Interesting AG Opinion on limits of duty to investigate intra-group collusion in procurement (C-531/16)

In his Opinion of 22 November 2017 in Specializuotas transportas, C-531/16, EU:C:2017:883, Advocate General Campos Sánchez-Bordona has considered the limits of a contracting authority's duty to investigate potential intra-group collusion or manipulation of tender procedures by entities belonging to the same corporate group--in particular in a setting where the tenderers are under no specific obligation to disclose their links to the contracting authority, but the contracting authority is aware of those links and can identify signs that point towards potential collusion. In my view, his approach is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion.

AG Campos concluded that, on the one hand, '[i]n the absence of an express legislative provision or a specific requirement in the specifications governing the conditions for the award of a service contract, related tenderers which submit separate tenders in the same procedure are not under an ineluctable duty to disclose their links to the contracting authority'. And, on the other hand, that '[t]he contracting authority will be obliged to request from those tenderers the information it considers necessary if, in the light of the evidence available in the procedure, it harbours doubts concerning the risk that the simultaneous participation of those tenderers will undermine transparency and distort competition between operators tendering to provide the service' (para 87).

In my view, and for the reasons discussed below, AG Campos' approach creates the right set of incentives both for national legislators and for contracting authorities. Even if his Opinion is concerned with the regime under Directive 2004/18/EC, in my view, the balance of duties deriving from EU law and those that can be created under the national law of the Member States will extend to the system created by Directive 2014/24/EU--as, ultimately, the second part of AG Campos' conclusion is compatible with the principle of competition in Article 18(1) thereof, and the first part will be largely unaffected by any self-certification requirements concerning the discretionary exclusion ground in Art 57(4)(d) under the ESPD.

The case and the questions in the preliminary reference

In the case at hand, both Specialus autotransportas UAB (‘tenderer A’) and Specializuotas transportas UAB (‘tenderer B’) had submitted tenders for a contract for the provision of municipal waste collection and transportation services. Both tenderers were subsidiaries of Ecoservice UAB (‘Ecoservice’) (see paras 15 and 16). However, they did not disclose this information explicitly to the contracting authority. Instead, tenderer B 'voluntarily submitted a declaration of honour to the effect that it was taking part in the call for tenders on an autonomous basis and independently of any other economic operators which might be connected to it, and it requested the [contracting authority] to treat all other persons as competitors. It further stated that it undertook, should it be so required, to provide a list of economic operators connected to it' (para 17).

The contracting authority eventually rejected tenderer A’s tender on the ground that it did not comply with one of the conditions set out in the tender specifications; and tenderer A did not contest that decision. The contract was ultimately awarded to tenderer B. The review court rejected a complaint by a disappointed competitor, arguing that the tenders submitted by A and B had not been properly evaluated and that the principles of transparency and equality before the law had been infringed. An appeal of such decision brought the preliminary reference to the Court of Justice (see paras 18-21).

Thus, in Specializuotas transportas, the referring court asked a long list of very detailed questions concerning the duties for a contracting authority to carry out an in-depth assessment of potential intra-group collusion for the manipulation of a public tender.

Interestingly, during the procedure before the Court of Justice, the contracting authority clarified that it was aware of the links between the tenderers because this was public knowledge, so that at no time was it misled when it took its decisions; and that 'quite apart from the relationship between the tenderers, which does not of itself imply an absence of competition, there [were] a number of objective factors in the instant case which enabled it to conclude that those tenderers were in competition with one another' (paras 26-27).

AG Campos' analysis

AG Campos grouped the questions under reference into two main issues: (1) whether related tenderers which submit separate tenders are under a duty, in all cases, to disclose that relationship to the contracting authority and, if so, what the consequences of failure to do so are; and (2) how must the contracting authority — and any court which reviews its actions — proceed where it becomes aware of the existence of important links between certain tenderers (para 42).

The answer to the reformulated issue (1) is straightforward, and AG Campos puts it simply that 'A requirement (the alleged duty to declare links with other companies) which is not set out in the contract documents, is not provided for in national law and is not laid down in Directive 2004/18 does not pass the transparency test referred to by the Court. ..., in the absence of an express legislative provision (of EU law or of national law), related tenderers are not under a duty to disclose the relationship between them to the contracting authority' (para 48, emphasis in the original). In my view, this is the correct approach. Any practical shortcomings derived from the absence of such explicit rules should by now be overcome with the adoption of the European Single Procurement Document (see part III.C of Annex 2 of the ESPD Implementing Regulation) and, if not, the position adopted in the Opinion creates a clear incentive for all Member States to reconsider their approach to tenders by related undertakings and the corresponding information requirements for exclusion/rejection screening purposes.

