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In Which Direction is the Analysis of Joint Bidding Agreements Going?

In Which Direction is the Analysis of Joint Bidding Agreements Going?

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In Which Direction is the Analysis of Joint Bidding Agreements Going?
09 May 2019
In Which Direction is the Analysis of Joint Bidding Agreements Going?
Joint bidding is a standard and legitimate business practice in many industries (e.g. to share risk etc.) and entails parties integrating their activities, or cooperating in some way with a view to submitting a more competitive bid. However, the analysis of this practice under EU antitrust law has been controversial, with some Competition Authorities and Courts claiming for its consideration as one of the most outrageous infringements, while others have expressed a more nuanced view towards them.

Obviously, if the members of the joint bidding agreement (consortium) are not competitors, such an agreement does not prima facie raise competition-law issues. However, if the members of the consortium were actual or potential competitors, then joint bidding could be considered as an agreement between undertakings that may have as their object or effect the prevention, restriction or distortion of competition.

In fact, some authorities have considered these types of agreements as falling directly into the “by object” infringement category.

This is the case of the EFTA Court judgement dated 22 December 2016 in which the Court effectively said that, if the parties can bid individually, then joint bidding is a restriction of competition by object.

The Spanish Competition Authority has followed a similar approach in several cases , indicating that “The benefits of and need to create a consortium can only be considered valid (…) in cases when it is not possible for companies to compete for these contracts individually due to a lack of capacity. Only in these cases could they avail themselves of the need to create an UTE (a temporary union of companies).” Therefore, according to the Spanish Competition Authority, only in cases where the companies would not be able to bid individually (because of their lack of capacity for doing so), would the joint bidding agreement not raise competition concerns.

Nevertheless, this very tough stance towards joint bidding agreements is not followed by other major antitrust authorities. A quick survey of international practice shows that a ‘by object’ or, per se, approach, to joint bidding is not in line with the position adopted by mature jurisdictions around the world. For example:

In the EU, the Commission’s Guidelines for the assessment of horizontal cooperation agreements does not treat joint bidding as an object restriction of competition . Similarly, the Commission’s Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the De Minimis Notice , which lists the practices that amount to an object restriction under EU Competition law, does not include joint bidding.
The Danish Competition and Consumer Authority Guidelines on joint bidding specifically state that the fact that the parties to the consortium could have made a bid individually does not directly mean that such an agreement would be considered contrary to Competition law. At that moment, the article 101.3 TFEU analysis should start: Even if the parties to a joint bidding consortium agreement are competitors and the consortium agreement restricts competition, a consortium agreement can nevertheless be legal according to competition rules. This is the case if the cooperation results in efficiencies that enable undertakings to make more competitive offers than if they submitted bids individually and these benefits outweigh the restrictions to competition.
In France, there are cases highlighting that joint bidding between actual or potential competitors can be considered as pro-competitive when the cooperation is objectively necessary in order to submit a more competitive or better quality bid .
In Germany, there is case-law both at the level of the Federal Supreme Court and the Regional Courts which notes that joint bidding does not amount to a restriction of competition (i) if the parties to the consortium are not able to bid for the project alone or, (ii) if they could bid individually but the decision to enter into a consortium is economically appropriate and commercially reasonable as it creates better chances of success.
Even in Spain, recent case law of the High Court has nuanced the very tough stance kept by the Spanish Competition Authority towards joint bidding. In fact, the High Court has recognised that consortium may be justified in cases where the individual participation in the bid is not economically viable and, therefore, the setting up of a consortium is an economic reasonable decision.
Finally, on January 2019, the Italian Competition Authority decided to put an end to its investigation into a joint bidding agreement between the pharma companies Grifols and Kedrion for the provision of some blood related products to the Italian national health care system. According to the Italian Authority, Grifols and Kedrion could have bid individually, at least theoretically. However, after the analysis of the economic evidence put forward by the companies, the Authority concluded that the consortium allowed the companies to submit a more competitive offer.
In conclusion, it will be necessary to analyse future cases (cases that are very likely to arise, as the European Competition Authorities have their eye on public tenders, where the use of joint bidding is very common) and see if the legal analysis of this type of agreements reaches a broader -and more business rationale pro-competitive- perspective.
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