The conclusion of “cartel” agreements between competitors/companies when participating in public tenders is undoubtedly a critical issue in correlation to competition law. Throughout the last few years, the risk of collusion practices in public tenders is high; to enforce their competition policies, the European Commission along with National Competition Authorities, including the Hellenic Competition Authority, have drafted legal opinions and published specific guidelines in order to prevent cartel-forming.
In many cases, market reasons favor the adoption of collusion practices in public tenders; for instance, a small number of competitor companies doing business in a particular market, the unique properties of certain products, such as medical supplies, as well as the business and personal ties between competitors who often interact with one another, must be taken into account when trying to identify the possibility of a cartel agreement.
In general, four anti-competitive behavior models may develop:
1. Tender manipulation
A tender manipulation may occur when public tender candidates recipient agree in advance who will be the final contractor. Tender manipulation may take the form of cover-bidding, whereby the competitors submit fictional offers to ensure the awarding to a mutually-agreed contractor. This can be achieved by submitting much higher offers in comparison to the one submitted by the agreed contractor. Bid suppression represents another tender manipulation practice via which the candidate suppliers agree to abstain from submitting a tender offer or to withdraw one they have already submitted, ensuring therefore that the tender is awarded to a previously agreed contractor. Finally, a third practice is the bid rotation through which the competitors agree in advance to allocate the contracts among them accordingly; for instance, by arranging secretly to service specific tender obligations, thereby becoming de facto alternate contractors.
2. Market segmentation
The conclusion of market segmentation agreements is strictly forbidden by EU and national competition laws. When concluding such agreements, competitors agree either to a geographical market partitioning or to allocate products or clients in such a way as to achieve the tender awarding as preferred by them.
3. Price fixing
Price fixing techniques take place when competitors agree to jointly influence the pricing of a product. This can be achieved by competitors when they determine the lowest or the highest price, when they decide to eliminate rebates or when they jointly decide to maintain the same price levels, distorting competition in the way.
4. Offer Limitation
Such collusion may occur when a candidate supplier to a tender agrees to limit the quantities offered, in order to achieve a higher bidding price.
Our law firm’s comment:
Collusion practices developed by competitors in the context of public tenders result to major economic damage both to the state and the consumers. Given that Public Supplies, especially within the Healthcare Industry, represent an important part of the Greek economy and that the tenders’ staff is already being trained in order to detect any possible collusions (they must be directly communicated to the Hellenic Competition Authority), it is advised to act with caution in order to avoid even unintended hints of anti-competitive practices.