A legal vacuum in the assessment of consortia in the light of Vejmarkeringssagen. Legal and economic perspectives

Aya Abdelkader Saleh Ben Rubayaa & Katja Vollertzen

Student thesis: Master thesis

Abstract

The purpose of this master thesis is to examine and elucidate the legal and economic consequences regardingjoint bidding and bidding consortia in the Danish public procurement market.This master thesis is based on a case from the Danish Competition Authorities and the Maritime and Commercial High Court, Vejmarkeringssagen, concerning re-marking of the state roads in three Danish districts. Following the controversial decision of the Danish Maritime and Commercial High Court on August 27th 2018,in Vejmarkeringssagen, there is high degree of uncertainty regarding the competition law assessment of consortia in Danish law and to what extent consortia result in a restriction of competition.In the legal part of this thesis an analysis of the current state of law concerning the legality of bidding consortiain relation to the national competition law is conducted. It will be found that consortia classified as horizontalcollaborations are found to be potential threats to the effectiveness of competition. An analysis of the scope ofsection 6 (1) of the Danish Competition Act shows that consortia should not be classified as restrictions “byobject”. Case law from the Court of Justice of the European Union establishes that a narrow interpretation of“by object” must be imposed. The thesis will analyze under what circumstances firms are considered to becompetitors in regard to the Danish Competition Act. This assessment is crucial to figure out whether or notan agreement between the firms can constitute a limitation of the competition. The current state of law on thissubject is not clear as there are conflicting views between the Danish Competition Authorities and the DanishMaritime and Commercial High Court. The thesis concludes that a division of a procurement contract intosubcontracts might be fruitless if competition is considered to concern the full contract. Regardless, an assessment of the consortia’s member’s capacities is a necessity in order to determine their status.The economic part of this thesis provides an analysis of the circumstances in which consortia restrict the effective competition in the market. There are two main effects from joint bidding 1) the competition effect and2) the information pooling effect. These effects work in opposite directions and consortia are generally viewedto contain both. It is therefore concluded that it is incorrect to assume that the forming of a consortium willaffect the competition negatively in all circumstances. Additional effects regarding uncertainty, such as thewinner’s curse, will furthermore have an impact on the tenderer’s bidding strategies. In the assessment ofconsortia and their effects, the efficiency gains must be included. One of the positive effects concerning consortia and joint bidding is the possible aggregation of resources. It will be found that it is appropriate to classifythese gains as synergies and thus allow the existence of a consortium if these gains outweigh the losses following fewer competitors.The final part of this thesis contains an interdisciplinary analysis concerning a recommendation for the appliedlegal policy of the Danish Supreme Court in their decision in Vejmarkeringssagen. The recommendation willbe influenced by both legal and economic aspects. It will be discussed whether a ruling of either a “by object”or “by effect” by the Supreme Court will lead to efficiency. Furthermore, it will be examined to what extentthe ruling will impose consequences for firms considering entering into consortia in the future. The thesis willconclude that the efficient result will be achieved when consortia agreements are assessed based on their effectbecause of their ambiguousness.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages85
SupervisorsKathrine Søs Jacobsen Cesko & Thomas Rønde