This piece, available here, surveys the interaction between competition and public procurement law in Europe.
It is structured as follows:
Section II looks at recent examples of competition enforcement against bid rigging.
Competition law enforcement in public procurement settings remains a top enforcement priority for competition authorities in Europe. This is not only clear in the practice of the European Commission, but is also demonstrated by a continuous string of cases brought all over Europe. Recent examples of this can be found in Poland (car towing and parking services), Belgium (railway infrastructure), Latvia (security services, distribution of professional stage equipment), Ireland (retail distribution), Greece (construction), Italy (consulting services), Lithuania (construction), Denmark (construction, passenger transportation), Romania (electricity consumption equipment), or Spain (advertising services). A continued focus on competition enforcement against bid-rigging seems adequate, given the continued trend towards less competitive tenders for public contracts over the last decade or so—in part, as a result of procurement aggregation strategies, but also as a result of collusion in procurement markets.
At the same time, recent judicial setbacks show that competition authorities need to properly base their findings on adequate theories of harm and complete factual investigations. Merely defining a practice as being anticompetitive ‘by object’ carries risks, as demonstrated by the quashing of two bid rigging decisions in cases involving subcontracting arrangements by the Swedish Competition Authority (Aleris/Capio/Hjärtkärlgruppen on healthcare services, and Telia/Gothnet on data communication services tenders). These cases provide ‘textbook’ examples of market sharing through subcontracting arrangements, a practice that has been identified as a pervasive form of bid rigging in a number of influential guidance documents, such as the OECD’s Guidelines for Fighting Bid Rigging in Public Procurement.
Section III deals with screening for bid rigging.
Competition authorities actively screen for instances of bid rigging. A good example of this is the launch in December 2017 of the UK’s CMA ‘Screening for Cartels’ digital tool to fight bid rigging. This tool uses algorithms to spot unusual tenderer behaviour and pricing patterns along three dimensions: the number and pattern of tender(er)s, pricing patterns and document origin, and low endeavour submissions. These dimensions are combined to generate a weighted ‘suspicion score’ for specific tenders. The tool is meant to be used by public buyers to identify suspicious procurement exercises that require a closer look and, if appropriate, referral to the CMA for further investigation. The author suggests that it could prove beneficial to couple this decentralised approach with increased centralisation in the collection and analysis of data, to enable big data analysis to improve the algorithm.
Section IV addresses joint tendering and competition law advocacy.
Competition authorities have also been active in developing guidelines on the application of competition law to joint tendering and subcontracting arrangements, and in their dissemination through advocacy efforts. The author devotes great attention to the recent Danish guidelines, which are one of the few to be available in English. These guidelines adopt the widespread approach of considering that collaboration in the form of joint tendering (or subcontracting) is problematic where it reduces the level of competition that could otherwise exist for a public contract, unless it generates net efficiencies that are passed on to the contracting authority. One of the virtues of the guidelines is that it acknowledges that the analysis of compatibility of joint tendering agreements with competition law is likely to proceed in reverse logical order. In other words, an authority is likely to first assess the existence of off-setting efficiencies (in terms of practical benefits for the contracting authority) that could exempt the agreement under Article 101(3) TFEU, and only when those efficiencies are absent or unclear proceed to an analysis of whether the agreement restricts competition.
The guidelines also contain some useful and clear messages, none more so than the eleven principles that undertakings should take into account when considering whether to set up a consortium agreement. To summarise, these principles emphasise the need: (i) for undertakings to conduct objective self-assessments of their own capacity to perform the contract individually, prior to engaging in discussions with potential consortium partners; (ii) to tailor the analysis to the size and requirements of the tender lots in which a contract can be divided, rather than limiting the assessment to the execution of the whole contract; (iii) to minimise exchanges of information, and make sure that exchanged information is used solely for the purposes of procompetitive consortium tendering; (iii) to make explicit assessments of efficiencies and the way they will benefit the contracting authority; and (iv) to keep adequate records of all these assessments for the purposes of enabling full and considerate responses to requests for information in the context of a competition investigation.
Section V then looks at competition-oriented developments in public procurement case law.
Reflecting earlier case law, the EU’s 2014 Public Procurement Package contains rules that allowed (but could also require, depending on the Member States’ transposition choices) contracting authorities to screen joint tendering, subcontracting and other arrangements for compliance with competition law. Under the new rules (mainly Art 57 of Directive 2014/24/EU), contracting authorities can exclude undertakings that have previously violated competition law from public procurement tenders for up to three years. In addition, where contracting authorities have sufficiently plausible indications to conclude that an economic operator has entered into agreements with other economic operators aimed at distorting competition, it can exclude them from an on-going tendering process.
Recent CJEU case law has provided some clarification on the substantive tests and procedural duties incumbent upon contracting authorities screening for competition law compliance in their tenders.
