Companies may soon be held responsible for anti-competitive actions by their external contractors. In a recent opinion, Advocate General Wathelet suggested introducing a rebuttable presumption that companies be liable for competition law infringements carried out by external contractors. The presumption would apply even if the contractor’s anti-competitive actions were distinct from the tasks assigned to it and without proof of the company having been aware of or having consented to the contractor’s actions. If the opinion is followed by the European Court of Justice, a company could rebut the presumption of liability by demonstrating that (i) it took all the necessary precautions when hiring the contractor and monitoring the execution of the contractor’s assigned tasks, (ii) the contractor acted outside of the assigned tasks, and (iii) it publicly distanced itself from the contractor’s actions or reported these to the authorities as soon as becoming aware of them.

The Advocate General’s opinion relates to a request for a preliminary ruling regarding a public procurement case for the supply of food products to educational institutions in Latvia. Three companies submitted tenders: DIV un Ko, Ausma and Pārtikas. Pārtikas had sought assistance in the preparation of the tender from a legal firm, which in turn hired subcontractor MMD Lietas for this purpose. Pārtikas sent MMD Lietas a bid proposal. Without informing Pārtikas, MMD Lietas also undertook to prepare the bid proposals for DIV un Ko and Ausma. It used Pārtikas’ bid proposal as a benchmark for the two other bid proposals. The Latvian Competition Authority imposed fines on DIV un Ko, Ausma and Pārtikas for bid rigging. In the appeal proceedings, the Latvian Supreme Court requested a preliminary ruling by the European Court of Justice on whether a company can be held liable for anti-competitive conduct without evidence of the company’s directors having been personally engaged in conduct or having been aware of, or consented to, conduct by persons providing an external service to the company.

The Advocate General noted that because the prohibition on anti-competitive conduct and the penalties for infringing the prohibition are well known, the conduct usually takes place in a clandestine fashion, with meetings held in secret and associated documentation reduced to a minimum. It would therefore be too easy to circumvent application of the competition rules by “hiding” behind an external third party. Furthermore, he found that the importance of safeguarding free competition justifies that companies, when assigning tasks to external third parties, need to take all necessary precautions to prevent anti-competitive conduct by those third parties, in particular by avoiding negligence and recklessness in defining and monitoring the assigned tasks. The Advocate General therefore suggested establishing a rebuttable presumption that a company is liable for the anti-competitive actions by an external third party assigned by it to perform certain tasks. The presumption would apply even if the contractor’s anti-competitive actions were distinct from the assigned tasks and no evidence existed of the company having been aware of or having consented to the third party’s actions.

Consequently, for the company’s presumption of liability to come into play, a competition authority will only need to prove that a party working for the company, without directly or indirectly being part of the company’s organisation chart, has carried out anti-competitive actions. It is then up to the company to rebut this presumption by providing evidence that it had no knowledge of the third party’s actions and by proving that it took the following measures to prevent the anti-competitive actions:

  • When hiring the third party, measures were taken relating to the choice of third party, the definition of the third party’s tasks and the monitoring of the execution of these tasks, the conditions for using subcontractors, the obligations to ensure – among other things – competition law compliance, the penalties for non-compliance with the contract, and the necessary authorisation for actions outside the contract’s scope.
  • During the contract period, measures were taken to oversee that the third party strictly adhered to the assigned tasks.
  • As soon as the company became aware of third party’s anti-competitive conduct, it took measures to publicly distance itself from the conduct, to prevent it from happening again and/or to report the conduct to the authorities.