La propuesta de 'Directiva de Daños’ crearía efectos de cosa juzgada para las decisiones finales de la Comisión Nacional de Mercados y Competencia

La Comisión Europea presentó ayer su esperada propuesta de Directiva sobre ciertas reglas relativas a las reclamaciones de daños derivados de infracciones del Derecho comunitario y nacional de la competencia. 

Entre otras muchas cuestiones controvertidas—como la protección de los documentos relativos a las solicitudes de clemencia, de los acuerdos de transacción y de la práctica integridad del expediente administrativo de las autoridades de competencia (al menos hasta la conclusión de los correspondientes procedimientos de infracción), que vienen a limitar muy significativamente la efectividad de las reglas de revelación de documentos previstas en la propia propuesta (como critiqué ayer)—la Directiva de Daños contiene algunas previsiones que pueden tener un significativo impacto en el ordenamiento jurídico español (véase la reseña del Prof. Díez Estella en blog del Prof. Alfaro).

Una de las que me parecen más destacables es la posible creación de efectos de cosa juzgada para decisiones administrativas que devengan firmes. De acuerdo con lo previsto en el Articulo 9 de la propuesta de Directiva de Daños, 

Los Estados miembros velarán por que, en el marco de las acciones de reclamación de daños y perjuicios derivados de infracciones de los artículos 101 o 102 del Tratado o del Derecho nacional de la competencia, cuando los órganos jurisdiccionales nacionales conozcan de acuerdos, decisiones o prácticas que ya hayan sido objeto de una decisión definitiva de infracción emitida por una autoridad nacional de competencia o por un tribunal de revisión, los jueces y tribunales no puedan tomar decisiones contrarias a la existencia de la infracción ya declarada. Esta obligación se entiende sin perjuicio de los derechos y obligaciones previstos en el artículo 267 del Tratado (traducción propia del inglés).

Por tanto, conforme al sistema previsto en la propuesta de Directiva de Daños, las decisiones de la Comisión Nacional de los Mercados y la Competencia (o de la Comisión Europea, o de cualquier otra autoridad nacional de competencia de la UE) que devengan firmes y definitivas por no resultar recurridas en vía judicial pasarán a vincular, con efecto de cosa juzgada, a los Jueces de lo Mercantil (y a las instancias de revisión en vía civil, incluido el Tribunal Supremo) que conozcan de las correspondientes acciones de daños. 

Esto va mucho mas allá de la teoría general de las fuentes del Derecho y, en particular, de la vinculatoriedad del precedente administrativo (véase el estudio de S Díez Sastre, El precedente administrativo. Fundamentos y eficacia vinculante, Madrid-Barcelona: Marcial Pons, 2008) y puede resultar de difícil encaje en nuestro ordenamiento jurídico. En contra de lo que opina el Prof. Díez Estella ("En la medida en que sólo las decisiones de las autoridades de la competencia que sean firmes tendrán este valor [de “prueba fehaciente”], no parece que haya problemas de constitucionalidad de la Propuesta"), personalmente no lo tengo tan claro. En el caso concreto de decisiones administrativas nunca recurridas (por ejemplo, por resultar de un acuerdo de transacción), puede preverse alguna dificultad que otra.

En todo caso, a la vuelta de los años, quizá este cambio pueda acabar extendiendo el mismo efecto de ‘cosa juzgada administrativa’ a ámbitos distintos del derecho de la competencia, especialmente en vista de la unificación de reguladores implícita en la creación de la Comisión Nacional de los Mercados y la Competencia. De producirse este ‘injerto’ en nuestro ordenamiento jurídico con la aprobación de la propuesta de Directiva de Daños, en mi opinión, esta será una cuestión a seguir de cerca (y, quizá, un muy buen tema para una tesis doctoral ¿sobre órganos administrativos independientes de naturaleza cuasi-jurisdiccional?).

(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.

GC (T-668/11): 'mere' non-compliance with formal #publicprocurement rules does not trigger liability for loss of profits

In its Judgment of 6 June 2013 in case T-668/11 VIP Car Solutions v Parliament II, the General Court of the European Union (EU) has addressed the issue whether non-compliance with the duties of transparency and motivation by a contracting authority can generate a right to claim damages for disappointed bidders and, more specifically, whether they would be entitled to claim loss of profit compensation.

In this clear Judgment, the GC does not exclude that possibility as a matter of principle, but it sets a very clear line of analysis of the causality required between the lack of motivation or failure to disclose certain information and the damages claimed by disappointed bidders--which makes this type of claims very difficult to succeed. 

In the Judgment, the GC has stressed that:

In this regard, it should be noted that it is true that the Court held that the [contested] decision should be annulled on the grounds, first, that the Parliament had violated the obligation to disclose the price proposed by the successful bidder and, secondly, that the decision was vitiated by an inadequate statement of reasons. However, it is clear that the non-disclosure of the price and the lack of motivation do not establish that the award of the contract to another tenderer was a fault, or that there is a causal link between this fact and the loss claimed by the applicant (see, to that effect, the Judgment of 25 February 2003, Renco / Council T-4/01, Rec. p. II-171, paragraph 89, and of 20 October 2011, Alfastar Benelux / Council T-57/09, not published in the ECR, paragraph 49). Indeed, there is nothing to suggest that the Parliament should award the contract in question to the applicant if the original decision had been sufficiently motivated or if the Parliament had disclosed the price of the successful bidder. It follows that the claim for compensation for the alleged damage suffered as a result of the first decision must be rejected as unfounded in so far as it is based on inadequate reasoning of that decision and the non-disclosure of the price proposed by the winning bidder (T-668/11 at para 38, own translation from French, emphasis added).

In view of this analysis of strict causality, which is appropriate, it seems clear that disappointed bidders that succeed in challenging public procurement decisions exclusively on the grounds of lack of compliance with transparency obligations and the duty to provide reasons are likely to only be entitled to claim legal costs and any other expenses related to the challenge of the award procedure. 

This should be welcome, despite the fact that it may reduce the incentives for disappointed bidders to challenge procedurally incorrect public procurement decisions because, unless they can prove that there has been a material (in terms of substantive) breach and that, but for that illegality they should have been awarded the contract, it is very unlikely that they can obtain any compensation for their efforts. 

This may (marginally?) diminish the effectiveness of challenge procedures (at least where no material rule has been breached), but an excessively generous rule that awarded damages exclusively due to 'mere' procedural shortcomings would generate a perverse incentive towards excessive litigation. This may justify the need for stronger mechanisms of public oversight, as it seems clear that the incentives for disappointed bidders to act 'in the public interest' have just been delimited in a proper, but narrow, manner.

#CJEU disagrees with AG Jaaskinen on access to #leniency files for damages claims purposes (C-536/11)

In its Judgment of 6 June 2013 in case C-536/11 Donau Chemie and Others, the Court of Justice of the European Union (CJEU) has disagreed with the Opinion of Advocate General Jääskinen on the need for an (almost) absolute protection of leniency applications from disclosure to third parties interested in claiming damages (which was criticised here). 

In my opinion, this development should be most welcome and puts pressure on the European Commission to change its own position regarding the disclosure of leniency applications for the purposes of damages actions before the national courts of the Member States.

It should be recalled that AG Jääskinen tried to carve out a truly significant exception for leniency applications not to be subjected to general rules on disclosure of evidence to potential damages claimants. In his opinion, he indicated that, on the one hand, and on the basis of the general requirements of the principle of effectiveness (effet utile) of EU law

51. […] subjecting access to public law competition judicial files to the consent of the infringer of the competition rules amounts to a significant deterrent of the exercise to a right to claim civil damages for breach of EU competition law. The Court has ruled that if an individual has been deterred from bringing legal proceedings in good time by the wrong-doer, the latter will not be entitled to rely on national procedural rules concerning time limits for bringing proceedings. I can see no reason for confining the application of this principle to limitation periods, and would advocate its extension to onerous rules of evidence that have an analogous deterrent effect. I would further query the compliance of remedies that deter enforcement of EU law rights with Article 19(1) TEU (footnotes omitted, emphasis added).

On the other hand, however, the AG considered that

55. Article 47 [of the Charter of Fundamental Rights] is also relevant to the case to hand because it guarantees the fairness of hearings, which serves to protect the interests of the undertakings that have participated in the cartel. In my opinion, access by third parties to voluntary self-incriminating statements made by a leniency applicant should not in principle be granted. The privilege against self-incrimination is long established in EU law, and it is directly opposable to national competition authorities that are implementing EU rules.

56. It is true that leniency programmes do not guarantee protection against claims for damages and that the privilege against self-incrimination does not apply in private law contexts. Despite this, both public policy reasons and fairness towards the party having given incriminating declarations within the context of a leniency programme weigh heavily against giving access to the court files of public law competition proceedings where the party benefiting from them has acted as a witness for the prosecuting competition authority (footnotes omitted, emphasis added). 

As I said, in my view, both positions are logically irreconcilable in that leniency applicants would have (by definition) prevented by their own unilateral will, access by third parties to the parts of the file that could be used to claim damages against them (something the AG rightly criticises at para. 51 of his Opinion).

In light of that debate, I think that the Donau Chemie Judgment should be welcome for the more balanced approach that the CJEU adopts:

39 […] in so far as the national legal measure or rule at issue in the main proceedings allows the parties to the main proceedings having infringed Article 101 TFEU the possibility of preventing persons allegedly adversely affected by the infringement of that provision from having access to the documents in question, without taking account of the fact that that access may be the only opportunity those persons have to obtain the evidence needed on which to base their claim for compensation, that rule is liable to make the exercise of the right to compensation which those persons derive from European Union law excessively difficult.

40 That interpretation is not called into question by the Austrian Government’s argument to the effect that such a rule is especially necessary in respect of documents lodged by parties in a file relating to proceedings under a leniency programme, in order to ensure the effectiveness of such a programme and therefore also that of the application of Article 101 TFEU.

41 Admittedly [...] Member States must not apply the rules on file access in such a manner as to undermine public interests such as the effectiveness of anti-infringement policies in the area of competition law.

42 The Court has recognised that leniency programmes are useful tools if efforts to uncover and bring an end to infringements of competition rules are to be effective and thus serve the objective of effective application of Articles 101 TFEU and 102 TFEU. The effectiveness of those programmes could be compromised if documents relating to leniency proceedings were disclosed to persons wishing to bring an action for damages. The view can reasonably be taken that a person involved in an infringement of competition law, faced with the possibility of such disclosure, would be deterred from taking the opportunity offered by such leniency programmes (C-360/09 Pfleiderer [2011] ECR I-5161, paragraphs 25 to 27).

43 It is clear, however, that although those considerations may justify a refusal to grant access to certain documents contained in the file of national competition proceedings, they do not necessarily mean that that access may be systematically refused, since any request for access to the documents in question must be assessed on a case-by-case basis, taking into account all the relevant factors in the case (see, to that effect, Pfleiderer, paragraph 31).

44 In the course of that assessment, it is for the national courts to appraise, firstly, the interest of the requesting party in obtaining access to those documents in order to prepare its action for damages, in particular in the light of other possibilities it may have.

45 Secondly, the national courts must take into consideration the actual harmful consequences which may result from such access having regard to public interests or the legitimate interests of other parties.

46 In particular, as regards the public interest of having effective leniency programmes referred to by the Austrian Government in the present case, 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.

47 By contrast, the fact that such a refusal is liable to prevent those actions from being brought, by giving the undertakings concerned, who may have already benefited from immunity, at the very least partial, from pecuniary penalties, an opportunity also to circumvent their obligation to compensate for the harm resulting from the infringement of Article 101 TFEU, to the detriment of the injured parties, requires that refusal to be based on overriding reasons relating to the protection of the interest relied on and applicable to each document to which access is refused.

48 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 39-48, emphasis added).

By rejecting the general criterion proposed by AG Jääskinen that leniency documents should in principle be protected from disclosure, the CJEU has preserved the potentiality for  damages actions to actually develop in the EU. 

However, the conditions under which the considerations regarding the circumstances in which the mere risk of disclosure of a specific document can be sufficient to prevent it on the basis that it could 'actually undermine the public interest relating to the effectiveness of the national leniency programme' (para 48) could have been explored in some more detail. A comparison of the English and the French, Spanish and Italian versions supports, in my view, the need for a very restrictive interpretation of this 'escape clause' created by the CJEU--which should only be applied under relatively extreme circumstances where the potential damage to the leniency system could be so great as to render it practically useless.

