Serbian Competition watchdog imposes fines on inept cartelists

On October 12th 2015, the Serbian Competition Authority (“Commission”) imposed a fine for bid rigging on three transportation companies operating in Niš, Serbia’s third largest city: D&D Travel, DJD Prevoz and Jeremić Prevoz (“Undertakings”). Reading the Commission’s decision, one is struck by how imprudent and inept the Undertakings were in trying – or, rather, not trying – to conceal their mischief. The only way the Undertakings could have further facilitated the Commission’s work in proving there had been a price-fixing agreement would have been, it seems, to record their meetings and upload them on the internet.

When one pictures a cartel, images of furtive gatherings taking place in smoke filled rooms in secluded hotels somewhere far, far away from the jurisdiction of any competition authority worth its salt are almost inevitably conjured in one’s mind. While these perceptions may seem silly and in all fairness are overblown, reality tends to confirm that cartelists do not take the prospect of drawing the attention of competition authorities lightly.

In the famous Lysine cartel, fearing the possibility of facing jail-sentences and hefty fines, the conspirators went to great lengths to avoid meeting inside the jurisdiction of the US. That is, until the FBI’s whistleblower and informant, Mark Whitacre, tempted Japanese giant Ajinomoto’s Kanji Mimoto with an 18-hole golf course in Maui. In the French Yoghurt cartel, meetings were literally held in smoke-filled rooms at au le chien qui fume (thus confirming that cartels are inextricably linked to the notion of smoke and opacity, not only figuratively but also literally). The cartelists, who also used secret mobile phones that were not billed to their names, presumably hoped the incessant murmur of the clientele would muffle the conversation and frustrate any attempts of recording it. It did, but it ultimately didn’t make a difference, as the ploy was eventually revealed by whistle-blower Yoplait.

Colluders in other cases, such as the (now almost legendary) Vitamins cartel, rolled out similar strategies to cover up their steps. Shredding evidenceoffering employees truckloads of money to take the fall for the company; No measure is too zany, no strategy too grandiose, when it comes to evading the repercussions of engaging in the most heinous of antitrust offenses: price-fixing.

But if the Vitamins cartel was to cartels what the Sistine chapel is to art, then the Niš bid-rigging transportation cartel must be Elias Garcia Martinez’s Ecce Homo after its “restoration” by Cecilia Gimenez in 2012.

What initially raised some flags was that all three Undertakings were registered at the same address.

Furthermore, only one of the Undertakings had sent a representative to the bid opening. While there is no legal obligation under Serbian law to be physically present at the opening of the tender, in the present case, the absence led the competition authority to suspect an information sharing mechanism existed between the bidders. Circumstantial evidence one might say. But here’s where it gets better.

The Undertakings submitted the required documents to substantiate their respective offers for the public contract in the same exact order, and with an identical structure (same headings, sub-headings, length etc.). By way of clarification, Serbian law does not prescribe any formalities to that effect. Unsurprisingly, the Commission took this as proof that there had been significant coordination between the Undertakings during the bidding procedure.

Next, all three Undertakings sent faxes confirming that they had been notified of the decision awarding the public contract – from the same fax number, using the same header (which included the name of one of the Undertakings) and at the same time. The notification of the outcome of the public tender was also sent by e-mail at 11:49, and two of the Undertakings responded within minutes of each other (at 13:31 and 13:32 p.m).

The Undertakings contended that the same fax machine had been used as a result of inexperience of the owner of one of the Undertakings.. The Commission was not entirely convinced by this explanation, so it requested additional information. What should have been an opportunity to raise a defense quickly turned into yet another calamity, as identical grammatical errors, phrasings and even printing mistakes were found in all three (and we use this word figuratively) individual responses to the Commission’s requests for information.

Frustrated with the Serbian competition watchdog’s onslaught against them, the two Undertakings which had submitted the highest bids (DJD Prevoz and Jeremić Prevoz) pointed out that the public procurement process was yielding positive results: the winning Undertaking was performing its contractual obligations with great care and timeliness – and had fully respected the agreed upon price. So why exactly was the Commission giving them a hard time? As you might have guessed this only served to further stoke the fire of the Commission’s suspicions, as the fact that the Undertakings even knew how the others were faring business-wise, and whether or not they were “performing their contractual obligations” diligently, strongly suggested that the Undertakings were sharing sensitive commercial information.

Faced with the overwhelming evidence against them, the Undertakings decided to seek leniency from the Commission. However, this only served to reaffirm the Serbian watchdog’s conviction that the Undertakings had been up to no good.

Under Serbian competition law, participants in a cartel can be spared from fines if they blow the whistle on their co-conspirators. However, the law requires that the information put forward either reveal a cartel the Commission had no previous knowledge of, or that it provide sufficient evidence to allow the Commission to initiate formal proceedings against a cartel it knew existed, but had no tangible proof of. Alternatively, leniency applicants can benefit from reduced fines if they produce additional proof that allows the Commission to find an infringement and impose a fine.

In this case, however, the Commission had already gathered a wealth of evidence against the Undertakings, including that all three Undertakings had filed essentially the same leniency application, with the same phrasing, grammatical mistakes and raising identical arguments. Talk about shooting oneself in the foot.

And did we mention that the same person was authorized to manage the bank accounts of all three Undertakings (not that it matters at this point)?

In light of the foregoing, the Commission concluded that the Undertakings had not acted independently when participating in the public tender, and that they had colluded to fix the prices offered at the tender. As a result, the offers were probably higher than they would have been had the Undertakings acted individually. Consequently, the Commission found a price-fixing agreement – an infringement of Article 10 of the Serbian Competition Act, the Serbian equivalent of Article 101(1) of the Treaty on the Functioning of the European Union.