Bidding Consortia And Antitrust: New (Draft) Guidance By The European Commission

• Published date: 06 April 2022
• Subject Matter: nti-trust/Competition Law, Antitrust, EU Competition
• Law Firm: Herbert Smith Freehills
• Author: Mr Kyriakos Fountoukakos, Daniel Vowden, Adrian Brown and Souzanna Omran

In March the European Commission ("Commission") published, for consultation, its draft revised Guidelines on the application of Article 101 TFEU to horizontal cooperation agreements ("draft revised Horizontal Guidelines"). The proposed revisions are important as they update and expand the existing guidelines and seek to address the latest economic and social developments. For example, they provide new guidance on sustainability agreements (discussed in our blogpost here), data sharing and the use of algorithms. Interestingly, the draft also introduces a new section on bidding consortia, clarifying the conditions under which independent firms may group together to submit joint competitive tenders without infringing EU competition law. We take a closer look at this important new section in this blogpost.

Background

Joint bidding by a bidding consortium refers to a situation where two or more parties cooperate to submit a combined bid in a public or private procurement process. If the tender is successful, the performance of the contract will be divided between the consortium members. Joint bidding also occurs in other contexts, for instance in relation to M&A deals where several parties may agree to join forces to make a bid to acquire a company. Usually, this involves the formation of a bid vehicle in which each of the parties has an equity interest.

Cooperation in bidding can be realised either through a consortium, where all partners participate jointly in the tender process, normally through a specific legal entity (vehicle) created for the purpose of the tender process, or through subcontracting, where one of the partners bids as a prime contractor and, if successful, entrusts performance of part of the activities to one or more subcontractors. From a competition law perspective, subcontracting and consortia both constitute joint bidding.¹

Under EU competition rules, bidding consortia are prohibited under Article 101(1) TFEU if they constitute collusive agreements or concerted practices which have the object or effect of restricting competition, unless they significantly contribute to the economy and general welfare of consumers and are therefore justified under Article 101(3) TFEU. However, to date there has been little guidance from the Commission or the EU Courts on the assessment of bidding consortia.

Guidance and case law so far

In its current Horizontal Guidelines,² the Commission notes that a commercialisation agreement is normally not likely to give rise...