CCA responds to anonymous complaints in the office supplies market

In spite of the fact that in accordance with the separate law responses to anonymous queries are placed on the notice board of the CCA, these two deserve attention in the interest of the wider public and are published on the CCA web site.

Following the receipt of the anonymous complaints, the CCA conducted a preliminary market investigation in order to establish the relevant facts of the case. However, in neither of the two following cases there were sufficient indices found on the basis of which the CCA opens ex officio proceedings.

Public procurement – purchase of office supplies by the Croatian Health Insurance Fund and the Central Procurement Office  

The first complaint involved the alleged anticompetitive practices performed by the undertakings participating in the public procurement procedure for the purchase of office supplies conducted by the Croatian Health Insurance Fund (HZZO) and the Central Procurement Office (CPO).

Allegedly, in every public procurement procedure there was a joint bidding of associated undertakings, who, in the opinion of the claimant, could have acted as single bidders. The bids of this association of bidders, in accordance with the anonymous claimant position, were so low that other single bidders could not have challenged them. In addition, the objective of this practice was allegedly market foreclosure and exclusion of the competing undertakings from the market. Finally, the claimant concluded this collusive practice between the participants constituted bid rigging or a prohibited cartel agreement under Article 8 of the Competition Act.  

Concretely, the joint procurement covered office supplies (including ink and toner cartridges) for 24 institutions and 13 municipalities for 2013 and 2014. The tender was published by HZZO in the E-Journal of Public Procurement on 14 December 2012. The other was an open public procurement procedure for the purchase of office supplies conducted by the public purchaser CPO on behalf of the users of central public procurement under Article 13 paragraph 1 of the Regulation on internal structure of CPO, with the view to concluding a framework agreement with one economic entity for a duration period of two years that was published in the E-Journal of Public Procurement on 16 April 2013.

The CCA analysed the bids of all bidders in both tenders as well as the relationships between the undertakings concerned. It was established that the differences between the bids were not so significant that the bids of the bidders who won the contracts could have been considered unusually low. At the same time, the very process of the public procurement – from the first selection of the best bid, followed by the review by the Commission for the Control of the Public Procurement Procedure, and until the final outcome and the conclusion of the contract with the selected bidders, indicated no anticompetitive practices between the bidders and the associated undertakings in the joint bidding.

From the point of view of competition law and policy and based on the insights of the CCA that it gained concerning the EU practice and policy as well as the data available from some other national competition authorities, joint bidding indisputably and legally exists as a form of associated acting of undertakings in the public procurement procedure, particularly when independent suppliers who take part in joint bidding are small and medium sized undertakings, with the view to promoting their businesses, and where these bidders associate financial and other resources and in such a way remove barriers to entry the market on which they as single bidders would not be able to act successfully.

Where tenders involve bigger volumes of products and a number of delivery locations, where several associated bidders submitted a bid in the public procurement proceedings and where the best bidders have been selected on the basis of the most favourable price, in the opinion of the CCA it does not contravene competition rules where there are no indices of an existing restrictive agreement between the bidders acting jointly in the sense of Article 8 of the Competition Act.

Based on the above there were no indices for the initiation of an ex officio proceeding by the CCA. 

No bid rigging between undertakings Narodne novine and Papir Internacional

The CCA conducted a preliminary market investigation following the anonymous complaint received by a group of undertakings claiming that Narodne novine and Papir Internacional have been engaged in a collusive outcome, sharing of sources of supply and allocation of customers and coercive practices in the office supplies market.

The anonymous complainant stated in his writing that the undertaking Narodne novine imposed on its buyers an obligation to buy their office supplies and printing paper from the undertaking Papir Internacional, a company that was founded by Narodne novine in 2013, where allegedly it contained restraints on the buyers, concretely, a non-compete obligation stating that if the buyers concerned would not purchase from Papir Internacional they would be themselves prevented from selling their products to Narodne novine.  

In the preliminary market investigation with the view to establishing the structure and the nature of the relevant market concerned and alleged prevention, restriction and distortion of competition, the CCA sought data from the undertaking Papir Internacional and eighteen (18) randomly chosen office products suppliers. The request for data included questions such as whether the undertaking bids in public tenders as single undertaking or jointly with other undertakings engaged in the sale of office supplies, accompanied with the lists, numbers, subjects and estimated value of purchase in all tenders in 2013 in which it participated as bidders, the names of public purchasers, dates of submittal of bids and the names of undertakings whose bids were selected.

Based on the received information the CCA found that the undertakings who submitted the required data offer a wide range of products from the office supply assortment. These undertakings hold low market shares (less than 5 % share) in the sales of office supplies market within the territory of the Republic of Croatia in 2013; they are mainly active in the wholesale and bid in public tenders. Generally, they bid independently and only occasionally they take part in joint bidding with other undertakings, where a single undertaking, a member of such a bidding consortium, is not able to meet the performance requirements or the functional requirements laid down by the contracting authorities.

In addition, it has been established that only four undertakings out of eighteen make business with Papir Internacional and every one of them stated that this cooperation was satisfactory.

Thus, the results of the preliminary market investigation and evidence collected by the CCA indicated in this case that there were no indices which would point to the existence of a prohibited agreement between Narodne novine and Papir Internacional within the meaning of Article 8 of the Competition Act or a collusive tendering, sharing of sources of supply and allocation of customers that have as their object or effect the distortion of competition in the relevant market.

Based on the above there were no sufficient indices for the initiation of an ex officio proceeding by the CCA against the undertakings Narodne novine and Papir Internacional.