February 25
2021
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19th January 2021
Competition & State Aid

Analysis: “The Court of Justice Provides Guidance on the Duration of Bid-Rigging Cartels in Kilpailu- ja kuluttajavirasto (C-450/19)” by David Pérez de Lamo

On 14 January 2021, the Court of Justice handed down a judgment in competition law case Kilpailu- ja kuluttajavirasto (C-450/19) concerning the duration of bid-rigging cartels.

The Finnish Competition Authority (‘FCA’) found that Eltel had infringed Article 101 TFEU and the national equivalent (Article 4 Competition Act) by agreeing with Empower on prices, profit margins and the sharing of contracts for the planning and construction of electricity transmission lines in Finland. On 31 October 2014, the FCA thus proposed to the Finnish Commercial Court that it find Eltel liable and impose a fine of 35 million euros on it. Empower, however, was granted leniency. The Finnish Commercial Court dismissed the FCA’s proposal because the statutory 5-year time limit to impose a fine had elapsed (Article 22 Competition Act). The FCA appealed the ruling before the Administrative Supreme Court, which referred a question for preliminary ruling to the Court of Justice seeking guidance on the duration of bid-rigging cartels.

The Court of Justice has now clarified when a bid-rigging cartel may be deemed to have ceased.

The FCA argued that a bid-rigging cartel produces long-term effects for the contracting authority because the price is staggered over several years. With each payment, the cartel price affects the cost structure and the competitive position of the contracting authority, as well as the price that consumers have to pay for electricity. Therefore, according to the FCA, the bid-rigging cartel should be considered to have ceased (i) at the time when the contracting authority made the last partial payment to Eltel (7 January 2010) or, in any event, (ii) not before the termination of the construction works (12 November 2009).

Eltel however argued that the duration of the infringement encompasses the period during which the offending undertakings have actually engaged in the prohibited conduct. The bid-rigging cartel should thus be deemed to have ceased (iii) at the time of submission of the tender (4 June 2007) or, if the price is negotiated subsequently, (iv) when the contract is concluded (19 June 2007). Thereafter, neither the staggered payments nor the pace of the works have an anticompetitive effect on the market, as they do not alter the price previously agreed on.

The Court of Justice agreed with the arguments of Eltel, stating that the duration of the infringement must be assessed by reference to the period during which the offending undertakings engaged in the prohibited conduct or implemented the bid-rigging cartel (paragraphs 30-32). Therefore, the Court found that the cartel extended during the period in which the price-fixed bid was in force, as well as during the subsequent period leading to the conclusion of the contract (paragraph 32). According to the Court, the duration of the cartel cannot extend beyond the date in which the essential characteristics of the public contract – and especially the price – were finally determined, which is for the referring court to ascertain (paragraphs 33 and 35). This is the last moment when the contracting authority can obtain the service under normal market conditions (paragraph 35).

The Court acknowledged that the anticompetitive effects may indeed endure over a wider period, as a result of which market operators may seek compensation for damages before the national court (paragraphs 36-37). Nevertheless, the determination of the duration of the cartel for the purpose of finding whether the limitation period has elapsed is a different legal question (paragraph 38). As Advocate General (AG) Pitruzzella noted, the quasi-criminal nature of cartel enforcement requires that the duration of the infringement is coupled with the intention of the offending undertakings to commit an infringement, and does not depend on other factors beyond their control (Opinion, paragraph 38) (see also this News update on the Opinion). The offending undertakings must have the possibility to stop the infringement (Opinion, paragraph 39), but ‘the conclusion of the contract on completion of the tendering procedure […] crystallise[s] the implementation of the cartel, constituting the culmination of the […] restraint of competition’ (Opinion, paragraph 37). As a result, the fact that the cartel price remained in force later on does not prove that the anticompetitive conduct imputable to Eltel endured over time (Opinion, paragraph 39).

Finally, the FCA argued that such an excessively short duration of the anticompetitive conduct would contravene the requirement that Article 101 TFEU be given full effect, as a number of infringements would go unpunished due to time limitation rules (paragraph 39). The Court plainly rejected the argument following AG Pitruzzella’s reasoning (paragraph 40). As he noted, the EU legal order is based on principles characteristic of the rule of law, which require that the enforcement actions pursued by competition authorities are subject to limitation and not artificially extended (Opinion, paragraph 45). It is thus ‘necessary to abandon […] any notion that Article 101 TFEU might be absolutely enforceable and to concede […] that certain infringements […] will go unpunished. In other words, the end cannot always justify the means’ (Opinion, paragraph 45).

The only point where the Court of Justice and AG Pitruzzella seemed to disagree concerned the determination of the relevant time in the hypothetical scenario where the bidding undertaking was ultimately not awarded the contract. While AG Pitruzzella explicitly considered that the infringement would cease at the time when the tender was submitted (Opinion, paragraph 41), the Court of Justice noted generally that it would endure for as long as the bid remained in force (paragraph 32), which would implicitly include the period until the contracting authority’s decision not to award the contract. In line with AG Pitruzzella’s reasoning, the former solution will be more sensible whenever the offending undertakings cannot alter their bid once submitted. However, in procurements with more dynamic awarding procedures, such as electronic auctions (Article 35 Directive 2014/24/EU), the undertakings’ intention to infringe will be prolonged in time and, with that, the duration of the bid-rigging cartel. At the same time, the rigged bid will be less likely to succeed due to the competitive price undercutting.

 

David Pérez de Lamo is a Legal Consultant at a law firm and holds an LL.M. in EU Law and Economic Analysis from the College of Europe (Bruges). He has published various contributions in EU competition law and constitutional law.

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