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Ban on Participation in Public Procurement: Slovak Competition Authority has new Powers on Sanctioning Bid Rigging

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The latest amendment of the Act on Protection of Competition (the "Amendment") widens the powers of the Slovak Competition Authority (Protimonopolný úrad Slovenskej republiky) (the "Authority") while punishing any coordination of undertakings in a public procurement, public tender or other similar collusive tendering ("bid rigging").

Bid rigging practices may have many forms that can significantly affect the purpose and goals of public procurement. Under Slovak law, the Authority is entitled to fines of up to 10% of turnover for the violation of the prohibition of any agreement restricting the competition such as bid rigging cartels. 

Application and effectivity

The Amendment is effective as of 18 April 2016. Although the ban can be imposed in cases where the imposing penalty concerns a bid rigging cartel that even occurred before the effectiveness of the Amendment. As a result any undertakings that are already being investigated by the Authority can eventually be prohibited from participating in a public procurement as well. 

New sanctions

Bid rigging conspiracies will not only be punished by the Authority with a fine but also with a ban on participation in public procurement:

  • The Authority will prohibit the undertaking from participating in a public procurement for a period of 3 years if it also imposes a fine for a bid rigging cartel. The only exception is the case where the Authority reduced the fine due to leniency program. 
  • A significantly shorter ban on participation in a public procurement for 1 year will be imposed on the undertaking in the case the imposed fine for bid rigging has been reduced as a result of a settlement with the Authority. Within the settlement proceeding the undertaking shall admit participating in a violation and accept the liability for such participation. Further, the Office shall reduce the fine that would be imposed otherwise. However, there is no legal claim for a settlement.

In the case of breaching the ban on participation in public procurement, the undertaking will be fined up to 10% of its turnover. 

Cooperation with the Public Procurement Office 

The Authority cooperates with the Public Procurement Office (Úrad pre verejné obstarávanie) in order to reveal bid rigging cartels. It also ensures that the final decision on the ban is delivered timely to the Public Procurement Office so that they can take any related steps (e.g. disqualify such undertaking from its respective register).

Bid rigging as a priority

Within the priorities set out by the Authority, bid rigging is considered a serious offence (a hard core cartel) deforming the public procurement process and having a negative impact on the business environment. Due to this recent development in Slovakia, we can expect that the Authority will now focus on public procurement and similar proceedings in order to punish bid rigging tendencies and cartels. Such approach can be already seen on the activities of the Authority in 2015 not only in Slovakia but in the Czech Republic as well. In 2015, the Authority revealed and punished 9 bid rigging cartels and further administrative proceedings are pending and continuing this year. The Czech Antimonopoly Office imposed significant fines mostly for bid rigging cartels in the field of construction engineering amounting from EUR 200,000 up to EUR 61million. 

Nonetheless, the risks and consequences of investigations of eventual bid rigging cartels are substantial. Such investigation can be very disruptive for the undertakings and its employees and result in information gathering and other obligations in relation to the Authority as well as significant costs. In light of the aforementioned, if you suspect that bid rigging is occurring, be sure to consult with your legal counsel first and consider whether it is appropriate to proceed with the bid. In order to prevent and mitigate the risk of investigation you should also implement internal compliance regulations and training programs for employees. 

By Michaela Stessl, Country Managing Partner, and Daniela Koncierova, Associate, DLA Piper

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