Cartels and Bid Rigging: Detection, Evidence and Liability in Azerbaijan

1) What evidence do antitrust authorities use to prove a cartel if there is no written agreement?

The competition authority may rely on circumstantial evidence demonstrating coordinated conduct, including exchanges of competitively sensitive information, participation in meetings aimed at restricting competition, and market behaviour indicating coordination to establish the existence of a cartel. It may also consider economic indicators, such as parallel price increases, market allocation, significant changes in market shares or supply volumes, and other circumstances specified in the Competition Code of the Republic of Azerbaijan dated December 8, 2023, #1051-VIQ (hereinafter – “the Competition Code”). The authority may even consider participation in anti-competitive discussions or the exchange of competitively sensitive information, unless the undertaking clearly distanced itself from such conduct.

2) How do competition authorities detect bid rigging in public and private tenders?

Under the Article 11 of the Competition Code, bid rigging is prohibited where competing economic entities pre-agree on bids, prices, or otherwise unlawfully influence public procurements, auctions, or other competitive procedures. Competition authorities may detect bid rigging through evidence of coordination between bidders, suspicious bidding patterns, exchanges of competitively sensitive information, and market indicators suggesting collusion. Authorities may also rely on documentary evidence, communications between participants, and information obtained during investigations.

3) Which types of information exchange between competitors may constitute an antitrust violation?

The exchange of competitively sensitive information between competitors may constitute an antitrust violation if it forms part of a horizontal agreement or coordinated practice that restricts competition. This may include information relating to prices, commercial terms, production or sales volumes, market allocation, or planned participation in public procurements or other tenders, particularly where it contributes to a prohibited horizontal agreement or concerted practice under Article 11 of the Competition Code.

4) What types of interactions with competitors are permissible under antitrust laws, and where is the line drawn between legitimate cooperation and unlawful coordination of competitive conduct?

Antitrust legislation does not prohibit all contacts between competitors. Legitimate cooperation, such as joint research and development, technology transfer, industry advocacy through associations of economic entities, or certain agreements that improve efficiency or benefit consumers may be permissible, provided it satisfies the conditions for exemption under Article 13 of the Competition Code and does not have the object or effect of restricting competition. The line is crossed where competitors coordinate their competitive conduct, for example by agreeing on prices, allocating markets or customers, limiting output, exchanging competitively sensitive information, or coordinating bids, all of which may constitute prohibited horizontal agreements under Article 11 of the Competition Code. Even participation in anti-competitive discussions without clearly distancing oneself may expose an undertaking to liability under the Competition Code.

5) What are the most common red flags indicating possible bid rigging?

Common red flags indicating possible bid rigging include identical or unusually similar bids, recurring patterns of winning bidders, bid rotation, unexplained withdrawal of bids, and competitors submitting intentionally uncompetitive bids. Under Article 11.2 of the Competition Code, the competition authority may also investigate parallel pricing, unjustified restrictions in supply, stable market shares, or other market patterns that suggest unlawful coordination under unchanged market conditions.

6) What liability may a company and its executives face for participation in a cartel or bid-rigging arrangement?

Participation in a cartel or bid-rigging arrangement may expose a company to a financial sanction of up to 10% of its total turnover in the preceding financial year, as prohibited horizontal agreements under Article 77.3.1 of the Competition Code. Officials who directly participated in the infringement may also be subject to separate financial sanctions under Article 77.12. In addition, where the conduct causes significant damage or generates significant unlawful income, it may give rise to criminal liability under the Article 199 of the Criminal Code of the Republic of Azerbaijan dated December 30, 1999 #787-IQ (hereinafter – “the Criminal Code”), including fines, disqualification from holding certain positions or conducting certain activities, and imprisonment.

7) Could participation in industry associations, working groups, or market information exchange forums give rise to antitrust risks?

Yes. Participation in industry associations, working groups, or market information exchange forums may give rise to antitrust risks if they facilitate the exchange of competitively sensitive information or the coordination of competitive conduct between competitors. Under Article 11 of the Competition Code, discussions or information exchanges concerning prices, market allocation, output, customers, or bidding strategies may constitute evidence of a prohibited horizontal agreement or concerted practice, unless the undertaking clearly distances itself from such discussions or information. While legitimate cooperation is permitted in certain circumstances, businesses should ensure that such interactions do not result in prohibited horizontal agreements or coordinated practices restricting competition.

8) What should a company do if it discovers potential cartel conduct during an internal audit or investigation?

If a company discovers potential cartel conduct, a company should promptly stop the potentially unlawful conduct, preserve relevant evidence, and conduct a privileged internal legal assessment to determine the nature and scope of the potential infringement. If a prohibited horizontal agreement or concerted practice is identified, the company should also consider whether it qualifies for leniency by voluntarily reporting the conduct to the competition authority, as exemption from or reduction of financial sanctions may be available under Article 78 of the Competition Code, provided the statutory conditions are met.

9) Are there any leniency or cooperation programs that allow companies to reduce or avoid penalties?

Yes. Under Article 78 of the Competition Code, a company that voluntarily discloses its participation in certain prohibited agreements or concerted practices, including cartels, may be exempted from financial sanctions if it satisfies the statutory conditions, such as terminating the infringement, fully cooperating with the competition authority, and not being the instigator of the violation. Where full immunity is unavailable, the competition authority may reduce the financial sanction for companies that make a significant contribution to detecting the infringement.

10) What elements should an effective antitrust compliance program include to minimize cartel risks?

An effective antitrust compliance program should include clear internal policies, regular employee training, procedures governing contacts with competitors and participation in industry associations, controls over information exchanges, and mechanisms for reporting and investigating potential violations. Companies should also conduct periodic compliance reviews and ensure that employees understand how to identify and respond to conduct that may constitute a prohibited horizontal agreement or concerted practice under the Competition Code.

Author: Fidan Vahabova