ECJ makes fundamental ruling on the participation of bidders linked in an economic unit, each with its own bid in public tendering procedures

On 19 December 2019, the district of Aichach-Friedberg published a contract notice for the award, by open procedure, of a public contract for public bus transport services in an EU-wide open procedure. J is a trader operating under his company name; K. Reisen is a bus transport company with limited liability of which J is the managing director and sole shareholder. Insolvency proceedings were opened previously against J's assets, in which the insolvency administrator had released J's self-employed activities. In his tender, J declared that insolvency proceedings had neither been applied for nor opened in respect of his undertaking.

Both J and K. Reisen submitted tenders in due time through the same person, namely J. In addition, other transport service providers participated in the invitation to tender, including E. GmbH & Co. KG.

After evaluation of all tenders, the contracting authority informed J and K. Reisen that their tenders - since they had been made by the same person - had been excluded due to infringement of competition rules and that the contract in question should be awarded to E. GmbH & Co. KG. After unsuccessfully lodging a complaint, J and K. Reisen brought an action before the Public Procurement Board, Southern Bavaria, Germany. This appeal leads to a review of the legality of the award decision of the contracting authority.

By decision of 12 January 2021, the latter upheld that action and ordered the District of Aichbach-Friedberg to reinstate the tenders submitted by those tenderers in the procedure for the award of the contract in question. In the opinion of the Public Procurement Board, their conduct was not to be assessed as an inadmissible agreement restricting competition within the meaning of Section 124 (1) No. 4 GWB, as they formed an economic unit (so-called "Konzernprivileg" (single economic entity doctrine)). This provision provides for a so-called "optional ground for exclusion", i.e. the possibility for the contracting authority to exclude certain tenderers if there are sufficient indications that the tendering company has entered into agreements with other companies or has coordinated practices with each other which have the purpose or effect of preventing, restricting or distorting competition. If the group privilege applies, however, there are no "other" companies with which to coordinate, so that this ground for exclusion does not apply.

In the opinion of the Public Procurement Board, exclusion could also not be based on the general principle of equal treatment because this principle does not apply in addition to the conclusive optional grounds for exclusion pursuant to Section 124 (1) GWB.

The District of Aichach-Friedberg brought an appeal against that decision before the Bavarian Highest Regional Court, Germany (BayObLG). According to that district, allowing two tenderers that constitute an economic unit to participate in the procurement procedure is not compatible with the interests of the other tenderers and infringe the principle of equal treatment as well as competition rules, in particular in so far as those tenderers are in a position to concert their respective tenders and undisputedly did so in the present case.

The Bavarian Highest Regional Court stayed the proceedings and referred several questions relevant to the decision to the ECJ for a preliminary ruling on the interpretation of the provision of Article 57 (4) of the EU Public Procurement Directive, which essentially corresponds to Section 124 (1) GWB.

The ECJ ruled as follows:

• The principle of equal treatment could preclude the award of the contract at issue to economic operators which - as in this case the applicants J and K. Reisen - form an economic unit and whose tenders, despite being submitted separately, are neither independent nor autonomous.
• The optional grounds for exclusion set out in Section 124 (1) ARC (or Article 57 (4) of Directive 2014/24/EU) refer to the professional qualification of the tenderers as well as to a conflict of interests or a distortion of competition resulting from its involvement in this procedure and are listed conclusively in this respect.
• However, in the opinion of the ECJ, this does not have the effect of blocking the application of the general principle of equal treatment - in contrast to the decision of the Public Procurement Board, Southern Bavaria, Germany. Such an conclusively list does not preclude the authority of the Member States to maintain or introduce substantive rules intended to ensure, inter alia, that the principle of equal treatment and the principle of transparency implicitly following therefrom are complied with in the field of public procurement, which must be observed by the contracting authorities in any procedure for the award of such a contract and which form the basis of the Union directives on public procurement procedures; this applies, however, only on condition that the principle of proportionality is respected.
• In the case of related tenderers, where there is single economic unity, the principle of equal treatment would be infringed if those tenderers were allowed to submit concerted or coordinated tenders, i.e. tenders that were neither independent nor autonomous, and which therefore might give them unjustified advantages over the other tenderers. In that regard, the applicant submits that, in order to comply with the principle of proportionality, the awarding authority is required to carry out an examination and assessment of the facts in order to determine whether the relationship between two entities has specifically influenced the content of the individual tenders submitted in the context of a public tendering procedure, the finding of such influence, of whatever nature, being sufficient to enable the entities concerned to be excluded from the procedure. This is because the tenders would have to be submitted autonomously and independently if they came from related tenderers.
• According to the ECJ, these considerations apply a fortiori to the situation of tenderers who are not merely affiliated with each other but - as is the case with the applicants in the original case - form an economic unit.

The ECJ ruling is of crucial importance for practice. As it makes a binding statement on the interpretation of the EU Public Procurement Directive, companies participating in public tenders must from now on check for all future tenders in the EU member states in which form the Directive has been implemented into national law and whether the regulations of the German legislator to protect undistorted tenderer competition have been standardised accordingly in law.

In particular for companies that participate actively in public tenders - for example through strong regional subsidiaries operating independently of one another - it will be important in the future to pay close attention to ensuring that "secret competition" is not infringed. It is not yet possible to predict whether the Public Procurement Board and national courts will apply an even stricter standard in the future. In the past, for example, Public Procurement Boards have postulated that affiliated companies must dispel doubts about the independence of their tenders (see for example VK Rheinland, decision dated 01.03.2022 - VK 48/21). The very fact that two tenderers are affiliated companies is an indication that raises doubts about the autonomy and independence of the tender preparation, which, however, does not per se lead to the exclusion of affiliated companies from public tenders.

The ECJ ruling is likely to provide support for this interpretation and give contracting authorities more far-reaching possibilities for exclusion, especially if there are concrete indications that the group companies have not acted independently of each other.

Companies in a group of companies that wish to maintain their practice of parallel, independent participation in tenders are advised to create clear structures and safeguards to prevent exclusion from the tender by the contracting authority.

For further details, please refer to the ECJ ruling, available here.

In the proceedings before the Bavarian Highest Regional Court and the ECJ, the authors represent the intervening party (E. GmbH & Co. KG), which is to be awarded the contract according to the previous award decision of the contracting authority.