The CC fines three public passenger transport service providers for participating in a cartel

On 5 January, the Competition Council (CC) adopted a decision establishing a cartel between public passenger transport service providers “Liepājas autobusu parks”, “Latvijas Sabiedriskais Autobuss” and “Nordeka” in the tenders organized by State Ltd. “Autotransporta Direkcija” for the provision of carriage of passengers by buses services on routes of regional importance for a period of ten years. The companies were fined a total of EUR 1 974 923.81 for the competition law infringement.

Regional bus routes market allocation

In July 2019, State Ltd. “Autotransporta direkcija” announced a tender for the provision of public passenger transport services on regional bus routes until 2030. The procurement affected a route network of 65 million kilometres per year. The tender divided the total bus route network into 16 parts. At the same time, the tender specifications set limits on the amount of service that one undertaking could provide in the market, i.e. a maximum of 15 million kilometres per year.

The CC investigation concluded that in order to be able to obtain service provision rights on routes as close as possible to the established threshold - 15 million kilometres per year - in the tender, public passenger transport service providers “Liepājas autobusu parks”, “Latvijas Sabiedriskais Autobuss” and “Nordeka” exchanged commercially sensitive information not only on the allocation of parts of route network, but also on the conditions for participation in the tenders, for example by agreeing on whether or not to participate in a particular tender for part of the route, as well as on the form of participation in the tenders - individually or in alliances, thereby mutually allocating the kilometres of a rout parts between the parties to the case.

The CC stresses that independent undertakings may form an association of persons and participate in a procurement with a joint bid only where they are not capable of fulfilling the procurement requirements individually and where they do not disclose commercially sensitive information to each other that is not related to their joint participation in a particular procurement.

Reports the infringement in the Leniency Programme

The CC received initial information about the alleged cartel from an application by a market participant under the Leniency Programme, which revealed that prior to the submission of bids for the procurement, a meeting between “Liepājas autobusu parks”, “Latvijas Sabiedriskais Autobuss” and “Nordeka” and the applicant of Leniency Programme took place on 26 August 2019 at the premises of one market participant “Nordeka” premises in Riga. This is also confirmed by the data on the mobile phones of the participants in the case, which indicate that the representatives of the above-mentioned companies were on the premises of “Nordeka” or in its immediate vicinity on the date and at the time indicated.

During the meeting, each market participant was invited to decide which bus route they would like to have. It was proposed to use each market participant’s existing contracts, i.e. the routes already served by each market participant and the locations of the bases, as an initial benchmark for market allocation.

During the meeting, a pre-prepared table of all 16 parts of bus route network was also presented, accompanied by handwritten notes on the possible allocation of the market. The tables, which showed all 16 routes and included notes with the intended winner and the form of participation - individual or association - were regularly updated by the parties and sent to each other. This helped to keep track of all 16 routs in a single document and to keep a record of the market allocation results over time, ensuring continuity and traceability of the cartel agreement. 

Regular meetings and communication through different channels

The initial 2019 procurement of individual 16 bus routes by State Ltd. “Autotransporta direkcija” was repeatedly interrupted and re-tendered. The investigation of the CC concluded that the parties exchanged commercially sensitive information even after the initial procurement was launched in order to ensure that each party would be able to operate routes as close as possible to the 15 million kilometre threshold also in the upcoming procurements.

The CC, having assessed the evidence in the case, concludes that during the infringement period, almost 20 meetings were planned, at which all three parties met in various combinations. Moreover, in order to implement the agreement and ensure its continuity, the agreement between the parties was systematically updated and developed through various communication channels, including calls, text messages, mobile phone applications (WhatsApp, Telegram), Google drive, etc.

Penalties imposed

“Liepājas autobusu parks”, “Latvijas Sabiedriskais Autobuss” and “Nordeka”, by exchanging commercially sensitive information on the allocation of the bus routes, by agreeing on the conditions of participation, including the form of participation in procurement, have infringed the prohibition of agreements set out in Section 11, Paragraph one of the Competition Law and Article 101(1) of the Treaty on the Functioning of the European Union.

The CC imposed fines of EUR 1.97 million on the undertakings concerned, calculated as a percentage of their net turnover for the previous financial year. At the same time, a decision was taken to increase the total amount of the fine imposed on “Nordeka” by 15%, as an undertaking had already been brought to the attention of the CC once for an infringement of the Competition Law.

Cartel members and the fines imposed on them as a percentage of the turnover of the previous financial year and in absolute figures (EUR)

As a result of the cartel agreement, the market for public transport services throughout Latvia was distorted and State Ltd.  “Autotransporta direkcija” received not genuinely competing bids, but bids that were coordinated between competitors and imitated competition.