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Some suggestions to the EFTA Surveillance Authority

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This presentation is the basis for a lunchtime seminar on the interaction between competition, State aid and public procurement rules, and the challenges in designing an effective enforcement mechanism that ensures coordinated substantive assessments.

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Some suggestions to the EFTA Surveillance Authority

  1. 1. Difficulties in coordinating EU/EEA competition, State aid and public procurement law enforcement: some suggestions to the EFTA Surveillance Authority Dr Albert Sanchez-Graells EFTA Surveillance Authority lunchtime seminar Brussels, 16 June 2016 16 June 2016 1Some suggestions to the EFTA Surveillance Authority
  2. 2. Agenda • Stress some of the tensions in the design of a system that ensures sufficient coordination of substantive enforcement of EU/EEA law on competition, State aid and public procurement • Reflect on risks and opportunities for EFTA Surveillance Authority to develop effective enforcement mechanisms / strategies Some suggestions to the EFTA Surveillance Authority 2 16 June 2016
  3. 3. Interaction between competition, State aid and public procurement rules • These three bodies of EU/EEA law rarely interact all at once (although it cannot be excluded) • Most usual combinations are • Competition law and public procurement • State aid rules and public procurement • Each of these two combinations triggers different issues, which we will discuss in turn Some suggestions to the EFTA Surveillance Authority 3 16 June 2016
  4. 4. Competition law and public procurement Some suggestions to the EFTA Surveillance Authority 4 16 June 2016
  5. 5. Competition law and public procurement • This raises two groups of issues • Cartel enforcement in public procurement settings (joint bidding, exclusion, leniency, etc) • Enforcement of competition law on public buyers and, in particular, centralised purchasing bodies (reframing of ‘economic activity’ in this area) Some suggestions to the EFTA Surveillance Authority 5 16 June 2016
  6. 6. Cartel enforcement in procurement settings • Procurement markets are ‘textbook scenario’ for collusive practices ~ issues of transparency • Need for guidance on competition-based restrictions of information at debarment stage • Art 4(3)(b) + rec (18) Directive on the protection of trade secrets against unlawful acquisition, use and disclosure • Enforcement of competition law requires careful monitoring of procurement activity (data!) • Procurement rules are adapting Some suggestions to the EFTA Surveillance Authority 6 16 June 2016
  7. 7. ‘Screening’ / preventing collusion by means of joint bidding / subcontracting arrangements • How to ensure compliance with prohibition of collusive practices in joint bidding? • Recent case law shows potential gap in analysis due to procurement authorities limited scope of review • MT Højgaard and Züblin, C-396/14, EU:C:2016:347 • Absence of procurement-specific guidelines triggers difficulties in the adaptation of general rules on (efficiency- based) justification (Horizontal cooperation guidelines) Some suggestions to the EFTA Surveillance Authority 7 16 June 2016
  8. 8. Exclusion of tenderers that have infringed competition law prohibitions – a closer look • General debarment sanction imposed at the end of competition law investigation [statutory basis…] • ‘Ad hoc’ exclusion based Art 57(4) Dir 2014/24 • Past conviction [Art 57(4)(c)] ‘guilty of grave professional misconduct, which renders its integrity questionable’ • Current (suspected) infringement [Art 57(4)(d)] ‘sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition’ Some suggestions to the EFTA Surveillance Authority 8 16 June 2016
  9. 9. Commitments, settlements, leniency applications and public procurement remedies • Commitments create challenges for exclusion due to lack of admission of wrongdoing • Interaction between settlements / leniency and procurement remedies deserve consideration • ‘Specific performance’ related remedies (ineffectiveness) against leniency applicants • Damages claims derived from improper award of contracts covered by leniency application Some suggestions to the EFTA Surveillance Authority 9 16 June 2016
  10. 10. Enforcement of competition law on public buyers and, in particular, centralised purchasing bodies • Dir 2014/24 changes nature of CPB activities, which become (tendentially) economic & triggers application of competition law [mostly, on abuse of dominance] • FENIN, C-205/03 P, EU:C:2006:453 • ’there is no need to dissociate the activity of purchasing goods from the subsequent use to which they are put’ • EasyPay, C-185/14, EU:C:2015:716 • ’in order to avoid classification as an economic activity, that activity must, by its nature, its aim and the rules to which it is subject, be inseparably connected with …’ Some suggestions to the EFTA Surveillance Authority 10 16 June 2016
  11. 11. Competition law analysis in preliminary market consultations / design of the tender • Emerging area of possible interaction? • Ultimate basis on the principle of competition consolidated in Art 18(1) Dir 2014/24 • To what extent can ‘market test’ mechanisms be used in connection with Art 40 Dir 2014/24? • To what extent can there be competition complaints based on tender documentation? Some suggestions to the EFTA Surveillance Authority 11 16 June 2016
  12. 12. State aid rules and public procurement Some suggestions to the EFTA Surveillance Authority 12 16 June 2016
  13. 13. Interaction between State aid and public procurement is multidimensional • There is not one single ‘point of interaction’ between State aid and public procurement • Direct award of contract = State aid • Flexibility in negotiation of contract encapsulating the possibility of State aid • New (innovation) contracting procedures and State aid • Complexities derived from new rules on modifications • Revised rules on abnormally low tenders • Increasing complexity of State aid to SGEIs and procurement Some suggestions to the EFTA Surveillance Authority 13 16 June 2016