In view of the Donau Chemie Judgment, it may now be time for the European Commission to revise its own approach to the disclosure of leniency applications and to modify the policy adopted in the Notice on Cooperation with the National Courts, where it is clearly established that

the Commission may refuse to transmit information to national courts for overriding reasons relating to the need to safeguard the interests of the Community or to avoid any interference with its functioning and independence, in particular by jeopardising the accomplishment of the tasks entrusted to it(45). Therefore, the Commission will not transmit to national courts information voluntarily submitted by a leniency applicant without the consent of that applicant (para 26, emphasis added).

Such an absolute protection seems clearly at odds with the approach adopted by the CJEU and, consequently, a revision seems in order as a matter of institutional loyalty. Let's see how quickly it can take place... 

US DoD to consolidate contracting for healthcare professionals in view of GAO recommendation

The US Government Accountability Office (GAO) has released a Report on Defense Health Care (GAO-13-322), where it concludes that the Department of Defense (DoD) needs a strategic approach to contracting for health care professionals. According to GAO, 

DoD does not have a consolidated agency-wide acquisition strategy for medical services. In the absence of such a strategy, contracting for health care professionals is largely fragmented. For example, the military departments had not consolidated their staffing requirements by developing joint contracts beyond a limited number of instances amounting to about 8 percent of the fiscal year 2011 spending on health care professionals. The departments have made efforts to use multiple-award contracts to consolidate intraservice staffing requirements, but GAO identified several instances where multiple task orders were placed for the same type of provider in the same area or facility. A more consolidated strategic sourcing strategy could allow DOD to acquire medical services in a more cost-effective way.

Therefore, GAO is recommending that the Secretary of Defense develops a DoD-wide strategic approach to contracting for health care professionals, with which DoD concurs. This means that there are winds of consolidation in US DoD healthcare procurement. Hopefully it will take into consideration previous GAO recommendations concerned with consolidation and centralisation, as discussed here in relation to inter-agency agreements.

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.

#CJEU incorrectly analyses 'State imputability' and gives green light to (pseudo)fiscal #Stateaid schemes (C-677/11)

In its Judgment of 30 May 2013 in case C-677/11 Doux Élevages and Coopérative agricole UKL-AREE  the Court of Justice of the European Union (CJEU) has carried on with its line of case law in C-345/02 Pearle and Others and stressed that, according to Art 107(1) TFEU, State aid cannot exist if the economic advantage under analysis is not funded by 'State resources' and there is no 'imputability to the State'.

In the case at hand CIDEF, a French agricultural inter-trade organisation (for poultry), introduced the levying of a 'cotisation volontaire obligatoire' (sic) (CVO) for the purposes of financing common activities decided on by that organisation. The contribution was initially introduced in 2007 as a voluntary measure for the members of CIDEF, but it was extended to all traders in the sector on a compulsory basis in 2009 by a tacit Ministerial decision to accept that extension (see press release).

Two complainants challenged the extension of the CVO on the basis that making it a mandatory payment for all traders in the sector (ie going beyond the group of members of CIDEF) involved State aid. The French Conseil d’État referred the matter to the CJEU for a preliminary ruling, which has decided that there is no element of State aid in the mandatory extension of the CVO to all traders in the industry concerned.

The reasoning of the CJEU indeed follows its previous line of case law in the area of State aid and adopts a very narrow approach to the concept of economic advantages 'granted by a Member State or through State resources'. On the point of the involvement of State resources, the CJEU finds that

the contributions [...] are made by private‑sector economic operators – whether members or non-members of the inter‑trade organisation involved – which are engaged in economic activity on the markets concerned. That mechanism does not involve any direct or indirect transfer of State resources, the sums provided by the payment of those contributions do not go through the State budget or through another public body and the State does not relinquish any resources, in whatever form (such as taxes, duties, charges and so on), which, under national legislation, should have been paid into the State budget. The contributions remain private in nature throughout their lifecycle and, in order to collect those contributions in the event of non‑payment, the inter-trade organisation must follow the normal civil or commercial judicial process, not having any State prerogatives (C-677/11 at para 32, emphasis added).

This should come as no big surprise, since this has become the standard position in the case law of the CJEU (ie that if the State 'does not touch' and 'should not have touched' the money, it cannot constitute a 'State resource'). However, one may wonder why the Court has not addressed the point of the (pseudo)fiscal nature of the imposition of a contribution (ie a levy) on undertakings that do not belong to the private organisation charging it. In the absence of a voluntarily established association (via membership), the prerogative of the inter-trade association to require payments from undertakings surely goes beyond the sphere of powers created by private law (taxation is one of the very exclusive powers of the State). In that regard, the reasoning followed by the CJEU on the point of 'imputability to the State' requires some close scrutiny. The Court finds that

35 […] Article 107(1) TFEU covers all the financial means by which the public authorities may actually support undertakings, irrespective of whether or not those means are permanent assets of the public sector. Therefore, even if the sums corresponding to the measure in question are not permanently held by the Treasury, the fact that they constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as State resources (see [C‑482/99 France v Commission (2002) ECR I‑4397], paragraph 37 and the case-law cited).

36 In the case in the main proceedings, the conditions laid down by the Court in paragraph 37 of the judgment in France v Commission are not met. It is clear that the national authorities cannot actually use the resources resulting from the [CVOs] to support certain undertakings. It is the inter-trade organisation that decides how to use those resources, which are entirely dedicated to pursuing objectives determined by that organisation. Likewise, those resources are not constantly under public control and are not available to State authorities.

37 Any influence that the Member State may exercise over the functioning of the inter-trade organisation by means of its decision extending an inter-trade agreement to all traders in an industry is not capable of altering the findings made in paragraph 36 of this judgment.

38 It is clear from the case-file submitted to the Court that the legislation at issue in the main proceedings does not confer upon the competent authority the power to direct or influence the administration of the funds. Moreover, as the Advocate General noted in point 71 of his Opinion, according to the case-law of the competent national courts, the provisions of the Rural Code governing the extension of an agreement introducing the levying of contributions within an inter-trade organisation do not permit public authorities to exercise control over CVOs except to check their validity and lawfulness.

39 Regarding that control, it should be noted that Article L. 632-3 of the Rural Code does not permit making the extension of an agreement dependent upon the pursuit of political objectives which are specific, fixed and defined by the public authorities, given that that article non‑exhaustively lists the very general and varied objectives that an inter-trade agreement must promote in order to be capable of being extended by the competent administrative authority. That conclusion cannot be undermined by the obligation imposed by Article L. 632-8-I of that code to inform the authorities of the way in which CVOs have been used.

40 Moreover, there is nothing in the case-file submitted to the Court permitting it to consider that the initiative for imposing the CVOs originated with the public authorities rather than the inter-trade organisation. It is important to emphasise, as the Advocate General observed in point 90 of his Opinion, that the State was simply acting as a ‘vehicle’ in order to make the contributions introduced by the inter-trade organisations compulsory, for the purposes of pursuing the objectives established by those organisations.

41 Thus, neither the State’s power to recognise an inter-trade organisation under Article L. 632-1 of the Rural Code, nor the power of that State to extend an inter‑trade agreement to all the traders in an industry under Articles L. 632-3 and 632-4 of that code permit the conclusion that the activities carried out by the inter‑trade organisation are imputable to the State (sic) (C-677/11 at paras 35 to 41, emphasis added).

The reasoning followed by the CJEU could not be more puzzling, particularly at para 41, which to me seems plainly wrong. Given the literal tenor of Art 107(1) TFEU, which sets that the prohibition of State aid covers 'any aid granted by a Member State or through State resources in any form whatsoever' it is clear that the analysis of the 'imputability to the State' must cover the aid measure and not the activities of the beneficiary of such measure. 

Therefore, the conclusion reached in para 41 of C-677/11 is simply a non sequitur. After having recognised that 'the State was simply (sic) acting as a ‘vehicle’ in order to make the contributions introduced by the inter-trade organisations compulsory, for the purposes of pursuing the objectives established by those organisations' (para 40), it is an illogical step to conclude that such (vehicular) intervention is not imputable to the State. In my opinion, this plainly makes no sense.

The implications of the Judgment in Doux Élevages are likely to be far fetched, since they open the door to a floodgate of (pseudo)fiscal measures designed by Member States (by indirect influence to the relevant inter-trade or similar organisations, which should not be readily proven, see para 40 ab initio) to compensate for the stricter (?) controls on aid directly granted by public authorities. 

The only remaining hope at this point is that, under the relevant constitutional law of the Member States, such (pseudo)fiscal levies are considered unconstitutional limitations to the right to property, since the State is the only entity vested with powers to extract money payments not voluntarily accepted, at least as a general implication of the membership of an association (as was the case in Pearle, although any element of mandatory membership obviously would grant the same conclusion). And, consequently, this (pseudo)fiscal structure  that allows non-State entities to extract mandatory payments can be seen as an excessive restriction of the right to property under some Member States constitutional law (such as in Spain, for instance).

Maybe with the accession of the EU to the European Convention on Human Rights and a (stronger) duty to protect the right to property under Art 1 Protocol No. 1 ECHR (which includes rules on taxation not mentioned in the right to property recognised in Art 17 of the Charter of Fundamental Rights of the EU), the CJEU will need to revisit this line of case law.

Avoidance of EU #publicprocurement rules by artificial contract split triggers #reduction in cohesion funds for #Spain (T-384/10)

In its Judgment of 29 May 2013 in case T-384/10 Spain v Commission, the General Court of the EU (GC) has dismissed the appeal against a 2010 Commission Decision that reduced the contribution of the structural and cohesion funds to several water management infrastructure projects in Andalusia due to various infringements of the applicable EU public procurement rules.

In its audit of the execution of the project, the European Commission identified several infringements of the EU public procurement rules by the project management firm appointed by the Andalusian regional authorities (which was mandated  by art 8(1) of Regulation 1164/94 to comply with public procurement rules due to the project being financed with EU funds). 

More specifically, the Commission considered that some contracts had been illegally split in order to keep them below the value thresholds that trigger the application of EU public procurement rules, in others technical criteria had illegally required undertakings to prove they had prior experience in Spain (which constitutes a discrimination on the basis of nationality), or award criteria had illegally included 'average prices' rather than a sound economic assessment of the offers, recourse to negotiated procedures had been abused, mandatory time limits had not been respected, and the ban on negotiations after the award of the contracts had not been respected. All in all, indeed, the project seemed to be severely mismanaged in terms of public procurement compliance.

In view of such shortcomings and infringements, and considering that full cancellation of the funding would however be a disproportionate penalty, the European Commission decided to impose financial corrections that partially reduced the contribution of the EU funds to the water management infrastructure projects by between 10 and 25% of the original contribution.

Spain tried to counter the Commission Decision and justify the inexistence of the alleged infringements, but to no avail. The discussion before the GC mainly revolved around the issue of the artificial split of the contracts in order to exclude the application of the EU rules (which is discussed in paras 65-97 of T-384/10). In order to address this issue, the GC offers a recapitulation of the criteria applicable to the assessment of whether a complex project involves a single or several detachable works.

66 As a preliminary point, it should be recalled that, under Article 6, paragraph 4 of Directive 93/37, no work or contract may be split up with the intention of avoiding the application of that Directive. Moreover, Article 1, letter c) of the Directive defines the term "work" as the outcome of building or civil engineering works taken as a whole that is sufficient of itself to fulfil an economic and technical function. Therefore, to determine whether the Kingdom of Spain infringed Article 6, paragraph 4 of the Directive, it must be ascertained whether the subject of the contracts at issue was one and the same work in the sense of Article 1, letter c), of the Directive.

67 According to the case law, the existence of a "work" within the meaning of Article 1, letter c) of Directive 93/37 must be assessed in light of the economic and technical function expected from the result of the works that are the object of the corresponding public contracts (judgments of the Court of 5 October 2000, Commission / France, C-16/98, ECR p. I-8315, paragraphs 36, 38 and 47, to October 27, 2005, Commission / Italy, C-187/04 and C-188/04, not published in the ECR, paragraph 27, of January 18, 2007, Auroux and Others, C-220/05, ECR p. I-385, paragraph 41, and of March 15, 2012, Commission / Germany, C-574/10, not published in the ECR, paragraph 37).

68 Moreover, it should be noted that the Court has stated that, for the result of various works to qualify as 'work' within the meaning of Article 1, letter c) of Directive 93/37, it suffices that those meet either the same economic function or the same technical function (Commission / Italy, paragraph 67 above, paragraph 29). The verification of the economic identity and of the technical identity are thus alternative and not cumulative, as submitted by the Kingdom of Spain.

