New paper on the need to review the Remedies Directive

I have uploaded a new paper on SSRN: ‘If it Ain't Broke, Don't Fix It’? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts, to be published in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming.

As detailed in the abstract: 

EU public procurement law relies on the specific enforcement mechanisms of the Remedies Directive, which sets out EU requirements of administrative oversight and judicial protection for public contracts. Recent developments in the case law of the CJEU and the substantive reform resulting from the 2014 Public Procurement Package may have created gaps in the Remedies Directive, which led the European Commission to publicly consult on its revision in 2015. One year after, the outcome of the consultation has not been published, but such revision now seems to have been shelved. This chapter takes issue with the shelving of the revision process and critically assesses whether the Remedies Directive is still fit for purpose. 

The chapter focuses on selected issues, such as the interplay between the Remedies Directive and the Charter of Fundamental Rights, and with the general administrative law of the Member States. It also assesses the difficulties of applying the Remedies Directive ‘as is’ to some of the new rules of the 2014 Public Procurement Package, which creates uncertainty as to its scope of application, and gives rise to particular challenges for the review of exclusion decisions involving the exercise of discretion. The chapter also raises some issues concerning the difficulties derived from the lack of coordination of different remedies available under the Remedies Directive and briefly considers the need to take the development of ADR mechanisms into account. Overall, the chapter concludes that there are important areas where the Remedies Directive requires a revision, and submits that the European Commission should relaunch the review process as a matter of high priority.

The paper is freely downloadable at http://ssrn.com/abstract=2821828. As always, comments welcome.

Brexit may have negative effects for the control of public expenditure, particularly regarding subsidies to large companies

In the current state of turmoil, it is difficult to speculate on the exact relationship between the EU and the UK that can result from the Brexit vote and the future negotiations to be held under Article 50 TEU, in case it gets triggered. However, in order to contribute to the debate of what that relationship should look like in the interest of taxpayers in the UK, it is important to consider the implications that a post-Brexit deal could have in terms of the potential disappearance of the EU rules applicable to the control of how public funds are spent. A reduction in the control mechanisms applicable to certain types of public expenditure could indeed diminish the effectiveness of policies funded by UK taxpayers and create shortcomings in public governance more generally.

This is particularly clear in the case of the EU State aid rules in Articles 107 to 109 TFEU and accompanying secondary legislation, which ultimately aim to avoid subsidy races, as well as the protectionist financing of national champions by Member States. Ultimately, these rules establish a set of controls over the selective channelling of public funds to companies, be it in the form of direct subsidies, or in more indirect ways such as tax exemptions, special contributions to pension plans, or the transmission of public assets (such as public land) in below-market conditions.

The European Commission has created a framework that allows Member States to use State aid for horizontal purposes (such as the support of environmental, innovation or employment-related activities), but also aims to prevent the use of public funds in order to benefit specific companies, in particular through a subsidisation of their operating costs. The European Commission enforces these rules and can bring Member States that breach them before the Court of Justice of the European Union. Additionally, competitors of the companies that receive State aid can challenge those decisions in their domestic courts.

Even if these rules are admittedly imperfect and their enforcement could be improved,* there is no question that the European Commission has been active and rather effective in combating the use of public funds to benefit specific large companies. Remarkably, Member States need to notify State aid measures to the European Commission and must not provide any aid until the Commission has authorised it. Overall, this means that in cases involving large companies, no State aid contrary to the EU rules is generally put in effect, as demonstrated by the discussions surrounding the Hinkley Point project. Where Member States infringe this standstill obligation, the Commission can force a recovery of the aid. The recent tax avoidance cases involving Starbucks or Fiat are a clear testimony of this important role in controlling the way public funds are spent in support of large companies.

The European Commission is thus heavily involved in the State aid measures aimed at specific large companies and acts as a filter to ensure that the expenditure of public funds pursues a legitimate objective in compliance with EU law. This was particularly the case of the State aid channelled to banks in the aftermath of the 2008 financial crisis.

Overall, then, at least for cases of State aid involving large sums of money and large companies, the Commission acts as an important filter to prevent damaging economic interventions in the economy, which constitutes an important check on how public money is spent. Whether such a tight system could be relaxed in order to enable a more proactive EU-wide industrial policy is a subject of significant debate, but the constraints that EU State aid rules currently impose on the provision of direct and indirect financial support to large companies are certainly not perceived as minor.

The question is thus whether a post-Brexit deal could free the UK Government from such State aid control, at least in the medium to long-run, so that it could engage in largely unchecked public subsidy policies, such as creating particularly beneficial tax conditions in order to try to retain or attract large multinational companies considering relocating elsewhere in the EU, or channelling public funds to chosen companies, either in support of industrial policy goals or otherwise.

