Exclusion of Cartel Members from Public Tenders – ECJ to Clarify Key Issues
Sanctions for participating in cartels are manifold: fines and damages are feared foremost, followed by reputation losses. Another painful consequence is often overlooked at first glance: exclusion from public tenders and hence from potentially lucrative government contracts.
The EU directives on public procurement provide for various reasons of mandatory and optional exclusion grounds, and this list includes anti-competitive behaviour. Insofar contracting authorities may exclude bidders when there are sufficiently plausible indications that the bidder has entered into agreements with other economic operators aimed at distorting competition.[i] The law opens up two routes to regain access to public tenders: First, companies may engage in self-cleaning measures, including an undertaking to compensate for any damages incurred and an active cooperation with the investigating authorities.[ii] In the absence of such self-cleaning measures (which are exceedingly difficult to establish) the only option is to wait as the exclusion (in the case of a cartel membership) is only possible until three years after the “relevant event”.[iii] Alas, that waiting period has just been extended considerably by a notable ruling of the ECJ in the so called Vossloh case.[iv]
The ECJ had been asked for preliminary ruling by the procurement chamber[v] of Southern Bavaria specifically on the question of what the “relevant event” within the meaning of the directives was.
Vossloh, the plaintiff who had been excluded from a tender of Munich’s municipal transport company on the grounds of its participation in the rail cartel, argued – reasonably so, in the eyes of the author – that the relevant event was the end of the cartel or its participation in it. To begin with, such reading of the directives seems fair: after the cartel or the participation therein has ended, the company in question returns to compliance; in other words: such reading would require that companies complete three full years of lawful, competitive behaviour and then allow them back into the public tenders. Secondly, the directives imply such reading: with regard to criminal convictions (mandatory exclusion grounds), the directives provide for a maximum exclusion period beginning from the date of the judgement. With regard to anti-competitive behaviour (and other optional exclusion grounds), the directives explicitly take another approach by referring to the relevant event (not a judgement, conviction or other decision).
Notwithstanding such considerations, the ECJ decided that the three years of maximum exclusion start to run with the decision of the investigating anti-trust authority. Defining the relevant event in such a way would lead to more legal certainty and foresee-ability. Certainly and foresee-ably, it will mainly lead to longer exclusion periods, though, given the fact that anti-trust investigations can be long and complicated (even with proactive collaboration of cartel member). Thus, former cartel members might be withheld from participating in public tenders (thereby enhancing competition!) because of the slow working of the investigating bureaucracies, irrespective of their own behaviour. The author holds that such ruling is hard to reconcile with principles of fairness and indeed the rule of law as it effectually prolongs the exclusion of companies although they have (voluntarily) ended their anti-competitive behaviour and acted in full compliance with the law over three years.
That having said, the ECJ rightfully rejected the even more sweeping reading by the procurement chamber. The chamber suggested that the “relevant event” was the moment in which the contracting authority (of the given tender) gained certainty about the bidders involvement in the cartel. Such reading is obviously far removed from the directives wording and would have effectively extended the exclusion period endlessly. Thankfully, such interpretation has been ruled out by the ECJ.
Further, the ECJ decided that with regard to self-cleaning measures national laws may – as is the case in the relevant German statute – demand that companies collaborate not only with the investigating authorities but also with the tender authorities. The case had an interesting twist here, as Munich’s municipal transport company considered themselves damaged by the rail cartel (and thus by the bidder they sought to exclude). Thus, any information on the cartel given to the contracting authority by Vossloh was bound to be used as munition in a civil lawsuit on theses damages. Understandably, the bidder was reluctant to provide comprehensive information. The ECJ held that the bidder may lawfully be asked to provide information on the cartel even if that helps the other side to prepare damage claims. However, such information requests must be limited to the measures strictly necessary. The judgement seems balanced insofar. Within the context of self-cleaning measures, a protection from damage claims seems contradictory: self-cleaning requires the undertaking to compensate for the damages caused. However, the ECJ thoughtfully restricted the information requests in order not to duplicate the cartel investigations.
The full judgement can be found in the ECJ’ register:
http://curia.europa.eu/juris/liste.jsf?language=en&td=ALL&num=C-124/17
 | Dr. Julian von Lucius, LL.M. (Cardozo) Rechtsanwalt, Mediator Associated PartnerPractice Group Telecommunications Practice Group Regulatory & Governmental AffairsT +49 30 20942332 julian.vonlucius@noerr.com |
Dr Julian von Lucius provides comprehensive advice to national and international private and public sector companies on all regulatory issues of public procurement law. He has a long standing track record in advising on complex infrastructure projects and has advised regional development companies and other governmental bodies. His expertise enjoys broad recognition in the market. His clients come from various sectors such as real estate, infrastructure, new mobility, telecommunications, public broadcasters and banking. Also Dr von Lucius has a strong competence in constitutional and European Law as well as telecommunications law.
[i] Art. 57 (4) (d) Directive 2014/24/EU of the European Parliament and the Council of 26 February 2014 on public procurement. Directives 2014/23/EU and 2014/25/EU on sector procurements and concession contracts respectively, include identical provisions.
[ii]Art. 57 (6) Directive 2014/24/EU.
[iii]Art. 57 (7) Directive 2014/24/EU.
[iv] Judgement dated 24 October 2018, C‑124/17.
[v] The German procurement chambers are court-like administrative adjudication bodies that decide on procurement cases in the first instance.