Construction companies face exemplary fines for long running cartel

The Czech competition watchdog, the Office for Protection of Competition (ÚOHS), in a three line statement on November 6 announced that it had taken initial steps to impose a 2.036 billion crown fine on a cartel of construction companies.

Photo: Kristýna Maková

Sadly, the office added that it would not be giving further information on what would amount to one of its biggest ever punishments until the decision had been finalized. Not even the names of the companies involved was revealed. Lawyers for those companies still have the right to challenge the competition office’s intended punishments. And they are, reportedly, contesting the office’s findings and prepared to challenge the fines.

Detective work by the Czech daily Mladá Fronta Dnes revealed Wednesday that three of the country’s biggest construction companies, Strabag, Skanska, and Eurovia are allegedly involved in the seven-company cartel and each face fines of over 600 million crowns.

The paper says the competition office has clearly mapped out how the cartel participants informed each other of the bids they would be making for significant public tenders and who would finally get the contract. Four tenders amounting in value to just over 1.0 billion crowns ,in which Stabag won one contract outright, landed two contracts in partnership with Swietelsky, and with a final contract landing up in the hands of the company Lesostavby, form the core of the competition office’s proof.

It appears to have been a classic slice up of the contract cake which, apparently, took place between 2006 and 2008. Most of the incriminating details came from documents taken away from bosses at the construction firms. The competition office has spent around three years compiling its case.

The largest Czech construction company, Skanska, is picked out for the biggest proposed fine although it did not win any of the final contracts: participation in the alleged cartel is judged by the office to be a serious enough offense in itself. The actions at Skanska, whose Swedish parent company takes pride into its reputation for clean and upstanding behavior, took place before Dan Ťok, the current Minister of Transport, took charge at the Czech subsidiary.

Rigging tenders in the construction sector is believed to be fairly common. Some companies make higher bids than they would in real competitive bidding on the understanding that they will get attractive sub-contract work on the project in question or the way will be paved for it to win another contract in the future. The state or more specifically the taxpayer is most often the victim of inflated prices and that is one of the reasons why cartels are punished as among the worst anti-competitive practices. The Czech Republic does not have a very good reputation for getting good value from big construction tenders with state authorities often appearing incompetent or willfully negligent and independent surveys highlighting higher costs than should be the case compared with other European countries.