The National Commission of Markets and Competition (CNMC) has sanctioned 8 companies dedicated to security, signaling and communications of the Spanish railway network with 127.8 million euros for fraudulently distributing up to 82 bids from the Ministry of Development and of Adif between 2002 and 2017.
The black holes of the AVE: cost overruns, fixes and corruption after an investment of more than 50,000 million
The companies with the highest penalties are Cobra, a division of ACS, which has received a penalty of 30 million euros; Germany’s Siemens, with 28.9 million; the Finnish Nokia, whose fine amounts to 24 million euros, and Alstom, a French company that has been fined 22 million euros.
Although only these three companies already account for 82% of the fine, three other companies will have to face the payment of 17 million euros in the case of Thales, 3.7 million in the case of Bombardier, and 1.7 million in the case of CAF Signaling.
Likewise, 10 executives have been sanctioned with 483,000 euros for their responsibility in the events. However, one of them will receive a 50% reduction in the fine for the information provided during the investigation process.
In addition, the leniency program has also been applied to Siemens. The German firm, which has received a sanction in its parent company and another in its Rail Automation division, will reduce both fines to 50%, leaving the total amount at 14.4 million euros.
The CNMC explains in its resolution that these companies created a cartel that fraudulently distributed at least 82 tenders from the Ministry of Development, the Railway Infrastructure Manager (GIF) and, later, from Adif, between 2002 and 2017 for construction, execution of works, supply, installation, commissioning and maintenance of the security and communications facilities of the AVE and conventional rail network.
Competition ensures that the practices of this cartel have been especially harmful since, in some cases, the effects of fraud last until 2040 for the period of validity of some of the tenders distributed and awarded to cartelized companies.
Operating since 2002
The cartel arose in 2002 at the initiative of the two main companies in the sector in that market, Alcaltel (from 2007 Thales) and Dimetronic (from 2013 Siemens Rail), with the aim of not competing and dividing the tenders through the constitution of a Temporary Union of Companies (UTE).
Both companies shared the amounts awarded (in the initial agreements it was set at 50-50%, which was later adjusted to 55-45%), as well as the signaling technology used in the projects.
In this way, they were able to introduce their technological systems in the tenders won 50%, and the maintenance contracts (and their corresponding renewals) were also guaranteed. As of 2003, other companies joined the cartel: Siemens, in 2003; NSN (current Nokia), in 2007; and Cobra, in 2008.
The entry of new companies in the market and the fact that Adif introduced changes in 2011 in the evaluation of the economic component of the tenders favored the presentation of offers with more competitive prices.
However, instead of maintaining the competitive tension that began in 2011, in practice, the CNMC explains that previously competing companies agreed to establish distribution quotas on tenders and joined the cartel. In the case of Alstom and Bombardier, as of 2014, and in the case of CAF Signaling, as of 2015.
In order to comply with the agreements adopted, the cartel companies decided which UTE (Unión Temporal de Empresas) – owned by the cartel companies – opted to win each tender, presenting other UTEs or, where appropriate, cartel companies individually , accompanying offers.
This type of agreements and concerted practices reveal the use of the UTE “as a regular instrument of the cartel, without there being a real need to use said option or efficiencies that were transferred to the bidding body,” according to the regulator.
A “very harmful” sign
The CNMC assures that it is a “very harmful” cartel, which has had the real effect of eliminating or at least significantly restricting competition in 82 tenders. During its 15-year duration, the companies were awarded tenders for a total amount of 4,142 million euros.
In some cases, the execution of the awarded contracts is maintained until the years 2035, 2037, 2038 and 2040, so their effects go beyond the duration of the cartel itself. Likewise, since they are tenders called by Adif (and previously by the Ministry of Development and GIF), it has meant an economic decline for the Public Administration, with the consequent damage to consumers and taxpayers.
In 2019, the CNMC sanctioned 15 companies with 118 million euros for forming several cartels that distributed public tenders for the electrification of the AVE network and the Spanish conventional network and its electromechanical equipment.
The information collected during the investigation of this file, especially during the home inspections of some companies, alerted the CNMC to the possible existence of anti-competitive practices that would affect tenders called for the security, signaling and communications facilities of the high-speed network. and conventional.
Consequently, the CNMC activated new investigations and inspected the Thales headquarters in May 2017. Subsequently, following the leniency request presented by Siemens in June 2017, it ordered home inspections at the Bombardier and CAF headquarters in December of that same year.