These would be policy interventions clearly tackled by the European Commission under existing rules, and they would also be caught by the EFTA Surveillance Authority in case the post-Brexit deal resulted in the UK joining the European Economic Area (the so-called ‘Norwegian option’), which would require compliance with the same rules. However, whether interventions aimed at subsidising large companies would be caught in case of a ‘WTO-based’ trade scenario is less clear because the WTO rules on subsidies are not as tight as the EU’s, and their enforcement ultimately relies on other WTO Members bringing a complaint against the UK to the dispute settlement board, which is a very political decision ultimately reliant on trade calculations. To be sure, the EU itself could bring cases against the UK, but this would be a highly contentious issue in the framework of a relationship already very strained by the UK’s exit from the EU and detachment from the EEA.

Should the UK not be a part of the internal market via membership of the EU or the EEA, and in the absence of effective WTO-based external checks on the use of public funds to provide financial support to large companies, the control of this form of public expenditure would fall solely to Parliament and the domestic UK institutions, such as the National Audit Office.

This can be seen as an advantage by those convinced by arguments of self-control and UK-centric governance, but economic regulatory capture theory, and public policy theory more generally, have repeatedly demonstrated that such a self-policing architecture is unlikely to prevent ‘politicised’ uses of public funds. It seems clear to me that, in that case, the possibilities for any given Government to engage in expenditures of this type would be greater than they currently are, which would not necessarily result in the pursuance of the best interests of taxpayers in the UK.

Therefore, if there is value in having an external control of subsidies to large companies in order to avoid anti-economical protectionist policies or redistributive policies that take money away from other pressing social priorities—and I would certainly argue that there is—it seems clear to me that any post-Brexit deal that does not include the application of EU/EEA State aid rules would imply a net loss in terms of public governance and, in particular, in terms of an effective control of public expenditure, particularly regarding subsidies to large companies. Ultimately, then, from this perspective, it seems to me to be in the interest of taxpayers in the UK to strongly support a post-Brexit arrangement that retains State aid control, either by the European Commission or the EFTA Surveillance Authority.

__________________

* A Sanchez-Graells, “Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis” (2016) 4(1) Journal of Antitrust Enforcement 157-187.

Some thoughts on the principle of competition's direct and indirect effects in public procurement from 18 April 2016

It was a pleasure to speak at Upphandlings Dagarna 2016 in Stockholm on the principle of competition enacted in Article 18(1) of Directive 2014/24 and Article 36(1) of Directive 2014/25 [for background reading, see here]. The recording of the livestreaming is available here (starts at 1:30, main remarks after 8:00).

One of the issues that featured prominently in the discussions with my panellists is the legal value of the principle under EU law, and how to make it effective in case Member States do not transpose it (or are late in the transposition, which will certainly be a common situation for a while). 

In my view, and in simplified terms, there are two main routes that EU law provides for the enforcement of the principle regardless of the transposition decisions the Member States adopt. Firstly, the principle can be given direct effect. And, secondly (and probably with greater practical relevance), the principle must be given indirect effect. I develop these ideas for the enforcement of the principle of competition, particularly through indirect effect or interpretation conforme, in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 215-227, available here.

Direct effect can be given to the presumption in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25 that 'Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators'. In my view, this provision sets out a clear, precise and unconditional individual right for candidates and tenderers not to be unduly disadvantaged, which therefore meets the requirements for direct effect as per Van Duyn (C-41/74, EU:C:1974:133). It will be particularly relevant to coordinate any legal claims with the clear push for effectiveness of the EU public procurement rules in the Remedies Directive.

Indirect effect must be given to the broad principle of competition in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25 that 'The design of the procurement shall not be made with the intention ... of artificially narrowing competition.' This is not only a clear general principle of EU law (which could also engage Mangold, C-144/04, EU:C:2005:709), but a fundamental pillar of the procurement system and, in particular, of the system created by the 2014 new public procurement Directives. The Commission could not have stressed this more clearly in the recent strategy for the Upgrade of the Single Market, where it highlighted that 'In 2014, the EU adopted a major overhaul of the EU procurement framework .... This was aimed at making public procurement more efficient and strategic, fulfilling the principles of transparency and competition to the benefit of both public purchasers and economic operators, in particular SMEs' (emphasis added). Overall, the obvious and pervasive pro-competitive orientation of the 2014 Directives and the explicit consolidation of the principle of competition triggers an obligation to interpret any domestic procurement rules in light of the principle of competition under as per Von Colson (C-14/83, EU:C:1984:153).

In short, even if Member States did not transpose (in time, or at all) the principle of competition in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25, EU law requires national administrative bodies, review bodies and courts to give it full effectiveness, both under  the direct and indirect effect doctrines. This obligation kicks in on 18 April 2016 at the latest (although arguments for an already existing obligation to do so have been on the table since, at least, 2011). This is likely to spur an initial wave of litigation likely to result in references to the CJEU for clarification of the content, meaning and extent of the principle of competition. I for one will keep a close look at these developments.