69 Lastly, it should be noted that according to the case law, the simultaneity of the call for tenders, the similarity of the notices, the unity of the geographical framework within which tenders are called for and the existence of a single contracting entity constitute additional evidence that can support the finding that different works contracts actually correspond to a single work (see, to that effect, Commission / France, paragraph 67 above, paragraph 65). [T-384/10 at paras 66-9, own translation from Spanish].

It is also worth stressing that the GC confirms prior case law and clarifies that there is no need to prove any intention on the part of the contracting authorities in order to find that they have infringed the rules against the artificial split of the contracts. In that regard,

94 Finally, the Kingdom of Spain argues that, in order to declare the existence of an infringement of Article 6, paragraph 4 of Directive 93/37, the Commission should have tested the concurrence of a subjective element, namely, the Spanish authorities' intention to split the contracts in question for the purpose of evading the obligations of the Directive. This argument cannot be accepted.

95 In that regard, suffice it to note that the finding that a contract has been split in contravention of EU rules on public procurement does not require a prior demonstration of a subjective intent to avoid the application of the provisions contained in these regulations (see, to that effect, Commission / Germany, paragraph 67 above, paragraph 49). When, as in this case, such a finding has been proven, it is irrelevant to assess whether or not the infringement results from the will of the Member State to which it is attributable, from its negligence, or even from technical difficulties that it had to face (see, to that effect, the Court of Justice of October 1, 1998, Commission / Spain, C-71/97, ECR p. I-5991, paragraph 15). In addition, it must be remembered that, in the judgment in Commission / France and Auroux and Others, cited in paragraph 67 above, in order to declare the existence of an infringement of Article 6, paragraph 4 of Directive 93/37, the Court saw no need  for the Commission to previously prove the intention of the member State concerned to avoid the obligations imposed by the Directive by splitting the contract. [T-384/10 at paras 94-5, own translation from Spanish].

The case also discusses the issue of the cross border interest of some of the contracts that, even after the prior criteria against the artificial split of contracts were applied, remained below the EU procurement thresholds. The considerations of the GC revolve basically around the fact that the works were to be conducted very close to the Portuguese border and, consequently, their cross-border interest cannot be excluded. 

Once this is found, the inclusion of discriminatory technical criteria requiring undertakings to prove they had prior experience in Spain (and, even more precisely, in Andalusia and with the specific contracting entity) shows too clearly the discriminatory design of the procurement procedures and the ensuing breach of the EU public procurement rules (in this case, the general principles applicable to tendering of contracts not covered by the Directive).

In view of all such infringements, the GC confirms the adequacy of the financial adjustments imposed by the European Commission, without finding any fault in the fact that they were determined as lump sums proportional to the initial value of the contribution by the EU funds.

In my opinion, the Judgment in Spain v Commission does not create new law in this area, but it provides clarification (particularly on the fact that single works can constitute a technical or an economic unit, at para 68) and useful guidance on the criteria applicable in the assessment of compliance with EU public procurement rules in the tendering of large and complicated infrastructure projects, which should be welcome.

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.

Anticompetitive behaviour in NHS #publicprocurement: Regulating distortions of competition?

The recently adopted National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 include an interesting (highly unsettling) provision authorising the carrying out of anti-competitive behaviour in the commissioning of NHS services, as long as that is in the interest of health care users. 

The oddity of such 'authorisation' for public buyers to engage in anti-competitive procurement deserves some careful analysis. According to the Regulations:

10.—(1) When commissioning health care services for the purposes of the NHS, a relevant body must not engage in anti-competitive behaviour [i.e. behaviour which would (or would be likely to) prevent, restrict or distort competition], unless to do so is in the interests of people who use health care services for the purposes of the NHS which may include—

(a) by the services being provided in an integrated way (including with other health care services, health-related services, or social care services); or

(b) by co-operation between the persons who provide the services in order to improve the quality of the services.

(2) An arrangement for the provision of health care services for the purposes of the NHS must not include any term or condition restricting competition which is not necessary for the attainment of—

(a) intended outcomes which are beneficial for people who use such services; or

(b) the objective referred to in regulation 2.

The only explanation provided in the Explanatory Memoradum is that

The Regulations place further requirements on commissioners to ensure accountability and transparency in their expenditure. In particular: [...] not to engage in anti-competitive behaviour unless to do so is in the interest of patients. Regulation 10 makes clear that behaviour in the interests of patients may include services being provided in an integrated way or co-operation between providers in order to improve the quality of services. This reflects the Government’s firm view that competition is a means to improving services and not an end in itself.

Generally, then, it seems that under the new NHS public procurement rules, whatever is considered in the 'interest of patients' can trump pro-competitive requirements and allow the commissioning entity to engage in distortions of competition. Even if Regulation 10(2) sets a clear proportionality requirement, my general impression is that this is at odds with the general requirements of EU public procurement law and, more specifically, with the principle of competition embedded in the public procurement Directives--so that the application of Regulation 10(1) for contracts covered by EU law (ie when there is cross-border interest) may result in a breach of those Directives.

In that regard, the substantive guidance published by the UK's healthcare sector regulator Monitor for public consultation is particularly relevant. According to such draft substantive guidance, Monitor will assess the appropriateness of engaging in anti-competitive behaviour on the basis of a cost/benefit analysis. Indeed, it is explained that:

When will behaviour be anti-competitive and not in the interests of users of health care services?

Where a commissioner’s conduct is in the interests of patients its behaviour will not be inconsistent with the prohibition on anti-competitive behaviour in Regulation 10.

In assessing whether or not anti-competitive behaviour is in the interests of health care service users, Monitor will carry out a cost/benefit analysis. Monitor will consider whether by preventing, restricting or distorting competition behaviour gives rise to material adverse effects (costs) for health care service users.

If we find that behaviour gives rise to material costs, we will consider whether it also gives rise to benefits that could not be achieved without the restriction on competition.

Monitor will then weigh the benefits and costs against each other.

The methodology for the carrying out of that cost/benefit (both clinical and non-clinical) analysis is explained and, at the bottom line, when weighing their relevance, Monitor will take into consideration that

This is not a mathematical exercise, but rather a qualitative assessment. Relevant benefits might outweigh costs when, for example, as a result of a commissioner’s actions there is a reduction of competition between a small number of providers, but a significant number of other providers of the relevant services remain and the clinical benefits of the initiative are significant and well evidenced. 

Given the very open-ended methodology described in the document and this final consideration, my impression is that the analysis to be carried out by Monitor may err on the side of allowing for an excessive amount of anti-competitive behaviour--particularly in view of the potential relevance given to qualitative (and, hence, difficult to measure, benefits). 

However, such lenient approach is not exactly matched when Monitor indicates the type of factors it will take into consideration when assessing whether a commissioner has engaged in disproportionate or unjustified anti-competitive behaviour, which include examples such as whether the commissioner:

·               has limited the extent to which providers are able to compete to attract patients to their services, for example, by limiting the total number of patients a provider can treat or the income a provider can earn, or by restricting the providers to whom a provider can refer patients for further treatment, without objective justification;

·               has restricted the ability of providers to differentiate themselves to attract patients, such as, for example, by imposing minimum waiting times that providers must adhere to or restricting opening hours without objective justification; and

·               has reduced the incentives on providers to compete, such as, for example, by disclosing commercially sensitive information belonging to one provider to a different provider without objective justification.

Therefore, it seems that the substantive guidance is strict in terms of promoting (or not reducing) competition of providers in their interface with patients, unless the cost benefit/analysis indicates a (qualitative) advantage for patients that derives from any restriction of competition--such as vertical or horizontal integration of services, joint provision, or standardisation of conditions [as indicated by Regulation 10(1)].

After reading the substantive guidance, it is not clear to me whether the structurally strict approach of Regulation 10(2) will restrict the 'anti-competitive authorisation' of Regulation 10(1) or, on the contrary, if Regulation 10(2) will also be affected by the 'qualitative' approach of Regulation 10(1). In that regard, it would be desirable for Monitor to make it clearer if it intends to use Regulation 10(1) only exceptionally and in cases where the cost/benefit analysis is clearly positive, or if it envisages a more lenient approach. 

I would personally favour the first option, since the authorisation of anti-competitive behaviour in public procurement is prone to generate clear social losses derived from the direct and knock-on effects that non-competitive public procurement generates (see here and here), whereas the (qualitative) benefits sought are hard to measure and to realise. In any case, it will be interesting to see how the final guidance may be affected by the current consultation period, which will be open until the 15th of July 2013.

#CJEU does not tolerate a slacker @EU_Commission in #Stateaid control (C-615/11): Commission counter-attacks with 'case management' excuses

In its Judgment of 16 May 2013 in case C-615/11 Commission v Ryanair, the Court of Justice of the European Union (CJEU) has dismissed the Commission's appeal against the prior Judgment of the General Court where it was found that the Commission failed to fulfill its obligations under the Treaty by not adopting a decision following a complaint lodged by Ryanair. 

Building up on the prior case law in Athinaïki Techniki AE v Commission (C-521/06), the CJEU has imposed upon the European Commission a clear duty to act when it is put in possession of information regarding alleged unlawful aid and called upon to to define its position within the meaning of Article 265(2) TFEU. In the view of the CJEU

27 As a preliminary point, it should be borne in mind that, under Article 20(2) of Regulation No 659/1999, any interested party may inform the Commission of any alleged unlawful aid and of any alleged misuse of aid.

28 Where it has in its possession information, from whatever source, regarding alleged unlawful aid, the Commission is required, under Article 10(1) of Regulation No 659/1999, immediately to examine the possible existence of aid and its compatibility with the internal market. The examination of such information, on the basis of that provision, gives rise to the initiation of the preliminary examination stage under Article 108(3) TFEU (see, to that effect, Case C‑322/09 P NDSHT v Commission [2010] ECR I‑11911, paragraph 49 and the case-law cited).

29 At that stage, and where it considers that there are insufficient grounds for taking a view on the case, the Commission, in accordance with the second sentence of Article 20(2) of Regulation No 659/1999, must communicate that finding to the interested parties which have sent it the information in question and must also allow those parties to submit additional comments within a reasonable period (see, to that effect, Athinaïki Techniki v Commission, paragraph 39).

30 Article 13(1) of Regulation No 659/1999, which is applicable in the context of an examination of alleged unlawful aid, obliges the Commission to close that preliminary examination stage by adopting a decision pursuant to Article 4(2), (3) or (4) of that regulation, that is to say, a decision finding that aid does not exist, raising no objections or initiating the formal investigation procedure, since that institution is not authorised to persist in its failure to act during the preliminary examination stage (Athinaïki Techniki v Commission, paragraph 40).

31 It follows […] that the preliminary examination stage, which ultimately obliges the Commission to take a position, requires that, where that examination is carried out on the initiative of an interested party, information concerning alleged unlawful aid be sent to the Commission by that party (C-615/11 at paras 27 to 31, emphasis added).

The extent of the Commission's duties is crystal clear and, consequently, the Institution should better internalize this obligation--which, more generally, is not much more than a specific expression of the duty of good administration that is increasingly recognised as a general principle of EU (Administrative) Law.

Indeed, this Judgment should seriously be taken into consideration in the current State Aid Modernisation (SAM) initiative--which the Commission should use to streamline its procedures as necessary to discharge the (raised) duty of diligence that derives from the CJEU's Ryanair Judgment. In this regard, it is positive to see that, as part of SAM (and probably in view of the defeat suffered before the GC and the likely, now actual, defeat before the CJEU), the Commission is already proposing to modernise the Procedural Regulation (659/1999) with regard to complaint-handling and market information tools. According to the Commission's proposal:

The Commission is required to conduct a diligent and impartial examination of complaints submitted from interested parties and take a decision thereon without undue delay. Where the Commission takes a decision finding that there exists no State aid as alleged by a complainant, the Commission must at least provide the complainant with an adequate explanation of the reasons for which the facts and points of law put forward in the complaint have failed to demonstrate the existence of State aid [COM(2012)0725 final, Explanatory Memorandum].

This begs the question why did the Commission not desist from the appeal in case C-615/11 if it had, itself, already assumed that it was in the wrong in the Ryanair case? (although the potential Art 340 TFEU claim for non-contractual liability of the European Commission that may follow today's CJEU Judgment seems the obvious explanation...).

