Investigation due to cartel suspicions against Skanska AB and Skanska Sverige AB the Swedish Competition Authority s case no.

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1 Unofficial translation Investigation due to cartel suspicions against Skanska AB and Skanska Sverige AB the Swedish Competition Authority s case no. 800/2001 Summary of Report 1. The assignment Due to the Competition Authority s suspicions of the existence of cartels between a number of companies in the asphalt business, i.a. Skanska AB and Skanska Sverige AB (hereinafter collectively referred to as Skanska ), the executive management of Skanska has asked Mannheimer Swartling to investigate, in collaboration with the legal departments of Skanska AB and Skanska Sverige AB, if there are grounds for the Competition Authority s suspicions that Skanska has participated in market-sharing or bid-rigging cartels in the asphalt business in violation of the provisions of the Swedish Competition Act. Essentially, a bid-rigging cartel means an agreement or a concerted practice with the object or effect that a possible tenderer is to refrain from tendering, that a tenderer is to hand in a higher tender than other tenderers or that tenderers otherwise co-operate on tender amounts or other conditions. Investigations as to the existence of bid-rigging cartels are very extensive, and they therefore require considerable resources. In addition, it is difficult and time-consuming to investigate general, unspecified allegations about cartel activities of the kind made in the material so far made public by the Competition Authority. Consequently, the investigation has focused on the examples of suspected cartels which are described in the material

2 2(11) published by the Competition Authority and which, as far as Skanska is concerned, include four different cases of alleged cartels, namely (i) An agreement, reached during the period January-February 2001, on the sharing out of asphalt contracts in Mälardalen put out to tender by the National Road Administration (Vägverket) during 2001, (ii) An agreement, reached in February 2001, concerning contracts in the municipality of Örebro during 2001, (iii) An agreement on tendering in February 2001 of supply of asphalt surfacing to the National Road Administration in the west of Sweden, (iv) An agreement on tendering of land and surfacing contracts in the municipality of Linköping (six different contracts) during As it has been indicated in the course of the investigation that certain cartel activities took place during 1999 and 2000 in the west of Sweden, the investigation also covers the National Road Administration s procurement in Region West during the year 2000 as well as the existence of contacts between Skanska and NCC AB ( NCC ) in this region during 1999 and Skanska is also carrying out internal investigations in Norway and Finland regarding alleged cartel activities there. We have not noted any connection between these allegations and the allegations investigated by us. Therefore, we have not found reason to combine the investigations in Norway and Finland with the one in Sweden. 2. Background information The Competition Authority carried out an investigation on October 2001, a so called dawn-raid, at the premises of a number of companies active in the asphalt business in

3 3(11) Sweden, including NCC, Skanska, Peab AB ( Peab ) and Vägverket Produktion (the separate production unit of the National Road Administration). The reason why the Competition Authority decided to conduct this investigation was that three former NCC employees had provided information which, according to the Competition Authority, indicated that for a considerable period of time most governmental and municipal asphalt contracts in Sweden had been the subject of bid-rigging. The three informants had previously been employed by NCC Surfacing ( NCC Beläggning ), but they were dismissed in March 2001 when NCC discovered economic irregularities in an internal investigation. The three informants and some other people who had previously been working at NCC Surfacing, as well as a representative of a local construction company in Östergötland, have been prosecuted for economic crime against NCC and legal proceedings are pending at Linköping District Court. As a result of the dawn-raid, NCC has commissioned an investigator to conduct an internal investigation concerning the information on cartel co-operation. The results of this internal investigation were communicated to the Competition Authority on 31 January It appears from the publicly available parts of the report that the investigation has confirmed that NCC has co-operated with one or more of its competitors in bid-rigging and marketsharing cartels in respect of surfacing contracts. The investigation confirms that NCC has participated in the alleged sharing out of asphalt contracts in Mälardalen during 2001, and in an agreement on the sharing out of the National Road Administration s asphalt surfacing contracts in the west of Sweden in 2001 (and partly 2000), as well as in agreements to share out a number of contracts put out to tender by municipalities in the west of Sweden in 1999 and On the other hand, NCC s internal investigation is stated not to confirm any such agreement between competitors in respect of the municipality of Örebro as alleged by the Competition Authority in its application for authorisation to conduct the dawn-raid. As far as the municipality of Linköping is concerned, it has not been deemed possible to conduct any investigation since the people involved have left NCC. The parts of NCC s internal investigation that Skanska has had access to do not contain any information as to what other companies have participated in the cartels that are said by

