The preliminary ruling issued by the ECJ on October 24, 2018, (Case C-124/17, Vossloh Laeis GmbH v Stadtwerke München GmbH) specifies the conditions for excluding suppliers from public tenders based on past infringements of competition law, and presents significant consequences in sectors such as life sciences, where market players are highly dependent on hospital public tenders.

I. Ground for exclusion from public procurement

In addition to risking a fine from a competition authority of up to 10% of their worldwide turnover in the case of infringement of competition law, economic operators also face the risk of being banned from public tender. Since public procurement may represent a significant part of the turnover of companies active in the health sector, it is important to detail the conditions of a possible exclusion based on competition law infringement.

Article 57, paragraph 4(d) of Directive 2014/24/UE on public procurement gives Member States the possibility of excluding from a public procurement procedure candidates who have infringed antitrust law. The exclusion is limited to infringements of Article 101, paragraph 1 of the Treaty on the Functioning of the European Union (TFEU) which prohibits anticompetitive agreements. It aims to protect public purchasers from being victims of such collusion.

In France, these grounds for exclusion have been inserted into Article 48 of the Ordinance related to public contracts (no. 2015-899). In practice, each candidate participating in a public tender must provide a statement guaranteeing that it is not subject to any ground for exclusion (as listed in Article 40 of the Decree no. 2016-361 on public contracts). However, the operator is also given the chance to prove that, despite a past infringement of competition law, it has taken the necessary measures to prevent a reoccurrence of such behavior in the future, thus proving its reliability.

II. Operators’ obligation to show good faith

A recent case illustrates how this exclusion is applied in practice by public bodies. Vossloh Laeis, a manufacturer of railway materials, was fined by the German Federal Cartel Office (FCO) for its participation in a cartel in 2011. Five years later, the company submitted a quote for the provision of railway material in a public tender organized by Stadtwerke München, which incidentally had been one of the victims of the cartel.

Based on the provisions of the Directive, the public purchaser raised its doubts to Vossloh Laeis regarding its reliability. The candidate responded by presenting the restructuration measures it had adopted further to the sanction imposed by the FCO. As the case had been settled, Stadtwerke München also requested a copy of the infringement decision itself, which Vossloh Laeis refused to disclose to prevent it from being used in a follow-on action. The company considered that its collaboration with the FCO was a sufficient guarantee of its goodwill for the public purchaser. However, Stadtwerke München ultimately excluded Vossloh Laeis from the tender.

The public purchaser’s requirement to see the FCO’s infringement decision was referred to the ECJ by the Public Procurement Board for Southern Bavaria. The question was whether the document was necessary to allow the public purchaser to assess the candidate’s capacity to perform the contract at stake, or if the existence of the leniency proceedings before the FCO was enough proof of the candidate’s good faith.

In its ruling, the ECJ considered that the public purchaser “must be able to ask an economic operator which has been held responsible for a breach of competition law to provide the decision of the competition authority concerning it” and specified that “the fact that the transmission of such a document might facilitate the introduction of a civil liability action by the contracting authority against that economic operator is not such as to call that finding into question.”

The ruling has therefore had a significant impact for economic operators that may have infringed competition law and benefited from a leniency program. Those willing to participate in public tenders will undoubtedly be placed in a difficult position; on the one hand, should they want to participate, they may result in helping a victim of their past infringement build a case against them. On the other hand, should they refuse to provide the requested document and offer other pieces of evidence in support of their reliability, they may be excluded from the public tender altogether.