Going back to the specific proposals of the Commission to improve the way it handles State aid complaints, the positive impression disappears when one realizes that the December 2012 proposal aims to modify Regulation 659/1999 to expressly regulate the way in which complaints need to be lodged--and, consequently, the reform is largely a 'self-defence' instrument for the European Commission, which feels overburdened by State aid complaints. As explained (excusation non petita...)

the Commission receives on average more than 300 complaints every year, whether lodged by interested parties or not, among which many are either not motivated by genuine competition concerns or not sufficiently substantiated. Most complaints are not treated as a priority and the average duration of those cases therefore tends to increase. Therefore, the complaints handling procedure is sometimes perceived by Member States and complainants as unpredictable and lacking transparency [COM(2012)0725 final, Explanatory Memorandum].

Hence, the Commission is proposing to consolidate in the regulation some of the 2009 Code of Best Practices for the conduct of State aid procedures, which expected benefits 'of shorter duration, increased efficiency and greater predictability – have not fully materialised [Moreover] Best Practices could not address some of the main shortcomings of the current system, since they directly stem from the Procedural Regulation. That is why a reform of the Procedural Regulation itself is proposed to address those issues.' Therefore, the European Commission proposed the following modifications:

In the interests of transparency and legal certainty (sic), the conditions to lodge a complaint which put the Commission in possession of information regarding alleged unlawful aid and thereby set in motion the preliminary examination should therefore be clarified. Indeed it is appropriate to require that:

– complainants submit a certain amount of compulsory information. To that end, it is appropriate to empower the Commission to adopt implementing provisions to define the form and the content of a complaint.

– complainants demonstrate that they are interested parties within the meaning of Article 108(2) TFEU and Article 1(h) of the Procedural Regulation and that they therefore have a legitimate interest to lodge a complaint. To reach that objective, it is proposed to specify in Article 20(2) on the "rights of interested parties" that "any interested party may lodge a complaint".

In cases where the information received will not be classified as a complaint since it will not have passed the admissibility criteria, the Commission will no longer be under an obligation to adopt formal decisions. Those submissions will be registered as market information and could be used at a later stage to conduct ex officio investigations.

To complete the staged procedure introduced by the Best Practices Code, the Procedural Regulation should formalise the possibility for the Commission to deem complaints withdrawn if the complainant does not return to it with meaningful information or otherwise fails to cooperate during the procedure. In that way, the treatment of complaints could be streamlined and improved (emphasis added and references omitted).

In my view, these changes are self-serving and would simply (aim to) deactivate the functional approach and the high duty of administrative diligence stressed by the CJEU in the Ryanair Judgment and, consequently, may diminish significantly the effectiveness of the complaints mechanism, sacrificing it in the altar of workload allocation and Commission liability-proofing. The trade-off may likely reduce the effectiveness of State aid control in the long run. 

Interestingly, these proposals were the object of a consultation and, hopefully, the Commission will issue a revised proposal in view of those and other considerations. In my opinion, given the very clear approach followed by the CJEU in Ryanair, the European Commission should abandon its self-centered approach to the reform of the rules on the handling of complaints in State aid cases and, in the spirit of institutional loyalty and in with the aim to keep (or develop) a well-functioning State aid control system, introduce more flexibility in the criteria for the lodging of complaints by (non)interested parties.

A strong defense of the 'welfare standard' in #antitrust #enforcement (#welfare trumps #choice): end of the debate?

The April 2013 Fordham Law Review [Vol 81 Iss 5] publishes the proceedings of a recent symposium on the (never-ending) debate concerning the goals of antitrust law. It might be surprising that antitrust scholars are still discussing the goals of the discipline, but it remains true that, as the recently parted Robert H Bork emphasised 20 years ago: "Antitrust policy cannot be made rational until we are able to give a firm answer to one question: What is the point of the law--what are its goals? [...] Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules" [The Antitrust Paradox, New York: The Free Press, 1993) p. 50].

Of all the contributions to the symposium, I find that Joshua D Wright and Douglas H Ginsburg's, 'The Goals of Antitrust: Welfare Trumps Choice' is particularly worth reading. As the authors stress

The promotion of economic welfare as the lodestar of antitrust law -- to the exclusion of social, political, and protectionist goals -- transformed and gave intellectual coherence to a body of law Robert Bork had famously described as paradoxical. Welfare-based standards have benefitted consumers and the economy and have led to greater predictability in judicial and agency decision making. In the latest of numerous challenges to the welfarist understanding of antitrust, Neil Averitt and Robert Lande propose their "consumer choice" standard as an alternative they claim takes better account of the nonprice dimensions of the competitive process. Adoption of the consumer choice framework would have seriously detrimental consequences for consumers, however. Both economic theory and empirical evidence are replete with examples of business conduct that simultaneously reduces choice and increases consumer welfare through lower prices, increased innovation, or higher quality products and services. Moreover, the welfarist approach already incorporates the tradeoffs between price and quality that consumers face. The flaw of the choice standard is that it altogether rejects the economic approach to dealing with those tradeoffs and instead imposes a structural presumption that the number of firms or brands in competition is directly correlated with consumer welfare. Shifting to defendants the burden of justifying any reduction in consumer choice would be merely a revival of the long ago repudiated inhospitality tradition in antitrust that should and likely will be rejected by the enforcement agencies and the courts.

My own personal take on the issue of the goals of competition law is that

there has been substantial debate as regards the objectives or goals of competition law. Notwithstanding that debate, a consensus has been reached as regards the restriction of the goal of competition law to economic considerations and, there is a majority view which considers that competition law should protect competition as a process, in order to maximise social welfare. Inasmuch as the pursuit of alternative or secondary goals (of a social or industrial nature) conflicts with the main economic goals—which will be the case in most circumstances—competition law should disregard such ‘secondary’ considerations and be guided exclusively by economic criteria. In the EU, market integration considerations have been historically important, but have lost momentum as the evolution of the internal market reached maturity. Therefore, in my view, as a part of EU economic law, competition law should be guided by economic efficiency considerations and have as its goal the protection of competition as a process, in order to maximise social welfare—even if the specific contours of this criterion (ie, total or consumer welfare) remain relatively undefined. In my opinion, and in the light of the position of most economists, the proper goal should be specified as the maximisation of total social welfare [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) 97].

I am convinced that the debate is unlikely to end soon. As  Martin cleverly put it, the evolution of this debate is ‘phoenix-like’, recurring, and one where ‘in each cycle participants exhibit no memory of the debate’s previous incarnations’ [Martin, Stephen Martin, 'The Goals of Antitrust and Competition Policy', in 1 Issues in Competition Law and Policy (Chicago, ABA, 2008) 79-84]. Therefore, we will probably remain engaged in this intellectual and academic exercise for a while. 

However, maybe we have not realized that the debate is about a different issue altogether. As Eleanor Fox claims in her contribution to the Fordham Law Review special issue, 

The core debate is how to design and apply antitrust principles so that robust markets are likely to result or be preserved, not what are the goals of antitrust [...] The exercise of debating goals of U.S. antitrust, while provocative and interesting, obscures the two data points that actually drive the debate on most applications of antitrust law—perspective and assumptions. It may be more productive to state the goals or essence of American antitrust at a level of generality, as did the Antitrust Modernization Commission in its 2007 Report—antitrust is for competition and consumers—and to proceed to examine particular categories of conduct and to debate what the rules and standards should be.

We might as well follow her lead and ditch the goals debate altogether. Or maybe we won't... 

The @EU_Commission Report on #Competition Policy 2012: An interesting piece of #softlaw?

The European Commission has published its Report on Competition Policy 2012. Its theme is the 20th anniversary of the relaunch in 1992 of the European Single Market and the Report focuses on the role of competition policy in leveraging the Single Market for growth--which is interesting, although a clearer connection with the current Europe 2020 Strategy could have been included.

The Report describes the enforcement activities of the Commission in those sectors where it was more active in 2012, which are described as: "sectors of systemic and cross-cutting importance to the EU economy: financial services; key network industries such as energy, telecoms and postal services; as well as knowledge-intensive markets such as smartphones, e-books and pharmaceuticals".

The Report is full of interesting remarks by the Commission, some of which may be excessively optimistic and highly contingent on difficult to foresee future developments. For instance, the assumption that "the bulk of the [State aid] activity involved the restructuring of banks, so that no more taxpayer funding will be needed for the foreseeable future" may sound excessively triumphalist and optimistic in case of a further deterioration of the economy of any of the Member States (such as Spain, to mention one).

It also shows the first experiences applying the 2012 new SGEI rules, which concerned the postal sector in the UK:

In March 2012, the Commission adopted two decisions concerning UK Post Office Limited based on the new SGEI framework. The Commission found that the aid did not exceed the net cost of the public service mission entrusted to the Post Office Ltd and that its entrustment complied with public procurement rules. Moreover, the entrustment letter and funding agreement governing the payment of the compensation contained appropriate provisions to incentivise an efficient provision of the public service, in line with the Post Office Ltd's strategic plan for the period 2012-2015 which aims at modernising and improving the provision of services over its network according to yearly efficiency milestones.

The content of the UK postal sector decisions will be highly relevant to the roll-out of the 2012 SGEI Framework, which is likely to gain relevance as the reform of the public sector picks its expected pace in the UK and elsewhere in the EU. Hence, the criteria used in these decisions and the clear (but naive) connection that they establish with the mandatory compliance of EU public procurement rules need to be properly understood and duly stressed. The Commission itself emphasized that:

the UK government commits to ensure, in the future, the compliance of all [Poste Office]'s public contracts with European Union public procurement rules [...]. This commitment is particularly important in the light of the link between Product SGEI and Network SGEI. The Commission will also check that this commitment has been respected in case of extension of the subsidies for the Network SGEI beyond 2015 or adoption of new State aid measures for the financing of that SGEI (Decision SA.33054 (2012/N)–United Kingdom, para. 68).

For commentary on these (stronger) interaction between competition, State aid and public procurement rules, see Koukiadaki, A (2012): ‘EU governance and social services of general interest: When even the UK is concerned’, in: Barbier, Jean-Claude (ed.) EU Law, Governance and Social Policy European Integration online Papers (EIoP), Special Mini-Issue 1, Vol. 16, Article 5  , and Sánchez Graells, A, 'The Commission’s Modernization Agenda for Procurement and SGEI' in Szyszczak & van de Gronden (eds), Financing SGEIs: State Aid Reform Modernisation, Series Legal Issues of Services of General Interest (TMC Asser Press/Springer, 2013) 161-181. 

On a different note, the Report has some signs of dumbing down competition discourse that, in my opinion, do not contribute to make the policy more accessible and, on the contrary, may water down important debates, such as the current State Aid Modernisation process (SAM). In that regard, I find it surprising that the European Commission explains the main rationale of SAM in these terms:

SAM's aim is to facilitate the treatment of aid which is well-designed, targeted at identified market failures and objectives of common interest, and least distortive. Aid which does not provide real incentives for companies crowds out private investment and keeps inefficient and non-viable companies on life support ("bad aid"). Good aid strengthens the Single Market while bad aid weakens it (footnote omitted, emphasis added).

What may be acceptable for a Commissioner's Speech (most likely not even for that), sounds odd and puerile in an official Report from the European Commission. Maybe it is just a matter of etiquette, but a different tone should be expected from one of the largest competition law enforcers in the world.

Finally, overall, the times where the European Commission used the Annual Report to announce changes in policy seem long gone and it is hard to see that the contents of the 2012 Report can be considered (relevant) soft law--a situation that reverses a clear trend of using this document to set the agenda for the future (as analysed by Stefan in her recent book Soft Law in Court). 

A spoonful of #publicprocurement in the #CJEU's bowl

Public procurement has been gaining relevance in the case law of the Court of Justice of the European Union (both at the General Court and Court of Justice level), both in qualitative and quantitative terms. A look at the statistics on public procurement cases clearly shows their increasing numerical importance, as well as the increasing backlog that is being accumulated in this area of EU economic law. 

(*) Note: Unfortunately, prior to 2010, the data for the Court of Justice does not include a separate category for public procurement cases (they were likely to be classified under approximation of laws, or under the relevant fundamental freedom). Therefore, the actual numbers may be higher than the available statistics show but, in my view, the general trends seem clear.

In terms of new cases, it seems clear that, despite the increasing prescriptiveness of the public procurement rules, the growing body of EU case law that interpret them, and the issuance of guidance by the European Commission--public procurement is an area of growing litigation. This is particularly clear before the General Court, which has the role of appeals tribunal for the public procurement decisions of the EU Institutions--which makes it surprising that, actually, the number of tender challenges the GC hears is relatively small if one takes into consideration the number of procurement procedures run by EU Institutions on a yearly basis (the Commission alone tenders over 9,000 contracts a year, mostly for services) [which may raise an issue of effectiveness of remedies for EU institutional procurement, but this is an issue that would deserve careful and separate consideration].