New SSRN paper on State aid enforcement after the crisis

I have uploaded a new paper on the University of Leicester School of Law Research Paper SSRN Series. It is entitled "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" and has the following abstract:

This paper aims to assess the likelihood that State aid enforcement can be revitalised in the post-crisis period as a result of the 2012-2014 State aid modernisation process (SAM). The paper takes the view that State aid enforcement was left in a difficult impasse as a result of the extraordinary measures the Commission implemented during and immediately after the 2008 economic breakdown, which left the Commission in a difficult position due to the unavoidable concessions and lowering of standards that dealing with the soaring volume of State aid required. The paper builds on this premise to critically assess whether a scenario of stronger enforcement can be foreseen under the modernised, post-2014 procedural framework of SAM. It pays particular attention to the need for the European Commission to (re)engage in a more substantive assessment of aid measures and to promote judicial (or private) enforcement of State aid rules in an effective manner. It concludes that revitalisation of State aid enforcement under SAM is highly unlikely.

I have attempted some statistical analysis to support my view that State aid enforcement is not being efficient. As a taster (full details in the paper), I argue that 'it seems conservative to estimate at around 100 billion Euros the amount of (non-investigated) illegally-granted State aid in the EU28 between 2008 and 2013' and that the Commission is accumulating a significant backlog of State aid cases (of around 500 in the same period), despite having expanded its State aid workforce by 53% between 2007 and 2011.

I also argue that the Commission's push for more transparency of the awards of State aid will not result in an actual involvement of private parties and society at large as stewards of EU State aid rules, in particular due to the restriction of the locus standi to submit (admissible) complaints to the Commission (following Sarc v Commission and the rules under the revised art 11a of reg 794/2004) and the compounded effect of the mandatory use of a standard form that requires significant information.


I will present a reworked version of this paper at the Antitrust Enforcement Symposium held by the Centre for Competition Law and Policy of the University of Oxford in June, where I am honoured to share a session on Competition and the State with such distinguished scholars and practitioners as Conor Quigley QC, Damien Geradin, James Cooper, David Szafram, Isabel Taylor, Angus Johnston and Ioannis Lianos. As you see, not the easiest audience. So all comments that can help me improve the paper are most welcome! I already thank my colleague Dr Paolo Vargiu for his first reactions.
The full citation for the paper is: A Sanchez Graells, "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" (May 5, 2015) University of Leicester School of Law Research Paper No. 15-15. Available at SSRN: http://ssrn.com/abstract=2602798.

"Monitor and the Competition and Markets Authority": My new paper on health care, procurement and competition in the UK

I have just uploaded my new piece "Monitor and the Competition and Markets Authority" as the University of Leicester School of Law Research Paper No. 14-32. The paper looks at the institutional design for the enforcement of competition and public procurement rules in the health care sector in the UK and criticises the concurrency regime developed in 2013. It is linked to my previous paper on the substantive aspects of the NHS Competition, Choice and Procurement Regulations 2013 (about to be published in the Public Procurement Law Review and available here).

I will be presenting this new paper at the EUI (Florence), at a workshop on Antitrust Law in Healthcare organised by Prof Giorgio Monti. Comments welcome!
Abstract 
As part of its enforcement duties under the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013, and in exercise of the powers assigned to it by the Health and Social Care Act 2012, the health care sector regulator for England (Monitor) is co-competent with the competition watchdog (Competition and Markets Authority) to enforce competition law in health care markets. Oddly, though, unlike other sector regulators, Monitor does not have a duty to promote competition but ‘simply’ to prevent anti-competitive behaviour. Monitor is also competent to carry out reviews and to decide bid disputes concerning procurement carried out by health care bodies, provided there is no formal challenge under the Public Contracts Regulations 2006.
This paper contends that such a concentration of regulatory, competition enforcement and procurement review powers puts Monitor in a unique situation of (potential) structural conflict of interest that can diminish significantly its ability to act as an effective (co-competent) competition authority. This paper focusses on this difficult structure for the enforcement of competition law in the health care sector in England, in particular due to the asymmetrical, sui generis concurrency regime created by the Enterprise and Regulatory Reform Act 2013 and the Concurrency Regulations 2014. As examples of such conflict of interest and its implications, the paper assesses Monitor’s incentives to bend the interpretation of both art.101(3) TFEU and the new special regime on procurement of social services (arts.72-77 dir 2014/24). The paper concludes that this situation requires regulatory reform to devolve powers to the Competition and Markets Authority.
A Sánchez Graells, 'Monitor and the Competition and Markets Authority' (November 20, 2014). University of Leicester School of Law Research Paper No. 14-32. Available at SSRN: http://ssrn.com/abstract=2528569.

Coauthored paper with @pacomarcos: “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard?

There seems to be a clear trend of increased protection of ‘corporate human rights’ and, more specifically, due process rights (or procedural fairness) in the field of enforcement of competition law. To a large extent, that trend is based on the uncritical extension of human rights protection to corporate defendants by a process of simple assimilation of corporate and individual defendants.
 
