Italy: Antitrust Infringements As A Ground For Exclusion From Participation In Public Procurement Procedures

On 19 April 2016, legislative decree n. 50/2016 containing the new Italian Public Procurement Code (PPC) entered into force. The PPC aims to implement, among others, Directive 2014/24/EU which sets out, at Article 57, a number of mandatory and discretionary grounds for excluding an economic operator from public procurement procedures. The discretionary grounds also include anticompetitive conduct.

In December 2016, the Italian Anti-Corruption Authority (ANAC) adopted Guidelines aiming to shed light on the application of the exclusion provisions, with a view to promoting the adoption of common practices by contracting authorities. The Guidelines, however, raise more questions than they answer and are likely to create considerable uncertainty for economic operators as to the relevance of antitrust infringements for the purposes of participating in public procurement procedures. 

Background

Article 57 of Directive 2014/24/EU provides, at paras. 4 (c) and (d) respectively, that a contracting authority may exclude (or may be required by Member States to exclude) an economic operator where it can demonstrate by appropriate means that the latter is guilty of grave professional misconduct, which renders its integrity questionable, or where it has sufficiently plausible indications to conclude that it has entered into agreements with other economic operators aimed at distorting competition.

The implementing provision of the PPC, Article 80, para. 5, lett. c), provides for the possibility to exclude an economic operator where, among others, the contracting authority can demonstrate by appropriate means that the latter is guilty of serious professional misconduct, which renders its integrity or reliability questionable, but does not reproduce the Directive's provision concerning anticompetitive agreements.[1]

The ANAC Guidelines

The "Guidelines n. 6, implementing D.lgs. n.50/2016 and containing an indication of appropriate evidence and deficiencies in performance of a previous contract that could be considered significant for the demonstration of the circumstances for exclusion in art. 80, para. 5, lett. c) PPC" ("the Guidelines") entered into force on 3 January 2017. They provide a non-exhaustive list of grounds for exclusion also with regard to serious professional misconduct and to other situations that may cast doubt on the integrity or reliability of the economic operator.

The situations listed in the Guidelines do not imply the automatic exclusion of the economic operator, but an obligation on each contracting authority to assess at its own discretion, and after hearing the economic operator concerned, the seriousness and relevance of the conduct in question.

The Guidelines include, as an instance of serious professional misconduct (hence as a potential ground for exclusion), the case where an economic operator has entered into agreements with other economic operators aimed at distorting competition. In addition, in assessing the integrity or reliability of an economic operator, the contracting authority must take into account the adoption by the Italian Competition Authority (ICA) of an infringement decision for serious antitrust violations affecting public contracts and concerning the same market of the contract to be awarded. Such decision must be final or confirmed by a final judgment.

In this case, exclusion from public procurement procedures cannot exceed three years "from the time when information about such events has been registered in ANAC's electronic register of public works." This provision must be read in combination with Article 213, para. 10 PPC, according to which contracting authorities are under a duty to inform ANAC, for the purposes of recording in its electronic register, of any exclusion decisions taken in the course of public procurement procedures. 

Uncertainty Arising out of the Guidelines

As noted, Article 80, para. 5, lett. c) PPC did not include anticompetitive conduct among the grounds for exclusion, while the Guidelines expressly do so. This discrepancy may provide, to those excluded from a procurement procedure by reasons of anticompetitive conduct, a ground for challenging both the exclusion decision and, more importantly, the Guidelines for non-compliance with the criteria laid down in Article 80, para. 5, lett. c) PPC. This approach is supported by recent judgments from two administrative courts of first instance,[2] pointing to the fact that the Italian legislator, in choosing not to include anticompetitive conduct among the grounds for exclusion, indicated a clear policy preference. 

In the second place, the Guidelines focus exclusively on infringement decisions of the Italian Competition Authority and do not clarify whether infringement decisions taken by the Commission or other national competition authorities in the EEA should be given the same status—one would presume so, but this is clearly a loophole in the Guidelines. 

Third, there is little clarity as to the day from which the exclusion operates. According to the Directive, the duration of exclusion must not exceed "three years from the date of the relevant event," thus suggesting that time starts running from the occurrence of the antitrust infringement. However, as noted above, the Guidelines establish that the three years start running from the time of the electronic registration, which clearly has very different practical consequences in terms of duration of exclusion.[3]

Fourth, the Guidelines refer to adoption by the ICA of an infringement decision for serious antitrust violations "concerning the same market of the contract to be awarded." In cases of bid-rigging (frequent in the context of public procurement), the market definition by the ICA is rather narrow,[4] which means that the infringer would still be free to participate in public procurement procedures on other markets. A broader interpretation of the wording "same market" may entail that the infringer would be unable to take part in a wide range of public procurement procedures and may ultimately be driven out of business. 

On a more positive note for infringers, the Guidelines implement the Directive's provisions concerning self-cleaning measures and establish that a contracting authority may decide not to exclude economic operators that adopt, among others, measures aimed at effectively preventing further misbehaviour and which may consist of personnel and technical/organisational measures to be implemented within the time limit for the submission of the offer. These measures can also be taken with regard to antitrust infringements[5] (presumably in the form of antitrust compliance programmes). Accordingly, an antitrust infringer may still be able to demonstrate its reliability and participate in the procurement procedure despite the existence of a possible ground for exclusion.

Conclusion

In the last few years, the Italian competition authority has been very active in trying to detect and investigate behavioural anomalies which might indicate bid-rigging in public procurement procedures. [6] In addition to antitrust fines, exclusion can now pose a significant threat to the financial solidity of an infringer. Accordingly, for companies operating in Italy, an effective and well developed antitrust compliance programme can be a key tool to prevent competition violations and the twofold sanction that these may trigger.

Show Footnotes +

Footnotes

[1]  Article 80, para. 5, is only applicable to public procurement procedures for which the call for competition has been published after 19 April 2016; otherwise, the procurement procedure remains subject to the old regime of legislative decree 163/2006, see the transitional provisions of article 216 PPC and ANAC decision n.296/2017.

[2]  TAR Campania, judgment of 19.12.2016 n. 10/2017 (issued before the adoption of the Guidelines); see also TAR Lazio, judgment of 01.02.2017 n. 2092/2017.

[3]  The Supreme Administrative Court, consulted on the draft guidelines, noted that ANAC's approach would render the sanction of exclusion more effective but is not in line with the Directive: Consiglio di Stato, opinion of 3.11.2016 n. 2286/2016.

[4]  See, for example, the ICA decision of 22.12.2015 in case concerning bid-rigging for school cleaning services, para. 158.

[5]  TAR Lazio, judgment of 01.02.2017 n. 2092/2017.

[6]  In October 2013, the ICA issued, for the attention of all contracting entities/authorities, a handbook based on the OECD Guidelines for fighting bid-rigging in public procurement of February 2009, including tips and hints for identifying and deciphering signals of potential bid-rigging.

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