4 4(11) NCC to have existed. Moreover, the Competition Authority has not, despite several requests from Skanska, been prepared to release details thereon. Skanska has appealed against the Competition Authority s decision on secrecy to the administrative court of appeal, but the appellate court has rejected the appeal. Skanska is considering lodging an appeal to the Supreme Administrative Court. If Skanska will be able to take part of the secret information, this investigation should be complemented accordingly. The official version of the report from an internal investigation carried out by Peab does not confirm that Peab has participated in any cartel. 3. Mannheimer Swartling s investigation measures taken An internal investigation of the kind carried out by Mannheimer Swartling in collaboration with representatives of Skanska is fundamentally different from an investigation by the Competition Authority. In an internal investigation like this, the law does not provide the possibility of hearing people, nor is it possible to take any coercive measures when it comes to the obtaining of information. Thus, the possibilities of carrying out interviews have depended on the willingness of contacted persons to co-operate (it should be noted that no Skanska employee has refused to participate), and the possibilities of obtaining material from sources other than Skanska have been limited to public material. In addition, unlike for example an investigation carried out by the Competition Authority, this investigation has had to respect the employees personal integrity and take into consideration that there is an employment relation between Skanska and the people concerned. Furthermore, in this case, the investigation has been made more difficult by the fact that the Competition Authority has not deemed it possible to reveal details on which people within Skanska were said to have represented Skanska in the alleged breaches of the Competition Act, nor detailed information on when, where and how the cartel in which Skanska was alleged to have been involved took place. This information is not included in the public version of NCC s internal investigation either.

5 5(11) As far as it has been deemed reasonable, we have tried to compensate for these limitations by requesting and analysing a large number of documents concerning Skanska. Skanska has provided us with all requested material which, according to them, is available at Skanska. However, it cannot be ruled out that our conclusions would have been different if we had been given access to the material which the Competition Authority has decided should remain secret and been given the opportunity to interview additional people outside Skanska. We have inter alia interviewed the three former NCC employees who provided the Competition Authority with the information which brought about the dawn-raid investigation on October We have also interviewed all Skanska employees who can reasonably be expected to be the persons who could have represented Skanska in the alleged violations due to their positions in the company during the period , as well as a number of other Skanska employees who have been expected to be able to contribute with relevant information. When it comes to the Skanska officers concerned, we have requested information on, and checked the existence of, mobile phone calls from them to employees in corresponding positions at NCC. We have also requested and examined calendars and travelling expenses accounts etc. for relevant periods of time, where available. Other documents which have been requested and reviewed are inter alia invitations to tender with attached documents, cost estimates, economic analyses and the purchasing authorities files on the procurements concerned by the Competition Authority s examples of alleged violations, and as far as the National Road Administration West is concerned, procurements also during the year Further, we have reviewed the public parts of the documentation in the police investigation against the prosecuted former NCC employees and the above-mentioned representative of a local construction company. In addition, all material reviewed by the Competition Authority in connection with the dawn-raid at Skanska s premises in October 2001 has been reviewed by us.