– Regarding the obligation to engage with the substance of seemingly anticompetitive agreements, in C-144/17 Lloyd’s of London EU:C:2018:78 the CJEU had to consider whether the fact that different bids were signed by the same representative was sufficient to exclude those bids as a means to prevent collusion. Italy’s administrative practice is that bid will not be automatically excluded in instances of intra-group competition for public contracts where the signature of tenders by the same representative is a formality required by the domestic rules concerning the organisation of the tenderers, and there is no additional evidence of intra-group collusion. The referring court feared that the fact that the same person signs several tenders submitted by different tenderers could undermine the independence and confidentiality of those tenders and, as a result, infringed competition rules. Reflecting earlier case law, the CJEU followed a functional approach and declared that it was legitimate for domestic rules not to impose the mandatory disqualification of tenderers that seemingly engage in multiple bidding due to intra-group corporate links, and rather make any such exclusion decisions conditional upon an investigation of the extent to which the apparent multiple tenders are representative of genuine competition for the public contract.
– Regarding the obligation to carry out independent investigations of potential competition infringements, in Case C-531/16 Specializuotas Transportas EU:C:2018:324 the European court faced the question of whether the contracting authority, when it has evidence that calls into question the autonomous character of the tenders submitted by certain tenderers, is obliged to verify such evidence. The court held that ‘a contracting authority that acquaints itself with objective evidence calling into question the autonomous and independent nature of a tender is obliged to examine all the relevant circumstances having led to the submission of the tender concerned in order to prevent and detect the elements capable of vitiating the tendering procedure and remedy them (…) However, a mere finding of a relationship of control between the undertakings concerned (…) is not sufficient for the contracting authority to exclude automatically those tenders from the procedure for the award of the contract, without ascertaining whether such a relationship had a specific effect on the independence of those tenders’. In other words, the court reiterated the functional approach adopted in Lloyds of London, and consolidated a duty by contracting authorities to engage in competition law compliance screenings by assessing the extent to which competing tenders have been developed autonomously by independent tenderers.
– A last question that recently reached the European courts concerns the extent to which contracting authorities can carry out compliance investigations in the context of self-cleaning claims by undertakings previously found to have infringed competition law. The relevant case – Case C-124/17 Vossloh Laeis ECLI:EU:C:2018:855 – was pending at the time of publishing (but was issued about a month after the paper was first published).
The factual background is as follows. Vossloh Laeis obtained leniency in the context of the German investigation into bid rigging offences in the railroad infrastructure market. Subsequently, a contracting authority that was seeking damages suffered during this cartel sought to exclude Vossloh Laeis from a procurement procedure. Vossloh Laeirs opposed the exclusion by submitting a claim of self-cleaning, while simultaneously refusing to disclose leniency documents on the grounds that this would be prejudicial to it in the context of damages claims related to the cartel. However, under the relevant public procurement rules, undertakings seeking to rely on their self-cleaning must not only fully collaborate with any relevant investigating authority (in bid rigging cases, the competition authority), but also with contracting authorities. This led the contracting authority not to accept the self-cleaning claim, on the ground that Vossloh Laeis failed to cooperate.
In his article, the author expresses his concern that the ECJ might decide to protect leniency documents, thereby going against the letter of the law and preventing self-cleaning from extending to remedying loss caused by a leniency applicant. In practice – and I emphasise that this is my reading of the decision – the ECJ proceeded to cut the baby, as it so often does. The court emphasised that the duty of cooperation by an undertaking to the contracting authority is limited to those measures strictly necessary for examining whether the undertaking’s reliability has been re-established. It follows that this duty of cooperation is not connected to other goals, such as ensuring that compensation for the competition infringement has been made. If follows that only those documents necessary to evidence the re-establishment of the bidding company’s reliability must be disclosed to the contracting authority. In practice, this means that the procurement entity can request the undertaking to provide the competition authority’s decision, even if such access might facilitate the introduction of a damages claim against it. The disclosure of the decision establishing the infringement should suffice to prove to the contracting authority that the leniency applicant / bidder has collaborated with the competition authority to ensure its reliability. At the same time, the contracting authority can, if necessary, ask the tenderer for factual information to show that the self-cleaning measures are appropriate, even if that evidence has already been requested by the competition authority.
This is a very interesting and practical paper, which is likely to be of interest for anyone with an interest in bid rigging. Given my personal predilection for private enforcement, I found the last case discussed above, which ultimately hinged on whether making or facilitating compensation for damages is required to overturn blacklisting in procurement procedures, to be particularly fascinating. I would really like to understand a bit more fully what the implications of the CJEU’s decision will be for the effectiveness of leniency regimes and follow-on damages claims in the bid rigging context. More modestly, I would also like to know whether the CJEU’s decision requires only the disclosure of the non-confidential version of the infringement decision, or of the confidential version as well.
On the other hand, I was a bit surprised to see a large portion of the paper being devoted to the Danish public procurement guidelines. I have no doubt that they provide an interesting example of guidance regarding joint bidding, but I would expect their relevance to be framed in greater detail – e.g. how they compare to other guidelines and why the author finds them so interesting. I suppose one would have to visit the next edition of the author’s leading book on public procurement and competition to find the answers to these questions.