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

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. 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
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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
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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?
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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)
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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
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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
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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
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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
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10. Thank you for your attention
• Stay in touch
a.sanchez-graells@bristol.ac.uk
@asanchezgraells
http://howtocrackanut.com
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