In this insightful and thoughtful blog post, Heidi Sander Løjmand discusses the hot-off-the-press Judgment of the Danish Supreme Court in longstanding litigation concerned with joint bidding in procurement procedures. As she stresses, this is a ‘must-know’ case for all competition and procurement practitioners, much as the earlier Norwegian SKI Taxi and the related EFTA Court Judgment, because it fleshes out the difficulties and implications of a strict application of competition law in this setting.
The Danish Judgment is likely to mark the end of an era in Danish practice, as Heidi points out, but it will certainly only add fuel to the fire of academic and policy-making discussions about the interpretation and application of Article 101 TFEU in the context of public procurement. I for one, am very grateful to Heidi for making this interesting line of Scandinavian case law accessible in English, as well as for sharp questioning of the legal arguments.
The Danish Supreme Court’s ruling in the “Road Marking Case”: the end of a joint bidding era
Yesterday, the 27th of November 2019, the Danish Supreme Court delivered its long-awaited judgment in the so-called “Road Marking Case”. The full judgment is available here (in Danish). The Danish Supreme Court found that joint bidding by companies that could have submitted independent bids for several lots of the same tender constituted an anticompetitive agreement between competitors and, as it included an agreement on the price of the tender as well as on the division of the services (share by lots) to be carried out by each of the teaming companies, it constituted a by object violation of Art 101(1) TFEU and the domestic equivalent, Section 6 of the Danish Competition Act. In doing so, the Danish Supreme Court upheld the initial decision by the Danish Competition Council and overturned an intermediate decision by the Danish Maritime and Commercial High Court that had deemed the joint tendering lawful.
1. Background
In 2010, the consultancy firm McKinsey & Company provided the Danish Government with a report on how to increase economic growth through competition. Amongst the suggestions were to consolidate public tenders within the construction and services industries in order to (i) take advantage of potential economies of scale, (ii) to attract foreign companies, and (iii) to apply procurement procedures and tender requirements that encourage efficient operation. Such initiatives would, according to the report, lead to fewer yet bigger and more efficient companies, and thus to a better utilization of economies of scale.
Tender I (2012): In that light, the Danish Road Directorate changed its tender format and published – in 2012 for the first time – an invitation to bid for a consolidated tender comprised of 337 contracts covering 19 different subject areas. One subject area was road marking. The demanded road marking services were divided into five lots/contracts covering different geographical areas. It was possible to submit bids for one or more lots; companies submitting bids for multiple lots could offer rebates not exceeding 20%, compared to the aggregation of their offers for individual lots. The award criterion was the lowest price.
The two road marking companies, Eurostar Danmark A/S and GVCO A/S (formerly LKF Vejmarkering A/S) (hereinafter referred to as Eurostar and GVCO or the parties) decided to team up and submitted a joint bid with a rebate for all 5 contracts via their agreement-based Danish Road-marking Consortium. The consortium was unsuccessful. All 5 contracts were awarded to the competitor, Guide-Lines, who had offered a 20% rebate (it bears mentioning that Guide-Lines would have won all the contracts without the rebate).
Tender II (2013): One year later, Guide-Lines won a similarly structured tender by the Road Directorate regarding road maintenance. As in 2012, Eurostar and GVCO submitted an unsuccessful joint bid via their Danish Road-marking Consortium.
Tender III (2014): Guide-Lines defaulted on two of their road marking contracts (i.e. from the 2012 tender) as they were unable to perform according to the set time and work schedules. As a consequence, the Danish Road Directorate decided to publish an invitation to bid for 3 of the initial geographical lots. The procurement format was similar to the two previous tenders, except this time there was no limit to the size of the rebate. For the third time, Eurostar and GVCO submitted a joint bid through their Danish Road-marking Consortium for all three contracts. If the consortium was awarded one contract, no rebate would be granted. If it won two or three contracts a rebate of 5% or 20% would be granted, respectively. The consortium won all three contracts. It turned out that no other company had submitted a total bid for all three lots, and on one of the lots the consortium’s bid was the only one. Guide-Lines had submitted a bid for two lots with no rebate, and Lemminkäinen for one lot. Guide-Lines filed a complaint with the Danish Competition Council alleging that the joint bid from Eurostar and GVCO constituted an infringement of Section 6 of the Danish Competition Act and art. 101(1) TFEU.
