Competition and public procurement contracts: The Luxembourg Competition Authority closes with a commitment decision an antitrust investigation into a joint bidding practice in the transport market

The Luxembourg Competition Authority (LCA) has closed an antitrust investigation into a joint bidding arrangement with a commitment decision in the Transport Union Lëtzebuerg (Decision n. 2017-E-01 of 8 March 2017, available -in French- at https://concurrence.public.lu/fr/decisions/ententes/2017/decision-2017-E-01/Decision-n_2017-E-01---version-non-confidentielle.pdf). The investigation targeted Sales-Lentz Group (SLG) and Voyage Emile Weber (VEW), which were alleged to have put in place joint bidding arrangement that affected a competitive tender procedure in the transport market. SLG and VEW submitted a set of structural and behavioural commitments that was accepted and made binding by the LCA.

In May 2014, the Luxembourg Ministry for the Sustainable Development and Infrastructure (MDDI) launched a competitive tender procedure for the selection of suppliers of transport services for persons with special needs (CAPABS). The tendered-out contract was divided on 12 regional lots. One of the bidders was Transport Union Lëtzebuerg (TUL), which was a joint venture owned by SLG and VEW. Unlike the other participants, TUL was the only one to make an offer for all the 12 lots. The terms of the TUL bid indicated that the joint-venture would subcontract the performance of the activities comprised in the lots awarded to it to several undertakings. Those subcontractors were almost all the operators active in the market for provision of transport services to disabled and to needy students following school integration or professional inclusion programmes (EDIFF). Incidentally, the market for CAPABS services was a segment of the market for EDIFF services.

Five days after TUL submitted its offer, MDDI quashed the bids made by TUL and its competitors, annulling the competitive tender procedure as whole. The reason for the MDDI decision was that the bid submitted by TUL amounted to an anti-competitive agreement. In that regard, the LCA observed that if a contracting authority has reasons to believe that the conduct of one of the bidders in connection to the tender procedure violates competition has the obligation to refer the matter to the LCA, whose statutory task is to enforce the competition provisions. The LCA regretted that the MDDI had annulled the tender procedure without filing a complaint with the LCA to report possible competition infringements. Later in 2014 TUL informally contact the LCA to have its opinion on whether its bid for the CAPABS contract infringed competition.

Therefore, the LCA decided to open an antitrust investigation into the SLG and VEW conducts. Consistently with the decisional practice of the Commission and the national competition authorities of the EU Member States, the LCA identified the relevant product market in the tender procedure called for by the MDDI for the award of the CAPABS contract. The first legal issues tackled by the LCA concerned the nature of TUL. The LCA noted that TUL was jointly controlled by SLG and VEW and it did not have any autonomous decision-making powers. Hereby, TUL could not be considered as an undertaking for the purpose of competition law.

The next step for the LCA was to consider whether TUL constituted an agreement within the meaning of Article 101 TFEU. The LCA pointed out that TUL was incorporated by SLG and VEW which used it to jointly bid for the CAPABS contract. Additionally, the subcontractors referred in the TUL’s bid had been contacted by SLG or VEW. Therefore, the LCA qualified TUL as a horizontal cooperation agreement concluded by SLG and VEW. In practice, this arrangement was a commercialization agreement that, according to the European Commission’s Guidelines on Horizontal Cooperation Agreements, may threat competition by horizontal price fixing.

Instead, the LCA ruled out that subcontractors of TUL were also parties to the above agreement. Evidence collected by the LCA did not show any meetings between the shareholders of TUL and the subcontractors concerning the CAPABS tender. Neither any evidence of bilateral meetings between TUL’s representatives and a given subcontractor was found. Therefore, the LCA focused only on SLG and VEW and acquitted the subcontractors of any allegations of competition breach.      

Then, the LCA considered whether the SLG-VEW cooperation agreement could be exempted under Article 101(3) TFEU. The Guidelines on Horizontal Cooperation Agreements clarify that a commercialization agreement, generally speaking, does not infringe competition if it is objectively necessary to enable one party to enter a market it could not have entered individually. In other words, a joint-bidding arrangement is not anti-competition breach when the parties to it cannot bid individually. In that regard, the LCA reviewed the requirements set out by the MDDI that the potential bidders have to meet in order to being eligible to participate in the CAPABS tender. Bearing in mind the organizational and technical requirements set out in the CAPABS tender notice, the LCA considered that SLG and VEW could bid individually only for some of the lots but not for all of them. The subcontractors were not eligible for bid individually for none of the lots. Therefore, if SLG and VEW intended to bid for all the lots in the CAPABS contracts, they had no other choice than set up TUL and make through it a joint bid. However, the LCA argued that SLG and VEW could make a less competition distortion agreement to submit their offer, for example relying on a lower number of subcontractors.   

To address the possible competition concerns of the LCA, the parties submitted a set of commitments pursuant to Article 13 of the Luxembourg Competition Law (LCL). First, the parties tabled the structural commitment to wind up TUL. Because TUL constituted a horizontal cooperation agreement between VEW and SLG, this measure should effectively address the competition problems arising from that agreement. Second. The parties undertook to organize each year a training programme and seminars about competition law for their top managers and employees. These programmes would focus, in particular, on competition rules applying on bid-rigging. The LCA saw favourably these measures as they would make the corporate personnel of SLG and VEW more aware about the need for competition compliance. Furthermore, the measure would prevent the competition breach at hand from occurring again in the future. Third and lastly, the parties gave the obligation to keep for a 5 year period the data and information they would obtained when negotiating with their competitors about bidding strategies in relation to future CAPABS tenders. The parties also committed to give in these data to the LCA upon request. The LCA believed that this measure would ensure that the parties would not enter into anti-competitive agreements concerning future tender procedures. The LCA considered this set of structural and behavioural remedies to be suitable to assuage its competition concerns and closed the investigation with a commitment decision.

In conclusion, in Transport Union Lëtzebuerg the LCA qualified the creation of a joint-venture as an arrangement for jointly bidding that may infringe competition. That said, the major legal issue in Transport Union Lëtzebuerg was whether a joint-bidding arrangement could be exempted because the parties to this arrangement were not eligible to individually participate in the tender procedure. Considering the facts of the case examined by the LCA, Transport Union Lëtzebuerg was not a clear-cut case. It is true that neither the owners of TUL nor the associated subcontractors could make an individual bid for all the lots included in the CAPABS contract. Yet, the LCA made the point that VEW and SLG would have chosen an arrangement to jointly bid that was less dangerous for competition. Arguably, what attracted the attention of the LCA was how many undertakings entered into a subcontract with TUL in connection with the CAPABS bid. Almost all the operators trading in the ETIFF market were also subcontractors of TUL. A further relevant factor was that SLG and VEW were the largest market players. Thereby, had the LCA adjudicated on the conducts of SLG and VEW, it might have found their cooperation agreement to restrict competition.

However, the question whether the agreement concluded by VEW and SLG was anti-competitive and could be exempted was left unresolved. The parties did not insist on the possible efficiencies of the agreement that they initially submitted in accordance with Article 101(3) TFEU. In contrast, they preferred to opt for a commitment procedure and, consequently, the LCA was not required to establish whether the agreement breached competition.