Cartel sanctions against Aargau-based building companies confirmed

The Federal Administrative Court confirmed, in essence, the contested cartel sanctions imposed by the Competition Commission against building companies from the canton of Aargau. It reduced the amount of the sanctions from approximately CHF 2.8 million to approximately CHF 1.9 million. The judgments shed light on important questions of principle, in particular with regard to the competition law assessment of agreements relating to public and private procurement.

At the end of 2011, the Competition Commission (COMCO) imposed fines on 17 building companies active in the canton of Aargau amounting to a total of around CHF 4 million. COMCO accused the companies of agreeing to fix prices and of determining who was to be awarded the respective contracts in connection with a number of road construction and civil engineering tenders in the canton of Aargau between 2006 and 2009. In its decision, COMCO assumed that the companies made individual agreements but that they did not agree on a defined rotation system and that these individual agreements were made in changing constellations.

Thereafter, the Cellere, Erne, Granella and Umbricht construction groups lodged appeals with the Federal Administrative Court (FAC). The other building companies accepted COMCO’s decision. These sanctions are already in force and amount to around CHF 1.1 million.

Reduced cartel sanctions
The cartel sanctions against the four appealing building companies have now been confirmed by the FAC. However, the court reduced the amount of the cartel sanctions from originally around CHF 2.8 million to around CHF 1.9 million in total.
The FAC could not find any evidence of a pre-determined rotation system either. Therefore, it had to examine all of the contested bid-rigging arrangements individually. Based on the 137 case-by-case assessments carried out – an unusually high number – the FAC concluded that between 2006 and 2009, the four building companies, through their group companies, were involved in 95 individual bid-rigging arrangements in total that are deemed illegal under competition law. With regard to 41 arrangements alleged by COMCO, the court held that there is insufficient evidence. In one case, the FAC noted a prohibited exchange of information between competitors in the run-up to the contract award. The individual cartel sanctions were therefore reduced to amounts ranging from around CHF 26,000 to around CHF 1.2 million.

Unlawful conduct
In each case, the sanctioned conduct consisted of covert attempts to manipulate competition in public and private tenders. The parties involved in the bid-rigging arrangements submitted largely coordinated sham bids with inflated prices. The aim of these sham bids was to steer the awarding of the contract towards a particular tenderer who had been mutually designated in advance. The FAC confirmed the legal classification of this conduct as hardcore horizontal price-fixing and agreements on the allocation of markets by business partner within the meaning of the Swiss Cartel Act.

Questions of principle clarified
The judgments of the Federal Administrative Court further clarify important questions of principle regarding the assessment of bid-rigging arrangements and restrictions of competition in general. These include, first of all, the minimum legal requirements in terms of submitting and assessing evidence in competition investigations. The handling of allegedly incorrect information from companies that have filed voluntary reports and cooperated with the competition authorities has so far been unclear and subject to debate. Furthermore, various issues relating to alleged violations of procedural rights by the competition authorities are clarified. The FAC also assesses and confirms the disputed sanctionability of these competition law violations (some of which had no impact on sales) and the legality of the method used by COMCO to calculate the sanctions.

These judgments may be appealed to the Federal Supreme Court.