each company and other commercial conditions), the RCC found it sufficient that an overall agreement was reached with respect to the allocation of the tenders for the finding of an infringement, even if subsequently the commercial terms of each tender were set unilaterally by each company.
This is due to the fact that such unilateral price setting would anyway be subject to the initial agreement regarding the envisaged winner of each tender.
The decision could have implications from a criminal law perspective
The sanctions applied by the RCC in this case ranged between 2.2 percent and 3.2 percent of the turnover of the concerned undertakings. However, the key issue raised by this case is related to its potential criminal implications.
The RCC has in recent years concluded multiple collaboration protocols with criminal authorities, and such collaborations have particularly focused on bid rigging practices in the context of tenders organized by Romanian public authorities and state-owned companies.
RCC officials have repeatedly stated publicly that, where public funds are negatively impacted by bid rigging practices, the RCC will team up with prosecutors to ensure that both companies and individuals are scrutinized and sanctioned where it is the case.
Under the Romanian Competition Law, designing and organizing an infringement of competition rules by a natural person acting as director, legal representative or otherwise exercising management functions in an undertaking qualifies as a criminal offense. Additionally, under the Romanian Criminal Code, as revised in 2014, bid rigging is also specifically incriminated.
It is not very clear at this stage if this decision will raise implications from a criminal law perspective as well for the persons involved. However, while so far there has been very limited case law in this respect in Romania, it can be expected that in the future more criminal cases will result from the RCC’s bid rigging investigations.