ECA Issues First Bid-Rigging Decision and Targets Healthcare Sector
Egypt: The ECA Issues Its First Bid-rigging Decision and Targets the Healthcare Sector
On 7 March 2017, the Egyptian Competition Authority (ECA) issued its first bid-rigging cartel decision. The cartel involved seven of the biggest suppliers in Egypt of heart and chest valves and antioxidants for heart and chest surgeries, and related to public tenders for governmental and university hospitals.
Implications for market players
- This is the first bid-rigging cartel case in Egypt. This suggests that the ECA has improved its investigative techniques, enabling it to prove such an infringement.
- The ECA conducted a dawn raid in this case, in order to collect further direct evidence. The number of dawn raids carried out by the ECA has increased recently, and the competition authority has so far always been accompanied on its raids by police forces in order to ensure cooperation by raided companies and their employees.
- This is the third infringement case related to competition in the health sector in Egypt. The ECA clearly considers this a sector of high relevance and importance, and its involvement goes beyond cartel investigations. The ECA is a member of a Ministry of Health Committee responsible for the pre-merger assessment of hospital and pharmaceutical company transactions. In addition, the ECA has investigated a post-merger situation to assess whether there was an abuse of a dominant position. Furthermore, the ECA engaged in advocacy efforts with the Ministry of Health in order to address concerns regarding pricing methodologies and entry barriers in the pharmaceuticals sector.
Companies should be aware that the ECA considers the health sector to be a key strategic area, and that it will hit hard to counter anticompetitive practices and to ensure full compliance with the competition law by all market players.
The ECA joins a growing body of antitrust agencies across the world who are determined to take on bid-rigging in public tenders. Many agencies train public procurement officials to help them spot collusion and a growing number of agencies crunch bid data to screen for suspicious bidding patterns. Pharma and construction are commonly targeted sectors. The Cartels Working Group of the International Competition Network recently held an agency-only meeting to share ideas and develop best-practice on proactive methods for detecting bid rigging.
What this case says
The ECA's year-long investigation enabled it to prove that the seven companies involved agreed to submit identical commercial offers in order to force hospitals to divide the bids among them. This enabled the cartelists to control supplies to those hospitals and to increase their supply prices.
The ECA considered that the cartel caused material damage to governmental and university hospitals, as it led to increased prices which affected the purchasing power of those hospitals and consequently their ability to buy sufficient medical supplies. This in turn directly affected patients.
The investigation involved several dawn raids on premises of the infringing companies. These raids enabled the ECA to obtain sufficient information and evidence to prove the infringement and refer the case to the Prosecutor’s Office.
All companies, including those active in the health sector, need to be aware of the importance of complying with the Egyptian competition rules. It is clear that enforcement is intensifying and that the ECA is becoming more likely to carry out dawn raids.
As it grows in experience and confidence in carrying out such investigations, bids and tenders cannot be considered low risk or as less of a priority for the ECA.