In view of this growing number of new cases, it is encouraging to see that the number of completed cases is also growing. However, this may be just a natural adjustment to the number of new cases--the more public procurement cases get on the table, the more that get completed in due time. In this regard, it would be interesting to estimate the average duration of public procurement cases to try to correlate increases in new cases (in 2008, for instance) with larger numbers of completed cases some years after (e.g. in 2011 or 2012).

On a less positive note, a comparison of new and completed cases shows that the pace of increase of completed cases is insufficient to cope with the larger workload of the Court of Justice in this area. It is clear to see that there is an increasing backlog of public procurement cases and that, in its best years, the EU Courts just manage to complete as many cases as they receive--leaving a relatively permanent backlog of some 40 cases before the GC and additional 20 cases before the CJEU.

All in all, then, it seems clear that the EU Courts have a lot of public procurement cases in their plates and that this is an area due to absorb more and more resources of this institution. In view of the larger workload of the GC in this area and the fact that it serves as the first instance for judicial review of the public procurement decisions of the EU Institutions, given the relatively minor relevance of some of these cases--as the (in)famous Evropaiki Dynamiki saga shows--and the fact that some of them are factually intensive, it may be worth reconsidering the attribution of this role to the GC and the potential creation of a specialized chamber to deal with public procurement cases (and there may be room for other specialized chambers, such as one on trademark law, but this is a matter for another day).

In any case, the development of EU public procurement law through the jurisprudence of the EU Courts seems prone to remain a constant feature of this area of EU economic law, at least for some years to come, until the existing 'stock' of pending cases is processed by the system. Something to keep an eye on.

#PublicProcurement Promoting #PublicHealth: A New Risk for Potential Distortions of #Competition or a Fat Chance?

In their recent paper Government Purchasing to Improve Public Health: Theory Practice and Evidence, Noonan, Sell, Miller and Rubin explore how using government purchasing power to stimulate demand for healthier products provides a pathway to healthier food purchasing. At first sight, this is yet an additional instance of the use of public procurement to achieve secondary policies [see Prof. Arrowsmith's taxonomy of horizontal policies in procurement here] and, consequently, deserves some attention.

As the authors clearly stress,

The sheer amount of money government spends on procurement gives it a unique capacity to shape markets that, in turn, may affect public health. Through public procurement, government can, for example influence private companies competing for its business. Government’s influence can shape not only the types of products and services offered to government by private contractors, but markets themselves and the choices available to both corporate and individual consumers.

And, it is precisely this vast potential to shape (rectius, distort) the markets where the public buyer is active that justifies the need to take such impacts on commercial markets when designing public procurement rules and practice [as clearly emphasized recently by Prof. Yukins and Cora here, and as I have argued elsewhere]. However well-intended the 'secondary policy' promoted by the government, it may (will) come at a significant (and opaque) cost if it is not thoroughly assessed and carefully designed in view of its potential impact on the competitive dynamics of the markets concerned.

Focusing on the promotion of public health, Noonan, Sell, Miller and Rubin consider that

Although the specific elements and the aims of healthy procurement policies may vary, the key component of such initiatives is their use of government’s role as a buyer to shape the food environment in ways that promote better public health [...] Through healthy procurement, governments have an opportunity not only to improve the nutritional quality of the food they distribute or sell to the public, but by increasing the market demand for and availability of healthful products, to influence the options available to a much broader range of consumers.

Government procurement policies provide an alternative to policies where government regulates industry directly. Rather than establishing rules that require an industry to alter its products to meet certain standards, government can purchase products that already meet those standards. This approach can alleviate the administrative burden for the government; overcome political resistance often associated with traditional regulation; facilitate less adversarial relationships with private industry that places more emphasis on achieving outcomes than on punishing violations; and stimulate and promote innovation that the market, alone, may not produce (emphasis added).

The use of public procurement as a tool of industrial policy has been discussed for the best part of the last 25 years (see Geroski's seminal work in 1990). As a counter-argument to the advantages perceived by Noonan, Sell, Miller and Rubin, I think that it is clear that the use of public procurement as a regulatory tool creates significant issues of democratic and legitimacy deficit, as well as difficulties in monitoring and oversight--not to mention the potential (implicit) economic costs and losses in economic efficiency that would have otherwise been identified in the regulatory impact assessment (RIA) / cost-benefit analysis that would have preceded the adoption of the regulation now substituted with public procurement practice. Therefore, the picture is far from the ideal / neutral description provided by Noonan, Sell, Miller and Rubin.

Therefore, it should not be lightly used as the preferred 'regulatory tool' and, in any case, the implications of allowing the government to intervene in the market through the sheer use of its buying power would then need to be subjected to some kind of check and balance--which, in my view, should be competition / antitrust law and, more specifically, the rules on abuse of dominance / monopolisation [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) ch 4].

The process diagram designed by Noonan, Sell, Miller and Rubin is interesting because it helps explain the way in which secondary policies work and the (indirect?) way in which the substitution of legislation with procurement (specifications) may affect industry structure.

Noonan, Sell, Miller and Rubin (2013: 8) circles added.

It is clear that moving public health (or any other secondary policy) from the set of legal requirements to the public procurement specifications completely alters the framework in which the public buyer operates, sets it free from significant regulatory constraints, and diminishes the transparency and predictability of the system for companies active in these sectors. On the other hand, the expected industry adjustment may not always be comprehensive, and it can generate a truncation of an economic market (eg that for foodstuffs) into two artificial (sub)markets: a 'public market for food' and a 'private market for food'. The economic consequences of such truncation are hard to predict but, in all likelihood, they are bound to be negative from a social welfare standpoint.

However, in the specific case of 'healthy procurement' discussed by Noonan, Sell, Miller and Rubin, it seems apparent that the pursuit of public health objectives is done exclusively through the setting of the 'technical' specifications of the food to be provided (in most instances, to schools). In this regard, the promotion of public health in procurement should not be seen as a 'classical' exercise of secondary policy promotion, since the government is defining what to buy and the 'healthy' component is intrinsic to the goods to be delivered. In that regard, the choice of healthy food for schools seems unobjectionable also from a competition perspective. The issue would be different if the government decided to buy from vendors that only sold 'healthy food'--an issue that, at least in the European Union, has been clearly prohibited by the Court of Justice in the Commission v Netherlands (Fair Trade) case.

In any case, given the growing attention to the promotion of public health and the prevention of obesity and its related health issues (see the World Health Organisation and its initiatives),  this new potential area of pursuit of 'secondary' / horizontal policies in public procurement deserves academic and policy-making attention.

Comentarios a la Comunicación sobre el programa de #clemencia de la @CNCompetencia

La Comisión Nacional de Competencia (CNC) ha sometido a consulta pública un borrador de Comunicación sobre el programa de clemencia que se inspira en el programa de la Comisión Europea y en la versión revisada del modelo de programa de clemencia aprobado en la red europea de autoridades de competencia (European CompetitionNetwork). La CNC ha solicitado comentarios a su borrador para mejorar la Comunicación sobre su programa de clemencia antes de su aprobación definitiva. Estos son los comentarios que se me ocurren en una primera lectura de la Comunicación.

1. Automatismo de la extensión de la solicitud a representates y directivos

La Comunicación desarrolla y completa lo previsto en los artículos 65 y 66 de la Ley de Defensa de la Competencia (LDC) y los artículos 46 a 53 de su reglamento de desarrollo (RD 261/2008). Dado que se trata de un acto administrativo de desarrollo de esta normativa (adoptado conforme a lo previsto en la DA 3ª LDC), no hay ninguna duda de que la Comunicación no puede ir más allá de lo previsto en la LDC y el RD 261/2008 ni puede reducir la efectividad de lo previsto en sus disposiciones. En este sentido, hay que destacar que lo previsto en el apartado 17 de la Comunicación resulta contrario al mandato de los artículos 65.3 y 66.4 LDC y, por tanto, debe ser modificado—so pena de resultar nulo por ser un desarrollo reglamentario (impropio) contra legem.

En efecto, los artículos 65.3 y 66.4 LDC prevén, con carácter automático, que la exención del pago o la reducción del importe de la multa concedida a una empresa beneficiará igualmente a sus representantes legales, o a las personas integrantes de los órganos directivos y que hayan intervenido en el acuerdo o decisión, siempre y cuando hayan colaborado con la CNC durante la inspección. En cambio, el apartado 17 de la Comunicación indica que “el solicitante puede hacer extensiva su solicitud a los representantes legales y a las personas integrantes de los órganos directivos que hayan intervenido en las conductas constitutivas del cártel, siempre y cuando dichas personas físicas también colaboren con la CNC en el esclarecimiento de los hechos, de acuerdo con los requisitos del programa de clemencia” (énfasis añadido).

Esta previsión es, cuanto menos, confusoria, dado que plantea el problema aparente de que un solicitante de clemencia no solicite la extensión a los representantes y directivos y, por tanto, é tos puedan no verse amparados por la misma. En este caso, los representantes o directivos no incluidos pueden tener dudas sobre la necesidad de presentar sus propias solicitudes de clemencia (incluso, probablemente, con asesoramiento jurídico independiente del solicitante principal) y se pueden generar situaciones de vulneración del derecho de defensa y de descoordinación entre solicitudes de clemencia. 

En mi opinión, la CNC debería ser mucho más clara al respecto e indicar que, precisamente en función de lo previsto en los artículos 65.3 y 66.4 LDC, “la solicitud presentada por una empresa o persona física se extenderá automáticamente a los representantes legales y miembros de los órganos directivos que hayan intervenido en las conductas del cartel, que se verán beneficiados de la clemencia eventualmente concedida al solicitante siempre que colaboren con la CNC en el esclarecimiento de los hechos”.

2. Contactos previos a la solicitud de clemencia

El apartado 18 de la Comunicación prevé la posibilidad de que los potenciales solicitantes de clemencia se pongan en contacto con la CNC antes de formalizar su petición. En este apartado, la CNC debería aportar más detalles sobre su experiencia práctica en estos trámites informales y, sobre todo, aclarar qué ocurre en caso que el solicitante finalmente decida no presentar la solicitud de clemencia. 

En su redacción actual, la CNC no ofrece ninguna indicación sobre el uso de la información adquirida en esta fase ni sobre los efectos de este contacto preliminar sobre los derechos de defensa del potencial solicitante (a diferencia de lo indicado en el apartado 45 de la Comunicación, que prevé expresamente la posibilidad de solicitar la devolución y borrado de la información presentada en solicitudes de exención desestimadas). 

En este escenario, pues, este contacto inicial debe entenderse como un camino de vía única, en que el solicitante debe asumir el riesgo de acabar autoinculpándose si la exención condicional de la multa no está ya disponible. Este riesgo puede disminuir significativamente los incentivos a la participación en el programa de clemencia. En este sentido, el desarrollo de la posibilidad de llevar a cabo contactos anónimos (intermediados por abogados, si es necesario) podría ser una alternativa a tener en cuenta por la CNC.

3. Momento de presentación de la solicitud verbal de clemencia

En el apartado 20 de la Comunicación, la CNC establece la posibilidad de que la petición de clemencia sea verbal, en cuyo caso se grabará y transcribirá utilizando los medios propios de la CNC y en sus dependencias. En este supuesto, no tiene sentido que la CNC considere que “la fecha y hora de entrada en el registro de la CNC de esta transcripción el elemento determinante del orden de recepción de dicha solicitud”. El criterio lógico es considerar que la fecha y hora de inicio de la reunión es la correspondiente a la recepción de la solicitud, con la única condición (quizá) de que la transcripción se complete y llegue a registrarse debidamente. 

Hay que tener en cuenta que, una vez participa en la reunión, el solicitante pierde el control sobre el proceso y, por tanto, no parece razonable que deba esperar al momento de registro de la transcripción para que se determine su orden de prioridad para optar a la exención o reducción de la multa. En mi opinión, ésta es una interpretación sistemática más razonable de lo previsto, por una parte, en los artículos 46.2 y 46.4 y, por otra, en los artículos 50.1 y 50.2 RD 261/2008. La interpretación literalista que plantea la CNC supone, en realidad, una disuasión a la posibilidad de presentación de solicitudes verbales, especialmente si las reuniones se prevén largas o el proceso de transcripción sufre cualquier contratiempo (técnico, o de otra índole).

