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Procurement issues SCF unfair competition from the public sector (glasgow, sept 2017)

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Presentation given at the Scottish Competition Forum on public procurement issues concerning potential unfair competition from the public sector in commercial markets.

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Procurement issues SCF unfair competition from the public sector (glasgow, sept 2017)

  1. 1. Public procurement issues Dr Albert Sanchez-Graells, Reader in Economic Law Unfair competition from the public sector in commercial markets: crowding out and state aid after Brexit Scottish Competition Forum, Glasgow, 7 September 2017 7 September 2017 1Unfair competition from the public sector after Brexit
  2. 2. Agenda • Raise some issues concerning the increasing gaps that (EU) procurement rules leave for public intervention in the market (via purchases) • Revisit interaction with EU State aid rules • Suggest some possible (post-Brexit) solutions Unfair competition from the public sector after Brexit 2 7 September 2017
  3. 3. Narrowing scope of procurement rules in atomised / intermediated markets • Recent tendency to limit the scope of (EU) public procurement rules • Falk Pharma – non-procurement systems for the delivery of goods/services in atomised markets • Creates an incentive for a substitution of procurement with licensing that can benefit incumbent (quasi/formerly public) providers Unfair competition from the public sector after Brexit 3 7 September 2017
  4. 4. Expansion of in-house, public-public collaboration and centralisation • New rules on in-house, public-public and centralised procurement allow for direct awards to less than full-arms’ length entities that can then compete in commercial markets • In-house + public-public up to 20% • Centralised without (explicit) limits • Does competition law apply here? Unfair competition from the public sector after Brexit 4 7 September 2017
  5. 5. Reservation of contracts • For special & social services up to €750k /3 years • Creates difficulties in small markets where private providers are bound to become sub-contractors of the (mutuals) beneficiaries of the reservation • Particularly problematic if combined with local aggregation; can create local dominant positions (cf Manchester out-of-hospital care tender and English NHS STPs under 5 year forward view) Unfair competition from the public sector after Brexit 5 7 September 2017
  6. 6. State aid through ’secondary policies’ • Inclusion of special performance conditions, particularly labour / wage requirements, can also result in de facto reservation of contracts • Theoretical need for regional legislation, but much going on de facto (local value, apprenticeships, etc) • Can also have an element of State aid, in particular if any increased contract price is not (monitored to be) transferred down to workers / community Unfair competition from the public sector after Brexit 6 7 September 2017
  7. 7. Summary of regulatory gaps • Shortcomings in application of standard competition law, depending on market definition • Shortcomings in application of EU State aid rules due to threshold values • Shortcomings in judicial review of procurement decisions unless strict proportionality test adopted (+ principle of competition)Unfair competition from the public sector after Brexit 7 7 September 2017
  8. 8. Potential solutions • Legislation of principle of competitive neutrality • Creation of domestic ‘public aid’ rules that replicate EU standards with lower value thresholds • Regulation of use of carve-outs from procurement rules + strict (public interest) judicial review of that discretion Unfair competition from the public sector after Brexit 8 7 September 2017
  9. 9. Conclusions • In the procurement context, there is an expanding regulatory gap that may result in distortions of competition in the medium term, in particular in small markets • Need for strict review under procurement rules • Functional need for ‘public aid’ controls at lower value levels than EU rules Unfair competition from the public sector after Brexit 9 7 September 2017
  10. 10. Thank you for your attention • Stay in touch a.sanchez-graells@bristol.ac.uk @asanchezgraells http://howtocrackanut.com Unfair competition from the public sector after Brexit 10 7 September 2017

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