It is worth noting that Eurostar and GVCO concluded a new consortium agreement for each of the three above-mentioned tender procedures. The civil charges in the present case concerned only the consortium agreement between Eurostar and GVCO in relation to the 2014-tender. The criminal charges that were brought against the parties in 2016 following the Competition Appeals Tribunal’s decision (discussed below), however – remarkably – accuse the parties of having entered into a cartel agreement in the period from primo 2012 to ultimo 2014, thus including the collaboration between the parties in all three tenders. It shall be interesting to see the outcome of the criminal proceedings, not least because individuals engaged in cartel behavior (which is defined very broadly in the Danish Competition Act) face the risk of prison sentences of up to 6 years. Fortunately, the Danish Appeals Tribunal noted in its decision that the joint bidding in question did not amount to a classic cartel.
2. Procedural history
A) Decision of the Danish Competition Council (24 June 2015) [available in full here (in Danish)].
The Competition Council found that Eurostar and GVCO had infringed the prohibition on anticompetitive agreements. Decisive for this finding was that the two companies could have submitted separate bids on at least one lot with their current individual capacity. In addition – though it was not essential for the conclusion – the companies could have expanded their individual capacities so as to bid separately for all three lots. They were therefore to be regarded as competitors in the tender procedure at issue, despite their argument that they were not competitors because they were incapable of submitting individual bids for all three lots, and that this, the total tender, was the relevant benchmark due to the way the procurement procedure was structured.
The Competition Council found that the joint bidding constituted an infringement by object because the consortium agreement was concluded between competitors (debatably the two largest in the industry, that were also subsidiaries of two large corporate groups: SAFEROAD and Geveko AB), and it contained the fixing of a joint price as well as an agreement to share the different geographical lots between the two companies with (allegedly) no pooling of resources etc. Not surprisingly, the Competition Council also found that the agreement did not meet the conditions for exemption under art. 101(3) TFEU.
The parties appealed the decision to the Danish Competition Appeals Tribunal.
B) Decision of the Danish Competition Appeals Tribunal (11 April 2016) [available in full here (in Danish)].
The Danish Competition Appeals Tribunal upheld the Competition Council’s decision but refrained from assessing whether Eurostar and GVCO had – or could achieve – sufficient capacity to submit separate bids on the entire tender. The parties indisputably had the capacity to bid individually for some of the lots and were therefore to be regarded as competitors. In light of this, the Tribunal found that their agreement to submit joint bids eliminated competition between them, and that it infringed art. 101(1) TFEU by object. Like the Competition Council, the Tribunal found that the criteria for exemption under art. 101(3) TFEU were not met.
Once again, the parties appealed the decision to the Danish Maritime and Commercial Court.
C) Judgment of the Maritime and Commercial High Court (27 August 2018) [available in full here (in Danish)].
Contrary to the decisions of the competition authorities, the Maritime and Commercial High Court found that the agreement between Eurostar and GVCO to submit joint bids did not infringe art. 101(1) TFEU. The Court noted that the tender was structured in a way that favored bids on all three lots, and that the companies’ ability to submit separate bids on some lots could not prevent them from teaming up for the purpose of submitting a joint bid for the entire contract. In the Court’s view, such a restriction on companies’ freedom to carry out their business would not necessarily promote competition.
Since the Competition Council had not provided sufficient proof that Eurostar’s and GVCO’s capacity calculations were inaccurate, the Court found that the parties were unable to independently bid for the entire contract. As a consequence – though it is not explicitly stated – they were not classified as being competitors, and therefore the agreement fell entirely outside of the scope of art. 101(1) TFEU. The competition authorities’ decisions were thus set aside.