This new coauthored paper briefly explores the rationale behind the creation of due process rights when the individual is the beneficiary of such protection. It then goes on to critically assess if the same need exists for the extension of those protections to corporate defendants, particularly in the field of competition law or antitrust enforcement. It concludes with some warnings concerning the diminishing effectiveness of competition law prohibitions and of human law protection that can result from an overstretched conception of due process protection in this area of EU economic law.

From a substantive perspective, this paper submits that the extension of human rights to corporations cannot be uncritical and should not be completely symmetrical to that for human beings; but that it rather needs to be necessarily adapted to their circumstances. To put it more bluntly, it is suggested that in the field of the enforcement of economic law, administrative law procedures should be sound and there should clearly be a strong system of judicial review in place, but corporations should not have access to broader constitutional or human rights protections and any perceived shortcomings in the design and application of those procedures should remain within the sphere of regulatory reform.
 
Sánchez Graells, Albert and Marcos, Francisco, “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard? (February 2, 2014). University of Leicester School of Law Research Paper No. 14-04. Available at SSRN: http://ssrn.com/abstract=2389715.

(Non)disclosure of leniency applications in the proposed 'Damages Directive': Commission v CJEU?

The European Commission has finally published its Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union [COM(2013) 404] (the proposed 'Damages Directive'). 

Amongst many other interesting (and controversial rules), the proposed Damages Directive tackles the issue of the disclosability of leniency materials, which has been recently analysed by the Court of Justice of the European Union (CJEU) in Donau Chemie and had been previously analysed in Pfleiderer (which were discussed here).

The proposed 'Damages Directive' follows the prior Resolution of the Meeting of the Heads of the European Competition Authorities of 23 May 2012, on the protection of leniency material in the context of civil damages actions and is based on the argument that
In the absence of legally binding action at the EU level, the effectiveness of the leniency programmes — which constitute a very important instrument in the public enforcement of the EU competition rules — could thus be seriously undermined by the risk of disclosure of certain documents in damages actions before national courts.
Remarkably, this argument was adopted by Advocate General Jääskinen in his Donau Chemie Opinion (para 56), but was later rejected in very clear terms by the CJEU in the Donau Chemie Judgment, where it very clearly emphasised that:
as regards the public interest of having effective leniency programmes [...] it should be observed that, given the importance of actions for damages brought before national courts in ensuring the maintenance of effective competition in the European Union (see C‑453/99 Courage and Crehan [2001] ECR I‑6297, paragraph 27), the argument that there is a risk that access to evidence contained in a file in competition proceedings which is necessary as a basis for those actions may undermine the effectiveness of a leniency programme in which those documents were disclosed to the competent competition authority cannot justify a refusal to grant access to that evidence (C-536/11 at para 46, emphasis added).
Consequently,  the CJEU restricted the possibility to reject the disclosure of leniency documents to very specific and narrow circumstances by stressing that
The mere risk that a given document may actually undermine the public interest relating to the effectiveness of the national leniency programme is liable to justify the non-disclosure of that document (C-536/11 at paras 48, emphasis added).
This is in clear contrast with the Commission's policy-based approach in the proposed 'Damages Directive', where specific rules against the disclosure of leniency documents are established in Article 6 on the limits on the disclosure of evidence from the file of a competition authority:
1. Member States shall ensure that, for the purpose of actions for damages, national courts cannot at any time order a party or a third party to disclose any of the following categories of evidence:
(a) leniency corporate statements; and
(b) settlement submissions.
2. Member States shall ensure that, for the purpose of actions for damages, national courts can order the disclosure of the following categories of evidence only after a competition authority has closed its proceedings or taken a decision referred to in Article 5 of Regulation No 1/2003 or in Chapter III of Regulation No 1/2003:
(a) information that was prepared by a natural or legal person specifically for the proceedings of a competition authority;
(b) information that was drawn up by a competition authority in the course of its proceedings.
3. Disclosure of evidence in the file of a competition authority that does not fall into any of the categories listed in paragraphs 1 or 2 of this Article may be ordered in actions for damages at any time.
As the explanatory memorandum clarifies, the rules have the following aims:
To prevent that the disclosure of evidence jeopardises the public enforcement of the competition rules by a competition authority, the proposed Directive also establishes common EU-wide limits to disclosure of evidence held in the file of a competition authority:
(a) First, it provides for absolute protection for two types of documents which are considered to be crucial for the effectiveness of public enforcement tools. The documents referred to are the leniency corporate statements and settlement submissions. The disclosure of these documents risks seriously affecting the effectiveness of the leniency programme and of settlements procedures. Under the proposed Directive, a national court can never order disclosure of such documents in an action for damages.
(b) Second, it provides for temporary protection for documents that the parties have specifically prepared for the purpose of public enforcement proceedings (e.g. the party’s replies to the authority’s request for information) or that the competition authority has drawn up in the course of its proceedings (e.g. a statement of objections). Those documents can be disclosed for the purpose of an antitrust damages action only after the competition authority has closed its proceedings.
(c) Apart from limiting the national court’s ability to order disclosure, the above protective measures should also come into play if and when the protected documents have been obtained in the context of public enforcement proceedings (e.g. in the exercise of one of the parties’ right of defence). Therefore, where one of the parties in the action for damages had obtained those documents from the file of a competition authority, such documents are not admissible as evidence in an action for damages (documents of category (a) above) or are admissible only when the authority has closed its proceedings (documents of category (b) above).
(d) Documents which fall outside the above categories can be disclosed by court order at any moment in time. However, when doing so, national courts should refrain from ordering the disclosure of evidence by reference to information supplied to a competition authority for the purpose of its proceedings. While the investigation is on-going, such disclosure could hinder public enforcement proceedings, since it would reveal what information is in the file of a competition authority and could thus be used to unravel the authority’s investigation strategy. However, the selection of pre-existing documents that are submitted to a competition authority for the purposes of the proceedings is in itself relevant, as undertakings are invited to supply targeted evidence in view of their cooperation. The willingness of undertakings to supply such evidence exhaustively or selectively when cooperating with competition authorities may be hindered by disclosure requests that identify a category of documents by reference to their presence in the file of a competition authority rather than their type, nature or object (e.g. requests for all documents in the file of a competition authority or all documents submitted thereto by a party). Therefore, such global disclosure requests for documents should normally be deemed by the court as disproportionate and not complying with the requesting party's duty to specify categories of evidence as precisely and narrowly as possible.
(e) Finally, to prevent documents obtained through access to a competition authority’s file becoming an object of trade, only the person who obtained access to the file (or his legal successor in the rights related to the claim) should be able to use those documents as evidence in an action for damages.
In my view, the rules that support points (a) to (d) are in contrast with the Donau Chemie Judgment and are bound to clash with existing EU Law in two respects: firstly, they can be disproportionately limiting the possibilities to obtain effective redress and, consequently, limiting the effectiveness of Articles 101 and 102 TFEU as interpreted by the CJEU in Courage. And, secondly, they can be disproportionately restricting the procedural autonomy of Member States by excluding the ability of domestic courts to conduct the balancing of interests between leniency defendants and damages claimants that the CJEU has stressed both in Pfleiderer and Donau Chemie

