UOKiK keeps close tabs on bid rigging | SSW Alert
The Office of Competition and Consumer Protection (UOKiK) has recently made public information about searches carried out at premises of entrepreneurs involved in road maintenance and construction in connection with the suspected collusion concerning public procurement. Shortly after this, UOKiK also disclosed its decision concerning bid rigging in a public transportation tender in Zogrzelec. These examples confirm that bid rigging is regularly and unwaveringly scrutinised by the antimonopoly authority. Poland is not an isolated island in this regard as bid rigging is also intensively prosecuted by antimonopoly authorities in other jurisdictions, particularly in Central and Eastern Europe (including Hungary, Slovakia, Czech Republic, Bulgaria and Romania). Suspected collusion is reported to the President of the Authority not only by other entrepreneurs but also by increasingly more aware and vigilant contracting entities. This makes it necessary and indispensable for tenderers to responsibly assess their activities in the light of the current law, and to implement the available security measures.
1. What is bid rigging about?
According to the Act on the protection of competition and consumers, all agreements whereby the entrepreneurs taking part in the tender or such entrepreneurs and the organiser of the tender agree on the conditions of the submitted bids, specifically the scope of works or price (so-called bid rigging) are prohibited. Such agreements are considered particularly harmful and therefore the prohibition applies regardless of the market share held by the concerned entrepreneurs.
2. What agreements may be considered illegal?
Bid rigging between the contracting entity and the potential contractors may consist in e.g. the agreement of tender conditions, or the contents of the tender conditions with a view to exclusion of other contractors. Such breaches may manifest themselves in the disclosure of tender conditions or other information to a potential contractor before their official publication.
Bid rigging among potential contractors may take different forms. The most common include the submission of so-called courtesy bids i.e. proposals which are deliberately less advantageous or contain formal errors or conditions which are unacceptable for the contracting entity. Other popular practices involve bid manipulation in order to achieve a premeditated outcome of the procedure. This may be done, for example, through the withdrawal of bids when the tender winner decides not to execute the contract and, as a result, the contracting entity is forced to execute such contract with an entrepreneur that offered a higher price. Such actions may be combined with an additional agreement between the entrepreneurs, by virtue of which they agree which tenders they are to wind or split the market by undertaking not to participate in procedures in a certain area, or in certain tenders (bid rotation). An additional element of such agreements frequently involves the split of profits among the parties to the collusion, e.g. through payments for subcontracted or other services (often fictitious).
3. What kind of cooperation between entrepreneurs is permitted?
The public procurement law allows for tenders to be submitted by a consortium, or subcontracting some services to another entrepreneur. It should be noted, however, that the permissibility of such forms of cooperation under the public procurement law does not automatically imply that agreements in this regard are not subject to assessment from the competition law perspective.
Tender consortia, in principle, are permitted under the antimonopoly law in case in the absence of the consortium, it would not have been possible for the entrepreneurs to participate in the procedure because the procurement would have exceed the capabilities of each of the parties acting on its own. In principle, it will also be permitted to form a consortium when complementary assets are jointed, which results in a reduced cost of contract delivery. At the same time, however, in case when there is no objective rationale for the consortium, and its members could have submitted a bid independently with a high probability of being awarded the contract, such consortium may be considered an agreement restricting competition.
The other acceptable form of cooperation between entrepreneur consists in the use of subcontracted services by the tenderers. In this context, it should be noted, however, that in principle a single contractor may submit only one bid. In practice, a situation when the same entrepreneur submits one bid on its own and in the bid of another party, in the same procedure, appears as the general subcontractor, could raise doubts of the competition authority.
In the context of cooperation between entrepreneurs, one should also note the risk related to the exchange of confidential information between entrepreneurs, which may also represent an illegal agreement. This will be the case e.g. in the event when entrepreneurs, in the course of negotiations related to the formation of a consortium exchange confidential information, and subsequently decide not to establish a consortium and submit individual bids.
4. What are the consequences of entering into an illegal agreement?
In case of the determination by the President of UOKiK that an agreement restricting competition was made, fines amounting up to 10% of the turnover in the preceding financial year may be imposed on the entrepreneurs involved in such an agreement. Moreover, persons in charge of the management of such entrepreneurs (i.e. members of the entrepreneur’s management body, exercising a managerial role or directing the entrepreneur or its undertaking, who have real influence on the market behaviour of the entrepreneur of its undertaking) may be subject of a fine amounting up to PLN 2,000,000, if they deliberately acted in collusion.
Entrepreneurs affected by the illegal agreement may also seek judicial redress for damages against the parties involved in the collusion. It is worth noting that bid rigging may also be subject to criminal responsibility.
5. How can we help you?
Jakub Jędrzejewski – Counsel, Attorney at Law
Filip Drgas – Junior Associate, Trainee Attorney at Law