Moreover, AG Campos also provides convincing reasons for the rejection of an implicit duty to disclose the links between tenderers (paras 49-52), as well as for rejecting the analysis of both tenders as variants (constructively) submitted by the same holding company (Ecoservice) (paras 53-62). In this part of the analysis, AG Campos refers to my views on the automatic exclusion of tenders submitted by entities belonging to the same corporate group (see fn 20, with reference to Sánchez Graells, A., Public Procurement and the EU Competition Rules, Hart, Oxford, 2nd ed., 2015, p. 341). I am greatly honoured by this reference.

The answer to the reformulated issue (2) is potentially less straightforward and the reasoning of AG Campos merits close attention. His starting point is that the relevant analysis concerns 'whether ... the contracting authority is under a duty to ask related tenderers to provide evidence that their situation does not run counter to the principle of competition ... [and] whether inactivity on the part of the contracting authority would be sufficient for a declaration that its conduct in the procedure is unlawful' (para 67). Furthermore, he considers that 'the aim is not so much to protect the (general) competition between independent operators in the internal market as to protect the (more specific) competition which must operate in procedures for the award of public contracts. From that perspective, what really matters is the separateness of and genuine difference between the respective tenders (which will enable the contracting authority to choose the tender most favourable to public interests), whether the tenderers are independent or related economic operators' (para 71, reference omitted and emphasis added). In my view, this points towards an analysis that is more demanding than a simple general competition test because, as the Opinion also rightly points out, the general prohibition of anticompetitive conduct in Article 101(1) TFEU does not apply to intra-group relationships (para 69).

Concerning the specific duty to investigate potential intra-group collusion in the procurement setting, AG Campos constructs the following reasoning:

... the judgment in Etruras and Others states that ‘the principle of effectiveness requires that an infringement of EU competition law may be proven not only by direct evidence, but also through indicia, provided that they are objective and consistent.’ The judgment in VM Remonts and Others states that, in the absence of EU rules on the matter, ‘the rules relating to the assessment of evidence and the requisite standard of proof … are covered … by the procedural autonomy of the Member States’.

Applying that case-law to the facts at issue in the main proceedings, where the contracting authority is aware that related tenderers are participating in the procedure, the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate. 

In short, that requirement is just one of the measures aimed at "[examining] all the relevant circumstances … in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence."

However, the contracting authority may, in cases such as the present one, dispense with a communication to the related tenderers, asking them, ... "to clarify whether and how their personal situation is compatible with free and fair competition between tenderers". Clearly, "where appropriate, requesting the parties to provide certain information and evidence" may be important if the information and evidence available to the contracting authority is not sufficient for it to form a view regarding the risk that the tenders are not separate and distort competition.

Therefore, what matters is not that the contracting authority contacts the related tenderers, asking them for information about their relationship and seeking their view regarding the protection of the principle of competition between tenderers. The decisive factor is, rather, that the contracting authority is in a position to conclude that the simultaneous participation of those related operators does not jeopardise competition. The contracting authority may, of course, reach that conclusion by requesting that information or that view from the tenderers but it may also do so by referring to the information already available in the procedure and therefore without the need to approach the tenderers (paras 76-80, references omitted and emphasis added).

Ultimately, when assessing the extent to which the contracting authority discharged its duty to ensure effective competition for the contract and equality of treatment in the assessment of the tender, AG Campos stresses that '[e]verything will depend on the sufficiency or insufficiency of the available evidence and, therefore, on the objective soundness of the contracting authority’s decision to allow related tenderers to participate in the tendering procedure, on which it ultimately falls to the national court to rule' (para 86).

Final thoughts

As mentioned above, I think that the approach taken by AG Campos in the Specializuotas transportas Opinion is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion. In situations where the contracting authority is aware of the existence of links between (seemingly) competing tenderers, it is appropriate to expect a high level of diligence--that is, to establish that 'the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate' (para 77).