Besides the different benchmark for assessing when two companies are competitors in connection to a tender procedure, the Court also stated its view on the Competition Council’s way of assessing companies’ ability to bid independently. The Council did not allow the companies to subtract resources allocated to the servicing of existing key customers, unless written agreements were in place. The Court dismissed this, stating that companies are entitled to take account of such capacity if the expectation of recurring orders is backed by previous experience. It would be commercially irresponsible not to.
This time, the Danish Competition Authorities appealed the judgment.
3. Ruling of the Danish Supreme Court (27 November 2019)
As already noted, the Supreme Court set aside the judgment of the Maritime and Commercial High Court. It is worth mentioning that during the proceedings, the Supreme Court refused to refer questions to the CJEU for a preliminary ruling as it found the law to be clear. The questions submitted by the parties have not been published, and thus it is not possible to elaborate on the justification of the Court’s refusal.
In general, the Supreme Court gave support to the interpretation applied by the Competition Appeals Tribunal. Initially, the Court confirmed that Eurostar and GVCO would not be treated as competitors if they were incapable of undertaking the services demanded by the Road Directorate independently, and that the basis for evaluating this ability was the requirements of the tender documents. Remarkably, the Supreme Court then stated that all the conditions, which according to the two consortium parties encouraged the submission of total bids—i.e. the terms of the tender (consolidation of previous smaller tenders + option to provide collective rebate) and the history of previous tenders (in which the winner submitted a total bid)—were irrelevant. Because the tender documents objectively allowed companies to bid for one, two or all three lots, the Supreme Court found no basis for the view that the “real contest” was for the total tender, i.e. all three lots. The Supreme Court instead observed that the other tenderers submitted bids for only one or two lots, respectively.
Since it was undisputed that Eurostar and GVCO could have submitted separate bids on individual lots, the Supreme Court found that Eurostar and GVCO were competitors in relation to the tender procedure at issue. On the issue of object/effect, the Supreme Court acknowledged that the agreement between the two companies was entered into with the purpose of submitting a joint bid on the Road Directorate’s tender and to perform the tasks accordingly if the consortium was successful. The Court then went on to state that the agreement did not possess the characteristics of a production agreement, and that it did not foster collaboration between the parties as to the actual performance of the offered road marking services, since the parties had decided ex ante which one of them should operate in the respective geographical areas in each possible outcome (i.e. whether the consortium won one lot, two or three). On this note, the Supreme Court concluded that the consortium agreement was in fact a means to distribute two individual companies’ services – and highlighted the price fixing as well as the market division element – and that the Appeals Tribunal was right in finding that it amounted to a restriction of competition by object. Not surprisingly, the Court also found that the conditions for individual exemption under art. 101(3) TFEU had not been proved to be met.
4. Comment
The Danish Road Marking Case is the second case in Scandinavia to make it all the way to the Supreme Court. In 2017, the Norwegian Supreme Court decided on the much-debated Ski Taxi case, in which two taxi companies had submitted joint bids via a jointly-owned administrative company for a number of years (for comments on the case, see e.g. A Sanchez-Graells, “Ski Taxi: Joint Bidding in Procurement as Price-Fixing?” (2017) 8(7) Journal of European Competition Law & Practice 451–453, and I Herrera Anchustegui, “Joint bidding and object restrictions of competition: The EFTA Court’s take in the ‘Taxi case’” (2017) 1(2) European Competition and Regulatory Law Review (CoRe) 174-179).
One would like to believe that, with these cases, the boundary between legal and illegal joint bidding should be just about clear-cut; providing legal certainty for the companies thereby allowing them to plan effectively their bidding strategy and behaviour. The reality is, however, that even with the clarity stemming from the mentioned cases, many (essential) issues still remain unsettled and/or ambiguous (as recently pointed put in a joint letter of 1 November 2019 to the European Commission by the Confederation of Danish Industry (DI), the Confederation of Norwegian Enterprise (NHO), the Confederation of Swedish Enterprise (Svensk Näringsliv), the Confederation of Finnish Industries (EK) and the Federation of Icelandic Industries (SI); on file with author)
First. When are two companies to be regarded as (of particular interest potential) competitors in relation to a certain tender procedure? The Supreme Court cases clearly indicate that it suffices to classify two companies as competitors if they are capable of submitting bids on some (the same?) lots, and that it is irrelevant whether they have the ability to submit bids for the entire tender/contract for which they have actually teamed up to bid.
