Antitrust law

    Antitrust law

    Antritrust law and public procurement

    French competition law rules in the context of public procurement are relatively well established. However, anti-competitive conduct remains frequent in that sector. The fines imposed on companies are increasingly substantial and anti-competitive conduct in this sector increasingly results in criminal sanctions being imposed on the management.

    Antitrust rules applicable to public procurement mainly derive from article L.420-1 of the French commercial code, which prohibits agreements and concerted practices which have the object or the effect of restraining competition.

    1. Anti-competitive practices generally prohibited

    Practices that are prohibited in the setting of public procurement are generally those through which companies enter into an arrangement in order to obtain the allocation of a contract at a price higher than that which would have resulted from genuine competition.

    Undertakings who agree not to submit aggressively priced offers are generally compensated for such conduct by the allocation of another market or mission (market sharing) and/or through a secret subcontracting relationship allowing to share the profits generated by the concerted practice.

    Such anti-competitive conduct generally implies an agreement between the companies concerned, concerning the price level and the modus operandi of the cartel (market sharing, secret sub-contracting, artificial offers made by one or several cartel participants in order to create the illusion of genuine competition, etc.). However a mere exchange of information on the content of the offers submitted in the tender proceedings is normally sufficient to be considered as an infringement of French antitrust rules.

    The fact that these arrangements are not put into effect, that their objectives have not been achieved or that they did not involve all the companies who have submitted offers in the tender proceedings (which generally explains why such arrangements have not been effective), does not preclude the condemnation of cartel participants.

    A specific issue arises as concerns grouped offers submitted by independent undertakings in tender proceedings. The creation of an official group of several companies submitting a joint offer is not prohibited per se and can, in particular, be justified by technical reasons. The creation of such a group of companies in the setting of public procurement can, however, be prohibited if it appears that in reality it had the objective of restraining competition.

    Fore example, the grouping of two companies at the final stage of tender proceedings, whereas those companies had initially submitted separate offers, may raise suspicions. In addition, negotiations between companies with the objective of making a joint offer should not be an excuse to exchange information which will enable such companies, after having terminated such negotiations, to submit allegedly competing offers at artificial prices.

    2. Evidence generally held against cartel participants

    A great majority of the cases brought before the French competition council are initiated by the Minister of Economy, after an investigation by the administrative services of the DGCCRF (a division of the French Ministry for the Economy in charge of antitrust matters).

    Investigators of the DGCCRF sometimes find documents which are blatantly evidencing the existence of arrangements and discussions between the undertakings participating in public tender offers. However, in the absence of such documents, the French competition council generally bases its decisions on circumstantial evidence which, taken together, shows a reasonable likelihood of anti-competitive conduct:

    - the similarity of price levels for all companies that have submitted offers is often considered as a first indication when the costs incurred by such companies are not similar;

    - any material evidence showing that there have been contacts or exchanges of information between undertakings that have submitted offers may be considered as an important indication;

    - evidence that makes it likely that there have been exchanges of information is also retained (for example the fact of finding the same mistakes in internal documents of two independent companies);

    - the testimony of employees or of the management of the companies concerned may be considered as important evidence.

    3. Sanctions

    The sanctions that may be imposed on the companies participating in anti-competitive conduct under French law have been increased in 2001:

    - the French competition council can impose a fine that may amount to up to 10% of the highest worldwide revenue figures (without taxes) generated by the undertaking concerned during the last three financial years before the year during which the anti-competitive practices have been carried out;

    - the French competition council can order the publication of the decision;

    - any agreement or contractual provision relating to a practice prohibited under French antitrust rules may be considered null and void;

    - infringement of French antitrust rules trigger a criminal sanction of up to four years of prison and a financial fine of up to 75,000 Euros. Such criminal sanctions may be combined with criminal sanctions for corruption.

    Finally, it should be noted that anti-competitive practices that are generally conducted in the setting of public procurement are usually considered as serious offenses and the French competition council thus does not hesitate to impose substantial fines to participating undertakings.