Hence, in my opinion, the rules in the Commission's proposed 'Damages Directive' are inadequate and should be revised, particularly as the absolute protection of  leniency corporate statements and settlement submissions are concerned, which are based on a policy option that has been disapproved by the CJEU very recently. 

The rest of the rules on temporary protection of evidence and preemption of discovery-like requests of evidence should also be revised, since they may make it very burdensome for potential claimants to actually have access to the requested evidence (for alternative proposals discussed in view of the 2005 Green Paper on Damages, see Sanchez Graells, 'Discovery, Confidentiality and Disclosure of Evidence Under the Private Enforcement of EU Antitrust Rules'). Otherwise, there will be very significant difficulties for the claim of damages in private actions due to infringements of the EU's and Member States' competition rules.

A missed opportunity to analyse a potential #abuse of a #dominantposition created by #publicprocurement (T-74/11)

In its Judgment in case T-74/11 Omnis Group v Commission (and Microsoft), the General Court of the European Union (GC) dismissed the appeal against the Decision of the European Commission (COMP/39.784 – Omnis/Microsoft) not to open a full investigation and rejecting the complaint submitted by Omnis  against Microsoft for the alleged abuse of its dominant position in certain software markets (in the EU and in Romania more specifically).

The appeal has several grounds and GC analyses in detail whether the Commission manifestly erred in its assessment of the facts or abused its discretion not to conduct a full investigation against Microsoft. The case is interesting to read (in French or Romanian only, unfortunately) for the detailed description of the elements and criteria the Commission must take into account before dismissing a complaint.

However, in connection with public procurement, it is interesting to note that, due to the poor information apparently submitted by the complainant, an important legal point was not explored by the Commission. To be fair, the arguments as presented by the Complainant are slightly far fetched, as they are based on the conclusion of a cartel-type agreement between Microsoft and the Romanian Government. As the Commission summarised it, 'Omnis Group [alleged] that Microsoft has entered into an illegal strategic partnership in contravention of Articles 101 and 106 TFEU with the Romanian Government which conferred an illegal monopoly on Microsoft in Romania and that such agreements amount to an illegal cartel or "cartel-type" behaviour(COMP/39.784, para 16)

In any case, the allegation that an exclusive right granted through public procurement (or in violation of the applicable rules) actually allowed Microsoft to distort competition (abusing a dominant position, or otherwise) seemed to require detailed scrutiny. DG COMP nevertheless brushed it aside: 'the complaint has been forwarded to the unit in charge of public procurement issues in the Commission's Internal Market Directorate General and to the European Anti-Fraud Office ("OLAF") in order to investigate the allegations which do not directly concern competition law. This decision will therefore solely address the competition law concerns raised in the complaint' (COMP/39.784, para 12).

