Cartels and Bid Rigging: Detection, Evidence and Liability in Kyrgyzstan
1) What evidence do antitrust authorities use to prove a cartel if there is no written agreement?
In the absence of a written agreement, a cartel may be established through concerted actions (согласованные действия), recognized where three cumulative conditions are met: (1) the results serve each party’s interests; (2) each party knew of the others’ actions in advance due to a public announcement by one of them; and (3) each party’s conduct was caused by the actions of the other participants, not by objective market factors.
The definition of “agreement” expressly includes both written and oral arrangements.
To gather evidence, the antimonopoly authority’s officers have a right of unimpeded access to organizations and business entities to obtain documents and information, including access to automated databases, except databases of telecommunications operators.
Types of evidence include: explanations of complainants, investigated parties, interested parties, and witnesses; expert opinions; physical evidence; and other documents including computer data, photo/video/audio recordings.
2) How do competition authorities detect bid rigging in public and private tenders?
The antimonopoly authority detects bid rigging by identifying, in any procurement, indicators of coordinated conduct prohibited under Article 20, Part 1 of the Law on Competition:
1. coordination of participants' activity by the procurement organizers or customers;
2. creation of preferential conditions of participation for one or more participants (including preferential access to information);
3. violation of the procedure for determining the winner(s), and
4. participation of the procurement organizers or customers (or their employees) in the procurement itself.
Where the organizers or customers are state bodies or local self-government bodies, or the procurement is for state or municipal needs, additional restrictions apply, including a prohibition on any access restriction not otherwise provided for by law, and a specific prohibition on bundling technologically and functionally unrelated goods, works, or services into a single lot to restrict competition.
A breach of Article 20 allows the antimonopoly authority to have the procurement, and any resulting transactions, declared invalid. In practice, the authority also relies on its broad investigative powers, including unimpeded access to organizations, business entities, and automated databases regardless of ownership form and on voluntary disclosures by cartel participants, who may be exempt from fines if they are first to report and cooperate throughout the investigation.
3) Which types of information exchange between competitors may constitute an antitrust violation?
Information exchange between competitors is not prohibited as such; it becomes a violation only when it forms part of a horizontal agreement, concerted action, or decision of an association of undertakings that restricts (or may restrict) competition.
Prohibited purposes include, among others: fixing/maintaining prices, tariffs, discounts, mark-ups; manipulating the tender/bidding process; dividing the market; restricting market access or eliminating competitors; coordinating production volumes; unjustified refusal to contract; price discrimination; imposing disadvantageous standard terms; and restricting/controlling production, markets, technical development or investment. Separately, the Competition Law prohibits any third party, such as an industry association or consultant not itself active on the relevant market from coordinating competitors' economic activity in a way capable of producing these same anticompetitive effects, which covers facilitated information exchange through an intermediary.
An “agreement” for these purposes includes oral arrangements.
4) What types of interactions with competitors are permissible, and where is the line between legitimate cooperation and unlawful coordination?
Horizontal agreements/concerted actions covering price fixing, bid manipulation, market division, unjustified refusal to deal, and restriction of production/investment (points 1, 2, 3, 8, and 10) are prohibited per se and treated as a cartel.
Agreements covering restricting market access, coordinating production volumes, unjustified refusal to contract, price discrimination, and disadvantageous standard terms (points 4, 5, 6, 7, and 9) are prohibited only where they are shown to restrict, prevent, or distort competition.
The latter prohibitions may be excused where the agreement improves production/distribution or promotes technical, economic, or environmentally sustainable development, and consumers receive a fair share of the benefit without non-indispensable restrictions.
These prohibitions also do not apply where the combined market share of the parties does not exceed 20%.
Agreements concerning intellectual property rights/means of individualization are outside the scope of Art. 14.
5) What are the most common red flags indicating possible bid rigging?
Key red flags include price manipulation in the bidding process — coordinated increase, decrease, or maintenance of prices at a certain level.
Price changes not attributable to objective market conditions (as opposed to legitimate common factors such as changes in regulated tariffs, raw-material prices, or world commodity prices) are also indicative.
