In previous decisions the European Court of Justice ("ECJ") had ruled that cartel infringements continue as long as they have economic effects. This was partly interpreted to mean that a bid-rigging cartel only ends with the final payment of the cartelized price or the competition of the project even if there were many years between the submission of the tender and the last payment. Now the ECJ ruled that cartel infringements end when they no longer restrict competition. The Kilpailu- ja kuluttajavirasto ruling will be of significant importance for the future prosecution of cartels in general and bid-rigging cartels in particular because the beginning of the limitation period is linked to the end of the cartel infringement.
What was Kilpailu- ja kuluttajavirasto about?
The national reference is based on a Finnish cartel case from 2007. In April 2007, the operator of the Finnish high-voltage electricity transmission network ("Customer") published a call for tenders for the construction of a high-voltage transmission line between two Finnish municipalities. The bidding company ("Contractor") coordinated its bid with a Finnish competitor, submitted the fixed bid in June 2007 and, in the same month, won the contract and signed it. However, execution of the contract took much longer. The construction work on the high-voltage line was finished in November 2009 and the last instalment of the agreed overall price paid in January 2010.
Following a leniency application submitted by the Contractor’s competitor (in January 2013), the Finnish Competition and Consumer Authority (Kilpailu- ja kuluttajavirasto, "FCCA") found a single and continuous Art. 101 TFEU infringement (lasting from October 2004 to at least March 2011) and applied to the Finnish Market Court for imposing a fine of EUR 35 million on the Contractor. The Market Court dismissed the application reasoning that by the time the FCCA’s application was submitted the infringement was already time-barred under the Finnish rules on limitation periods. The FCCA appealed to the Supreme Administrative Court of Finland arguing that coordination on the bid-rigging had harmful effects until the time the final instalment of the price was paid or, in the alternative, at least until completion of the construction work. Accordingly, the cartel only ended either in January 2010 or November 2009 such that the infringement (whether under either end-date) had not yet become time-barred. Having doubts about the application of European jurisprudence to the issues raised, the Supreme Administrative Court stayed proceedings and referred the matter to the ECJ for a preliminary ruling.
Cartel infringements end when competition is no longer restricted
In its judgment of 14 January 2021, C-450/19, the ECJ rules that cartel infringements end when competition is no longer restricted. Applied to a bid-rigging case, the cartel ends with the conclusion of the contract, that is when “the essential characteristics of the contract, and in particular the overall price to be paid for the goods, works or services which are the subject of the contract, have been definitively determined”. By that moment, the customer “is definitively deprived of the opportunity to obtain the goods, works or services in question under normal market conditions”. While the harmful economic effects of a bid-rigging cartel may last until the final instalment of the overall price is paid, the decisive issue is the moment at which “the exclusion of competing tenderers and/or the potential artificial restriction of the customer’s choice” (which “deprives the contracting authority of the opportunity to obtain the agreed goods, works or services under competitive conditions”) ends.
With this judgment the ECJ appears to have shifted from (or at least qualified) its former case law which held that identified “economic effects” determine the end of a given infringement. Any further adverse effects produced by the cartel are rightfully the subject of damage claims that affected parties may choose to bring before national court(s). The ECJ also dismisses the principle of effectiveness (effet utile) as an argument: even though EU competition law must be implemented effectively, this principle cannot justify artificially extending the duration of the infringement period since it is superseded by the (colliding) principle that the actions available to the EU Commission and the national competition authorities, to prosecute and penalize, are subject to limitation.
The judgment is convincing since the actual competition opened by the customer ends with the conclusion of the contract. Certainly, as long as the contract is not fully executed, the theoretical possibility remains to repeat the call for tenders and the bidding process. That is why, for instance, the German Federal Supreme Court in a recent judgment considers a bid-rigging cartel as having ended with full execution of the contract and not earlier than with the final invoicing. Yet, the EU Commission’s Horizontal Guidelines rightly require the assessment of potential competition to be based on realistic grounds. The mere theoretical possibility to enter into the market is not deemed sufficient. Taking the (relevant) realistic view, from the moment in which the contract is (formally) concluded, no (bidding) competition exists which could be further restricted. The customer would have first to publish another call for tenders.
It remains to be seen how national courts will take this judgment into consideration when reviewing future cartel cases. Given that agreements and concerted practices capable of affecting trade between the Member States are not to be sanctioned more severely under national law than under EU law, national courts (including the German Federal Supreme Court) will likely adopt the ECJ’s new case law. In addition, where the national criminal law offense of bid-rigging (where applicable) primarily serves the protection of competition, there are also good arguments for (re-)interpreting the period for criminal enforcement as narrow as in Kilpailu- ja kuluttajavirasto.
Such a point of view would have the advantage of avoiding contradictive decisions under criminal and competition law. Kilpailu- ja kuluttajavirasto will be of significant importance for the future prosecution of cartels in general and bid-rigging cartels, in particular because the beginning of limitation period (which is usually five years) is linked to the end of a given cartel infringement.
In practice, the judgment may have mainly two consequences:
- First, unlike normal cartels which often remain ongoing and only come to an end where a party blows the whistle and applies for leniency, bid-rigging cartelists’ formal participation is likely to be relatively short with the relevant limitation period starting to tick well before damage is inflicted and/or otherwise felt in the market. This might reduce incentives for disclosing a bid-rigging cartel to the competition authorities and applying for leniency.
- Second, it can be expected that EU competition authorities will seek to speed-up their cartel investigations (and identify suspected infringements at an earlier stage) in order to avoid walking into this limitation trap.