Moreover, the Commission considered (maybe lightly) that the 'allegations that these mere procurement contracts would instate a monopoly of Microsoft in the relevant market or a cartel between the Romanian Government and Microsoft remain unsubstantiated by any reference to concrete provisions of these contracts and/or their anticompetitive implementation on the relevant market. It is therefore highly unlikely that an infringement of Articles 101 and Art 106 TFEU could be established on the basis of the information provided by the complainant(COMP/39.784, para 44). In my view, the Commission could have done more to access those contracts, which are bound to remain confidential and, consequently, out of reach for an independent complainant.

In that regard, I find it remarkable that the GC finds no fault in that approach:
98 The applicant maintains that Microsoft's dominant position on the Romanian market and its agreements with the Romanian State have the effect of requiring third parties to use Microsoft programs for compatibility reasons. This position on the Romanian [markets for certain business software products] prevents the existence and development of competitors. By ignoring the existence of such a dominant position, the Commission wrongly refused to consider this complaint.
99 On the one hand, to the extent that this argument is concerned with Article 102 TFEU, it should be noted that the reasons put forward are similar to those rejected in the context of the first plea [where the GC has backed the European Commission's view that Microsoft was not dominant in the relevant markets]. It is therefore necessary to reject this plea for the same reasons as those set out [...] above.
100 On the other hand, given that this plea aims to challenge the assessment carried out by the Commission under Articles 101 TFEU and 106 TFEU, this argument must also be rejected.
101 Indeed, in the contested decision, the Commission found that the allegations of strategic partnership with the Romanian government fell within the scope of the rules on public procurement and that the claims regarding Microsoft's monopoly or the existence of an agreement Microsoft and the Romanian government were not supported (see paragraph 15 above). The Commission has therefore concluded that it was highly unlikely that can be established a violation of Articles 101 TFEU and 106 TFEU on the basis of information provided by the complainant (T-74/11, paras 98-101, own translation from French and emphasis added).

In my view, and with the disadvantage of not having access to the file or the arguments presented by the complainant, this seems like a missed opportunity to further the joint enforcement of EU public procurement and competition rules and to assess whether public procurement rules (or agreements entered into in compliance, or not, with them) generated a negative market impact equivalent to the abuse of a dominant position. It seems to respond to a 'compartmentalised' or 'silo-based' enforcement structure by the European Commission (DG COMP seems to have brushed the procurement argument aside as if it was not relevant, at least within its sphere of action), which may need revision if public procurement and competition concerns are to be truly integrated and jointly enforced--which would bring about significant potential improvements.

How forcefully can the @OFTgov reign in #NHS anti-competitive procurement?

In his speech about Competition in Public Services, the Chief Executive of the Office of Fair Trading (OFT) has expressly mentioned the need to address market design issues in the current reform of the provision of public services and, more specifically, healthcare services. It is worth noting that the OFT considers that:
Market design needs to flow from the public policy objectives intended from opening up a market.
For example, in health it has been considered necessary to fix price tariffs and allow competition to focus on quality to avoid competition focusing on price at the expense of quality. In this context, quality is partly about clinical outcomes, partly about other things like access and service.
But articulating clear objectives can be difficult when the purpose of introducing choice and competition itself varies: sometimes to address concerns about quality, choice or innovation; in others to reduce costs. Weighing up these points is an important first step in market design (emphasis added),
As should be expected, it looks like the OFT's approach to the reform of healthcare provision is based on the premise that competition is still the best mechanism to achieve the desirable levels of quality. And this seems difficult to reconcile with the provisions of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013, which (as briefly discussed here) precisely allow NHS commissioners to engage in anti-competitive behaviour (ie in distortions or restrictions of competition) in order to achieve desired quality improvements.

With this in mind, it looks difficult to reconcile the substantive guidance given by the sectoral regulator Monitor--which has advanced that qualitative assessment is not a mathematical exercise and that quality improvements can justify reductions in competition (although some marginal competition is expected to be protected)--with the warning issued by the OFT, which Chief Executive has stressed that it will seek direct enforcement of the competition provisions in the healthcare sector where appropriate, as its recent enforcement track record shows, since:
For example, last summer we secured voluntary assurances from eight NHS Hospital Trusts that they will no longer exchange commercially sensitive information about their Private Patient Unit (PPU) prices, to ensure they comply with competition law. We have urged all Trusts to take steps to ensure compliance with competition law when engaging in commercial activity.
One can wonder whether this type of enforcement activities will still be possible when NHS commissioners argue that their anti-competitive behaviour is justified on the basis of Regulation 10(1) of the 2013 Procurement, Patient Choice and Competition (No. 2) Regulations, since it was carried out in the patients' interest, measured in qualitative terms.

