1. Nederlandse Mededingingsautoriteit 1 Bid rigging investigations in the Netherlands ICN Workshop November 14, 2006

2. Nederlandse Mededingingsautoriteit 2 Outline of presentation  Cause + start of investigations  Selection of targets  Investigation methods  Results of investigations  Characteristics of bid rigging schemes  Market conditions favourable to bid rigging  Lessons learned

3. Nederlandse Mededingingsautoriteit 3 Cause and start of investigations End of 2001:  whistleblower A; black account  informant B  strong attention politicians and media  pressure on competition authority NMa

4. Nederlandse Mededingingsautoriteit 4 Selection of targets: analyses + checks  analyses of materials and markets  verify: - is black account authentic? - credibility of informants? - in what markets did behaviour took place?  informants appeared to be insiders  matching statements  road construction market  demand per project: tenders by clients

5. Nederlandse Mededingingsautoriteit 5 Construction industry attitude “In the branche, we have a new rule of conduct: every whistleblower must swim with concrete boots!”

6. Nederlandse Mededingingsautoriteit 6 Selection of targets: first line of reasoning Largest companies (5-10) in road construction market:  mentioned far more often than middle sized and smaller companies  seemed involved in - different types of bid rigging - both national and regional collusion - both larger and smaller projects  smaller companies seemed only involved in smaller projects

7. Nederlandse Mededingingsautoriteit 7 Selection of targets: fixation of targets  main strategy: centralize pressure on leading companies  5-10 largest companies  focus on limited number of bid rigging occasions  bearing in mind: - likely involvement many other companies - likely existence of bid rigging schemes  bid rigging scheme (system) = connected bid rigging events within one market segment

8. Nederlandse Mededingingsautoriteit 8 Investigation methods: target persons  identify involved persons (names; positions and roles)  if unknown: assessment of likely involved company officials (key persons, taking decisions on bids)  their right-hand man and/or secretary

9. Nederlandse Mededingingsautoriteit 9 Investigation methods: sources of information  written sources: notes, agendas, letters, lists  digital recorded information: hard disks, servers, diskettes How and were to find: company premises  tender information (clients): chronology of tender events

10. Nederlandse Mededingingsautoriteit 10 Collusion and culture breakdown Early 2004, after 2 years of investigations:  first set of fines: € 100 million  new information  government invitation to apply for leniency  power of the press  company employees felt deceived

11. Nederlandse Mededingingsautoriteit 11 Construction industry attitude “First of all: I didn’t do anything, and secondly: everybody did the same!”

12. Nederlandse Mededingingsautoriteit 12 Special leniency approach  wider acceptance of applicants  focus on prove of participation and extensiveness of bid rigging schemes  option for companies for “fast lane procedure”: * no access to file * no individual comment on objections

13. Nederlandse Mededingingsautoriteit 13 Overall results  470 companies applied for leniency  bid rigging schemes proven in: - the largest market segments (civil engineering; housing & buildings; installation; cables & pipes) - smaller market segments  also: cartels by producers of construction materials  till now: some 1300 fines have been levied  a few investigations are still in progress

14. Nederlandse Mededingingsautoriteit 14 Main characteristics of bid rigging schemes  large number of participants and/or some 80+% marketshare  varying group of participating competitors per project (project requirements and/or client determined composition of group)  allocation of works in rotation, under mutual granting of “claims” (future turnover)  claims: collusion debts and credits

15. Nederlandse Mededingingsautoriteit 15 Market conditions favourable to bid rigging schemes  interdependency * inherent to rotation schemes * parties are each others subcontractors * road construction: larger companies are asphalt producers  market transparency  multi discipline construction companies  low level of innovation  low level of competition from abroad  history; non-competing attitude throughout construction branches

16. Nederlandse Mededingingsautoriteit 16 Construction industry attitude “Sir, I don’t have competitors, I only have counterparts!”

17. Nederlandse Mededingingsautoriteit 17 Lessons learned  find the insiders  collusion with dozens of parties do exist  investigations may not be enough to end massive misconduct  dare to take a new approach  knowledge of markets and developments  coherent approach: enforcement strategy (programmes)  clients must play a much more active role