The Polish Competition Authority continues to pursue bid-rigging cases
According to an announcement on its official website, the Polish Competition Authority (PCA) has issued eight decisions concerning bid-rigging cases since 2015. Another 34 proceedings are pending. This clearly demonstrates two things: that the national competition watchdog is very active in the public procurement market in Poland, and that many of the companies participating in tenders are not aware of the risks related to competition law. With large numbers of tenders announced every year, the PCA will certainly continue to closely monitor this part of the market. What is more, it tends to cooperate closely with contracting authorities with a view to raising their vigilance in competition law matters.
The most common scenario that comes under the scrutiny of the PCA is where companies are accused of engaging in so-called bid rotation schemes. This happens when their offers are ranked first and second and the company with the most advantageous offer either pulls out or does not rectify the formal defects of its offer (eg, fails to provide required documentation) in order to make it possible for the contracting authority to choose the second offer. The PCA usually examines if there are any business or family relations between the bidders, as it considers these as factors that facilitate collusion in tenders.
However, the PCA does not limit its activities in the public procurement market to bid rotation schemes. The most widely debated topic at the moment is the permissible scope of cooperation between bidders − in particular competitors − in the form of consortia. Such cooperation is more frequent in larger procurements, such as infrastructure or construction projects. By its very nature, such cooperation involves the exchange of information about resources, capabilities, and prices of certain types of work, and therefore raises significant competition law issues, especially in the case of consortia formed by competitors.
With the PCA paying particular attention to the public procurement market, it is essential for bidding companies to be aware of competition law-related risks. They should bear in mind that compliance with the rules governing public procurement procedures does not guarantee immunity from competition law and possible fines. Any action that may influence the final result of a tender – such as a refusal to sign the contract or the decision about whom to form a consortium with – should be a part of every bidding company’s competition law screening.
Romanian Competition Council issues guidance for companies participating in public tenders
In May 2016 the Romanian Competition Council (RCC) published a set of guidelines dealing with the competition risks triggered in the context of public procurement procedures.
The RCC invited the stakeholders to express their opinion on the draft Guide for observing the competition rules when tendering as part of consortium in public acquisition procedures (the Consortium Guide). Separately, the RCC published a Guide for the detection and discouragement of anticompetitive practices in public procurement procedures (the Bid Rigging Guide) which is addressed to contracting authorities.
Both guides have been published in the context of the entering into force on 26 May 2016 of the legislation package transposing the EU directives package on public procurement.
The Consortium Guide includes guidelines and recommendations for companies that want to form a consortium to tender for a public contract:
- Brief assessment of the consortia that in principle do not breach competition law:
- the consortium members are not actual or potential competitors (subject to the limitations triggered by potential facilitation of unlawful exchanges of information)
- the consortium members form part of a single economic entity
- the consortium members are competitors but the following conditions are cumulatively met: (i) none of the parties to the consortium bid could fulfill the tender requirements on its own; and (ii) no subset of the consortium members could together fulfill such requirement; and (iii) only the minimum amount of information strictly necessary for the preparation of the bid or performance of the contract are exchanged between the consortium members; and (iv) the consortium members ensure that they compete vigorously as normal in all other contexts
- The consortia that do not meet the conditions above should perform a self-assessment.
In addition to the guidelines for the assessment of the potential competition risks triggered by the participation to a public procurement in consortia, the Consortium Guide includes a Q&A tree, sample hypothetical case studies, as well as recommendation of the steps to reduce the risk that a consortium bid breaches competition law and the steps to be taken should there be any indication of competition law breaches.
The Bid Rigging Guide also includes practical case studies that were previously addressed by the RCC. The Bid Rigging Guide is in line with the OECD Recommendation on Fighting Bid Rigging in Public Procurement.
The public consultation for the Consortium Guide ended on May 31, 2016; it is expected that the RCC will soon publish an updated final version taking any comments into consideration.
Companies should take into account the guides published by the RCC, together with EU Public Procurement Legislation, since these could impact them, especially those active in sectors that usually deal with public procurement procedures. In addition, the RCC maintains a focus on bid rigging practices in various industries.
Slovak Competition Authority has new powers on sanctioning bid rigging
The latest amendment of the Act on Protection of Competition widens the powers of the Slovak Competition Authority (Protimonopolný úrad Slovenskej republiky) while punishing any coordination of undertakings in a public procurement, public tender or other similar collusive tendering (bid rigging). Bid rigging practices may have many forms that can significantly affect the purpose and goals of public procurement.
Under Slovak law, the Authority is entitled to impose fines of up to 10 percent of turnover for the violation of the prohibition of any agreement restricting competition, such as bid rigging cartels.
Bid rigging conspiracies will however not only be punished by the Authority with a fine but also with a ban on participation in public procurement:
- The Authority will prohibit the undertaking from participating in a public procurement for a period of three years if it also imposes a fine for a bid rigging cartel. The only exception is the case where the Authority reduced the fine due to leniency program.
- A significantly shorter ban on participation in a public procurement for one year will be imposed to the undertaking in case the imposed fine for bid rigging has been reduced as a result of a settlement with the Authority. Within the settlement proceeding, the undertaking shall admit participating in a violation and accept liability for such participation. Further, the Office shall reduce the fine that would be imposed otherwise. However, there is no legal claim for the settlement.
The Amendment became effective as of April 18, 2016, although the ban can also be imposed in cases where the imposing penalty concerns a bid rigging cartel that occurred even before the Amendment came into effect. As a result, any undertakings that are already being investigated by the Authority may eventually be prohibited from participating in a public procurement as well.
In case of breaching the ban on the participation in a public procurement, a sine will be imposed on the undertaking of up to 10 percent of its turnover.
The Authority cooperates with the Public Procurement Office (Úrad pre verejné obstarávanie) in order to reveal bid rigging cartels. It also secures that the final decision on the ban is delivered timely to the Public Procurement Office so that it can take related steps (e.g., disqualify such undertaking from its respective register).
Within the priorities set out by the Authority, bid rigging is considered a serious offence (a hardcore cartel) deforming the public procurement proceedings and having a negative impact on the business environment. Due to this recent development in Slovakia, we can expect that the Authority will now focus on public procurement and similar proceedings in order to punish bid rigging tendencies and cartels.
The risks and consequences of investigations of possible bid rigging cartels are substantial. Such an investigation can be very disturbing for the undertakings and its employees and may result in various information and other obligations in relation to the Authority, as well as significant costs.
In the light of this, if you suspect that bid rigging is occurring, be sure to consult with your legal counsel first and consider whether it is appropriate to proceed with the bid. In order to prevent and mitigate the larger risk of investigation, consider implementing internal compliance regulations and schooling programs for employees.