Prevention, detection and effective prosecution of bid-rigging – Polish experience

1. Prevention, detection and effective prosecution of bid-rigging – Polish experience Sonia Jóźwiak-Górny Head of Unit, Department of Competition Protection, Polish Office of Competition and Consumer Protection Budapest, 13.09.2018

2. Relevant legislation on bid-rigging in Poland

3. Bid rigging (or collusive tendering) occurs when businesses,that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process. OECD, Guidelines for Fighting Bid Rigging in Public Procurement

4. Bid rigging - relevant Polish legislation • Criminal Code Art. 305- Hindering a public tender § 1. Anyone who, in order to achieve a material benefit, prevents or obstructs a public tender, or acts in concert with another entity to the detriment of the owner of property or an entity or institution for which the tender is to be held is liable to imprisonment for up to three years. § 2. Anyone who, in connection with a public tender, spreads false information or withholds circumstances of significant importance to the conclusion of the agreement that is the subject of the tender, or acts in concert with another entity to the detriment of the owner of property or an entity or institution for which the tender is to be held, is liable to the same penalty. § 3. If the aggrieved party is not the State Treasury, the prosecution of the offence specified in § § 1 or 2 takes place at a motion of the aggrieved party.

5. Bid rigging - relevant Polish legislation • Proposal for amendment of the Criminal Code – „Justice and Security” package, April 2018 Art. 305- Hindering a public tender • no need to provematerial benefit motivation; • imprisonment up to 5 years; • whenmaterial benefit motivation proved – imprisonment up to 8 years; • collusion in public procurement always prosecuted ex officio.

6. Bid rigging - relevant Polish legislation • Act on Competition and Consumer Protection Art. 6 § 1.7 – Anticompetitive agreements Agreements which have as their object or effect elimination, restriction or any other form of infringement of competition on the relevant market shall be prohibited, in particular those consisting incollusion between undertakings entering a tender, or by those undertakings and the undertaking being the tender organizer, of the terms and conditions of bids to be proposed, particularly as regards the scope of works and the price.

7. Bid rigging - relevant Polish legislation • Public Procurement Law Art. 24. para 1.24 and para. 7.3 - Reasons for excluding an economic operator The following will be excluded from contract award procedures:economic operator that entered into an agreement with other economic operators, aimed at distortion of competition between economic operators in a contract award procedure, which the contracting authority can demonstrate with the use of appropriate evidence;if less than 3 years have passed as of the occurrence of the event constituting grounds for the exclusion.

8. Bid rigging - relevant Polish legislation • Request for a preliminary ruling from the VergabekammerSüdbayern (Germany) lodged on 10 March 2017 in caseVosslohLaeis(C-124/17) Article [57](4)(d) and Article [57](7) of Directive 2014/24/EU • Is the fulfillment of the optional grounds for exclusion to be understood as the relevant event or is the relevant date that on which the contracting entity has certain and reliable knowledge of the existence of the ground for exclusion? • Accordingly, for the fulfillment of the conditions for exclusion through participation of an economic operator in a cartel, is the relevant event the termination of participation in the cartel or the contracting entity’s acquisition of certain and reliable knowledge of the participation in the cartel?

9. Bid rigging - relevant Polish legislation Criminal law Competition law Public procurement law • Natural • persons • Detriment and/or material benefit • Public and private • procurement • Horizontal and vertical • Undertakings and directors • Restriction of competition • Public and privateprocurement • Horizontal and vertical • Undertakings • Restriction of competition between tenderers • Public • Procurement • Horizonatal

10. Enforcement against bid-rigging in Poland – UOKiK case law

11. UOKIK - recent enforcement statistics 11 nation- wide cases ongoing 172 tenders verified 48 ongoing proceedings 2018 Eg. EVP over PLN 2 billion

12. UOKiK - decisions issued and fines imposed for bid-rigging infringements in 2011-2017

13. Cover bidding - designed to give appearance of genuine competition, occurs eg. when an undertaking agrees to submit a bid that is higher than the bid of the designated winner, or agrees to submit a bid that contains special terms that are known to be unacceptable to the purchaser; Bid suppression – occurs when an undertaking agrees to behave in such a way that its’ bid is not taken into account for final consideration, eg. to refrain from bidding, to withdraw a previously submitted bid, to bring about tenderer exclusion or bid rejection; Bid rotation - occurs when undertakings agree to take turns being the winning bidder. OECD, Guidelines for Fighting Bid Rigging in Public Procurement

