Public procurement: awareness of general competition law rules matters

More and more competition law infringements are found by EU competition authorities in public procurement markets. Usually, the scenarios of these infringements are very predictable (so-called “textbook examples”) and do not attract much of attention of competition specialists. However, the fact that undertakings participating in public tenders make straightforward infringements show that business is still not aware of basic competition rules.

Recent bid rigging investigations in the EU

In general, competition law tackles anticompetitive practices of suppliers in public tenders. Those are the practices falling under Art 101 TFEU and are treated as a restriction by object implying that competition authority has no duty to prove the real economic harm of the infringement. Thus, the investigation is relevantly easier for competition enforcers.

Recent cases of Lithuanian, Latvian, Dutch, Greek and UK competition authorities show that:

  • Most investigations start by receiving ‘tip-offs’;
  • Competition authorities invest educating purchasing institutions about competition law and prepare guidelines on how to recognize cartels in public tenders;
  • Tools to identify cartels based on big data analyses are on the way: digitalization of tenders allow to facilitate analyses of patterns of bidders, proposal price and document origin which signal the existence of anticompetitive agreements;
  • Anticompetitive agreements in public tenders usually are standard, including agreements on pricing strategies set by professional associations, fixing prices among competitors, sharing territories (agreeing in which municipalities which competitor bids or not), as well as agreeing in advance who the wither of the tender will be and submitting less favorable bid or bidding to only assist the winner.

Lessons undertakings participating in public tenders must learn

Suppliers shall be aware that:

  • they must comply not only with public procurement laws but also competition rules;
  • agreements to share markets (by product or territory), fix prices or any other potentially restricting competition are prohibited in public procurement markets;
  • too high or inconsistent prices in tender proposals signals cartel agreement (bid rigging); behavior patterns in price coordination and exchange may show ‘cover bidding’ when the winner is decided in advance and competitors bid ‘in favor’ of that winner;
  • competition authorities and purchasing organizations cooperate, share information and consult each other. Furthermore, digital tendering systems allow to easier recognize suspicious behavior and to identify patterns in actions of undertakings. That is why it should not be expected that competition authorities are insufficiently equipped to detect prohibited agreements in public procurement markets.
  • no real economic harm has to be proven; a mere fact that suppliers engaged into anticompetitive practices prohibited by Art 101 TFEU is enough to be fined by competition authority.

The full article published as a blog post in the official blog of European Competition and Regulatory Law Review (CoRe) is here.