The Court of Justice of the EU clarifies the application of the limitation period rules to an anti-competitive bid-rigging practice

By its recent preliminary ruling in Eltel[1], the Court of Justice of the EU (CJEU) considered how the date when a violation of Article 101 TFEU in the form of a bid-rigging conduct interfering with a procurement procedure for construction works should be determined. Is the date when the public works are completed or when they are fully paid for to the awardee of the public contract? Replying to this question was instrumental to determine whether the acting national competition authority was still empowered to penalize the wrongdoers or was time-barred due to the expiry of the relevant 5-year limitation period.

 

The facts of the case

On 4 June 2007 Entel submitted an offer in a competitive tender procedure for the award a public works contract for the construction of an electricity transmission line. Its bid was accepted by the contracting authority, Fingrid which concluded with Entel the public contract on 19 June 2007. The works were completed on 12 November 2009 and the last instalment was paid in to Eltel on 9 January 2009. Subsequently, the Finnish Competition Authority (FCA) found that, prior to the awarded of the above public works contracts, Entel colluded with another bidder, thereby infringing Article 101 TFEU and the correspondent national provision. Apparently, this cartel started in October 2004 and continued uninterruptedly until March 2011.

Pursuant to Finnish Law, on 31 October 2014 the FCA applied to the Market Court to the permit to impose a € 35 million competition fine on Eltel for its participation in the cartel. The Market Court, however, dismissed the FCA application on the ground of the limitation period rules. Indeed, the anti-competitive practice in question ended before 31 October 2009 that was the date from which the 5-year limitation period for taking action against the competition breach started running. The FCA appealed to the referring court, the Supreme Administrative Court (SAC), arguing that the cartel protracted until the date of the last payment (7 January 2010) or the completion of works (November 2009). Eltel replied that the competition breach ended and the limitation period began running on the date of the submission of the winning bid (4 June 2007) or the conclusion of the public works contract (19 June 2007). The SAC observed that the CJEU had never dealt with the determination of the economic effects of a violation of Article 101 TFEU and the duration of such violation where it took the form of a collusion interfering with the award of a public works contract to be executed over several years. Therefore, the SAC stayed proceedings and referred the matter to the CJEU for guidance on the starting point of the limitation period.

 

The judgment of the CJEU

The CJEU pointed out that the principle of substance over form comes into play when determining the scope of application of competition rules. These rules are concerned with the economic effects of anti-competitive practices rather than with their legal forms. Article 101 TFEU also applies to unlawful contracts that formally come to an end but still produce their effects beyond that date. The length of a competition infringement should be then assessed having regard to the whole period during which the wrongdoers carry put an anti-competitive practice.

According to the facts of the case, the CJEU held that the duration of the Eltel’s participation to the violation of Article 101 TFEU covers the entire period during which the cartelist implemented the prohibited bid-rigging practice. This stretch of time includes, in particular, the period during which the fixed-price offer submitted by Eltel was in force or could have been converted into a definitive contract between Eltel and Fingrid. Hence, the duration of the Eltel’s infringement could not go beyond the date on which the essential characteristics of the awarded public woks contract were finally determined and, in particular, the total amount of the price for the works.

Agreeing with the Opinion of the AG Pitruzzella, the CJEU reminded that the objective of the EU competition rules is to protect the direct interests of competitors and consumers as well as of competition as such. Hence, an infringement of Article 101 TFEU lasts as long as the restriction of competition resulting from the unlawful conduct persists. That said, the next question addressed by the CJEU is the length of the restrictive effects of an anti-competitive agreement consisting of the manipulation of a tender procedure for the award of a public works contract through the bidders jointly fixing the prices to be submitted to the contracting authority. The CJEU clarified that the negative effects of such a cartel disappear, in principle, at the latest at the time when the essential characteristics of the tendered out contract have been definitively determined. This occurs with the conclusion of the contract between the successful tenderer and the contracting authority. It is at this point in time that the contracting authority is definitively deprived of the opportunity to obtain the goods, works or service it needs under normal market conditions. The task of the national court is to determine when the essential characteristics of the contract are determined.

The argument submitted by some Member States that the harmful effects of the contract extended until the payment of the final instalment of the price was rejected by the CJEU. Agreeing with the AG, the CJEU distinguished between, on one side, the anti-competitive effects of a cartel and the potential artificial restriction of the customer’s choice and, on the other side, the resulting wider adverse economic effects on other market players. Only the former limit the capability of the contracting authority to contract under competitive conditions, whereas the latter may be compensated before national courts.

The CJEU also rejected the argument that opting for too a short infringement period would violate the principle to give full effect to Article 101 TFEU with several competition infringements going unpunished due to the limitation rules. The CJEU stressed that EU law enshrines the principle that the powers of the European Commission and national competition authorities to prosecute competition infringements are subject to limitation rules. The need for an effective enforcement of Article 101 TFEU cannot justify an artificial extension of the duration of the infringement period.

Therefore, the CJEU’s reply to the referring court was: ‘Article 101(1) TFEU must be interpreted as meaning that, where an undertaking which has allegedly participated in a single and continuous infringement of that provision, the most recent constituent element of which consists in the concerted submission with its competitors of a tender for the award of a public works contract, has won the contract and concluded with the contracting authority a works contract determining the essential characteristics of that contract and, in particular, the overall price to be paid for those works, the performance and payment of the price for which are staggered over time, the infringement period corresponds to the period up to the date of signature of the contract concluded between the undertaking and the contracting authority on the basis of the concerted bid submitted by that undertaking. It is for the national court to ascertain the date on which the essential characteristics of the relevant contract and, in particular, the total price to be paid for the work, have been definitively determined’.

 

Conclusion

When does a violation of Article 101 TFEU consisting of a concerted submission of a price offer in procurement procedure end? And which is the starting point of the limitation period to prosecute this competition infringement? To these questions posed by the SAC, the CJEU replied that the competition infringement lasts until and the limitation period starts from the conclusion of the public works contract between the cartelist and the contracting authority.

It is precisely at this point of time that the essential elements of the public contract crystallizes and the harmful effects of the anti-competitive practice take place. From then on, national competition authorities are then time-barred from penalizing the undertaking that participated to the unlawful conduct. A side-effect of Eltel is to shorten the length of anti-competitive bid rigging having the same factual characteristics of that examined in this case. However, as stressed by the CJEU and the AG Petruzzella, the need of effective enforcement of Article 101 TFEU against anti-competitive practices cannot constitute a valid justification for extending the duration of the infringement period to avoid the expiry of the relevant limitation period for national competition authorities.

  

 

  

 

  

 

 

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[1] CJEU, judgment of 14 January 2020, Case C-450/19, Kilapailu-ja kuluttajavirasto.