Overview of bid-rigging enforcement in Bulgaria (2008-2018)
Image Credit: anjči [CC BY 2.0] via Wikimedia Commons.
11th March 2019
In the last 10 years, the Bulgarian Commission for Protection of Competition (BCPC) has, on several occasions, tried to enforce prohibition of bid-rigging in public procurement procedures. The main reason for the limited success of the enforcement was the lack of direct evidence on coordination between the investigated undertakings. Historically, bid-rigging was implemented as breach of competition law in the Bulgarian Competition Protection Act (CPA) only in 2008 – the Competition Act adopting the rules of Art. 101 and 102 of the TFEU.
Starting from 2008, the BCPC initiated proceedings against undertakings active on different markets – such as construction, wholesale of medical products, provision of diagnostics services and consumables, tourism sector, energy sector, delivery of printing machines and materials etc. Usually, the proceedings gained significant public attention due to the characteristics of the bid-rigging: public procurements with public bodies as assignors (e.g. Ministry of Finance, Ministry of Health, municipal or state-owned hospitals etc.) often relying on financing from EU funds.
When conducting its investigations and enforcing the prohibition of bid-rigging, the BCPC applies its Notice on bid-rigging enforcement in public procurement procedures. The Notice sets the standards for conducting investigations, obtaining evidence, applying competition law on merits, determining the fine in the case of established breach, etc.
One of the first proceedings for bid-rigging occurred in 2010. It concerned delivery of pharmaceutical products under a public procurement procedure initiated by the Ministry of Health. The BCPC was seized by the Minister of Health with suspicions that the participating wholesalers fixed their prices for two tenders organised by the Ministry. Following its investigation, the BCPC found no breach. It noted that there is no evidence for coordinated prices between the undertakings and the coincidence in the lowest prices was due to the terms of the tender itself: maximum price set by the Ministry itself and non-application of the principle “the winner takes it all”, i.e. the possibility of several candidates to qualify as winners and to share the quantities to be delivered among themselves. The competition authority found the wholesalers’ behaviour to offer the highest admissible price as economically justified, and the equal prices applied by some of the bidders cannot be seen as evidence for bid-rigging in this particular case.
Unsuccessful bid-rigging enforcement due to lack of direct evidence arose again in 2011, when the BCPC found no breach in the public procurement proceedings under the EU funded program Regional Development 2007-2013 for reconstruction of infrastructure in some regions outside Sofia.
The first finding of a cartel in a public procurement procedure occurred in 2012, where sanctions of approximately EUR 1,500,000 were imposed over three travel agencies for price fixing of airways tickets in a public procurement procedure aiming to ensure travel services to the public administration.
After this initial success, in 2013 BCPA did not established breaches in a public procurement procedure for delivery of consumables for medical diagnostics to hospitals. The proceedings were initiated by one of the main participants and market leader in the delivery of medical consumables market. The BCPC found no coordinated behaviour concerning price fixing under tenders for consumables organized by hospitals and, curiously, noted that the company complaining of bid-rigging actually won most of the tenders and there was no evidence for any competition law breach.
The second successful proceedings ended in 2016 with imposition of sanctions and again concerned the travel sector (provision of transportation services under EU funded Operation Program for cultural cooperation between Bulgaria and Greece). Two Greek companies, active on Bulgarian market, and a Bulgarian company were accused for collusive price-fixing in public procurement contracts.
In 2018 the BCPC was particularly active in the field of enforcement against bid-rigging. The Commission issued 3 statements of objections relating to alleged bid-rigging breaches, i.e. two under the EU funded National Energy Efficiency Program and one concerning the EU funded Operational program "Regions in growth" 2014-2020.
The Statements of Objections under the National Energy Efficiency Program were issued against a total of 24 Bulgarian bidders containing allegations for a cartel between undertakings on the market of surveys for the establishment of technical characteristics and technical passporting of the buildings benefiting from the program.
The BCPC was seized by a mayor of small town in Northeast Bulgaria (Targovishte) with information about agreement between undertakings for allocation the works for reconstruction of the facades of buildings subject to renovation under the Energy Efficiency Program and for price fixing of the value of the respective works.
Following the initiation of the proceedings, the BCPC dawn-raided the premises of three of the companies. As a result, proceedings for bid-riggings against other companies were initiated.
The rise of bid-rigging enforcement is of importance for all investors in Bulgaria. Currently the state conducts and plans to conduct numerous public procurement procedures, e.g. concession of Sofia and Plovdiv airports, public procurement for renovation of railways, public procurement for enlargement of the gas infrastructure of the country, to name a few ; the cumulative value of these proceedings amounts to billions of euros. The best tool against bid-rigging is the full transparency of all proceedings for public procurement and concessions.
Eleonora Mateina is Senior associate at Tsvetkova, Bebov, Komarevski law firm, Sofia. Eleonora is Bulgarian qualified lawyer with focus on competition law, pharmaceutical, food, tobacco regulations and dispute resolution (commercial arbitration and administrative litigation). Eleonora is fluent in Bulgarian, English and Italian and has excellent conversant skills in Russian and French.