CADE and Prosecution Services of Rio Grande do Sul investigate alleged bid rigging

On 06 November, the Administrative Council for Economic Defense (CADE) and the Prosecution Services of the State of Rio Grande do Sul (MPRS) launched the “Operação Camaleão” (Chameleon Operation), which aims to investigate and disband an alleged cartel involving bid rigging in procurements and money laundry in product supply for the state of Rio Grande do Sul.

About 150 agents carried out 30 search and seizure warrants at companies and households in 8 cities of the state of Rio Grande do Sul (RS) and 2 cities in the state of Paraná (PR), to seize documents and media (Porto Alegre, Viamão, Cachoeirinha, São Leopoldo, Santa Maria, São Gabriel, Soledade, and Passo Fundo in RS, and Curitiba and Pinhais in PR). Since 2018, 11 companies from RS and 6 from PR have been responsible for bid riggings worth more than BRL 460 million.

According to the investigation, in 2018 a group of large and medium entrepreneurs from RS and PR gathered to rig bids in the state of Rio Grande do Sul, aiming to provide continuously  large amounts of products. The investigated parties used strategies to create small companies with straw parties to participate in reverse state auctions, among others. Since small companies have tax benefits and pre-emptive rights in bids, the cartel would choose a specific company to win one of the various bids.

To ensure that the chosen companies would win a certain bid, large, medium, and small-sized companies with straw parties offered prices that were three times above market value for the products to be provided. The bid rigging happened when a specific company won the reverse auction, since it had been previously chosen and was under a straw party name.

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 Tribunal decides to dismiss the case or convict the defendants, if the antitrust violation is confirmed.

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 that may vary from BRL 50 thousand to BRL 2 billion.

The Grupo de Atuação Especial de Combate ao Crime Organizado (GAECO) - a group for fighting organised crime - of the Prosecution Services of the State of Rio Grande do Sul (MPRS) and the Prosecution Services of the State of Paraná (MPPR), the State Comptroller-General (Contadoria e Auditoria-Geral do Estado - CAGE) of the State Secretariat of Finance, and the Military Brigade (BM) were part of the operation.