Enforcement of competition law in this area is growing more and more complicated precisely at a moment where the reform of the provision of public services may have a significant impact on market structure and competitive dynamics. Therefore, it is to be welcome that the OFT has prioritised this area in its strategic plan for 2013-14 and that this focus is likely to gain equally important strategic relevance for the future Competition and Markets Authority

However, closer coordination with the sectoral regulator Monitor may be necessary at this point in order to prevent sending mixed messages to the actors in the field and, more importantly, to prevent situations where an excessively broad interpretation of regulatory exclusions of competition could take place. The market structure resulting from the current wave of public sector reform is likely to influence market dynamics for a relatively long time in the future and, consequently, getting the process right is of utmost importance.

Stock manipulation via twitter: The new frontier of securities regulation?

What happened yesterday with the US stocks should be more than a wake up call to what may be an unmanageable problem--which was anticipated some 4 years ago by @jonathanfields (and probably others, but which has not yet received serious attention).


The fact that anyone can attempt to manipulate stock prices by publishing false information on twitter definitely makes it a dangerous outlet. As useful as it is a tool to get real time information, it is also too good a platform to broadcast fake market intelligence. The fact that well-reputed twitter accounts can be hacked and used as a loud speaker for the fake news just complicates the scenario.

As a matter of principle, at least in the EU and the US, there are regulatory instruments in place to prohibit this manipulative type of conduct and to prevent the dissemination of false information with the purpose (or the foreseeable effect) of altering stock prices (hacking being dealt with by the criminal law of the relevant jurisdiction) [for general discussion, see R Söderström, Regulating Market Manipulation. An Approach to designing Regulatory PrinciplesUppsala Faculty of Law Working Paper 2011:1]. 

In the US, the issue is dealt with in SEA section 9(a)(4) (with a requirement for the false information to be disclosed by a trading party (or a dealer or broker) that may limit its application to a case like yesterday's). In the EU, a 2003 Directive on insider dealing and market manipulation (reformed in 2008 and 2010) addresses this issue more broadly (and a proposal for stronger, criminal sanctions has been on the table since December 2012) and sets a mandate for EU Member States to prohibit any person from engaging in market manipulation (art 5), which under the relevant definition (art 2) includes
(c) dissemination of information through the media, including the Internet, or by any other means, which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news, where the person who made the dissemination knew, or ought to have known, that the information was false or misleading.

Notwithstanding the (theoretical) sufficiency of this regulatory framework (ie the law on the books, at least in the EU), it is just too obvious to point out that the enforcement problems are almost intractable when market manipulation takes place in social media--despite the recent efforts of financial authorities to provide updated guidance on these delicate issues (for instance, see the US SEC's guidance on the use of social media by issuers). Maybe it is time to set up a new task force (unless it is already in place, but I am not aware of it) to update the findings of IOSCO's 2000 Report on Investigating and Prosecuting Market Manipulation and adapt it to the very different social conditions that exist 13 years after its initial publication.


An interesting assessment of the enforcement of EU procurement rules: Pelkmans & Correia De Brito (2012) Enforcement in the EU Single Market

In their forthcoming book Enforcement in the EU Single Market (http://ssrn.com/abstract=2160236) Jacques Pelkmans and Anabela Correia De Brito provide an interesting overview of the laws and regulations of the single market of the European Union, the current EU enforcement landscape and its functioning, with a particular focus on compliance with public procurement rules. This is a very topical and relevant field of inquiry and their book sheds some interesting insights into the actual level of compliance with EU public procurement rules and the potential gains to be obtained if the current modernization process is correctly driven towards simplifying and promoting compliance.

As the authors rightly indicate,
Among all types of EU single market legislation, the problems with public procurement are undoubtedly the harder ones. The potential market is huge: there is still an enormous potential of cross-border competition for contracts and the economic welfare gains can be very substantial. The European Commission’s proposals of December 2011 should be of some help. There should be more harmonization, including in the national review and remedies systems.
In their book, Pelkmans and Correia De Brito offer a short but useful typology of enforcement barriers that stress some of the main areas of difficulty, such as administrative barriers [which include include "the incorrect application of EU directives, conformity assessment barriers and enforcement issues in (intra-EU) public procurement, especially non-publication (when above the value thresholds in EU law)] or the maybe more implicit restrictions derived from gold plating and an improper application of the rules controlling technical requirements in public procurement procedures.