14. UOKiK case-law • Decision of 30 December 2014 in Bombardiercase (DOK-10/2014): cooperation with the Prosecutor’s Office • Tender organized by Polish Railways for design and construction of an integrated rail traffic control and management system on Warsaw - Warsaw Airport –Radom line; • Estimated value of procurement: more than 0,5 billion PLN; • The only contract award criterion: the price; • Cooperation with and evidence provided by the Prosecutor’s Office; • Bombardier, Kombud and KZA agreed that Bombardier would submit a cover bid: the price was higher than that proposed by the Kombud and KZA consortium; • Bombardier’s bid also contained accounting error, presumably designed for the bid to be rejected, which, however, was corrected by the contracting authority as an obvious error, as a result: Bombardier pricebecame the lowest. Bombardier did not agree to this correction. • Subsequently: incorrect extension of the period for which the bid was bindingand the validity of the down payment intended to bring about bid’s rejection; • Decisionquashed in first instance (SOKiK, XVII AmA 56/15) as well as in second instance (VII AGa 1122/18) due to„sub-presumptions”; cassatory appeal under preparation.

15. UOKiK case-law • Decision of 30 December 2014 in Bombardier case (DOK-10/2014): cooperation with the Prosecutor’s Office

16. UOKiK case-law • Decision of 30 December 2014 in Thales case (DOK-11/2014): sub-contracting as bid-rigging • Tender organized by Polish Railways for design and construction of an integrated rail traffic control and management system on Warsaw - Warsaw Airport –Radom line; • Estimated value of procurement: more than 0,5 billion PLN; • The only contract award criterion: the price; • Thales and Qumak agreed that Thales willfully sub-contract in Qumak’s bid. Thales submitted its own bid and also prepared Qumak’s bid; • Thales in factcircumvented the prohibition on submitting morethan one bid in a tender; • Sub-contractwas not necessary for the proper performance of the contract; • Decision qushed in first instance (SOKiK, XVII AmA 43/15), due to lapse of prescription period and erronous formal qualification,appeal filed.

17. UOKiK case-law • Decision of 31 December 2012 in ASTWA case (RLU-38/2012): joint/consortia bidding as bid-rigging • Tender organized by ZMK Białystok for collection and disposal of municipal waste in the period 2008-2011; • The only contract award criterion: the price; • Consortium of Astwa and MPO - two largest undertakings operating in Białystok and the only ones which provided services to ZMK before - submitted the winning bid; • Undertakings had a possibility to perform the contract each on their own; • After contract was awarded, cooperation of MPO and Astwawithin the consortium was in fact non-existent; • Creating the consortium was to allow the undertakings to maintain their current market shares; • First decision by UOKiKprohibiting consortia bidding – no fines imposed; • Decision quashed in first instance (SOKiK, XVII Ama 73/13), but confirmed on appeal (SA, VI Aca 651/15); • Twoexplanatory (DOK3-400-2/18/MP; DOK1-400-9/18/PD) and one antimonopoly (DOK2-410-1/15/PG) proceedings with respect to joint bidding ongoing.

18. Recent cooperation, awareness–raising and outreach initiatives undertaken by the UOKiK to counteract bid-rigging

19. Cooperation with other public bodies Bid-rigging Contracting authority

20. Recent awareness–raising and outreach initiatives • „ Well informedcontractingauthorities – competitionlaw in public procurement” programme, 2014-2010; • 32 seminarsorganised for contractingauthoritiesallover the country in 2017; • Special website and e-learning programmededicated to prevention and detection of bid-rigging in public procurement, www.szkoleniazmowy.uokik.gov.pl; • Special informants’ programme; • E-tool and standard form to report bid-rigging; • „Public procurement system and competition in market economy” Report, 2013; • Active participation in bid-riggingdevotedseminars and conferences.

21. Recent awareness–raising and outreach initiatives

22. Thank you Sonia Jóźwiak-Górny, LL.M. Head of Unit Department of CompetitionProtection Polish Office of Competition and Consumer Protection +48 22 55 60 356 sonia.jozwiak@uokik.gov.pl www.uokik.gov.pl