4. Descalificación del solicitante por haber obligado a otras empresas a participar

En el apartado 40 de la Comunicación, la CNC interpreta el artículo 65.2.d) LDC de un modo que parece, cuanto menos, cuestionable. La previsión legal impone que una empresa solicitante de clemencia no pueda beneficiarse de la exoneración de la multa (aunque sí de la reducción de su importe) si ha “adoptado medidas para obligar a otras empresas a participar en la infracción”. En este sentido, resulta difícil de comprender como la CNC puede considerar que este supuesto no se cumple si “la conducta del solicitante responde a la ejecución de los mecanismos establecidos por el cártel, tales como invitar a formar parte de éste, participar en la adopción o ejecución de medidas coordinadas o concertadas de retorsión o la asunción de funciones de liderazgo o coordinación del mismo o de control o vigilancia de los acuerdos adoptados por el cártel” (énfasis añadido).

Una interpretación simple de lo previsto en el articulo 65.2.d) LDC parece incluir claramente la adopción de medidas de retorsión para obligar a una empresa a participar (que incluye continuar participando) en la infracción. Así se interpreta por la Comisión Europea en su programa de clemencia: “una empresa que haya tomado medidas con objeto de coaccionar a otras empresas para que se unan al cártel o permanezcan en él quedará inhabilitada para la obtención de la dispensa del pago de las multas. Sí podrá acogerse a una reducción del importe de la multa si reúne los requisitos y condiciones necesarios para ello” (apartado 13, énfasis añadido). Por tanto, la Comunicación puede incurrir de nuevo en un desarrollo reglamentario (impropio) contra legem y extender indebidamente el ámbito de la exención de la sanción que en otro caso corresponde por la comisión de la infracción.

En definitiva, la interpretación del artículo 65.2.d) LDC en este apartado debería revisarse para limitarlo a lo estrictamente permitido por la norma legal—que sólo permite la exención de la sanción a quien haya adoptado una posición relativamente pasiva en el cartel y haya participado en él, pero no haya impuesto su participación o impedido el abandono de otras empresas (y, de hecho, así parece entenderlo también la CNC en el apartado 44.6 de la propia Comunicación). 

Si la CNC pretende dar esta interpretación en su Comunicación, como mínimo, debe cambiar la redacción del apartado 40 y sustituir “No se considerará que concurre el presupuesto del artículo 65.2.d) si la conducta del solicitante responde a la ejecución de los mecanismos establecidos …” por una redacción más clara, como “En todo caso perderá la posibilidad de beneficiarse de la exención de la multa el solicitante que ha ya participado en los mecanismos …”.

5. Ejercicio de actividades inspectoras con posterioridad la rechazo de una solicitud de exención

El apartado 47 de la Comunicación reduce significativamente el valor del apartado 45 y las mínimas garantías ofrecidas al solicitante de una exención rechazada por la CNC. Si, pese a proceder a la devolución de la información de los elementos de prueba aportados y al borrado de las declaraciones verbales, la CNC puede “hacer uso de sus facultades de investigación”, parece que, de nuevo, el sistema previsto en la Comunicación debe entenderse como un camino de vía única, en que el solicitante debe asumir el riesgo de acabar autoinculpándose si la exención de la multa es rechazada. Este riesgo puede disminuir significativamente los incentivos a la participación en el programa de clemencia y generar un volumen muy significativo de litigiosidad sobre la base del derecho a un proceso justo si la CNC acaba utilizando la misma información para la imposición de sanciones.

En realidad, este es un problema intratable desde una perspectiva práctica y quizá la CNC debería optar por mantener toda la información en el expediente, a efectos de que la Audiencia Nacional y el Tribunal Supremo puedan valorar adecuadamente si la CNC consigue información suficiente de forma independiente o si, en realidad, obtiene mediante sus facultades de investigación exactamente la misma información que había devuelto o borrado al solicitante rechazado. De todos modos, la solidez de las investigaciones en que se produzcan solicitudes de exención que resulten rechazadas puede verse gravemente afectada en cualquier caso y, probablemente, la CNC debería desarrollar buenas prácticas para asegurar que nadie que haya estado involucrado en la consideración de la solicitud de exención participa en la posterior investigación, como mínima garantía procesal.

6. Valoración de solicitudes sucesivas de reducción de la multa

En el apartado 55 de la Comunicación (y en el 58), la CNC parece establecer un sistema “móvil” de valoración de la prueba aportada por los solicitantes de reducciones de la multa. Conforme a su redacción, parece que la CNC lleve a cabo una suerte de evaluación continuada de la prueba que cada uno de los solicitantes vaya aportando. Este mecanismo puede generar inseguridad jurídica, sobre todo si uno o varios de los solicitantes va completando la información inicialmente aportada. 

En este sentido, sería preferible que la CNC aclarase que las solicitudes se analizan en orden estricto de presentación y exclusivamente en relación con la información presentada en ese momento, y que cada complemento o aportación de nueva información se considerará como una nueva solicitud presentada por el mismo solicitante. En caso contrario, los posibles litigios derivados de acusaciones de discriminación o de abuso de la discrecionalidad administrativa implícita en la valoración de la prueba aportada y su valor añadido estarán servidos. Por tanto, la redacción de este apartado debería ajustarse a la práctica realmente llevada a cabo por la CNC (que, en su caso, deberá revisarse).

7. Deber de colaborar en la traducción

Llama la atención que una de las obligaciones de colaboración que la CNC espera de los solicitantes de clemencia sea la “traducción de documentos cuya versión original no sea el castellano” [apartado 66.b) de la Comunicación]. La aportación de traducciones de parte puede plantear numerosos problemas, especialmente si la traducción se impugna con posterioridad porque el documento en lengua extranjera es utilizado como prueba de cargo. 

En este sentido, la CNC debería tener un mecanismo interno para llevar a cabo las traducciones (y utilizar al resto de autoridades de competencia en la European Competition Network, por ejemplo) para poder asegurar la solidez de la traducción y su correcto uso en el procedimiento. Pese a que genere un coste, cuando sea necesario llevar a cabo traducciones juradas de los documentos, la CNC debe poder obtenerlas de forma independiente. La práctica consistente en confiar en las traducciones propias de los implicados en el procedimiento de investigación no es una muestra de administración diligente ni de desarrollo adecuado de un procedimiento administrativo-sancionador.

8. Deber de mantener en secreto la presentación de la solicitud de clemencia

En el apartado 66.e) de la Comunicación se impone un deber de guardar secreto sobre la presentación de la solicitud de clemencia. Pese a que el propio apartado prevé que la CNC pueda autorizar una divulgación limitada de esta información y de la concesión de una exención condicional a resultas de la solicitud, el régimen de secreto plantea problemas de incompatibilidad con la normativa del mercado de valores y, probablemente, con regímenes sectoriales de supervisión (bancaria, seguros, etc). Sería deseable que la CNC aclarase su posición en estos casos y que asegurase que el solicitante de clemencia no se vea en riesgo de incumplir otra normativa aplicable para beneficiarse de la exención o reducción de la multa solicitada.

9. Confidencialidad e imposibilidad de obtener copias en caso de recurso o revisión jurisdiccional

El apartado 74 de la Comunicación es defectuoso. Literalmente, la CNC indica que: “En caso de revisión jurisdiccional, al remitir a la Audiencia Nacional la solicitud de clemencia presentada en el procedimiento sancionador, la CNC identificará expresamente las declaraciones realizadas por el solicitante de clemencia, de las que no se puede obtener copias, de acuerdo con lo indicado en el artículo 51.3 de la LDC (sic)”. En primer lugar, la referencia debe ser al artículo 51.3 RD 261/2008. 

En segundo lugar, la posibilidad o no de obtener copias de estas declaraciones en la fase de recurso no puede venir regulada por lo previsto en el RD 261/2008 (que, en sí mismo, plantea problemas de desarrollo reglamentario extra legem, dado que la LDC no prevé la posibilidad de prohibir la obtención de copias de cualesquiera documentos), dado que supone una restricción de lo previsto en los artículos 48.6 y 52 de la Ley 29/1998, de 13 de julio, reguladora de la Jurisdicción Contencioso-administrativa (que sería, estrictamente, contra legem).

De forma similar, lo previsto en el apartado 75 de la Comunicación sobre la imposibilidad de transmisión a los interesados de la información facilitada a los órganos jurisdiccionales competentes para revisar la actuación de la CNC antes de que haya dictado la Resolución que ponga fin al procedimiento es un desideratum contrario a importantes garantías procesales en el ámbito contencioso-administrativo y, en particular, en materia sancionadora. Por tanto, tampoco parece que el apartado 75 pueda limitar de ninguna manera los derechos de acceso al expediente o a los autos de los interesados en esos procedimientos judiciales conforme a las normas generales.

Por tanto, la Comunicación de la CNC debe modificarse en estos dos puntos para no crear unas pretendidas expectativas legítimas de secreto de las solicitudes de clemencia que forman parte del expediente administrativo que, en realidad, corresponderá determinar a la Audiencia Nacional (¿u otro órgano jurisdiccional competente?) y que, en principio y conforme a lo previsto en la Ley 29/1998, no debe amparar una restricción del traslado del expediente administrativo a efectos de preparación de la demanda correspondiente, ni una restricción del derecho al acceso a los autos.

*  *  *

Esperemos que la CNC tenga en cuenta estas observaciones y las demás recibidas en la comunicación pública y que adopte una versión mejorada de la Comunicación. 

#CJEU shows excessive deference towards #socialpolicy in #publicprocurement: #socialhousing schemes may not be public contracts (C-197/11)

In its Judgment of 8 May 2013 in Joined Cases C-197/11 & C-203/11 Libert and Others, the Court of Justice of the European Union has quashed the Belgian 'Living in Your Own Region' scheme, whereby the acquisition of land and property in certain parts of the country was restricted on grounds of social policy. Moreover, when a building or land subdivision authorisation was granted, Belgian law imposed 'social obligations' on economic operators, such as subdividers and developers, so that they had to either pay a contribution to the commune (in cash or in kind), or discharge such obligation through certain sale and lease schemes, or any combination thereof. Interestingly, the CJEU has found that this latter part of the 'authorisation + social obligation' scheme, which potentially implies mandatory sales of property to public entities, may not fall under the scope of Directive 2004/18 on public procurement.

In the first part of its Libert Judgment, the CJEU has followed its prior approach against restrictive development schemes in Konle (C-302/97), and has quashed a decree of the Flemish Region of 27 March 2009 on land and real estate policy that linked the transfer of immovable property in certain Flemish communes to the condition that there existed a 'sufficient connection' between the prospective buyer or tenant and the relevant commune--ie that provided for a prior authorisation procedure to determine whether there was such a ‘sufficient connection’ (based on previous residence or on professional, family, social or economic connections with the commune in question) and, in reality, amounted to prohibiting certain persons from purchasing or leasing for more than nine years land or the buildings thereon (see CJEU press release).

It is interesting to see that the Belgian Government had tried to justify the scheme on social policy grounds and, particularly, by the objective of responding to the housing needs of the less affluent local population in the target communes. However, the CJEU has decided to quash the scheme for its lack of proportionality. The Court has rightly considered that none of the conditions used to assess the existence of a 'sufficient connection' directly reflected the socio-economic aspects relating to the objective of protecting exclusively the less affluent local population on the property market--since they could be met not only by the less affluent local population but also by other people with sufficient resources who, consequently, had no specific need for social protection on the property market. Moreover, such social goal could be achieved through other, less interventionist measures, such as housing subsidies specifically designed to assist the less affluent. So far, the case does not depart from what could be expected from the CJEU.

In its second part of the Libert Judgment, the CJEU considered that the mandatory discharge of social contributions by developers and subdividers can be a justified restriction of the fundamental freedoms involved (mainly, free circulation of capital). The Court considered that such a restriction, in so far as its purpose is to guarantee sufficient housing for the low-income or otherwise disadvantaged sections of the local population, may be justified by requirements relating to social housing policy in a Member State as an overriding reason in the public interest (and left it for the referring court to assess whether such an obligation satisfies the principle of proportionality, that is to say, whether it is necessary and appropriate to attain the objective pursued). Again, the CJEU has followed an approach that was to be expected.

The CJEU then engages in an assessment of a part of the social housing scheme that implies tax incentives and subsidy mechanisms for developers from a State aid perspective. However, the CJEU has very limited information and limits itself to refresh the conditions for the exemption of aid, with an express reference to the old 2005 SGEI Decision--now substituted by the 2011/12 'Almunia Package' [for commentary, see Sánchez Graells, 'The Commission’s Modernization Agenda for Procurement and SGEI' in Szyszczak & van de Gronden (eds.), Financing SGEIs: State Aid Reform and Modernisation (TMC Asser Press/Springer Series Legal Issues of Services of General Interest, 2012)]. 

