LENIENCY AND BID RIGGING IN STATE CONTRACTS Enforcement Challenges ICN-2015 INTERNATIONAL COMPETITION NETWORK ANNUAL MEETING. Sydney, Australia LENIENCY AND BID RIGGING IN STATE CONTRACTS Enforcement Challenges Alfonso Miranda Londoño Sydney, April 30th, 2015

Alfonso Miranda Londoño 1. Introduction Alfonso Miranda Londoño

Alfonso Miranda Londoño 1. Introduction The Leniency Program has proved to be one of the most important tools in the fight against anti competitive conduct and specially cartels. Bid Rigging in State contracts is a specially damaging kind of cartel because it affects the competition process, hurts competitors, creates corruption at the state level and impedes the effective execution of public funds. It would be desirable that the leniency program would work very effectively to curb this kind of cartel. However, we have found that the application of the leniency program to this cases faces important challenges. Alfonso Miranda Londoño

2. Requisites for a successful Leniency Program Alfonso Miranda Londoño

2. Requisites for a successful Leniency Program Fear of Detection: The authority must build a record of cases. Heavy fines: The imposed fines must outweigh the benefits of the bid rigging conducts. Transparency and Reliability: The rules for leniency must be clear and the authority needs to build a record of reliability in the application of the benefits. Alfonso Miranda Londoño

3. Main Challanges of the Leniency Program in Bid Rigging cases Alfonso Miranda Londoño

3.1 Bid Rigging in State Contracts is a criminal offense In some countries such as Colombia, there is very limited criminal enforcement of competition laws, but Bid Rigging in public contracts is considered a crime. In the case of Colombia since Article 28 of Law 1474, 2011 (Anti Corruption Statute). This situation will create a block to leniency applications for this specific conduct, specially because the Competition Authority will only be able to offer immunity from the fine, but not from the criminal charges. Alfonso Miranda Londoño

3.2 Debarment for several years Apart from the criminal charges, the conspirators face consequences derived from the public contracting legislation, such as debarment for several years. The Competition authority may grant full immunity form the fines applicable under competition laws, but will not be able to impede the debarment of the conspirators, due under the public contracting statutes, which creates an additional block to the Leniency Program. For a company dedicated to public contracting, debarment my signify its bankruptcy once all its contracts are taken away. Alfonso Miranda Londoño

Alfonso Miranda Londoño 3.3 Reputational Damage Corruption in State contracts always draws the attention of the media and have big potential for damaging the reputation of the companies and individuals involved. After the companies have been identified they may face duress not only from the public but also from politicians and agents involved in the public procurement process. All previous activities and contracts of the company will be suspected to be illegal, even if not all of them were tainted by anti competitive conduct, and clients, politicians and the media will try to avoid any contact with the company. For that reason, coming forward may simply be so burdensome that companies would prefer to defend themselves and maintain innocence even after an investigation. Alfonso Miranda Londoño

Alfonso Miranda Londoño 4. Conclusions Potential leniency applicants in bid rigging cases related to State contracts have a negative incentive to come forward in many countries because even if they get full immunity from the Authority they will still face a criminal investigations, jailtime, debarment and media exposure. The conclusion of our investigation is that in this cases Leniency may not be as good a tool for the fight against cartels as in other conducts. It is Therefore important that the Competition Authority coordinates its activities with the criminal prosecutor and with the procurement agents in order to mitigate the described situations that tend to block the Leniency Program. There is also potential for legislative reforms in order to grant more protection to the leniency applicants in these cases in the criminal front and the front of the State contracts legislation. Alfonso Miranda Londoño

END OF THE PRESENTATION DOCUMENT AVAILABLE AT: http://www.centrocedec.org Alfonso Miranda Londoño 2009