  14. 14. Direct award of public contracts as State aid • Traditional position that direct award of public contracts can be constructed as illegal award of State aid • Triggers issue of coordination of remedies (time limits for actions for ineffectiveness much shorter than State aid limitation period) and jurisdictional avenues • ‘New’ difficulty derives from lack of precision of when procurement rules should apply ~ what is direct award? • Falk Pharma, C-410/14, EU:C:2016:399 Some suggestions to the EFTA Surveillance Authority 14 16 June 2016
  15. 15. Negotiated procurement and State aid • Standard test that ‘compliance with procurement rules excludes existence of State aid’ is under pressure • Increased possibility for negotiations raises issues of discretion that exclude ‘procurement black box argument’ (2013 SGEI, State aid & procurement Guidelines) • Interaction with de minimis and general BER rules is unclear because this type of aid can hardly be considered transparent • Need to develop a more substantive test to outcome of procurement negotiations (legal certainty?) Some suggestions to the EFTA Surveillance Authority 15 16 June 2016
  16. 16. Innovation partnerships and State aid • More specifically, the possibility to grant implicit R&D State aid through innovation partnerships is very problematic • Innovation partnership increases risk of implicit State aid due to the explicit requirement of ‘need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market’ • 2014 Framework for R&D aid [2.3] requires open procedure or demonstration that price reflects market value of the benefits obtained (but, by definition, there is no market for object of the procurement) Some suggestions to the EFTA Surveillance Authority 16 16 June 2016
  17. 17. Contractual modifications and State aid • Roughly same arguments / issues related to negotiated procedures and the possibility to selectively improve contractors’ economic position • De minimis or non-substantial modifications under Art 72(2) Dir 2014/24 particularly problematic (15% works = €778k) due to higher threshold than State aid • Oversight of restrictions of all types of (non de minimis) modifications due to change of economic balance of the contract in favour of tenderer [Art 72(4)(b)] = State aid? Some suggestions to the EFTA Surveillance Authority 17 16 June 2016
  18. 18. Abnormally low tenders due to State aid • Increased difficulties when substantive assessment of State aid required [Art 69(4) Dir 2014/24] • “abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone … unable to prove … that the aid in question was compatible with the internal market” • Issues of coverage by BER will be particularly problematic and require assessments contracting authorities may not be ready to carry out • Potential complications due to preliminary references in judicial proceedings parallel to State aid investigations • Deutsche Lufthansa, C-284/12, EU:C:2013:755 Some suggestions to the EFTA Surveillance Authority 18 16 June 2016
  19. 19. State aid and the provision of (directly awarded) SGEIs • Test applicable to aid for SGEIs particularly complex in areas where a service can be considered non-economic; raises issues of coverage by procurement rules as well • Even if SGEI, growing lack of clarity about the substantive test to be applied to support for SGEIs • Altmark Trans, C-280/00, EU:C:2003:415 • Spezzino, C-113/13, EU:C:2014:2440 • Germany v Commission (Zweckverband Tierkörperbeseitigung), C-446/14 P, EU:C:2016:97 Some suggestions to the EFTA Surveillance Authority 19 16 June 2016
  20. 20. State aid and the provision of (directly awarded) SGEIs • Increasing complexity in the assessment of ‘local services’ public contracts and State aid measures subjected to scrutiny / procedural requirements • Opposing approaches to the determination of cross-border effects in public procurement (Ancona) and in State aid (2016 Notice on the notion of State aid) • Mere possibility of cross-border interest (procurement) vs ‘significant probability’ of effect on cross-border trade (State aid) • Particularly relevant / problematic for (some) EEA States? Some suggestions to the EFTA Surveillance Authority 20 16 June 2016
  21. 21. Thank you for your attention Be in touch a.sanchez-graells@bristol.ac.uk http://howtocrackanut.com @asanchezgraells Some suggestions to the EFTA Surveillance Authority 21 16 June 2016
  22. 22. Further reading – Competition law and public procurement • A Sanchez-Graells, Public procurement and the EU competition rules, 2nd end (Hart, 2015). • A Sanchez-Graells, ‘Competition Law and Public Procurement’, in J Galloway (ed), Intersections of Antitrust (OUP, 2016, forthc). • A Sanchez-Graells, ‘Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law’, in C Bovis (ed), Research Handbook on European Public Procurement (Edward Elgar, 2016) 423-451. • A Sanchez-Graells & I Herrera Anchustegui, ‘Revisiting the Concept of Undertaking from a Public Procurement Law Perspective – A Discussion on EasyPay and Finance Engineering’ (2016) 37(3) European Competition Law Review 93-98. Some suggestions to the EFTA Surveillance Authority 22 16 June 2016
  23. 23. Further reading – State aid and public procurement • A Sanchez-Graells, ‘Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis’ (2016) 4(1) Journal of Antitrust Enforcement 157-187. • A Sanchez-Graells, ‘Competition and State aid implications of the Spezzino Judgment (C-113/13): the scope for inconsistency in assessing support for public services voluntary organisations’ (2016) 11(1) European Procurement & Public Private Partnership Law Review 31-38. • A Sanchez-Graells, ‘Enforcement of State Aid Rules for Services of General Economic Interest before Public Procurement Review Bodies and Courts’ (2014) 10(1) Competition Law Review 3-34. • A Sanchez-Graells, ‘ Public Procurement and State Aid: Reopening the Debate?’ (2012) 21(6) Public Procurement Law Review 205-212. Some suggestions to the EFTA Surveillance Authority 23 16 June 2016

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