The key issue in this area clearly seems to be how to determine the remit of the 'public service'/ 'social service' obligation, and to find a valid benchmark to ensure that there is no excessive remuneration. In this regard, it is worth stressing that, following Altmark (C-280/00), the Commission is increasingly relying on the conduct of public procurement procedures to exclude the existence of an undue economic advantage for the provide of the 'public service'/ 'social service'. Consequently, the following part of the case becomes all the more relevant.

In that regard, it is key to stress that, in the final part of Libert, the CJEU has addressed whether this authorisation scheme fell within the remit of the EU public procurement rules. The CJEU was asked the following question:

'Should the concept of “public works contracts” in Article 1(2)(b) of Directive 2004/18… be interpreted to mean that it is applicable to a scheme whereby, when a building or land subdivision authorisation is granted in respect of a project of a certain minimum size, it is linked by operation of law to a “social obligation” entailing the development of social housing units, amounting to a certain percentage of the project, which are subsequently to be sold at capped prices to a public institution, or with substitution by it?'

In its (partial) reply to this question, the CJEU heavily relies on the (in)existence of an express written agreement, and considers that

109 [...] it should be borne in mind that, in accordance with Article 1(2)(b) of Directive 2004/18, read in conjunction with Article 1(2)(a) thereof, public works contracts result where four criteria are fulfilled, that is to say, they are contracts for pecuniary interest, concluded in writing, between an economic operator and a contracting authority, which must have as their object either the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex I to that directive or a work, or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority. [...]

111 So far as concerns, in particular, the existence of a contract concluded in writing, it follows from the order for reference that the Constitutional Court is uncertain as to whether that criterion has been met in the present case, inasmuch as the social obligation entailing the development of social housing units is imposed in the absence of an agreement concluded between the housing authorities and the economic operator concerned. According to the order for reference, the social obligation is imposed directly on subdividers and developers by the Flemish Decree and is applicable to them merely because they own the land in relation to which they have applied for the grant of a building or land subdivision authorisation. 

112 In that regard, it should be borne in mind that, in order to establish that some kind of contractual relationship existed between an entity which could be regarded as a contracting authority and a subdivider or developer, the case-law of the Court requires [...] a development agreement to be concluded between the housing authorities and the economic operator in question for the purpose of determining the work to be undertaken by the economic operator and the terms and conditions relating thereto. 

113 Where such an agreement has been concluded, the fact that the development of social housing units is a requirement imposed directly by national legislation and that the party contracting with the authorities is necessarily the owner of the building land in question does not preclude the existence of a contractual relationship between the authorities and the developer in question (see, to that effect, Case C‑399/98 Ordine degli Architetti and Others [2001] ECR I‑5409, paragraphs 69 and 71). 

114 However, although it is true that Article 4.1.22, first subparagraph, of the Flemish Decree expressly requires an administration agreement to be concluded between the subdivider or developer and the social housing organisation, it is apparent from the order for reference that that agreement does not, in principle, regulate the relationship between the contracting authority and the economic operator concerned. In addition, such an agreement does not appear to concern the development of social housing units, but only the next stage which entails placing them on the market. 

115 It is therefore for the referring court to determine, in the light of all the applicable legislation and the relevant circumstances of the case in the main proceedings, whether the development of social housing units at issue in the main proceedings is within the framework of a contractual relationship between a contracting authority and an economic operator and whether the criteria referred to in paragraph 109 above have been met. (C-197/11 at paras 109 to 115, emphasis added).

In my opinion, the CJEU leaves the door excessively open to a finding that the scheme is not covered by Directive 2004/18 due to the lack of a 'proper' or 'sufficient' contract. In my view, for the purposes of controlling the award of the rights to divide land, develop property, and then sell it to a public institution in the social housing market, the CJEU should have adopted a more functional approach and indicated that the submission of an authorization followed by its approval (by means of an administration agreement) suffices for the establishment of a contractual relationship between the authority and the developer or subdivider, which would then automatically include the 'social obligation'. 

Otherwise, there seems to be excessive room for strategic behaviour on the part of contracting authorities to avoid compliance with public procurement rules through 'unstructured' documentation of their planning decisions and their economic relationships with developers. Given that only those developers that obtain authorisation will be able to develop and then sell property to public institutions under the 'social housing' scheme, it seems clear that the award of the authorisation implies an economic exchange (or that they are concluded for a pecuniary interest, even if it is deferred) and that the authority will (indirectly, at least) benefit from the development in the execution of its social housing policy. Therefore, the CJEU seems to have adopted a (mild) formalist approach that shows deference towards the implementation of social policies via (quasi)procurement schemes.

The only (implied) safeguard to this approach would be that the CJEU assumed that there would be a procurement procedure when the developments are complete and the property is 'sold at capped prices to a public institution, or with substitution by it', ie in the 'next stage which entails placing them on the market' (para 114). However, that seems highly unlikely, given that the administrative agreement entered into with the developer at the time of granting the authorisation seems to cover that--and, in any case, the contracting authority would probably try to rely on aspects of 'exclusivity' due to the location of the property, or excuse the purchase as a legal obligation, in order to avoid procurement procedures at that stage.

Moreover, in my opinion, the CJEU goes out of its way to provide the referring court with several additional reasons why, even in the presence of a written contract, the scheme may not be covered by Directive 2004/18. As the Court stresses, the scheme may well be below the relevant thresholds (which is a fair remark), or be exempted as part of an in-house scheme or a public-public cooperation scheme (see the European Commission's guidance for further details). These latter considerations are unwarranted by the question referred to the CJEU, which shows no element of collaboration between contracting authorities.  Indeed, the CJEU notes that:

116 [...] on the one hand, the application of Directive 2004/18 to public works contracts is nevertheless subject to the condition that the estimated value of the contract reaches the threshold set out in Article 7(c) of that directive and that, on the other, there are, as is apparent from the settled case-law of the Court, two types of contracts entered into by a public entity that do not fall within the scope of EU public procurement law. 

117 The first type of contracts are those concluded by a public entity with a person who is legally distinct from that entity [under the in-house exemption] where, at the same time, that entity exercises over the person concerned a control which is similar to that which it exercises over its own departments and where that person carries out the essential part of its activities with the entity or entities which control it (see Case C‑159/11 Ordine degli Ingegneri della Provincia di Lecce and Others [2012] ECR I‑0000, paragraph 32 and the case-law cited). 

118 The second type of contracts are those which establish cooperation between public entities with the aim of ensuring that a public task that they all have to perform is carried out. In those circumstances, the EU rules on public procurement are not applicable in so far as, in addition, such contracts are concluded exclusively by public entities, without the participation of a private party, no private provider of services is placed in a position of advantage vis-à-vis competitors and implementation of that cooperation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest (see Ordine degli Ingegneri della Provincia di Lecce and Others, paragraphs 34 and 35). (C-197/11 at paras 105 to 119).

 The Court concludes with a tautology:

In the light of all the foregoing considerations, the answer to the eleventh question in Case C‑203/11 is that the development of social housing units which are subsequently to be sold at capped prices to a public social housing institution, or with substitution of that institution for the service provider which developed those units, is covered by the concept of ‘public works contract’ contained in Article 1(2)(b) of Directive 2004/18 where the criteria set out in that provision have been met, a matter which falls to be determined by the referring court (C-197/11 at para 119, emphasis added).

In my opinion, the answer provided by the CJEU to this last question in the Libert case is at the same time too vague and too lenient with the social housing scheme under consideration, and opens a door to a dangerous path of limited or non-application of public procurement rules in relevant areas of social policy and social services, such as social housing. In that regard, it will be important to see how this (emerging?) trend of case law gets squared with the foreseeable future rules applicable to the procurement of social services of general interested, such as those included in the 2011 Proposal for a new Public Procurement Directive (art 74 to 76). 

Definitely, both avenues of development of public procurement law point towards a light-touch regulation of social services / social policy-related procurement, but I am not sure that they are moving in the same direction, since the CJEU seems to be keen to exclude (certain) 'social' contracts from procurement rules, whereas the Commission would like to keep some (restricted) control over them. It will be highly relevant to see how this area develops in the near future, since legal uncertainty is bound to be coupled with intense executive action.

GC on #quality assurance #standards in #publicprocurement: A knee-jerk reaction (T-288/11)

In its Judgment of 6 May 2013 in case T-288/11 Kieffer Omnitec v Commission (only available in French), the General Court of the European Union (GC) was presented with an important issue concerning the proportionality of quality assurance requirements under EU public procurement rules. In a setting that resembled the issue addressed a year ago by the Court of Justice (CJUE) in relation to general corporate social responsibility / fair trade requirements in Commission v Netherlands (Fair trade beverages) (C‑368/10), the GC was asked to consider whether requiring that tenderers be ISO certified for all their maintenance activities is disproportionate and, consequently, breaches the applicable EU rules.

In the case at hand, the European Commission had tendered a contract for the maintenance of HVAC, sprinklers and other equipment in one of its buildings. As a part of the tender requirements, the Commission requested that all tenderers furnished proof of ISO certification valid for the whole of their maintenance activities. A tenderer that failed to provide such proof (but which engaged a third party to ISO-audit its activities in the Commission's building in case it was awarded the contract) and was, hence, not considered for the award of the contract challenged this requirements on various grounds. Amongst the challenges raised by the disappointed tenderer, it is worth noting that it considered that extending the requirement to all maintenance activities instead of limiting it to the activities covered by the contract was excessive and disproportionate.

One of the arguments presented by the disappointed tenderer was that, despite the Commission not being directly subjected to the provisions of Directive 2004/18 on public procurement, the rules established in its article 49 should be taken into consideration. Such provision specifically addresses the issue of quality assurance standards and mandates that:

Should they require the production of certificates drawn up by independent bodies attesting the compliance of the economic operator with certain quality assurance standards, contracting authorities shall refer to quality assurance systems based on the relevant European standards series certified by bodies conforming to the European standards series concerning certification. They shall recognise equivalent certificates from bodies established in other Member States. They shall also accept other evidence of equivalent quality assurance measures from economic operators (emphasis added).

However, before entering the discussion of the proportionality of the requirement, the GC strangely separated itself from the use of Directive 2004/18 as a valid interpretation guide (by analogy). The GC considered that:

22 Before turning to the examination of the matter at hand, it is important at the outset to recall that, regarding the law applicable to procedures for the award of public service contracts undertaken by the institutions of the European Union, these procedures are governed by the provisions of Title V of Part I of the Financial Regulation as well as its Implementing Rules.

23 These provisions are based, of course, on the EU directives in this area (see, to that effect, judgment of 12 July 2007, Evropaïki Dynamiki / Commission, T-250/05, not published in the ECR, paragraph 1, and judgment of 9 September 2010, Evropaïki Dynamiki / EMCDDA, T-63/06, not published in the ECR, paragraph 4). However, Member States are the sole addressees of these directives and, therefore and in principle, these rules only govern public procurement by the institutions of the Member States. Such directives do not apply to public contracts awarded by the institutions of the Union on their own account, save for the question regarding the thresholds that determine the manner of publication, the choice of procedures and the applicable deadlines (judgment of 19 March 2010, Evropaïki Dynamiki / Commission, T-50/05, p. II-1071, paragraph 104).

24 It follows that, in this case, in the examination of the first plea raised by the applicant, only the provisions of the Financial Regulation and the Implementing Rules need to be taken into consideration. Reversely, however, there is no need to take into account Article 49 of Directive 2004/18, cited by the applicant. (T-288/11 at paras 22 to 24, own translation from French).

With these remarks, the GC is departing from its previous practice to consider the rules under Directive 2004/18 as a valid guide for interpretation and is generating a risk of inconsistency in the development of EU public procurement law. Moreover, there is no good reason why the general criteria encapsulated in article 49 dir 2004/18 could not be expressly referred to since, it must be stressed, they are no more than a specification of the general principles of 'technical neutrality' (in broad terms) and proportionality that the GC must take into consideration anyway. Nonetheless, as we shall see, by excluding the use of the general provision as a valid analytical framework and 'chopping off' the last bit of article 49 dir 2004/18, the GC conveniently avoids the issue of having to consider if the Commission failed to accept 'equivalent quality assurance measures'.

Once the assessment is carried out precisely in terms of the proportionality of the ISO requirement, the GC finds that:

38 [...] the requirement [of full ISO certification] does not appear disproportionate to the extent that, on the one hand, Article 137, paragraph 3a of the Implementing Rules provides that "[w]hen the contracting authorities require the production of certificates drawn up by independent certification bodies attesting that the economic operator complies with certain standards of quality assurance, they shall refer to quality assurance systems based on the relevant European standards certified by bodies conforming to the European standards series concerning certification."