6 6(11) 4. The results of the investigation We have made inter alia the following findings during the investigation. In our interviews, the former NCC employees have stated that the four procurements in issue had been shared out in advance and that Skanska participated in the cartels. However, in respect of all procurements except the Linköping one, the information is of a secondhand character in that the interviewed persons do not claim to have participated themselves in the arrangements. This is true for some of the interviewed persons in the Linköping case too. As to the National Road Administration West and Örebro, the person who is said to have co-ordinated the cartel within NCC has, in police interrogations, denied participation in any cartel, but he has not been willing to be interviewed within the framework of this investigation. All interviewed Skanska employees deny any cartel involvement in the four procurements in issue. We have also taken part of several internal Skanska documents, inter alia ethical guidelines, clarifying that Skanska s policy is to comply with the applicable competition rules and that cartels are unlawful and incompatible with Skanska s policy. Moreover, we have been informed during the investigation that this has been explained to Skanska s regional managers, district managers and heads of projects. It has also been stated in interviews with Skanska employees that especially one of the former NCC employees has tried to initiate cartels with Skanska on several occasions, but that these proposals have been rejected by the Skanska employees concerned. We have also in the course of the investigation found evidence of a meeting where representatives of Skanska are said to have made it clear to NCC employees that Skanska does not participate in cartels (see below). The interviewed former NCC employees have referred to certain written documentation which is said to describe the cartel arrangements. The documentation consists of handwritten lists which are claimed to be instructions from NCC indicating the tender amounts to be offered by the respective cartel participants, and consequently also

7 7(11) identifying the winner of each contract. As far as the National Road Administration West is concerned, there is also a note which is claimed to be from a meeting at the end of 1999 and which is said to reflect a cartel arrangement in respect of the National Road Administration West s tendering during the period Our review of tendering records and other documentation has shown that the amounts stated in the various handwritten lists often approximately correspond with the actual tender amounts offered. However, as regards Mälardalen and Örebro, we have noted considerable discrepancies. As to the note which is claimed to be from a meeting regarding the National Road Administration West, we have noted discrepancies between on the one hand prices indicated in the note for deliveries between the participants and on the other hand prices which have actually been paid for such deliveries. Only in respect of the documents relating to Linköping does one of the interviewed persons claim to have drafted the documents himself. As regards the other documents, we have not received confirmation from the alleged author as to who has drafted the documentation, when this was done or for what purpose. As regards the Linköping procurement, a couple of the former NCC employees have claimed that a certain invoice from Skanska to NCC amounting to some 2.5 million kronor covered cartel compensation. However, we have obtained satisfactory explanations and specifications in respect of the entire amount of the invoice, showing that the invoice relates to contract work performed. As regards telephone contacts between representatives of Skanska and NCC, our review of lists of mobile phone calls has shown that there have been quite a large number of calls of varying length between the surfacing managers of the two companies in Region West. The relevant Skanska manager has explained that the calls have mostly concerned discussions on asphalt deliveries. We have examined the extent of asphalt deliveries between Skanska and NCC in Region West during the period in question and have found that a large number of deliveries of inter alia asphalt were made during that period. As far as Linköping is concerned, we have found that a number of calls of varying length took place between Skanska s project manager for asphalt in Östergötland and various people within NCC.

8 8(11) The Skanska manager has said that these calls may have been returns of calls and that the discussions may have concerned the renting of machinery or other production resources. It should be emphasised in this connection that we have noted, generally, that there have been many business relations between Skanska and its competitors regarding deliveries of asphalt and other material, transportation, sub-contracting etc. As regards Mälardalen, we have found only a few short calls between Skanska s surfacing manager in Central Sweden and one of NCC s surfacing managers. As finally regards the Örebro procurement, we have not found any calls of interest. In reviewing calendars, travelling expenses accounts etc., we have found a note in a calendar belonging to Skanska s surfacing manager in Region West from the end of January 2001, which seems to relate to NCC s corresponding surfacing manager. The Skanska manager has explained that a meeting took place at that time and that the discussions concerned asphalt deliveries. We have also found some notes in the calendar of one of Skanska s project managers in Region West which seems to relate to one of NCC s surfacing managers in Region West. The project manager has explained that these notes, and some of the calls he made to two surfacing managers at NCC, concerned a joint project on professional licences for asphalt workers as well as a joint surfacing project. Finally, a number of Skanska and NCC managers have referred to a meeting outside Gothenburg between representatives of Skanska and NCC in February According to all of the (three) Skanska people who state that they participated in the meeting, the meeting had been arranged on Skanska s initiative because of frequent suggestions of cartel cooperation from NCC. According to Skanska s representatives, it was made clear to NCC s representatives at the meeting that Skanska does not participate in cartels. 5. Conclusions of the investigation As to the cartel suspicions in respect of Mälardalen and the municipality of Örebro, the information and material obtained during the investigation do not support the suspicion that Skanska should have participated in any bid-rigging cartel. As regards the suspicions

