Transcription

• Narrator

  This podcast is brought to you by the French Competition Authority, France's independent watchdog in charge of tackling anti-competitive practices. This podcast was originally produced in French. You're listening to an English translation by the French Competition Authority. Voiced by professional actors. All names are unchanged.

• journalist

  You’re listening to Cartels & Co., a podcast about major cases of economic fraud in France. My name is Isabelle Souquet, and I’m a journalist. In this eight-part series, I’m taking you behind the scenes of investigations by the French Competition Authority, right to the heart of scandals involving big-name companies. I wanted to take a closer look at the world of cartels – what they are, how they work and how they hurt us, the consumers. Because when companies secretly agree to fix prices, it’s our pockets that take the hit, whether that’s through higher prices on the things we buy or the way our tax money gets used. Along the way, you’ll hear from people on the inside – from the teams leading the investigations to uncover and dismantle cartels. Third investigation: the road sign cartel. This is the story of how France’s biggest road sign manufacturers managed to get their hands on hundreds of public contracts across the country and ended up running the whole industry. Episode 1 – The Cartel Bible

• archive

  “Stop”, “No right turn”, “Destination X, Y kilometres”... All those road signs you see every day? They’re part of a thriving local industry. So much so, the factory in Saint-André-de-Nice in the south of France got too small and had to move to a bigger site nearby in the Carros industrial park.

• journalist

  Road signs have been big business for a long time. Back in the 1910s, tyre brand Michelin started making signs in reinforced concrete for local authorities. Then Citroën followed suit, making signs for the French state. It was a clever bit of marketing for these companies, because their names and logos were there on the signs for every driver to see. By the 1950s, competition was heating up. France’s first motorways were being built and demand for signs was soaring. Sign manufacturers were springing up all over the country, bidding for public contracts.

• archive

  Metal sheets are cut, pressed with a 400-tonne machine, cleaned, coated, painted… They’ve hired more workers, upgraded half their equipment and made working conditions safer and easier. And road sign production is now up 50%.

• journalist

  Today, most road signs are ordered and bought by the local authorities that manage France’s roads, regions, and towns and villages. With more than a million kilometres of roads, that’s millions of signs to be replaced or updated regularly. It’s a huge market. To get the best deal, local authorities use standard tender processes. But some companies will stop at nothing to win the contracts, even if it means breaking the law. Eight companies ended up at the centre of a scandal that hit the evening news in October 2006.

• archive

  Tonight, we’re looking at a case that may have cost French taxpayers more than a billion euros. For 10 years, the eight biggest road sign manufacturers colluded to carve up nearly all public contracts in the sector – and, in the process, hiked up prices.

• journalist

  It all started back in 1997. Several companies that made and installed road signs decided to divide up the market between themselves, by fixing their prices in advance. In doing so, they completely rigged the tender process. These companies, which were the leaders in their sector, took turns winning contracts through an illegal system called “cover bidding”. Here’s how it worked: before responding to a tender, the cartel would pick one company to win. And the others would submit deliberately higher bids, to ensure the chosen winner got the contract. Stanislas Martin is the General Rapporteur at the French Competition Authority. He explains how cover bidding works.

• S. Martin

  What usually happens is there’s one company that’s picked to win the contract, at a certain price. And then you’ve got other companies that submit bids too, but always higher – basically just to cover the winner. A lot of the time, the company that’s supposed to win even prepares the bidding documents for the others. I was going to say “competitors”, but of course they’re not actually competing anymore. Sometimes you’ll even see the same typo in every single document. Little things like that, that’s what give cover bids away.

• journalist

  Irène Luc is a judge and one of the Vice-Presidents of the French Competition Authority. She explains why cover bidding is so harmful.

• I. Luc

  When companies decide, before responding to a tender, to carve up the market between themselves and say, “Okay, this time I’ll submit a higher bid so you can win the contract, but next time we’ll switch and you’ll cover me”, it’s clear who pays the price – it’s local authorities, in other words public money.

• journalist

  And in this case, the damage lasted nearly 10 years. The cartel was extremely organised. Absolutely every possible scenario was covered in a secret, and completely illegal, document nicknamed “The Bible” by the cartel members.

• S. Martin

  Our colleagues in the serious crimes unit made a big – and, I might add, very satisfying – discovery. They found what the cartel members called “The Bible”: a set of documents that laid out exactly how the cartel operated.

• journalist

  That's Stanislas Martin again, from the French Competition Authority.

• S. Martin

  The documents listed punishments for companies that broke the rules. And detailed how contracts were to be shared out between the cartel members at every level of local government across France – in the regions, in big cities, in smaller towns and even in the smallest villages with fewer than 5,000 inhabitants. It was a full-on manual for running a cartel.

• journalist

  The Bible was extremely comprehensive, down to the smallest detail. It started with the general rules on how to organise their secret meetings and set the agendas. There was even a table showing which company “owned” which recurring contracts, which were totally off-limits to the others. So every company knew in advance what contract they’d win and at what price. Once a year, the cartel did an annual review to make sure all the cartel members were getting their fair share. If a tender didn’t go to plan, there was even compensation for the company that lost out. And the cartel also had its own sort of policing system – breaking the rules meant a fine, tracked in a system of credits and debts between the members. There was also a blacklist of companies the cartel wouldn’t work with, companies that were considered too likely to lower their prices to gain market share. That way, the cartel controlled the entire competitive chain. Virginie Beaumeunier, who was the General Rapporteur at the French Competition Authority at the time, explains.

• Virginie Beaumeunier

  In the road sign cartel, the companies had formed a sort of club, and they kept a blacklist of the businesses they wanted to shut out, in particular resellers. They’d refuse to sell to those businesses at a fair price, meaning they couldn’t compete. Really, it was a way of forcing out anyone that wanted to bring in real competition.

• journalist

  The blacklist had about 15 companies and was regularly updated. The financial consequences were brutal. Blacklisted companies no longer had access to public contracts, lost commercial opportunities and saw their economic development stall. Some never recovered, and a few were even forced to shut down. The head of Signal Concept, a road sign manufacturer based near Tours, in the Loire Valley, told a local TV station in 2011 how being blacklisted had stunted his company’s growth.

• archive

  We were on the blacklist, because we refused to play their game. So we lost business and, of course, that held us back. We’ve been sort of stuck, really, for the last decade.

• journalist

  For 10 years, public buyers were fooled by the cover bidding and the companies that were pushed out of public contracts thought it was just normal competition. The whole system seemed airtight. But in February 2006, a business owner who’d been sidelined by the cartel wrote to an investigating judge in Nantes. He had something to say. And that’s where we’ll leave it for now. Next time, everything starts to unravel.

• Narrator

  Cartels & Co. is brought to you by the French Competition Authority and produced in English by Peech Studio.