Whistleblowing reporting systems
Implementation deadline ended on 17.12.2023
In a recent decision, the ECJ (once again) deals with the question of whether affiliated companies participating in one and the same tender must be excluded from the award procedure.
A district in Bavaria invited tenders for public bus transport services. Both a natural person and a company of which this natural person was the managing director and sole shareholder took part in the procedure.
The district that had issued the tender eliminated both bidders from the procedure because of the alleged violation of competition rules. The two bidders appealed to the Southern Bavarian Public Procurement Chamber, which overturned the decision. The Bavarian Higher Regional Court, which was appealed to by the district because of this decision, submitted the matter to the ECJ.
The Bavarian Supreme Court wanted to know from the ECJ whether two bidders may be excluded from the procedure in a situation such as the one in the present case.
According to Art 57 (4) subparagraph 1 lit d of the Public Procurement Directive, bidders are to be excluded from the procedure if the contracting entity has sufficiently plausible indications that the economic participant has made agreements with other economic participants which are aimed at distorting competition. The Directive on procurement by entities operating in the water, energy, transport and postal services sectors does not contain any grounds for exclusion of its own but refers to the Procurement Directive in this respect.
An agreement between two or more companies on the bidding behavior in an award procedure will (with the exception of necessary bidding consortia or a participation as subcontractor) regularly give rise to the suspicion of a distortion of competition (possible bidding cartel). The national (German) implementation of Art 57 (4) subparagraph 1 lit d Procurement Directive essentially adopts the description of a cartel in connection with the concept of distortion of competition (§ 1 dGWB, Art 101 TFEU). A cartel – i.e., agreements between competitors aimed at coordinating their market conduct to restrict competition – necessarily requires at least two companies (or as a US judge once put it in another context: “it takes at least two to tango for conspiracy purposes“). However, two companies that are under the same management are only regarded one company in antitrust law, so that an anti-competitive agreement or conduct within the meaning of the prohibition of cartels is not possible between them.
However, the ECJ has now ruled that Art 57 (4) subparagraph 1 lit d of the Procurement Directive covers violations of the prohibition of cartels but is not limited to them (section 51). For Austria, this finding is particularly interesting because in the national implementation of the provision (§ 78 (1) 4 BVergG), the legislator has permissibly made the ground for exclusion – which is optional under the Directive – into a mandatory ground for exclusion and it could now be asked, for example, whether a violation of the prohibition of abuse of market power or of fair competition also constitutes a (mandatory) ground for exclusion.
In addition – and this was decisive in the present case – it would be forbidden for the Member States to provide further grounds for exclusion due to a lack of suitability than those mentioned in Art 57 (4) of the Procurement Directive (section 54), but they would not be precluded from providing for the non-consideration of applications to participate or the elimination of tenders on other grounds of substantive law (section 58). For example, it would not be compatible with the principle of equal treatment if affiliated bidders could submit coordinated bids if this might give them unjustified advantages over other bidders (section 59). However, in order to comply with the principle of proportionality, it would be necessary, in a case such as the one at issue, “to carry out an examination and assessment of the facts to determine whether the relationship between two entities has specifically influenced the content of the individual […] tenders, whereby the finding of any such influence would be sufficient to exclude the entities concerned from the procedure” (section 60).
With the latest decision, the ECJ continues its previous case law on multiple participation of bidders in an award procedure (see, for example, ECJ 08.02.2018, C-144/17, Lloyd’s of London, section 38; ECJ 17.05.2018, C-531/16, Assitur, sections 26, 29). The decision-making practice of domestic Administrative Courts and the Supreme Administrative Court also continues to prove compatible with this case law.
Thus, the submission of two bids corresponding to the tender, which differ only in price, is not permissible under procurement law, because the bidder could try, depending on the result of the bid opening, either to have their lowest bid eliminated, for example due to underpricing or to present it as a bid to be evaluated (VwGH 18.06.2012, 2010/04/0011). If, however, the bids of the same bidder (or affiliated bidders) show a difference also in the service offered that is relevant to the assessment, there is nothing fundamentally wrong with considering both bids. Nevertheless, this also presupposes that the bidder can define the subject matter of the contract (or parts thereof) themselves on the basis of the invitation to tender and that the quality of this self-determined subject of agreement is evaluated as part of the determination of the best bidder (VwGH 27.02.2019, Ra 2016/04/0103). Moreover, the relations of affiliated companies can be regulated by contractual provisions which are suitable to guarantee both independence and confidentiality in the preparation of bids submitted simultaneously by the companies concerned in the context of a single tender. (ECJ 17.05.2018, C-531/16, Assitur, sections 26, 31).
In summary, this means:
This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.
21. September 2022