The Xunta de Galicia will pay a million-euro fee to the law firm that manages to recover the overcharge on the thousands of absorbent briefs for severe adult incontinence purchased over 18 years by the Servizo Galego de Saúde (Sergas). The case of inflated prices in the so-called “diaper cartel” now falls to the autonomous communities, which are prepared to file claims for damages and recover the millions of euros overpaid to eight companies already convicted. Through the Galicia Public Contracts Portal and dated Tuesday of this week, Sergas publishes the tender for legal defense, open to lawyers with at least a decade of experience and expertise in competition law infringement claims. The estimated value of the tender, based on the money the Xunta expects to recover, is 6,052,720.30 euros excluding VAT. This amount—calculated as a percentage—is still open, pending the audit that will determine how much the Galician Administration overpaid, which could be around 50 million in the case of the diaper overcharge.
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In a statement, the Xunta recalled that in 2016, the National Commission on Markets and Competition (CNMC) imposed fines totaling 128 million euros on eight manufacturers and importers of these diapers, the Spanish Federation of Healthcare Technology Companies (Fenin), and two individuals “for their participation in restrictive competition practices.” As established in the resolution, the cartel companies agreed on a price for the absorbents financed for adult patients that “was double the price achieved through public tenders in the various autonomous communities.”
“The seriousness of the sanctioned conduct and the significant amount of the overcharge paid make it necessary for the Servizo Galego de Saúde to claim damages caused by the companies participating in the cartel,” argues the Galician Administration after the autonomous government plenary approved the start of its legal battle. Up to 14 Autonomous Communities have already initiated or plan to initiate claims demanding a combined value of about 1.75 billion euros from the diaper manufacturers who illegally raised their prices. The work ahead is arduous, as much documentation is not digitized and in most cases audits will require hiring specialized experts and inspectors.
Before announcing the tender for legal services, with a proposal submission deadline at 2 p.m. on October 8, Sergas reviewed the internal information available and concluded that “the minimum verified and identifiable expenditure with the cartel companies, between 2004 and 2014, amounted to a total of 140.8 million euros.”
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For the earlier period, from 1996, “there is currently an estimate of about 153 million euros of expenditure with all cartel members,” although the Xunta does not have “a breakdown by company” for that stage. The final expenditure estimate “must be specified and determined through expert evidence” which “is part of the object of this contract,” clarifies Alfonso Rueda’s government.
Besides its own calculations, Sergas commissioned a preliminary analysis from economists at the University of Santiago (USC) to make “an estimate of the damage.” The study proposed several hypotheses, with variables such as the duration of the fraud and the overcharges, but it is believed the falsified amount approaches 50 million.