Procurement-specific indicators include: coordination of participants by the organizer/customer, preferential access to information for certain bidders, breach of the winner-selection procedure, participation of the organizer in the procurement, and the prohibited bundling of technologically unrelated goods into one lot.
6) What liability may a company and its executives face for participation in a cartel or bid-rigging arrangement?
Concluding prohibited agreements (cartels) or engaging in concerted actions triggers a fine on legal entities: 650 calculated indicators, or 1%–15% of the offender’s revenue from the relevant goods/services, or the amount of the offender’s expenses to acquire goods/services in the market where the violation occurred. Furthermore, criminal liability applies to the setting and maintenance of monopolistically high or monopolistically low prices, as well as to the restriction of competition through collusion or concerted practices aimed at dividing up the market, restricting market access, or eliminating other economic operators from the market, or setting or maintaining uniform prices, provided that these acts result in the generation of substantial profits, punishable by a fine of between 100,000 and 200,000 som (approximately 1,000–2,000 euros) or by imprisonment for up to 5 years, or for between 5 and 8 years in the event of aggravating circumstances.
Additionally, a violating entity and its managers must, per the antimonopoly authority’s decision: cease the violation, restore the prior situation, terminate/amend the agreement, repeal any inconsistent act, transfer unlawfully obtained income to the republican budget, and take other required measures.
A separate fine of 650 calculated indicators applies where a company fails to submit information/documents requested by the antimonopoly authority during an investigation.
Note: the limitation period for violations of Art. 13 (abuse of dominance) and Art. 14 (cartels) is 5 years.
7) Could participation in industry associations, working groups, or market information exchange forums give rise to antitrust risks?
Simple membership/participation in industry associations, working groups, or forums is not itself unlawful. Risk arises where such platforms become vehicles for prohibited horizontal agreements or concerted actions, e.g., discussing/fixing prices, tariffs, or discounts, dividing markets, coordinating production volumes, or establishing discriminatory pricing.
The Law separately prohibits any person from coordinating the economic activity of business entities in a manner capable of producing anticompetitive effects, including where coordination is performed by a third party (e.g., an association’s leadership or a consultant) not itself active on the relevant market.
8) What should a company do if it discovers potential cartel conduct during an internal audit or investigation?
The company should immediately cease the conduct that could be characterized as a prohibited agreement or concerted action under the Law.
Consider voluntary (leniency) disclosure: the first company to report its participation is exempt from fines/recovery to the budget if it (i) admits participation, (ii) provides reliable and sufficient evidence, and (iii) cooperates throughout the investigation.
If a violation is found, the company may be required to cease the violation, restore the prior position, terminate/amend the agreement, repeal any inconsistent act, transfer unlawfully obtained income to the budget, and take other required measures.
To prevent future violations, the company may establish (or engage an external organization to establish) an internal antitrust compliance system.
9) Are there any leniency or cooperation programs that allow companies to reduce or avoid penalties?
Yes. The first company to voluntarily report its participation in agreements/concerted actions prohibited by Art. 14 is exempt from fines and from the obligation to transfer unlawfully obtained income to the budget, provided it (i) admits participation, (ii) provides reliable and sufficient evidence, and (iii) cooperates continuously throughout the investigation.
Companies that are not first but voluntarily disclose and make a substantial contribution to the investigation may receive a partial reduction of the fine.
Important: a functioning antitrust compliance system is an additional ground for exemption/mitigation of liability, except in relation to horizontal agreements/concerted actions (cartels).
10) What elements should an effective antitrust compliance program include to minimize cartel risks?
To establish an internal compliance system, a company adopts an internal act that must contain: (1) procedures for assessing risks of violating antimonopoly legislation; (2) measures to reduce such risks; (3) measures for monitoring the compliance system’s functioning; (4) a procedure for familiarizing employees with the internal act; and (5) information on the person or external organization responsible for the system.
The company may add further requirements of its own. Information on adoption of the internal act must be published on the company’s official website. The company may submit the act (or draft) to the antimonopoly authority, which must issue an opinion within 30 working days.
Important: a functioning compliance system is an additional ground for exemption/mitigation of liability, except in relation to horizontal agreements/concerted actions (cartels); the procedure for exemption for dominant undertakings is set by the Cabinet of Ministers.
Author: Tamirlan Muktarov
