Insights | September 30, 2021

The FCCA issues a penalty payment proposal concerning joint bids in public procurements

The Finnish Competition and Consumer Agency (FCCA) has issued a proposal to impose a penalty payment of approximately 1.9 million euros on six companies and their joint venture operating in the public transport services sector in the Turku region. This is the first time the question of when joint bids in public procurements are compliant with competition law has been considered in Finland. Thus, the case provides some much-welcomed guidance for companies considering participating in joint bids.

Background to the case and the FCCA’s assessment

The companies in question had submitted joint bids in competitive tender processes through their joint ventures in 2013, 2014 and 2016. As, in the FCCA’s view, the joint ventures were not autonomous of their owners, the cooperation and the joint bids submitted by the joint ventures were to be assessed as agreements or concerted practices between undertakings, and/or decisions by associations of undertakings within the meaning of section 5 of the Finnish Competition Act.

The key question considered by the FCCA in its assessment was whether, when assessed objectively, the companies could have had real and concrete possibilities to participate independently in the competitive tendering, i.e. whether the companies were actual or potential competitors of each other in relation to the procurement.

In its analysis, the FCCA considered, among other things, the companies’ existing equipment, number of drivers and depot capacity, as well as their ability to increase those resources to meet the requirements laid down for the procurements. Additionally, in relation to the 2013 procurement, the FCCA pointed out that each of the companies separately could have submitted partial bids for the route(s) for which their resources were sufficient, as it was not a requirement to bid for all of the routes simultaneously.

Interestingly, the FCCA found that in relation to the competitive tender process in 2014, some, but not all, of the companies participating in the joint bid would not have been able to participate in the competitive tendering on their own.

However, as the cooperation through the joint venture was capable of restricting the companies’ independent competitive behavior on the market (including their ability to cooperate with each other or third parties and, thus, form a competing consortium), the FCCA held that their participation in the joint venture was nonetheless capable of restricting competition in the competitive tender process.

Based on the above considerations, the FCCA concluded that the joint bids constituted by object restrictions of section 5 of the Competition Act. According to the FCCA, the companies’ conduct had reduced the number of separate bids that could have been submitted otherwise, therefore limiting the number of alternatives available to the contracting authority. The parties had eliminated all competition amongst them and divided the operation of the transport services subject to the procurement in accordance with a pre-agreed plan.

Key takeaways

When it comes to participating in joint bids, it is up to the tenderer to ensure that it is in compliance with both procurement law and competition law. This self-assessment must be made on a case-by-case basis, based on all of the characteristics of the procurement and the market in question, as well as on considerations as to the roles and capabilities of the prospective participants.

The matter is further complicated by the fact that, under procurement law, the submission of joint bids may not be restricted, whereas, based on the analysis of the aforementioned factors, participating in a joint bid may still be in breach of competition law.

As the assessment is based on a company’s objective potential to participate independently, the company’s subjective intentions are irrelevant. Where a company does not have the required resources readily available, it must consider whether increasing its resources to meet the requirements laid down in the procurement, e.g. by renting equipment or even procuring a loan to purchase resources, would be a realistic possibility. Companies considering participating in a joint bid must also pay special attention to the procurement model adopted and whether it allows tenderers to submit partial bids.

Further, it is not sufficient if only some of the participants in a consortium are not able to participate in the competitive tender process on their own. The essential question companies must consider is whether submitting a joint bid increases or reduces the number of separate bids in the public procurement process.