When Group Companies Compete against Each Other in Public Procurement

These questions may sound surprising. After all, the prohibition of bidding cartels under competition law  does not apply to companies that are part of the same group and that are in a relationship of control. For example, a group’s parent company may exchange information or allocate customers with its subsidiaries in the daily course of its business without this being considered a competition infringement.

Public procurement is a different ball game, though. According to the Court of Justice of the European Union, companies participating in a public procurement procedure must compete against each other and make their tenders independently even if they are part of the same group.

The CJEU has lately charted the territory between competition law and procurement law. It recently handed down judgments in two cases, Lloyd’s of London and Specializuotas transportas, in which it held that tenderers in a relationship of control must not be excluded from procurement procedures, but their tenders must be autonomous and independent of each other. 

If in doubt, the contracting entity must ascertain whether the relationship between the group companies had a specific effect on the tenders they submitted in the procedure. This is required by the principles of transparency and non-discrimination. The contracting entity must ask for additional clarification if it knows, for example, that the same persons are involved in the decision-making bodies of both companies or that the two tenders make use of the same resources.

Ask about Connections, Be Prepared to Clarify

How does the CJEU’s new case-law translate into practice? Contracting entities seek to generate as much competition as possible. It is important for them to ascertain that tenders are actually in competition against each other, especially in the case of framework agreements with multiple tenderers or if tenderers are allowed to submit partial tenders. Group companies, in turn, must be able to show that they have not cooperated when preparing their tenders. Finally, it is in everyone’s interest to avoid messy appeal procedures after the procurement decision is made.

The following simple checklists will help contracting entities and group companies avoid pitfalls.   

Checklist for Contracting Entities

Checklist for Tenderers