Further than that qualitative analysis of the enforcement landscape, some of the data provided by Pelkmans and Correia De Brito is also worth highlighting. They provide a statistic of the cases handled by the Commission concerning the enforcement of public procurement rules (p. 89, please note that the most recent year is to the left, which makes the reading of the table slightly counter intuitive): 


As the authors derive from those numbers:
[...] the number of public procurement infringement files handled by the European Commission each year has progressively decreased in the period 2007-10 (155 in 2010, 258 in 2009, 333 in 2008 and 344 in 2007). Most of the files opened by the Commission were closed during the pre-administrative/administrative phase of the infringement procedure (76, 127, 163 and 142, respectively). However, in comparative terms, the number of cases referred to the Court of Justice of the European Union increased slightly in 2010 (7.5% of the cases in 2010 had been reported to the CJEU, compared with 2.3% of the cases in 2009, 2.4% in 2008 and 3.5% in 2007).
Even if the number of infringement procedures opened by the Commission in the reported period had decreased in relation to previous years, the case load of public procurement infringement complaints still remains high and indicates that compliance levels should be improved in a number of member states.
In my opinion, the analysis of the data also offers other  interesting hints, since it shows that there seems to be a significant amount of backlog piling up in the Commission's docket (ie the number of cases closed is less than 50% of those open for any year in the 2007-10 period) and that only a small fraction of those cases are referred to the CJEU (which means that political negotiation remains the paramount enforcement tool in the public procurement field).

I also find it interesting to compare the relatively low number of public procurement cases based on Article 258 TFEU and the increasing number of Judgments of the CJEU and the GC in the field of public procurement. A quick search for the words "public procurement" with the case-law search engine of the curia webpage retrieves over 730 documents, most of which were produced after the adoption of the current 2004 Directives. Such a contrast in numbers indicates that public procurement enforcement is running trough two very different roads when one compares its enforcement based on the "law in the books" (Commission enforcement) and the "law in action" (references for preliminary rulings and challenges to procurement decisions of the European Institutions). This seems, then, a worthy area were to focus future research efforts.

In their conclusions, Pelkmans and Correia De Brito find that the source of the massive litigation in public procurement is basically the heterogeneity of the rules. They submit that:
There are still numerous ‘barriers’, real and perceived, in the internal public procurement market. Member states have (too) much regulatory discretion because the procurement directives are ‘coordination’ directives, with insufficient harmonization. The ‘regulatory heterogeneity’ in the area is far too costly for the businesses interested in cross-border or even EU-wide operation. More harmonization and/or disciplines of national ‘special or extra’ rules and requirements should urgently be pursued. Also, the national review and remedies systems are vastly different in terms of rules, procedures, ease-of-access and effectiveness. Such complications go squarely against the justified desire of business to have prior confidence in cross-border tenders. Quick access to national reviews of public procurement is an asset, but its utility is dramatically diminished by the overly fragmented arrangements that confuse business and undermine a level playing field. Harmonization here is tough given the incorporation in national legal systems, but EU-wide performance criteria might be introduced to enhance confidence for cross-border entrepreneurs (pp. 130-131).
This may be a call for a shift from having public procurement Directives to the adoption of proper public procurement Regulations (although many scholars, such as Arrowsmith or Treumer, have already indicated that the EU public procurement directives just fall shy from being disguised regulations due to their high degree of prescriptiveness). 

Be it as it may, the findings of the authors may be worth taking into consideration in the last steps of the modernization process of EU public procurement rules, which still seems to be scheduled for completion before Summer of 2013. Having enforcement considerations in the back of the policymakers' heads when finalizing the drafting of the new rules seems definitely desirable.

Public buyers will self-protect against bid rigging

Another of the interesting developments included in the compromise text that reflects the current status of negotiations for the modernisation of  EU public procurement rules (http://tinyurl.com/modernisationcompromise) is the inclusion of a new Article 54(3) that clarifies that tenderers affected by any grounds for exclusion can be disqualified by contracting authorities at any time:
Contracting authorities may at any moment during the procedure exclude an economic operator where it turns out that the economic operator in question is, in view of acts committed either before or during procedure, in one of the situations referred to in Article 55(1) to (3).
This is a relevant clarification that prevents a rigid interpretation that would have limited the possibility to exclude tenderers at the beginning of the procurement process (ie only at selection stage).

Notwithstanding the above, and maybe most interestingly, this provision is coupled with a new Article 55(3)(d) in virtue of which a tenderer can be excluded
where the contracting authority can demonstrate that the economic operator has entered into agreements with other economic operators aimed at distorting competition.
This is an important development in terms of reducing the impact of bid rigging on procurement, which stresses the need for contracting authorities to cooperate closely with competition watchdogs (both at regional and national levels, and with the European Commission's Directorate General for Competition) and that opens the door to potential difficulties in terms of due process (eg what is the burden of proof to be discharged by contracting authorities?) and an eventual conflict of enforcement competences (both by administrative bodies and in terms of judicial review, particularly where competition matters are assigned to specialised courts).

Therefore, when the time to transpose Articles 54 and 55 of the new Directive (if adopted in the terms of the compromise text) comes, it will be interesting to revisit the institutional architecture of procurement authorities to ensure the appropriate collaboration channels with antitrust authorities (on this, see A Sanchez Graells, Public Procurement and the EU Competition Rules [2011] Hart Publishing 381-389).