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District Court of Rotterdam reduced fines imposed by the ACM for "cover pricing" in tender procedures

District Court of Rotterdam reduced fines imposed by the ACM for "cover pricing" in tender procedures

05.01.2016 NL law

On 26 November 2015, the District Court of Rotterdam ("District Court") reduced the fines imposed by the Netherlands Authority for Consumers and Markets ("ACM") on two undertakings which infringed the cartel prohibition through "cover pricing" in several tender procedures for demolition contracts.

Cover pricing, a form of bid-rigging, occurs when one or more invited bidders in a tender procedure have no intention of winning but want to stay in favour with those involved in arranging contracts. Not submitting a (realistic) bid would entail the risk of not being considered for future tenders. In these instances, an undertaking asks a competitor for the value of its bid and subsequently submits a credible but higher bid.

In 2012 and 2013, the ACM rendered several decisions in which it concluded that these exchanges of commercially sensitive information gave rise to a concerted practice having as its object the restriction of competition, thus resulting in a breach of Article 6 of the Dutch Competition Act ("DCA"). According to the ACM, the undertakings created a misleading impression of a competitive bidding process. It imposed fines on a number of undertakings, varying from EUR 2,000 to EUR 69,000.

On appeal, the District Court confirmed that the exchange of commercially sensitive information through cover pricing restricts competition by object under Article 6 DCA. The argument that the concerted practice of cover pricing pursued the legitimate objective of remaining on tender lists was rejected. Furthermore, the parties argued that competition was not distorted because the given "cover price" was clearly non-competitive. The District Court also rejected this argument and stated that the undertakings distorted competition by not submitting prices independently from each other.

The District Court agreed with the ACM that cover pricing constitutes a "very serious" infringement. However, with regard to the applied gravity factor, it decided that the ACM inadequately expressed the difference in severity between "bid rigging" and "cover pricing". Cover pricing is to be regarded as less serious than bid-rigging, which eliminates competition among tender participants. The District Court therefore reduced the "gravity factor" from 1.75 to 1.5 and lowered the fines accordingly.

This article was published in the Competition Law Newsletter of January 2016. Other articles in this newsletter:

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