Illegal price fixing costs consumers a lot of money. However, obstructing competition is difficult to detect – but there should now be an end to it.
Deutsche Bahn DB is something of the epitome of evil. Practically every day negative headlines come from the German transport company.
Travelers in Switzerland can also sing a song about it when yet another “event abroad,” as Swiss Federal Railways SBB nicely describes it, has an impact here in Switzerland.
But now completely different headlines are coming from the German state railroad. DB has a tool in use that is supposed to uncover cartels. The state-owned company buys so much every year and puts the orders out to tender that there could well be price agreements – analogous to the Bündner construction cartel – to take more money from the rail company.
However, DB uses a screening program and Big Data to check all of its suppliers for suspicion of market manipulation, as the business newspaper “FAZ” reported in its latest issue.
With 20,000 suppliers and a volume of around 40 billion euros per year, hardly anyone is likely to be able to keep track. The risk of price fixing or cartelization in general is extremely high.
In recent years the state-owned company has repeatedly recovered millions, but only on the basis of damages in out-of-court settlements.
To prevent the company from being ripped off by suppliers, this ‘protective shield’ is now being used. All offers, from coffee beans to steel for rails to fuel, are examined for conspicuous signs of cartels.
Devil in the details
In the past a department also did this, but it was more like searching for the famous needle in a haystack, according to DB. Now the company uses big data and the results come at the push of a button.
The state railroad is also learning from anomalies for future contract awards, for example, when tender areas can be better tailored to promote competition even further.
On graphs the tool illustrates whether it’s a fair price war or if, strangely, everyone is moving in one direction and something could be wrong.
Cartel office involved
Since the beginning of the year some 2,500 ongoing and new awards have been examined, according to the German paper. This is in about 50 to 70 tenders to suppliers per week, it said, and in fact the tool has already sounded the alarm 120 times.
While this is not yet evidence of illegal action by suppliers. However, DB can use it to investigate indications of cartels in a much more targeted manner. One case has probably already been reported to the watchdog for competition in Germany, the Federal Cartel Office.
Benefits for Switzerland
Just how difficult it is to take general action against price or quantity agreements is impressively demonstrated by the OPEC oil cartel, against which an economics professor is defending himself, as muula.ch also recently reported.
Of course, it is better not to give the orders to companies suspected of cartels in the first place.
Automated indications of illegal agreements by suppliers could thus also be necessary in Switzerland, as the scandal in Graubünden had impressively shown and the civil engineering office had been led around by the nose by construction companies for years.
The companies involved not only agreed on the price, but even determined who would get the contract.
In the end, the officials in Graubünden had not even believed the whistleblower. With the use of a cartel screening tool, this probably would not have happened in Switzerland.
Now, Deutsche Bahn should not be taken as the epitome of evil and the positive news about the “event abroad” should also be heard in Switzerland.
The tool for uncovering cartels and market manipulation is also needed in this country – in as many places as possible. This would at least have a deterrent effect against price fixing.