If two or more bidders in the context of award procedures agree on the amount of their respective bids or submit sham bids to implement a quota or territory allocation, there is a clear violation of the prohibition of cartels. In addition to potential consequences under criminal law, bidders face substantial fines from cartel authorities if their conduct is discovered.

But how is it to be assessed under competition law if the contracting party itself is also involved in such an agreement - for example, because it manipulates the award procedure in favour of a certain contractor?

Since § 1 German Act against Restraints of Competition (GWB) and Art. 101 TFEU also cover vertical restraints of competition – i.e. between the contracting party and the contractor - such agreements can also violate competition law. The Bundeskartellamt (BKartA) therefore recently imposed a fine for the first time also on a contracting party that had participated in a restrictive agreement with bidders in the context of an award procedure.

Andreas Mundt, the President of the BKartA, therefore also particularly emphasised this circumstance in the press release on the proceedings:

“This case breaks new ground for us as this is the first time we have uncovered an agreement concluded within the context of an award procedure in which both the bidders and the contracting party participated. The case shows that not only agreements among bidders, but also contracting parties which participate in the agreements will be punished by substantial fines. If those responsible undermine the principle of economical and efficient procurement, they not only cause harm to other bidders, but also to their own company.”

The collusion between the contracting party and the bidders penalised by the BKartA allegedly consisted in particular in the fact that the contracting party invited fewer than the intended number of companies to submit bids, contrary to the company's internal tendering rules. It is also alleged that the contracting authority - in addition to the desired contractors - only invited bidders to submit bids who were not expected to submit competitive bids.

The transactions at issue was a procurement procedure in the private sector. However, the reasoning of the BKartA - protection of the principle of economical and efficient procurement - can also be applied without further ado to public tender procedures in accordance with the rules laid down in Part 4 of the GWB or the European Public Procurement Directives. This applies at least insofar as the contracting authority is economically active and can thus be regarded as an "undertaking" within the meaning of antitrust law. At any rate, this will be the case for many public companies.

A violation of competition law can have far-reaching consequences for a contracting party. In addition to a potential fine, claims for damages by the bidders who did not win the contract are particularly conceivable. Furthermore, it is also interesting to observe the consequence of nullity of contract under § 1 GWB in conjunction with § 134 of the German Civil Code (BGB) or Article 101 (2) TFEU and whether this could apply if the award of a contract is based on an agreement between the contracting party and a bidder that restricts competition. The persons involved may also face criminal consequences.

Contracting parties that regularly conduct award procedures should therefore ensure that their employees are sufficiently sensitised to the requirements of antitrust law and criminal law.

Key Contacts

Jan-Oliver Schrotz

Dr. Jan-Oliver Schrotz, LL.M.

Partner, Commercial
Germany

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Stefan Bauer

Stefan Bauer, LL.M.

Counsel, Competition & Regulation
Germany

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