Joint bidding under competition law

17. January 2019

Call for tenders regarding public and private contracts are organized in order to create competition for the tendered contract. In certain cases undertakings jointly bid for a contract. Often these forms of cooperation are called consortia agreements (in what follows coopera-tive agreements to submit joint bids will be referred to as “consortia agreements”). In Denmark this type of cooperation is quite common and can be valuable for the public as well as private contracting entities. However, this requires that such a cooperation does not in reality restrict competition but instead creates value for the customers.

Accordingly, undertakings must pay attention to competition rules when they consider entering into a consortium agreement. Competition rules prohibit undertakings from entering into agreements that restrict competition. This prohibition has been in the Danish Competition Act since 1998 and has been applicable under the corresponding prohibition in EU´s competition rules since Denmark became a member of the European Communities in 1972.

Furthermore, it follows from competition rules that consortia agreements which benefit consumers are typically legal if a number of other conditions are fulfilled - even if the joint bidding consortium agreement prima facie restricts competition.

In recent years there has been increased focus on competition rules in relation to consortia agreements. The purpose of these guidelines is to create more clarity for undertakings that consider entering into consortia agreements.

As a general rule a consortium agreement will typically be legal if the parties to a consortium agreement are not competitors as regards the contract that the consortium is to carry out. This is also the case if the undertakings carry out the contract significantly better and/or cheaper for the contracting authority and if the undertakings do not exchange more information than necessary to fulfill the contract. Many consortia agreements will therefore be beneficial for competition.

In contrast, consortia agreements whose parties can each bid for the contract individually and are therefore competitors, and where the collaboration is not beneficial for the contracting authority will normally not be legal. Similarly, it can be problematic if there are more parties than necessary to carry out the concrete contract. Consortia agreements that weaken competition for a contract and that could eventually lead to higher prices have the same effects as a cartel. This form of cooperation is harmful for consumers, as well as for the great majority of undertakings that comply with competition rules.

It is the undertakings‘own responsibility to comply with competition rules. Therefore, undertakings themselves shall assess whether a cooperative agreement is legal. In many cases, undertakings know whether a cooperative agreement will benefit consumers and whether the other conditions are fulfilled. But if there are doubts about whether a consortium agreement is legal, legal advice should be sought, e.g. from a lawyer, before commencing negotiations about the collaboration.

Furthermore, undertakings may ask for informal guidance from the Danish Competition and Consumer Authority regarding an envisaged cooperative agreement. The process for obtaining informal guidance and the information to be provided is described in more detail in the Danish Competition and Consumer Authority´s guidelines on procedure in competition cases, which can be found in the authority’s webpage (only available in Danish).