The Danish Supreme Court does not seem to give importance to the distinction between the individual lots, but it follows from the Competition Council’s decision that GVCO had the capacity to submit an individual bid on lot A or B and Eurostar on lot A and B (given the information about the lot sizes, Eurostar could presumably also have bid for lot C instead of lot A and B). Without specifically mentioning that the two companies are competitors because of their ability to submit individual bids on (some of) the same lots, the Danish Supreme Court leaves the impression that if company 1 is able to submit an individual bid for lot A, and company 2 for lot B, the two companies will be competitors in relation to a tender consisting of the two lots A and B. Unless the two lots are very similar in size – and needless to say concern the same product – this logic does not appear very convincing or pro-competitive.
Providing the lots A and B are similar, what is clear from the Danish Supreme Court’s approach is that the possibility of receiving two bids on lot A or lot B is favoured over the possibility of receiving one (joint) bid on lot A and B. For the contracting authority (and society in general), this may not be the most desired (economically efficient) approach, as lot B will have to be re-tendered if company 1 and 2 happen to submit individual bids on the same lot (provided of course that there are no other bidders than company 1 and 2).
Both the Norwegian and Danish Supreme Court cases concerned contracts/lots of the same product. It is not clear-cut how the analysis is to be applied to tenders of e.g. framework agreements or public contracts with various products. Two companies could have subject-specific overlaps but different key operations – a consultancy firm specialized in construction could have in-house architects employed (or have architecture companies as subsidiaries) but want to team up with a specialized, independent architecture company. If a tender is divided into lots, one of which concerns architectural services, would such an overlap in competencies lead to the conclusion that the consultancy firm and the architect are competitors, because of their ability to bid for the “architecture lot”? Or should they be viewed as non-competitors in relation to the entire tender/or to the demanded consultancy services of which architecture services may just be a part?
Second. The Danish Supreme Court did not consider the capacity assessments put forward by the parties or the Competition Council in order to prove the companies’ (in)ability to submit individual bids. It is therefore uncertain whether the parties’ calculations had been sufficient to prove their lack of individual abilities, if the benchmark had been the entire tender as in the Maritime and Commercial High Court’s view. It is going to be very interesting to see how far the assessment of a company’s “real and concrete possibilities” to expand its capacity in order to submit a bid (on a single lot!) will be stretched. Indeed, if the standard follows that of the Competition Council in the Road Marking Case (which however concerned the ability to expand in order to bid for the entire tender, not single lots) it seems many companies are likely to be viewed as potential competitors for future procurement tenders.
Third. It remains undecided how the use of sub-contractors affects the competition assessment. If it is common to use sub-contractors, should two companies be classified as competitors if they could submit individual bids with the use of (non-competitors) as sub-contractors? In a case for the Norwegian Competition Authority (Vedtak V2009-17 – Gran & Ekran AS og Grunnarbeid AS [available here (in Norwegian)], the company Gran & Ekran could perform only 8% of the tasks required in the tender. The fact that the company had contacted a sub-contractor with a view to submit a bid for the entire tender, however, indicated to the competition authority that it was a potential competitor to the company Grunnarbeid. Though the case is not a straight-forward joint bidding case as it concerned a reciprocal sub-contracting arrangement between Gran & Ekran and Grunnarbeid (and was assessed ex post with the knowledge that both parties in fact submitted separate bids on the entire tender with each other as sub-contractors, and thus were de facto actual competitors), it raises the question whether – in a “more traditional” joint bidding case – a company with such a limited ex ante competence to bid risks being considered a potential competitor for a tender (lot!?) to which 92% of the tasks must be performed by sub-contractors?
