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Can infringement of competition rules prevent from participating in public procurement tenders?

Both public procurement and competition rules have an intense mutual relationship, however it is not always so clear for companies operating in the market which provide works, supplies or services to public entities.

Undoubtedly, public procurement rules are settled on principles mainly aimed to provide a scenario of fair competition (enhancing transparency and equality), and Directives on the subject clearly state it. Additionally, the Treaty on the Functioning of European Union clearly sets forth the prohibition of any conduct aimed to distort or restrict competition. Nevertheless, many companies participating in public tenders might not be aware of the strong repercussions that infringing competition law may cause on its public procurement strategies. In fact, it might prevent them from participating in public procurement tenders for a long period of time.

Former Directive 2004/18/EC stated the possibility of excluding any economic operator when it "ha[d] been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate" (art. 45.2). No explicit allusion to infringement of competition law was included in the text. However, the Court of Justice of the European Union (CJEU) recently interpreted that the expression "grave professional misconduct" could have the following meaning:

"In relation to the exclusion of economic operators from a public contract in the context of freedom of establishment and the freedom to provide services under Articles 49 TFEU and 56 TFEU, it must be observed that Article 45(2)(d) of Directive 2004/18 makes it possible to exclude any operator who «has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate»" (Judgment of the Court dated 18 December 2014, C-470-13, para. 35).

As a result, on the grounds of professional misconduct, an infringing company could already been excluded from a public contract. This situation has been further clarified with the new Directive 2014/24/EU. Article 57.4 includes a specific provision in relation with the possibility of exclusion of economic operators from public tenders "where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition". According to this article, the candidate can be excluded directly by contracting authorities, provided they have those "sufficiently plausible indications".

In the EU level, thus, infringement of competition rules, or even the mere indications of that infringement are deemed sufficient in order to prevent economic operators from participating in tenders for public contracts.

The situation is similar, though not strictly equivalent in every Member State. For instance, in Spain, Government is currently preparing a new bill of the Public Sector Procurement Act (the Bill). The Bill is aimed to introduce the new Directive 2014/24/EU into Spanish Law. As it occurred in the former Directive 2004/18/EC, the current Public Sector Procurement Act (the PSP Act), which is the legal instrument ruling the tendering of public contracts, does not contain any explicit provision on the exclusion of operators due to infringement of competition rules. Therefore, competition law infringements have barely been a cause of exclusion in Spanish public procurement practice. Nonetheless, the new doctrine of CJEU might be now employed on this purpose.

The situation is about to change substantially, in line with which is stated in Directive 2014/24/EU, since the Bill sets forth the possibility of Competition Authorities (in the State level, the Spanish Markets and Competition Commission) directly declaring the exclusion of the operator from participating in public tenders.

In order to do it, it is necessary that the resolution imposing the penalty (usually a fine) for the infringement of the competition rules has the force of res judicata. The declaration shall also indicate the range of the exclusion (which Administrations and public entities cannot admit the operator to a procurement tender). Since Spain is a decentralized State, with a large number of public entities, and where public sector provides around 40% of GDP, exclusion could have a very strong impact on the companies which rely a significant part of their incomes on public contracts.

In a nutshell, there is a clear trend in the EU, which Member States are adopting (and Spain is not an exception), in order to allow public entities to exclude from public tenders those economic operators which have infringed competition law rules.