39 Moreover, as the Commission has rightly pointed out in its defense, in the selection of tenderers, when it comes to ensuring their technical capacity, the ISO certification must necessarily target the agent itself and not the contract to be awarded. In fact, ISO 9001 specifies requirements for the quality management system when an organization needs to demonstrate its ability to provide a product that meets customer and regulatory and legal requirements. This standard of "quality" is applicable to the process that a company uses to make its products or services and so can attest to the effectiveness and quality of its organization and its ability to provide the deliverables covered by the contract.

40 It is true that, except for ISO certifications attesting to the quality of the organization of the company, there are ISO certifications to attest to the quality of products or specific projects. However, as pointed out by the Commission, only the former may be required under the selection criteria of a given tender. The latter can only be used, as appropriate, as a contract performance condition, since they can only be obtained once the contract is in place in order to certify that the project or the product has been made in accordance with ISO standards.

41 Contrary to what the applicant claims, the Court considers that the requirement of a certificate attesting that the bidders to comply with ISO [for all their maintenance activities] is proportionate to the subject of the contract. (T-288/11 at paras 38 to 41, own translation from French, emphasis added).

In my view, there are several objections to be raised to the finding of the GC. Firstly, as mentioned in passing, this 'maximalistic' approach to quality control that links it to a selection criteria may run contrary to  the approach taken by the CJEU in Commission v Netherlands (Fair trade beverages). Indeed, the CJEU took a very restrictive approach to the use of general technical requirements that go beyond those specified in art 48 dir 2004/18. As the CJEU clearly put it 'Article 48 exhaustively lists the factors on the basis of which the contracting authority may evaluate and assess the technical and professional abilities of the tenderers' (C-368/10 at para 105). 

In that regard, it is worth stressing that art 48 dir 2004/18 only mentions quality assurance in the following respects: i) an indication of the technicians or technical bodies involved in quality control [art 48(2)(b)]; ii) a  description of the technical facilities and measures used by the supplier or service provider for ensuring quality [art 48(2)(c)]; and, only in relation to specific products to be supplied, certificates drawn up by official quality control institutes or agencies of recognised competence attesting the conformity of products clearly identified by references to specifications or standards [art 48(2)(j)(ii)]. Therefore, when art 49 dir 2004/18 refers to the 'production of certificates drawn up by independent bodies attesting the compliance of the economic operator with certain quality assurance standards', it can be said that it is only referring to the requirement of art 48(2)(j)(ii)--and clearly sets a strong link (and limitation) with the specific products (not services) to be supplied in a given contract. Failing that, and in any case, art 49 requires contracting authorities to accept 'equivalent quality assurance measures'.

In my view, then, the finding of the GC in Kieffer Omnitec is irreconcilable with the case law of the CJEU on selection criteria and with the foreseeable interpretation of art 49 dir 2004/18. Moreover, even from a broader perspective--and similarly to what I have argued elsewhere [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart, 2011) pp. 315]:

Even if rules on qualitative selection and non-discrimination requirements are formally complied with in a given tender, the adoption of certain award criteria could generate the same results as an infringement of those rules. That could be the case if the award criteria or their weighting favoured tenders submitted by certain operators on the basis of conditions that could not have been used for the purposes of the qualitative selection of candidates or that automatically exclude de facto a significant number of tenders (or even restrict the number of compliant tenders to one). For instance, they could do so by requiring the implementation of quality management systems for the purposes of the specific contract that would have proven excessive or irrelevant for the purposes of assessing the general suitability of the tenderer; or that exclude certain operators because they focus on requirements whose implementation would be impossible for tenderers that did not comply with these or other requirements beforehand, or whose partial implementation would not be economically viable with regard exclusively to the specific contract.[1] In these instances, the adoption of such award criteria could generate significant distortions or restrictions of competition—without, it must be admitted, generating a substantial potential for discrimination. Therefore, such a strategy should be banned and contracting authorities should guarantee that the award criteria and their weighting ensure equality of opportunity of all tenderers and, consequently, should not focus on or advantage compliance with criteria not restricted to the tender itself—ie criteria that undertakings would be in a position to comply with or not depending on previous or general conditions unrelated (or not specifically related) to the subject-matter of the contract.[2]

---

[1] In similar terms, rejecting the possibility of establishing general requirements that go further than required by the object of the contract, see P Trepte, Regulating Procurement. Understanding the Ends and Means of Public Procurement Regulation (Oxford, Oxford University Press, 2004) 197–8.

[2] For instance, if certifying compliance with a given quality standard for the product required the previous certification of the general operations of the undertaking as being compliant with a more general quality control system, and the tender documents did not require tenderers to be certified under that standard—then, giving better evaluations to certified than to non-certified products would generate a distortion of competition by de facto excluding or reducing the chances of award to non-certified undertakings (which would not be in a position to get the products certified only for the purposes of the tender). Therefore, by indirectly advantaging or requiring compliance with a condition not imposed at the qualitative selection stage, which refers to more general conditions unrelated to the specific contract, the contracting authority would be distorting competition in a way that should be declared to run contrary to the directives.

As the discussion above shows (despite it being referred to award criteria), the GC has opened the door to the requirement of general certification for undertakings to  participate in tenders. In my view, this is incorrect, in that contracting authorities can only be concerned with the quality assurance of the products they are supplied or the services they receive, but cannot use procurement as a regulatory tool to mandate quality assurance compliance that goes beyond the remit of the contractual object--in the same manner that the CJEU clearly said in Commission v Netherlands (Fair trade beverages) that public procurement cannot be used to mandated corporate social responsibility.

In my opinion, the Judgment of the GC in Kieffer Omnitec is a knee-jerk reaction to an action brought by a disappointed bidder that clearly did not meet the technical requirements (properly) set by the European Commission. It will be desirable to hear the CJEU interpret art 49 dir 2004/18 and to rule on its (analogous) application to the procurement conducted by the EU Institutions--particularly because the trends to potential inconsistent development of EU public procurement law and the regulatory use of procurement for quality control purposes are not desirable at all.

Beyond reasonable doubt?: Proposal for #simplification of the #acceptance of #publicdocuments in the #EU and #publicprocurement

The European Commission has recently launched a Proposal for a Regulation on promoting the free movement of citizens and businesses by simplifying the acceptance of certain public documents in the EU [COM(2013) 228 final], which advances: 1) the abolition of the formalities of 'legalisation' and 'Apostille' for intra-EU public documents and 2) the creation of standard multilingual forms for certain (limited) public documents. In the area of business activity, this proposal affects documents such as proof of  the legal status and representation of a company or other undertaking.

Remarkably, the Proposal  (art 4) exempts these documents from all forms of legalisation and similar formality (in particular, the use of the famous 'Apostille'). It is clear, though, that the simplification merely concerns the 'acceptance' of such intra-EU public documents (either in original form, or their certified copies, art 5). And, even in the limited context of acceptance of intra-EU public documents, the proposal includes a system whereby contracting authorities can request additional information (to the central authorities of other Member States within the Internal Market Information System, under Regulation 1024/2012) when they have reasonable doubts as to the authenticity of such public documents (art 7)--which simply shows that the system is not really based on mutual acceptance of documents and that security / anti-forgery devices are still not there.

Furthermore, beyond mandatory acceptance (with all its caveats), the proposal crucially does not cover the 'recognition of the content' of the intra-EU public documents (art 2)--which may significantly diminish the effectiveness of the Proposal, since it falls short from ensuring full operability of the use of (non-translated) public documents in countries other than that of origin (or one sharing the language). 

In that regard, the Proposal is well-intended but not necessarily definitive in the treatment of non-certified translations (art 6), since it establishes that "Authorities shall accept non-certified translations of public documents issued by the authorities of other Member States [BUT] where an authority has reasonable doubt as to the correctness or quality of the translation of a public document presented to it in an individual case, it may require a certified translation of that public document. In such a case, the authority shall accept certified translations established in other Member States". 

'Reasonable doubt' may (again) be a faulty standard here, since it can either leave this safeguard void of content, or give it excessive amplitude. Generally, contracting authorities will have a hard time justifying that they have grounds to (reasonably) suspect the improper translation from languages that are arcane to the public servants involved--and, hence, a strict interpretation of the standard of 'reasonable doubt' may result in an absolute requirement of acceptance (particularly if it is couple with an increasingly demanding duty of good administration as a matter of EU law).

Reversely, and probably adopting a pragmatic approach, review courts may be too lenient and determine that 'reasonable doubt' covers almost any case in which a (well-intended) public servant is distrustful of the non-certified translation provided by the EU citizen / business--in which case, the virtuality of the system envisaged in the Proposal of the Commission can be doubted. One way or the other, the standard of 'reasonable doubt' seems faulty and will lead to either improper and excessive recognition of documents badly translated, or the improper and excessive rejection of well-translated documents (or both). Surely, the situation seems far from ideal.

Trying to avoid these obstacles, the Proposal also establishes Union multilingual standard forms that are aimed to completely harmonise and provide 'automatic / implicit' translations of the affected documents (Annex V details the multilingual standard form concerning the legal status and representation of a company or other undertaking).

So far, the list of multilingual standard forms is very short and, to no one's surprise, it is hard to see how it can be satisfactorily extended to more complicated legal (public) documents without actually creating more problems than it would solve.

All these proposals are reminiscent of the 'European Procurement Passport' that the European Commission proposed creating in December 2011 and that the Council was quick to scrap from the current agenda for the revision of public procurement rules concerned with business formalities. One may wonder if the newest Proposal by the Commission will not meet the same faith, at least as business / commercial documents are concerned.

In general, it seems that the issue of cross-border use of public documents will remain intractable until we realise the massive elephant in the room: language disparity. It seems impossible to attain an effective unified (or, at least, a smooth functioning) public administration if English is not finally adopted as the single language across the EU for all official matters with a cross-border dimension. However, this debate seems beyond political will, beyond potential agreement, and beyond tractability. 

Public sector reform in the UK: A procurement battlefield in the horizon?

With is forthcoming announcement of a new wave of privatisation, the Cabinet Office is envisaging a significant redesign of the public sector and the provision of public services in the UK. 

In broad strokes, the Ministers are preparing to spin off a significant number of state-owned services into independent companies that will be owned by the Government, private investors (with a share of up to 50%) and workers (up to 25%), and to which the Government will then guarantee contracts for a number of years – with the businesses free to sell their services in the market.

Such a strategy will reshape the UK public sector, but it will also have a very significant impact on competition in services markets (since the Cabinet Office is focusing on IT, personnel and legal functions, which could be provided by existing private suppliers in the markets concerned).

This is a strategy that deserves close scrutiny by the competition watchdog--as anticipated by the OFT in its 2013-14 Annual Plan, where it stresses that it "may focus on IT and local government issues in particular and work with government partners on a range of issues relating to the public sector reform agenda to ensure that government interventions maintain competitive markets. In addition to advocacy and influencing, [the OFT] will consider using the full range of tools at our disposal to tackle any breaches of competition law identified in public service markets." Maintaining competitive neutrality will be a major issue, as indicated by the OECD recently.

Importantly, the public sector reform will need monitoring from the public procurement perspective. Depending on how the privatisation and contracting out strategy is carried out, the Cabinet Office will create a complex scenario by running auctions  to acquire 'minority' stakes in the spin-off companies and (simultaneously?) running (open?) tenders or directly awarding the contracts to the newly created companies. 

If these procedures are not structured and timed in the proper manner, the UK government could easily fall foul of the relevant rules and exceptions to the current EU public procurement Directives--including, to name the most relevant ones, the 'public-public' cooperation exception, the 'in-house' provision exception, and the direct award of contracts on the basis of exclusive rights (which abuse determines the ineffectiveness of the contracts). 

It is worth noting that the current proposals for the reform of the EU procurement rules include some potential changes that could contribute to further legal complication, depending on the final calendar for the transposition of the new EU rules.

Moreover, the rules on State aid to services of general economic interest will also be relevant, particularly once the spin-off companies start competing in the market and incumbents or new entrants raise claims that public participation and public contracts allow them to cross-subsidise activities and compete unfairly for public and private business.

Given the multiple competition, public procurement and State aid implications of the new wave of public sector reform in the UK, this sector deserves close monitoring and will provide a myriad of opportunities for legal and economic analysis and research. Moreover, given that this is not the only strategy for public sector reform (since, at local level, aggregation of demand and pure public-public cooperation schemes are being developed), this promises to be an interesting battlefield.