In my view, this is completely in line with the principle of competition of Article 18(1) Dir 2014/24/EU and seeks to avoid that contracting authorities tolerate an artificial narrowing of competition by inaction or omission. Conversely, the Opinion also seems to indicate that contracting authorities have a self-standing role as 'guarantors of genuine competition between tenderers', which is a good foundation on which to build a broader due diligence duty to identify the existence of indications of distortions of competition by colluding tenderers--whether linked through corporate group relationships or not. On the whole, then, the Opinion of AG Campos in Specializuotas transportas must be welcome and it can be hoped that the Court of Justice will not only follow his approach, but consolidate the general duty for contracting authorities to actively act as the 'guarantors of genuine competition between tenderers'

Further clarification on non-contractual liability vis-a-vis abnormally low tenderers in EU Institutional procurement (C-198/16 P)

In its Judgment of 19 October 2017 in Agriconsulting Europe v Commission, C-198/16 P, EU:C:2017:784, the Court of Justice of the European Union (CJEU) has provided additional clarification on the conditions for EU Institutions to incur in non-contractual liability (ex Art 340 TFEU) in the context of an investigation of apparently abnormally low tenders in public procurement governed by the Financial Regulation (in that case, the no longer in force 2002 version, but note that the reasoning is generally applicable to current rules).

The Agriconsulting Judgment consolidates a balanced approach to the obligations incumbent upon a contracting authority investigating apparently abnormally low bids, and formulates the emerging principle that tenderers submitting abnormally low tenders are unlikely to have the right to claim for potential damages derived from other shortcomings in the evaluation of their tenders.

In Agriconsulting, the CJEU decided on an appeal of a previous General Court Judgment (T-570/13, EU:T:2016:40) that rejected the claims made by Agriconsulting against the way in which the Commission had assessed its tender and eventually decided that it was abnormally low and thus non-compliant with the tender specifications. The case concerned a services contract that was split between main and additional tasks, and where the tender documentation established minimum levels of staff to be assigned to each of them. This was to be assessed under award criterion 3: 'practical organisation of the tasks'. Under the circumstances, Agriconsulting's tender was found not to meet the minimum staffing requirements in the tender documents.

However, this only emerged after additional details were requested as part of an investigation of the apparent abnormality of its tender, which was €1 million (ie 43%) lower than the competing tender, and €1.2 million (47%) lower than the maximum budget for the contract. The information provided by Agriconsulting did not address the concerns about the abnormality of its tender, which led the evaluation committee to change its preliminary assessment--where Agriconsulting was ranked first but suspected of abnormality--and to reach the final position that its tender did not merit the required minimum points under award criterion 3 to be awarded the contract. Agriconsulting raised a number of claims against this, of which two are particularly interesting: (1) that even if its tender was properly found to be abnormally low under award criterion 3, it could have a right to compensation for damages if it could demonstrate other errors by the contracting authority; and (2) that it had been discriminated against because the competing tender was not investigated for abnormality.

Abnormality and rejection of the tender

In simple terms, the first ground of appeal concerns a claim by Agriconsulting that can be understood as intimating that, even if the rejection of its tender as abnormally low due to its not having met the minimum requirements of award criterion 3 was correct, the existence of errors in the evaluation of its tender under other award criteria could still give rise to liability of the contracting authority.

The argument arises from the fact that, in its application, Agriconsulting had claimed that there was a causal link between the improper assessment of its tender under criterion 3, and that unlawful acts concerning award criteria 1 and 2 "supported" its claim. The GC had dealt with this in the following terms:

42 The applicant contends that the condition relating to the causal link is satisfied because its tender was ranked in first place and it would have been awarded the contract had it not been for the alleged infringements.

43 Nonetheless, it must be stated that the rejection of the applicant’s tender is based only on the assessments concerning award criterion 3 and the abnormally low nature of its tender. The applicant’s tender was indeed ranked in first place following the examination of the tender from an economic standpoint. That ranking was altered for two reasons, namely the changes to the evaluation of the tender in the light of award criterion 3, which was considered to be insufficient, and the classification of the tender as abnormally low. The applicant also states in its application that the harm at issue is the direct result of the evaluation committee’s decision to lower the score for award criterion 3 and to find that the tender was abnormally low.

44 Furthermore, as the Commission points out, the applicant has not, at any time, explained how the award of a higher score for award criteria 1 and 2 could have had a favourable impact on its chances of being awarded the contract.

45 The applicant is therefore wrong to assert that the contract would have been awarded to it if it had not been for the infringements and errors concerning award criteria 1 and 2. Even a higher score for those award criteria would not have affected the assessment of its tender in the light of award criterion 3 and the finding that the tender was abnormally low.

