At the end of April this year, a Swedish case involving alleged procurement collusion in healthcare markets reached its final conclusion. In a reversal of fortunes for the Swedish Competition Authority (SCA), the Patent and Market Court of Appeal overturned the December 2015 judgment of the Stockholm District Court, exonerating the companies involved (Aleris Diagnostik, Capio S:t Görans Sjukhus*, Hjärtkärlgruppen i Sverige (HKG) (the Parties)).
In 17 pages, the Court of Appeal dismissed the 200-plus page judgment of the lower court and thereby the fines of around EUR 3 million previously imposed on the Parties. With cartels in procurement being a focus area for competition authorities around the world, the paragraphs below offer a high-level overview and a brief look at the wider Nordic context.
Triggered by dawn raids in 2012, the case involved a public procurement process run by Stockholm County Council (SCC) in 2008 for clinical physiology services. The contract was divided into various categories and awarded to a number of tenderers on the basis of lowest price. The SCA objected to the approach taken by the Parties in responding to this tendering exercise.
The core of its concern was that the Parties had entered into sub-contracting arrangements (Capio and Aleris and Aleris and HKG) covering off the eventuality were they not to win the tender in their own right. The parties did not exchange information on the actual contents of their respective bids, simply provided for the possibility for a losing party to carry out (an unspecified) proportion of services under the winning party’s agreement with SCC. The SCA argued that this constituted illegal volume sharing and information exchange with the object of restricting competition (i.e. behaviour so serious as not to require consideration of its effects).
The object/effect distinction was pivotal to this case, with reasoning from Cartes Bancaires (C-67/13 P) peppered throughout the judgment. Highlighted in the succinct reasoning of the Court was the need to consider context in determining a ‘by object’ infringement, the importance of not confusing this with a deeper effects analysis (not undertaken by the SCA) and the consequently narrow scope to classify behaviour in this most serious of categories.
Ultimately, the Court interpreted the clauses under scrutiny as involving a conditional obligation for one party to appoint the other on demand as sub-contractor of an unknown volume of services in the event of a win. It did not agree that an arrangement of this character could have the object of restricting competition. Furthermore, evidence was accepted that the arrangements did not incentivise higher-priced bids.
Also relevant to the outcome of this case was the structure of the procurement itself (e.g. open and unspecified volume levels and a restricted number of winners), as well as the quasi-monopoly position of the tendering party on the buyer market for the acute-care services involved. The Parties had argued that in the absence of the sub-contracting arrangements, unsuccessful tenderers would be forced to exit the market leaving fewer options for future procurements. The Court went so far as to state expressly that some forms of cooperation in procurement can be beneficial to tenderers.
This final ruling may prove a useful source of reference when considering the competition law risk of a procurement strategy.
To add further Nordic flavour to this topic, see also the June 2017 judgment of the Norwegian Supreme Court, which upheld fines on taxi operators for colluding in a tender for patient transportation services. In contrast to the Swedish case, here the behaviour in question was considered to constitute a ‘by object’ infringement.
It is also interesting to note that in the same month, the Danish Competition Authority launched a consultation on draft Guidelines on Joint Bidding.
By Sarah Hoskins
*Note: Mannheimer Swartling represented Capio S:t Görans Sjukhus in this matter.