Fourth. The relevance of whether the companies submitting a joint bid are competitors in the market “outside of” the particular tender appears ambiguous. The Danish Supreme Court observed in its commented Judgment that Eurostar and GVCO were amongst the biggest Danish undertakings in the road marking industry at the time the Road Marking Consortium was established and the joint bid submitted, and that they were active in the same market and at the same level of the value chain. Thus, it is apparent that they were competitors in the traditional relevant market; but (why) does this matter?
In a recent case for the Danish District Court [Retten i Glostrup, case 15-10950/2017 Bjerregaard Sikkerhed, available here (in Danish)] two companies’ (lack of) competitive relation outside of the tender procedure was determinative for the conclusion. The company Bacher Logistics (formerly Four Danes) submitted a bid for an entire tender (i.e. 5 lots of various work wear and logistics) with the company Bjerregaard Sikkerhed as a sub-contractor. Bjerregaard Sikkerhed, however, also submitted an independent bid for one of the lots, and thus the two companies were de facto competitors for that lot. The two independent bids from the companies on that specific lot were identical. Nevertheless, the Court found that – with the evidence presented – this behavior did not amount to a restriction of competition. The conclusion rested on mainly three arguments:
i) since the companies were specialized in different products/services (specialist wholesaler within safety footwear vs logistics), they were not normally competitors;
ii) there was nothing unusual about the commercial practice of submitting bids based on prices/product information from sub-contractors; and
iii) it was unlikely that the sub-contractor would have been able to submit a better bid.
As with the Norwegian case mentioned above, this case is not a “straight-forward” joint bidding case, yet it opens for a discussion of the impact that the competitive relation outside of a specific tender may have for the assessment of the companies bidding behavior.
Fifth. As regards the size and number of the teaming companies, one could in the light of the Maritime and Commercial High Court’s approach wonder: if two consortium parties are amongst the biggest companies (no. 1 and 2, or 2 and 3) in a highly-concentrated industry, and none of them could bid individually for a contract, what is the likelihood of other market participants being able to? Presumably, less likely. Would the acceptance of a joint bid between these two companies then not lead to the conclusion that all of the industry’s companies could have teamed up to submit one joint bid without conflicting with the competition rule, because none of them could be regarded as competitors in relation to the tendered contract? No. Though it does not appear from any the mentioned cases, a joint bidding arrangement may restrict competition if it involves more companies than it is objectively necessary to submit a bid, even if the companies are not competitors in relation to the specific tender.
The requirement of a joint bid being “objectively necessary” also raises – in light of the Road Marking Case – the question of whether account should be taken of the size/market share/market power of the teaming companies. Would it have been objectively necessary that the allegedly two largest companies teamed up, even if they were incapable of submitting individual bids? What if the two companies could have submitted bids in competition with each other by teaming up with any of the industry’s smaller enterprises; should they be regarded as competitors because of that possibility? Can and should competition law impose such a “less restrictive means” approach to determine the legality of joint bidding, and if so should it be applied to determine whether two companies are competitors or whether the restriction is by object or by effect for the purposes of art. 101(1) TFEU, or perhaps reserved for whether exemption is possible under art. 101(3) TFEU?
Sixth. An issue that has not been given much attention in the mentioned cases is the risk of achieving static efficiency as opposed to dynamic, when assessing the legality of a joint bid with a sole focus on the particular tender procedure at issue. Such an approach risks neglecting the possible spill-over effects that may affect the broader market on which the companies operate, including for example higher (joint) concentration. Of course, one may argue that if there is an expectation that consortium members will bid jointly for future contracts, the industry’s other companies will (need to) team up in order to effectively compete against that consortium. This may promote economic efficiency, if the (likely) fewer bids are more competitive than any individual bids would have been; thus, such promotion of a more concentrated industry structure (in the bidding market) may not sit as awkwardly together with competition policy as would appear at first sight. One could, however, wonder whether this type of structural assessments belong to the enforcement of the prohibition of anticompetitive practices rather than e.g. merger control, as joint tendering in one occasion does not necessarily imply joint tendering for future contracts.
