Background
Conditions
Special criteria
A consortium is a form of cooperation for the joint execution of two or more undertakings of a project that are typically competitors or potential competitors. Such a cooperation is particularly common in the construction industry.
To date, there has been hardly any practice on the antitrust assessment of consortia in Switzerland. On 11 May 2021, the Secretariat of the Competition Commission published the final report of a preliminary investigation, dated 6 October 2020, concerning a matter in the construction sector. This report clarifies the conditions under which a consortium, particularly a permanent one, is permissible.
From a Swiss antitrust point of view, a consortium between competitors is only permissible under certain conditions. One is that the creation of the consortium does not reduce the number of offers in a (public) tender process. This is the case, for example, if an undertaking is independently unable to:
- fulfil the tender requirements; have sufficient resources (eg, human resources, equipment);
- aquire the know-how for the project; or
- bear the financial or commercial risks of such project. In these circumstances, the consortium is "economically and commercially reasonable".
The other is that even if the number of offers is reduced, the consortium is permissible if its price-performance ratio is significantly better than the individual offer of such undertaking, or if the consortium clearly enhances efficiency (eg, cost reduction, cost optimisation or risk optimisation), evidenced by a lower price.
Generally, the Secretariat considers that any consortium should consist of as few undertakings as possible to meet these requirements.
When assessing a "permanent" consortium, special criteria under antitrust law apply. A permanent consortium is a form of cooperation based on the agreement to collaborate not only on one project but also on future projects. Generally speaking, permissibility of a permanent consortium under antitrust law strongly depends on the substance of the underlying agreement and the characteristics of the market. The Secretariat considers the following criteria when assessing the permissibility of a permanent consortium:
- whether the consortium partners agreed in advance on criteria under which they would jointly submit a tender and jointly execute a project, or whether they agreed on basic criteria but decided on a project-specific basis in each case, in which they would actually submit a joint tender (the latter implies a less intense cooperation of the undertakings);
- the effect of a permanent consortium on the total number of offers for a project;
- whether a permanent consortium may be justified by public procurement laws;
- whether a permanent consortium may be justified by the particularities of the market, such as topography, climate, availability of human resources and fluctuations in demand;
- whether cross-project risks (financial or capacity bottlenecks) exist that can be avoided or reduced to an acceptable level only by forming a permanent consortium;
- the number of projects acquired jointly, but carried out by one partner alone. The fact that one undertaking executes a jointly acquired project alone presumes that the consortium could be misused as a cover to divide the projects between the consortium partners and thus be illegal under antitrust law; and
- the share of the total turnover of a partner generated by the projects of the consortium.
With regard to the information exchange within the consortium, it is worth mentioning that any exchange in the course of the negotiations on the formation of the consortium has, according to the Secretariat, neither the purpose nor the effect of restricting competition. However, if the exchanged information goes beyond what is necessary for the formation of the consortium, the admissibility of this exchange has to be assessed separately under antitrust law.
For more information please contact Marcel Meinhardt or Luzius Sidler at Lenz & Staehelin by telephone (+41 58 450 80 00) or email ([email protected] or [email protected]). The Lenz & Staehelin website can be accessed at www.lenzstaehelin.com.