Polish Competition Authority Fines Electricity Contractors $3.5 Million Over Bid Rigging

Key Takeaways

• 11 Tenders Affected: UOKiK found that electricity infrastructure contractors coordinated their conduct in 11 tenders organized by PGE Dystrybucja.
• Companies Decided Who Would Win: According to the authority, participants agreed which bidder would secure particular contracts and when competitors would stop lowering their prices.
• Phone Calls Exposed the Arrangements: UOKiK cited conversations in which bidders used phrases including “not to go for ice cream tomorrow” and “next time I call, you’ll be the ones to back down.”
• More Than $3.5 Million in Fines: UOKiK imposed penalties totaling more than $3.5 million (PLN 13.5 million), with ZPUE receiving the largest individual fine at approximately $1.98 million (PLN 7.64 million).
• Decision Can Be Appealed: UOKiK’s decision is not final, and the companies may appeal it to court.

Deep Dive

“Next time I call, you’ll be the ones to back down.”

It is the sort of sentence that leaves little mystery about what was happening behind an ostensibly competitive tender. According to Poland’s competition authority, it came from one of the companies bidding for electricity infrastructure work as contractors decided among themselves who would win and, just as importantly, who would get out of the way.

The Office of Competition and Consumer Protection, or UOKiK, has imposed more than $3.5 million (PLN 13.5 million) in fines after finding that contractors coordinated their behavior in 11 tenders organized by electricity distributor PGE Dystrybucja. The contracts covered the construction and modernization of electricity grid infrastructure, including switching and disconnection points.

The mechanism was straightforward. PGE Dystrybucja was supposed to select the best offer through electronic auctions. UOKiK found that some bidders had already settled the important question before those auctions ran their course: which company was supposed to win.

“The undertakings were aware that they were acting unlawfully,” UOKiK President Tomasz Chróstny said. He said the companies repeatedly contacted one another by phone to divide successive tenders and, no later than the day of an electronic auction, knew which participant was expected to take the contract.

Those calls became some of the strongest evidence in the case. One of the agreements concerned the modernization of the Garwolin–Żelechów 15 kV medium-voltage electricity grid. UOKiK identified EnergoTech of Lublin, Przedsiębiorstwo Techniczno-Usługowe Elektra of Lublin and Przedsiębiorstwo Handlowo-Usługowe Kurpiewski of Łomża as participants.

The companies agreed that PHU Kurpiewski would take the contract, according to UOKiK. The consortium of PTU Elektra and EnergoTech was supposed to “stay out of the way.” In practice, that meant not lowering its price.

There was an expectation that the favor would eventually be returned. The conversations cited by the authority included assurances that “the bread would be returned” and that one participant would “not get in the way in the other case.” Then came the more explicit expectation: “next time I call, you’ll be the ones to back down.”

UOKiK imposed approximately $886,424 (PLN 3,419,938.78) in penalties over that agreement. EnergoTech was fined approximately $153,094 (PLN 590,656.16), PTU Elektra approximately $193,738 (PLN 747,467.75) and PHU Kurpiewski approximately $539,592 (PLN 2,081,814.87).

The second agreement was larger. It concerned tenders for radio-controlled switching points and involved EnergoTech, ZPUE of Włoszczowa, PTU Elektra, Ekto of Zaścianki, Elmo of Żelków-Kolonia and Przedsiębiorstwo Wielobranżowe Farad of Józefów.

Again, the telephone conversations did much of the explaining. At one point, a company asked a competitor “not to go for ice cream tomorrow.” UOKiK said the message was understood: do not submit further bids in the auction. The same participant explained that “the idea was that we would, you know, be the ones to do it.”

The other companies could still bid. What they could not do, under the arrangement described by UOKiK, was compete hard enough to upset the planned result. The authority found that participants would at most create the appearance of price competition without threatening ZPUE’s leading position.

The conversations also show that the companies were thinking beyond individual auctions. In another case examined by UOKiK, participants suggested raising their prices “by five each” compared with an earlier tender because they considered the previous bids too low against the contracting authority’s budget. They spoke approvingly of bids coming from companies belonging to the “old set-up.” A company allocated one contract could also agree to stay away from later contracts.

That second set of arrangements brought approximately $2.64 million (PLN 10,176,777.57) in penalties. ZPUE received the largest fine, approximately $1.98 million (PLN 7,642,588.80). EnergoTech was fined approximately $120,026 (PLN 463,074.43), PTU Elektra approximately $119,343 (PLN 460,440.13), Ekto approximately $78,369 (PLN 302,358.71), Elmo approximately $156,881 (PLN 605,265.70) and Przedsiębiorstwo Wielobranżowe Farad approximately $182,225 (PLN 703,049.80).

What makes the case unusually legible is how little decoding some of the conversations ultimately require. “Ice cream,” “bread” and promises to back down may have softened the language used between competitors. UOKiK’s decision describes something considerably plainer: companies that were supposed to compete independently instead deciding who would win, when others would stop bidding and, in some cases, whose turn would come next.

For the contracting authority, the consequence was more serious than colorful language on a telephone call. Electronic auctions depend on bidders continuing to compete against one another. Once competitors agree who should win and restrain their bids accordingly, the auction can continue on the screen while the competition it was designed to produce has already been compromised.

UOKiK’s decision is not final. The companies may appeal it to court.

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