More generally, this line of argumentation raised one of the main questions in the Road Marking Case: Do fewer bids necessarily equal a restriction of competition when such could provide the public authority with a higher (or equivalent) value-for-money than individual bids? Having in mind that the goal of competition law is to promote economic welfare (for the consumers), and that the mean to achieve this goal is effective competition, it would be useful to obtain further clarity on how exactly “effective competition” is to be understood in a public procurement context, and how the static welfare of a contracting authority stemming from one tender procedure is to be weighed against the dynamic welfare of other contracting authorities and consumers in its broader sense.
Seventh. A different but somewhat related topic, which the cases do not provide clarity on, is whether and/or when joint bidding constitutes an infringement of competition law by object or by effect; and how much detail and effort is needed to establish an object infringement. In the Road Marking Case both the competition authorities and the companies used AG Bobek’s fish metaphor (Opinon of 5 September 2019 in Budapest Bank and Others, C-228/18, EU:C:2019:678, para 51) to support their respective views.
The companies claimed that, although the consortium agreement perhaps looked like a fish and smelled like a fish, it possessed so many characteristics different from a fish that in order to qualify it as such, a detailed examination (of its effects) should be carried out. Of course, they also argued the obvious; since joint bidding can have pro- as well as anticompetitive effects on competition, such behavior does not categorically fall into “the object box”. In fact, because of its ambivalent effects, joint bidding should always require a detailed analysis as to the effects on competition.
Not surprisingly, the competition authority argued to the contrary. In their view, the consortium agreement looked like a fish, smelled like a fish, and behaved like a fish; and no circumstances in the market could convincingly question the (likely) anticompetitive effects of such a fish. It was a price fixing and market sharing agreement between competitors, and because such have long been classified as object restrictions, no detailed analysis was needed to establish that it was in fact a fish. The only plausible object of the agreement was to restrict competition. As revealed, the Danish Supreme Court supported the authority’s interpretation.
Clearly, the parties and the competition authority viewed the agreement very differently. Some may argue that at first glance their different approaches seem to fit nicely into “the more economic” vs “the orthodox” approach to competition law enforcement. The authority seemed to follow the rather stringent approach adopted by the Norwegian Supreme Court and the EFTA Court in the Ski Taxi case, where a joint bidding arrangement was deemed a restriction of competition by object mainly due to its price-fixing element. From an enforcement perspective, this simple yet inflexible approach is not hard to understand; merely observing a price-fixing element between competitors renders a joint bidding arrangement anticompetitive by object, regardless of any legitimate purposes or (likely) pro-competitive effects. The benefits of this approach are that it provides a high degree of legal certainty; it reduces the procedural burden of the competition authorities under art. 101(1) TFEU; and it effectively reverses the burden of illegality to the parties, who must provide sufficient evidence to prove fulfilment of the cumulative conditions in art. 101(3) TFEU to find their joint bidding agreement exempt. This approach, however, also creates risk of type I enforcement errors, i.e. condemnation of conducts that are not anticompetitive, and may lead businesses to refrain from entering into joint bidding arrangements that are not harmful to competition—to the potential detriment of contracting authorities and, ultimately, taxpayers.
The parties in the Road Marking Case did not give “stand-alone” importance to the price fixing element as this is an inevitable element of joint bidding. To correctly assess the restrictive effects of joint bidding one should therefore see the price-fixing element in its rightful context. This led to another principal disagreement in the case; namely, determining which facts and circumstances should be included in the “legal and economic context”, and which should be reserved for the analysis of efficiencies under art. 101(3) TFEU. The companies argued that past experience from comparable tenders revealed that the winning bidder was likely to be found amongst those who submitted bids for the entire tender, and the companies’ legitimately anticipated participation by foreign tenderers to submit such “total bids” because of the Road Directorate’s active marketing efforts in the Nordic countries. These circumstances determined the parties’ bidding strategy and should, according to the parties, be taken into account under the legal and economic context (art. 101(1) TFEU). The authority noticed that the companies’ ability to provide a “more competitive bid” (i.e. a “more likely to win” bid) could only be assessed under art. 101(3), as the ability to bid is the determinative factor under 101(1) TFEU, not the ability to win, and objectively it was not a requirement that tenderers submitted “total bids”. Again, as already declared, the Danish Supreme Court upheld the authority’s approach, leaving much to be desired from a commercial bidding strategy perspective.
