Until now, the NCA has assumed that joint tenders between undertakings that are individually able to carry out the project alone, will normally have the purpose of restricting competition in the sense of the Norwegian Competition Act (“the Competition Act”).
The topic of consideration as to whether the cooperation is affected by the prohibition on anticompetitive cooperation in Section 10, first paragraph, of the Competition Act has primarily focused on whether the undertakings – without the cooperation – would have had a genuine opportunity to submit separate bids for the project. The assessment of whether the undertakings have had a genuine opportunity to carry out the project individually has relied on a strict, concrete and objective assessment that has resulted in a very restrictive approach to tender cooperation.
Furthermore, the NCA’s assessment of whether the project cooperation will result in socio-economic efficiency gains that offset the anticompetitive effects of the cooperation and the possibility of exemption provided for in Section 10, third paragraph, of the Competition Act, has been very narrow. This has led to a high level of uncertainty and frustration among undertakings wishing to take part in commercially desirable cooperation constellations and consortium agreements with clear efficiency gains to the benefit of the contracting entity, suppliers and consumers.
Changes to the European Commission´s guidelines
In item 5.4 of the guidelines, “Bidding Consortia” (unofficial publication available here), the European Commission has addressed the framework for lawful tender and project cooperation. Section 10, first paragraph of the Competition Act prohibits cooperation between undertakings whose purpose or effect is to restrict competition. The prohibition means that, as a general rule, competitors are not allowed tocooperate on submitting a joint bid in a tender competition.
The basis of the assessment under the new guidelines is still whether the companies are able to submit bids separately. In its concrete and objective assessment of whether the undertakings are able to submit separate bids, the NCA will typically place emphasis on the undertakings’ resources in relation to the nature and size of the project. In addition to the companies’ actual and potential resources at the time of performance, the new guidelines allow for considerations such as financial and commercial risk (including investment needs) to be relevant. Consequently, a theoretical possibility of submitting separate bids is not sufficient to regard the undertakings as competitors. A realistic assessment must be made of whether the company would actually have carried out the specific project on its own.
Much needed relaxation of the possibility of entering into cooperation
Despite the companies being able to submit bids individually, the guidelines now clearly state that if the cooperation entails substantiable efficiency gains for the contracting entity that one of the suppliers is unable to achieve alone, including a lower price, better quality/selection and/or more efficient project implementation, the cooperation will be lawful pursuant to the exclusionary provision in Section 10, third paragraph, of the Competition Act (the efficiency defence). This lowers the high threshold that has been applied by the NCA for assessing when a project cooperation can produce efficiency gains that exceed the negative effects of the cooperation.
The new Horizontal Guidelines will form the basis for the NCA’s interpretation of Section 10 of the Competition Act and provide a much-needed relaxation of the possibility of taking part in tender and project cooperations in the face of strong competition from larger undertakings. There will be greater scope for cooperation between competitors on joint bids for projects and in the context of tender processes.