CADE and government agencies launch operation to investigate alleged bid rigging in public works

On 04 December, the Administrative Council for Economic Defense (CADE), the Office of the Comptroller General of Brazil (CGU), and the Brazilian federal highway police (PRF) launched the operation Novo Rumo to investigate alleged cartels and fraud schemes in public procurements for highway engineering works and services. The procurements analysed amount to BRL 9 billion. 

The search and seizure operation happened in the headquarters and branch offices of companies of the sector of building and construction works in the Brazilian states of Goiás, Minas Gerais, Tocantins, Pará, and Maranhão. Around 30 professionals at CADE work directly in the case, in addition to 24 public servants from CGU, 41 public servants from PRF, and several representatives of Brazilian Federal Courts.

The case was launched with the analysis of the Office of the Superintendent General at CADE (SG), after receiving information from the Brazilian Court of Accounts (TCU) regarding electronic procurements held by the Company for Development of the São Francisco and Parnaíba Valleys (CODEVASF) between 2019 and 2021, especially in three markets: wells, cisterns, and bridges.   

Thus, given the information brought up by the TCU, the SG has broaden the object and duration of the investigation. There was also evidence of coordinated practices among companies in the sector of highway engineering works and services in procurements between 2018 and 2023 held by CODEVASF and the Brazilian National Department for Transportation Infrastructure (DNIT). 

CADE used public procurement data, economic, econometric, and data science tools, including machine learning, to evaluate quantitatively the risk of cartel.

Evidence showed a set of 12 companies that were considered to represent more risk of cartel formation and, as soon as proof is found, an administrative proceeding will be launched.

After the discovery phase, the Office of the Superintendent General at CADE will issue an expert opinion and send the case to the Tribunal of the agency for a final decision. The Brazilian antitrust authority will either decide to dismiss the case or sanction the defendants for antitrust violations.

The companies are to pay fines ranging from 0.1% to 20% of the gross turnover of the company, group, or conglomerate obtained in the market that the practice took place and in the year prior to the launching of the administrative proceeding. Individuals are subject to fines ranging from BRL 50,000 to BRL 2 billion.

This is the first time that the CGU and CADE launch a joint operation of this nature, based on the judicial order that authorised the CGU to engage with it, providing more efficiency in the case. The partnership between the institutions is the result of a Technical Cooperation Agreement signed in November 2023.

To guarantee that the operation proceeds without complications, the PRF will monitor it and protect the other public agents during the search and seizure warrants, ensuring a safe environment for the enforcement of the judicial order.