Competition

Illegal bid rigging or lawful project agreement?

In June 2012, The Norwegian Competition Authority (“NCA”) announced a draft on new guidelines regarding tendering and project agreements. Several competition lawyers have questioned whether the draft guidelines are expressing an incorrect interpretation of Section 10 of the Norwegian Competition Act (equivalent to Article 53 of the EEA Agreement and TFEU Article 101). The guidelines are yet to be adopted, which may indicate that the NCA will await the outcome of a case pending in the Norwegian court system. 

The origin of the case was a public tender competition regarding transport of patients, announced by Oslo University Hospital three years ago. Ski Follo Taxidrift AS, a joint venture established by Follo Taxisentral BA and Ski Taxi BA, submitted a joint tender on behalf of the two founding taxi companies. The procurement procedure was cancelled due to the fact that Oslo University Hospital received this tender only, after which Ski Follo Taxidrift AS submitted a joint tender also in the second procedure.

The NCA considered the joint tenders as illegal bid rigging pursuant to Section 10 of the Competition Act, and imposed fines of total MNOK 2.85 in a decision July 2011. The undertakings brought an action against the decision before Follo Disctrict Court in December 2011.

The main legal issue in the trial was whether the tendering agreements had as their object or effect the restriction of competition pursuant to Section 10 of the Competition Act. In particular the two taxi companies contested the statement in the NCA’s decision that a lawful project agreement requires that none of the cooperating parties could have performed the contract independently.

With reference made in particular to European Night Services Ltd. v. Commission (T-374/94), Follo District Court concluded, in accordance with the parties’ objections, that this it is not a requirement. According to the District Court the cooperating parties cannot be considered as actual or potential competitors in an individual project if only one of them could have performed the contract. The District Court also assumed that this kind of cooperation could generate efficiency gains.

The Court found that Ski Taxi BA could not have performed the first contract announced independently, and contrary to the NCA’s decision, that the joint tender did not represent a breach of Section 10 of the Competition Act. If Borgarting Court of Appeal, and potentially The Supreme Court, affirms this judgement, the NCA will have to amend its draft guidelines.

However, the District Court concluded that Ski Tax BA and Follo Taxisentral BA should be considered as competitors in the second joint tender. The Court thus accepted the NCA’s view that cooperating parties which are able to perform parts of the contract on their own cannot submit a joint tender for the whole project.

The cooperation between Ski Tax BA and Follo Taxisentral BA was announced to Oslo University Hospital and even to the NCA prior to the submission of the joint bids. Even though tendering agreements between competitors as a general rule are considered to have as their object the restriction of competition, the Court concluded otherwise in this case: Because the undertakings disclosed all information on the cooperation, the Court refused to apply the object alternative. In its analysis of the effect of the second tender agreement on competition in the relevant market, the Court found that the possible negative effects on competition were only insignificant.

Borgarting Court of Appeal will try the case from 1st to 4th of April 2014.

 

Contributing author:

Hanne Them-Enger (Associate) – hte@steenstrup.no

Hanne Them- Enger is a member of Steenstrup Stordrange’s Competition Law Practice. She has particular focus on issues related to competition law.

 

The Author

Thomas Sando
Thomas Sando Thomas Sando is partner and a member of Steenstrup Stordrange’s Competition Law Practice. Sando is a former legal advisor in the Norwegian Competition Authority. He has extensive experience in competition law work and advises and represents clients on all aspects of competition law issues, e.g. with regard to cooperation and distribution agreements, abuse issues, merger control procedures, general compliance and in the case of dawn raids. Sando has been selected by his peers to be included in Best Lawyers Norway (in the category “Antitrust”) in 2011, 2012 and 2013.

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