It is correct that it was objectively possible to submit bids for one or several lots, and that the consortium parties could in fact have done so independently. The problem is that in reality no company (except in certain cover price cases) submits bids merely to participate in public tenders because of the costs involved; they bid to win. If they assess that there is no (or a low) chance of winning, they will refrain from bidding. The Maritime and Commercial High Court acknowledged this commercial reality of the companies, and though the Court repealed the case primarily because the parties were not competitors (in relation to the entire tender), it also noted that the Competition Appeals Tribunal had failed to carry out the necessary, concrete assessment of the agreements’ purpose and character so as to conclude with sufficient clarity that it had the object of restricting competition. Whether the Maritime and Commercial High Court would have repealed the case if the companies had been found to have the ability to individually submit bids for the entire tender, is questionable.
The Supreme Court found that, in the given market settings, the consortium agreement by its very nature had the potential to restrict competition, and thus it was unnecessary to demonstrate any actual anti-competitive effects on the market. Neither the parties’ subjective purpose of submitting a more competitive bid, nor the fact that the collaboration happened openly, could change this.
The questions and issues highlighted above are by no means exhaustive, but already demonstrate the complexity of the enforcement of competition law in the context of public procurement. Further topics within the joint bidding sphere are equally interesting (and unclear), for example; the possibility of joint bidding arrangements fulfilling the conditions for exemption under art. 101(3) TFEU; the burden of proof and usage of the proof proximity principle in regards to the assessment of companies’ (lack of) capacity to bid individually; the substance of the profitability test when assessing whether it constitutes a sustainable business strategy to expand company capacity; the relevance and significance of ex ante vs ex post facts; the limits on information exchange between the companies during the different stages of the tender process; the relevance and application of auction theory; the relevant market and competitor-analysis when applying the de minimis, the qualification of illegal joint bidding as cartel behavior that may be faced with criminal charges; etc.
Needless to say, the Road Marking Case limits the possibility for companies to bid strategically with each other; or at least it makes clear that such collaboration must involve some integration of resources/competencies. A prospective need to (maybe) pool resources if needed during the contract period does not suffice, if the market (in this case geographical lots) has been divided between the parties ex ante. The case, however, not only offers a cautionary tale to companies but also to contracting authorities when it comes to procurement design (as did the SKI Taxi case, as discussed by Sanchez-Graells in this blog). Clearly, the contracting authorities have very limited scope to utilize the benefits of potential bidders’ economies of scale, if at the same time, they decide to divide the tender into lots.
Looking at the future, it is worth stressing that the detailed Danish Guidelines on joint tendering [available here (in English)]: were amended – in a less than convincing way – to reflect the judgment of the Maritime and Commercial High Court. In light of yesterdays’ Supreme Court judgment, the Danish Competition and Consumer Authority may simply pick out the few comments reflecting the High Court’s stance and change the guidelines back to how they used to be.
Heidi Sander Løjmand, MSc
Heidi Sander Løjmand is a PhD Researcher at the University of Southern Denmark (Law Department). In her PhD she explores the approach to joint bidding under art. 101(1) TFEU, in particular in the Nordic Countries. She holds a master’s degree in Business Administration and Commercial Law (law and economics) from Copenhagen Business School, and has previously worked in legal practice. You can connect with Heidi via LinkedIn: https://www.linkedin.com/in/heidi-sander-l%C3%B8jmand-ba41513b/.