9 9(11) concerning the municipality of Linköping and the National Road Administration West, the results of the investigation cannot be deemed to confirm, all circumstances considered, that Skanska has participated in any bid-rigging cartel. Stockholm, 17 April 2002 MANNHEIMER SWARTLING Johan Coyet Tommy Pettersson Stefan Perván Lindeborg

10 10(11) (English translation) To: The Board of Directors Skanska AB Statement concerning Skanska's internal investigation in connection with allegations of car operations related to the asphalt industry. On February 12, 2002 I was asked to examine the investigation referred to above. On the same da assignment was defined more precisely, as follows: The Swedish Competition Authority is currently conducting an investigation of alleged violations of 6 of the Competition Act in the asphalt industry by Skanska AB and Skans Sverige AB, among others. In its petition to the Stockholm City Court on October 11, 200 Authority requested, and was granted, permission to conduct investigations of Skanska, am others, in accordance with 47 and 48 of the Competition Act. The petition sets forth in the violations of the prohibitions in 6 of the Competition Act alleged by the Swedish Competition Authority. The investigation was conducted in Skanska's offices on October 24 and 25, In connection with the Swedish Competition Authority's allegations, Skanska is conductin internal investigation with the assistance of lawyers from Mannheimer Swartling. The Chairman of the Board of Directors of Skanska AB, Bo Rydin, has asked former Sup Court Justice Hans-Gunnar Solerud, assisted by Adjunct Professor Rolf Skog, to examine internal investigation thoroughly and carefully. This assignment also includes conducting supplementary study of the Swedish Competition Authority's allegations, if the examinati provides reasons for doing so. In fulfillment of my assignment, I submit the following. The implementation and results of the internal investigation referred to in the job description are reported, in part, in a report Summary dated April 17, 2002 prepared by Mannheimer Swartling Advokatbyrå under the title "Investigation in connection with allegations of cartel operations aga Skanska AB and Skanska Sverige AB - Swedish Competition Authority document number 800/2 and in part in a Report of the same title and an appendix to the Report. As the Summary and Report shows, the Senior Executive Team of Skanska has instructed Mannh Swartling Advokatbyrå to investigate, in cooperation with the legal departments of Skanska AB a Skanska Sverige AB, whether there is any basis for allegations that Skanska has participated in ca related to the division of the market or collusive bidding (bidding cartels) in the asphalt industry Sweden in violation of the Competition Act.

11 11(11) In connection with implementation of the assignment, I have, on a continuing basis, examined m and results that emerged in various interviews, as well as other work that was undertaken within t framework of the internal investigation. To the degree that this has given reason to do so, I have pointed out to the representatives of the law firm, and to the legal departments within Skanska tha responsible for the investigation, circumstances that could benefit from additional "illumination" through interviews or in-depth studies. Such measures have then been taken. I have not, however found reason to conduct interviews myself or to undertake studies parallel with, or supplementary the internal investigation. In this context, there is reason to note the limited opportunities to obtai information that apply in connection with an internal investigation of the present type, limitations are touched on in the Summary and Report. These limitations would to the same degree restrict opportunities to obtain information through interviews and investigations conducted by me. Sinc studies that I considered should be conducted were in fact made, it has been my opinion that it w not have been possible to obtain additional information of value if I with or without the cooper of internal Skanska personnel or the law firm had made arrangements for my own interviews or other studies. In brief, my examination shows that the internal investigation, with the limitations and reservation shown in the Summary and Report and within the framework of documents therein, is as thoroug reliable as can be desired. Without thereby questioning what is stated in the Summary under the heading "Investigation's conclusions" and in the Report under the heading "Our opinion," I wish matter of form to note that it was not part of my assignment to draw personal conclusions from investigation pertaining to the basis for allegations that Skanska participated in cartels involving distribution of the market or collusive bidding (bidding cartels) in the asphalt industry in Sweden violation of the Competition Act. Stockholm, April 17, 2002 Hans-G Solerud /Rolf Skog