Russia: Watchdog uncovered a cartel in a 3.5 billion military contract

The Federal Antimonopoly Service of the Russian Federation revealed the biggest cartel agreement, which included 118 legal entities. All of them participated in tenders for the supply of uniforms and equipment to such structures as the Ministry of Internal Affairs, the Federal Security Service and the Federal Customs Service.

At the moment, the Antimonopoly Service officers possess information on eighteen episodes of contractual auctions totaling 3.5 billion rubles. According to FAS, some of the participants had about 3-4 dummy legal entities who participated in the auctions as the so-called spoilers, creating the appearance of competition. Despite the fact that from 11 to 40 companies initially submitted the applications, only one won the contracts, because others refused from further participation.

At the same time, as the Head of FAS Anti-Cartel Department Andrey Tenishev reported to TASS, an incentive scheme existed within the cartel. Quotas were calculated based on a contract’s initial price in proportion to the number of participants. It was possible to earn, exchange, or accumulate quotas. Entity, who possessed a certain amount, could win the next bidding.

According to the Service, some participants confirmed the existence of the cartel agreement on the conditions of exemption from liability. It was also found that individual companies have already been held accountable for such acts in 2012.

Cartel participants have paid large administrative fines. It is expected that investigation materials will be referred to the MIA General Administration for Economic Security and Combatting Corruption. Criminal charges under Restriction of Competition and Organization of a Criminal Group or participation in it may be initiated.

Full Content: Financial Crimes

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