Unfair Competition in Public Tenders - Marger

2020 07 07

Justas Čobotas prepared case law executive note due to unfair competition in public tenders.

Summary: The Supreme Administrative Court of Lithuania upheld the decision of the Competition Council of the Republic of Lithuania, in which the Competition Council had found that two competitors Irdaiva and Panevėžio statybos trestas (both from the list of TOP 10 construction companies)  had entered into anti-competitive agreement to win public tenders. The Competition council had found and examined 24 instances where Irdaiva and Panevėžio statybos trestas had made joint bids in public tenders. The Court agreed with the conclusion of the council that forming ad hoc consortiums for participation in public tenders was a form of illegal anti-competitive agreement between two competitors.

The finding of the Court was based on the fact that Irdaiva and Panevėžio statybos trestas had sufficient qualifications and capabilities to participate in the tenders individually. Hence follows the rationale of the court that joint bids were intended not to accumulate qualifications and capacities (otherwise insufficient separately), but to avoid competition between the competitors and increase competitive advantage against other competitors in the market. Such agreements were found to infringe national and EU regulation, the companies were imposed fines in the amount of 10 percent of annual income (FY 2016) respectively.

The ruling of the Court recognizes consistent line of work of the Competition Council in fighting uncompetitive behaviour in public tenders in the form of joint bidding (ad hoc consortiums).

This landmark decision of the Court clarifies that usual potential excuses for cooperation between competitors in public tenders are insufficient to justify the violation of the ban of uncompetitive behaviour in public tenders.

Checklist for CEO before taking decision to make a joint bid with a competitor in a public tender:

  • Is your Company qualified and capable to bid by itself?
  • Is potential bidding partner qualified and capable to bid by itself?
  • Consider including in the consortium agreement warranty of each partner that each of them is not sufficiently qualified and capable to bid by themselves.
  • Organizational obstacles (lack of actual manpower, deployment of resources in other projects) is a very weak reason to justify joint biding with competitor.
  • Goal to jointly increase chances of winning in a tender does not justify joint bidding by competitors.
  • Making joint bid in a public tender which may be recognized as an anti-competitive agreement the company takes risk of fine of 10 percent of annual income.

Justas Čobotas, Attorney-at-law

Justas Čobotas

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