By Aurélien CONDOMINES
Avocat à la Cour

The prohibitions applicable to anti-competitive practices within the setting of public procurement under French competition law are relatively well established. However, such practices remain frequent in practice, as shown by the important number of decisions rendered by the French Competition Council on that subject almost every month, although the financial sanctions imposed on the companies involved in such practices are increasingly substantial.

The anti-competitive practices at stake generally fall into the scope of article L.420-1 of the French Commercial Code, which prohibits agreements having the purpose and effect of restraining competition.

1/  Prohibited anti-competitive practices

Anti-competitive practices in the setting of public procurement generally aim at enabling a company or a group of companies to be chosen as a contractor as a result of the public procurement process, although the price it offered is higher than that which would have resulted from genuine competition.

Companies who agree not to submit aggressively priced offers are usually paid back by way of market sharing and/or by becoming occult sub-contractors of the main contractor (thus sharing the profit resulting from the higher price achieved thanks to the anti-competitive practice).

The companies concerned may simply enter into an oral (or sometimes even a written) agreement on the price offers to be submitted and on the organization of the concerted practice (market sharing, fictive submission of offers, occult sub-contracting, etc.). However, the sole fact of having exchanged information on prices is usually sufficient for a violation of article 420-1 of the French Commercial Code.

The concerted practice is condemnable even if it did not achieve its objectives and even if some of the companies participating in the public procurement process did not participate in the concerted practice.

The fact for several independent companies to group their submissions is not a per se violation of article L. 420-1, and can sometimes be justified by technical reasons. However, in certain circumstances it can be considered an infringement of competition law, if the grouping of submissions aims in reality at distorting competition.

For example, the grouping of two companies at the final stage of the public procurement process (the final selection of the contractor), although the companies had submitted distinct offers in the beginning of the process (the selection of candidates), can seem suspect.  Likewise, preliminary discussions between companies in order to achieve such a grouping of submissions should not be an artificial excuse for exchanges of information on prices, where the companies involved then abandon their discussions and submit distinct offers in the procurement process.

2/ Acceptable evidence of anti-competitive practices

The majority of cases are triggered by inquiries undertaken by the French authorities (DGCCRF) at the request of the French Minister of the Economy. The latter can decide to refer the case to the French Competition Council if he considers that there has been a violation of competition rules.

The French authorities sometimes find documents that provide blatant evidence of concerted practices. In the absence of such clear evidence, the Competition Council generally relies on a certain number of circumstantial evidence, such as:

-  the similarity in the evolution of price offers submitted by the companies involved at different stages of the procurement process (this is however not sufficient to justify a condemnation) ;

- any material evidence of contacts or exchanges of information in view of an agreement between the companies involved ;

- indications that there is a high probability that the companies involved have exchanged information (for example, the fact that the market studies found in the documents of two competing companies contain the same mistakes) ;

- declarations, or sometimes even confessions of the existence of anti-competitive practices, made by employees and directors of the companies involved when questioned by the French authorities.

3/ Sanctions

The following sanctions may be imposed on the participating companies (taking into account the new rules of the "NRE" law of Mai 15, 2001):

- the Competition Council may impose a fine of up to 10% of the participating company's highest yearly turnover achieved in the financial years before the anti-competitive practices occurred (this percentage amounted to only 5% before the "NRE" law entered into force - the 5% figure is still applicable to practices which occurred before the reform).

- the Competition Council can also order the publication of its decision in specialized magazines or newspapers.

- under article L.420-3 of the Commercial Code, any agreement or contract related to an anti-competitive practice within the meaning of article L.420-1 is void.

- under article L. 420-6 of the commercial code, the fact of entering into anti-competitive agreements or concerted practices are a criminal offence, which is sanctioned by imprisonment for up to 4 years and a fine of up to 500.000 Francs. This rule is seldom enforced, but it could be used increasingly in the future (especially if the anti-competitive practices are also connected to acts of corruption).

Finally, it must be stressed that most anti-competitive practices in the setting of public procurement are considered serious offenses. Thus the Competition Council usually imposes substantial financial sanctions on the companies involved.

(January 2002)

Homepage