In its preliminary ruling of 14 January 2021, the Court of Justice of the European Union (“CJEU”) clarified that the duration of an infringement in the case of bid rigging ends once the essential characteristics of the public tender are determined – which in practice likely means at the signing date of the contract between the winner of the bid (who participated in the bid rigging) and the contracting authority. As such, this decision sets clear time-limits to competition authorities’ enforcement powers when prosecuting bid-rigging cartels. The CJEU provided this guidance in response to a preliminary question from the Supreme Administrative Court of Finland.
Facts leading to the preliminary question
In April 2007, the Finnish national electricity transmission operator published a public tender for the construction of high voltage electricity lines in Finland, with a deadline for submitting offers on 5 June 2007. Eltel submitted a winning bid on 4 June 2007 and signed a contract with the contracting authority on 19 June 2007. On 12 November 2009, Eltel completed the construction works, while it received its final instalment payment for the construction works on 7 January 2010.
Following a leniency application on 31 January 2013 from a competitor for the public tender, the Finnish competition authority initiated an investigation for bid-rigging in the context of the public tender. Subsequently, on 31 October 2014, the Finnish competition authority fined Eltel’s participating subsidiary and its parent company for €35 million and held both severally liable for agreeing on prices, margins and market allocation for the design and construction of power transmission lines in Finland. In its analysis, the Finnish competition authority found a single and continuous infringement, initiated by the infringing parties between October 2004 and March 2011.
On 30 March 2016, the Finnish tribunal for economic affairs dismissed the fine, because it found that the Finnish competition authority decision of 31 October 2014 was after the five-year time limit for competition cases under Finnish law. The tribunal considered that Eltel had ended its involvement in the concerted practices before 31 October 2009, so imposing a fine for the infringement was therefore time barred under Finnish competition law.
The Finnish competition authority appealed the dismissal decision from the Finnish tribunal for economic affairs before the Supreme Administrative Court of Finland. It argued that the tribunal should consider the effects of the illegal contract when assessing the end date of Eltel’s involvement in the concerted practices. In particular, the Finnish competition authority considered that Eltel was still involved in the illegal conduct at the time of the final instalment payment, as the contract stemming from the public tender and the illegal tariffs resulting from that contract were still applicable on that date. Therefore, the tribunal should take into account the date on which the contracting authority paid Eltel’s final instalment (i.e. 7 January 2010). The Finnish competition authority further argued that the tribunal should at least consider the construction works’ completion date (i.e. 12 November 2009) as the final date of Eltel’s involvement in the infringement.
Eltel counterargued that, when determining the infringement’s duration, the court should only consider the period during which the allegedly infringing parties had implemented the anti-competitive practices. Therefore, Eltel argued that in the context of a public tender, the limitation period started on the date on which it submitted its offer (i.e. 4 June 2007).
The CJEU’s assessment
In June 2019, the Supreme Administrative Court of Finland requested a preliminary ruling from the CJEU on the interpretation of Article 101 TFEU to receive clarification on the duration of the infringement and, in particular, on the end-date of the infringement. It highlighted four specific dates in the context of bid-rigging for a public tender that could be regarded as the end date of an infringement:
- The date of Eltel’s submission of the winning bid;
- The signing date of the contract with the contracting authority;
- The date of the construction works’ completion; or
- The date of the final instalment payment.
In its assessment, the CJEU considered that the end-date of the infringement is at the latest the date on which the essential characteristics of the contract (in particular the overall price to be paid in return for the construction works) are established. Therefore, the duration of an infringement in the case of bid rigging ends at the contract’s signing date between the winner of the bid (who participated in the bid rigging) and the contracting authority, because, at that moment, the contracting authority is irrevocably deprived from obtaining services under normal market conditions.
The CJEU further noted that its finding was not undermined by the fact that the concerted practice could have damaging effects until the last instalment payment by the contracting authority and could impact downstream customers, and that the relevant time limits for private enforcement (e.g. the annulment claim for the contract or damages claims) might well be later than the expiry date for the purposes of public enforcement.
The CJEU’s preliminary judgment provides guidance on the end-date of a “one-off” infringement, focusing on the date at which the legal consequences of the bid-rigging were fixed. This approach would typically lead to a shorter, sometimes much shorter, duration of an infringement than if the infringement had continued until final payment and/or final performance of the contract. On the facts of this case, if the contract signing date is taken as the end date then it appears that the duration of the infringement will be less than three months (as the tender was published less than three months before the contract was signed and assuming that the first anti-competitive contact was after the publication of the tender). However, as is clear from the Court’s assessment of the case, it was less concerned by the duration of the infringement, than it was on the consequences for prescription.
An alternative approach focusing, for example, on the final performance of the contract, raised the prospect of public enforcement many years after the date of the actual collusion. The Court may well have been concerned about evidentiary issues and the ability of the defendant to properly defend themselves. There has been a similar concern in the US, with the US Department of Justice pursuing similar infringements on the basis of a “payments” theory with mixed success, amid judicial concern about evidentiary issues.
Looking at the implications of the case for future cases:
First, the Court was careful to note that the end date of the infringement for the purposes of public enforcement may well be different from the end date for the purposes of annulling the contract or of seeking damages. We may well see future cases clarifying these dates.
Second, the facts of this case were slightly unusual in that the authority was faced with a single bid-rigging infringement. In many cases, instances of bid-rigging will be part of a broader agreement to rig a succession of bids: the European Commission has in the past treated the end-date in those cases as the date at which the broader agreement came to an end – for example when the Commission conducted on-site inspections (see, for example, International Removals; Elevators). The present ruling would not seem to call that reasoning on duration into question. Though last summer’s ruling in the Prysmian case would mean that there is at least a question over whether several rigged bids – with some intervening tenders that were not rigged – would constitute a single, continuous infringement (i.e. a series of interlinked efforts made in pursuit of a common objective to distort competition), or a single, repeated one (i.e. repeated occurrences of essentially the same infringement, separated by periods of non-infringing conduct). If the latter, then the present ruling would again seem relevant.
One other consequence may be for competition authorities to review their fining policies. Fining policies based on turnover over time are implicitly based on continuing unlawful conduct that has a continuing effect on turnover. This ruling, however, could lead to a short duration cartel having a longer term impact on turnover. Faced with such a mismatch, a competition authority may well seek to fine based on the total affected turnover, rather than the formal duration of the infringement.