46 Accordingly, the alleged illegalities concerning award criteria 1 and 2, even if proven, have no direct causal link to the alleged harm, relating to the loss of the opportunity to conclude the contract and the expenses incurred in order to participate in the tendering procedure (T-570/13, paras 42-46, emphasis added).

Thus, the issue in front of the CJEU was to assess whether, in dismissing its claim and thus finding that (even if proven) infringements concerning criteria 1 and 2 would not have met the causality requirements to give rise to liability, the GC had erred in law. In its Judgment, the CJEU dismisses this claim by indicating that

... the General Court did not hold in a general and abstract manner that the unlawful acts affecting a tender procedure, such as those alleged in the present case by Agriconsulting in relation to award criteria 1 and 2, can never entitle a tenderer to compensation. In the present case, the General Court merely assessed in concreto whether such a right to compensation existed, in the light of the arguments submitted by the appellant concerning the causal link and by carrying out an assessment of the facts of the case (C-198/16 P, para 21, emphasis added).

I find this interesting for two reasons. First, because it can be read to mean that, where a tender is properly rejected for being abnormally low, there is no liability that can possibly arise vis-a-vis that tenderer due to any other failings in the way the contracting authority assessed the tender. This seems adequate as, in more general terms, a tenderer submitting an abnormally low tender cannot hold legitimate expectations of being awarded the contract. Second, I find this interesting because the CJEU also leaves the door open to the possibility that unlawful acts affecting a tender procedure give rise to liability of the contracting authority where they have a negative impact on a tenderer's chances of being awarded the contract. However, this probably needs to be understood as a slim or remote possibility, applicable only where the unlawful acts are substantive and affect the possibilities of being awarded a contract in a sufficient or material manner.

Abnormality and equal treatment

As mentioned above, the second issue raised by Agriconsultingin its third ground of appeal concerned a notional duty of contracting authorities that engage in the investigation of a tender as apparently abnormally low to investigage all tenders received in that procedure for abnormality. The CJEU summarises the claim as follows:

48 ... the General Court ... stated that [the competitor]’s tender, calculated on the basis of the formula set out in the tender specifications, was slightly lower than the budget ceiling provided for in those specifications for the performance of the contract and higher, by almost EUR 1 million, than Agriconsulting’s tender. It thus concluded that [the competitor] was not in the same situation as Agriconsulting and that therefore the Commission was entitled, without infringing the principle of equal treatment, to verify the abnormally low nature of [Agriconsulting]’s tender, without applying the same treatment to [the competitor]’s tender.

49 It must be stated that the differential treatment of the tenders of Agriconsulting and of [the competitor] is intrinsically linked to the issue of identifying abnormally low tenders and the procedure reserved for them. Assessing the merits of the reasons given by the General Court ... will require revisiting the relevant obligations imposed on the contracting authority (C-198/16 P, paras 48-49, emphasis added).

This also seems like the proper approach to assessing any unequal treatment, and links to the procedural obligations that contracting authorities face in the presence of allegations or suspicions of abnormality--which have been recently discussed in European Dynamics Luxembourg and Others v Agence, T-392/15, EU:T:2017:462 (see here).

Following the same functional approach, the CJEU reiterated in Agriconsulting that:

52 It is only on condition that the reliability of a tender is, a priori, doubtful that the obligations ... are imposed on the contracting authority, including, in the present case, that of verifying in detail the seriousness of the prices offered using the reference economic parameters.

53 In the present case, since the evaluation committee had identified the appellant’s tender as being, prima facie, abnormally low, and had considered that [the competitor]’s tender did not, a priori, present any abnormality, it could, without infringing the principle of equal treatment between tenderers, initiate the adversarial procedure ... against the appellant and verify in detail its prices using the reference economic parameters without applying the same treatment to [the competitor]. The General Court was therefore correct in finding ... that both undertakings, as regards their respective tenders, were not in the same situation (C-198/16 P, paras 52-53, emphasis added).

This is also a welcome development because it creates continuity in the position reached in European Dynamics Luxembourg and Others v Agence that contracting authorities do not have motu proprio obligations beyond reaching an initial view on the absence of concerns regarding the abnormality of a tender, and that any additional obligations only arise from explicit claims to that effect. This is further clarified by the CJEU when it stresses that 'Agriconsulting would ... have had to establish the reasons why the contracting authority should, prima facie, have doubted the reliability of [the competitor]’s tender' (C-198/16 P, para 58).