CCA opinion concerning the Decision on the lease of public use areas of the City of Zagreb

In the course of public tender procedures conducted by units of local and regional self-government, including the City of Zagreb, it has been observed that public tenders — as well as the subordinate legal acts governing their implementation — frequently contain provisions which, from the standpoint of competition law, constitute a breach of the principles of market competition.

Such instances typically arise where the tender conditions are formulated in a manner that is excessive, restrictive, or unduly burdensome, or otherwise disproportionate, thereby resulting in a distortion or limitation of competition within the relevant market.

From the standpoint of competition law, the Croatian Competition Agency (CCA) considers that every undertaking must be free to determine its bidding amount in public tender procedures, as this represents a fundamental element of entrepreneurial freedom and a market-based economy.

Accordingly, in this case the CCA assessed that the decision forming the basis for the public tender procedure contains a contentious provision stipulating that, in the event the selected bidder withdraws, the next most favourable bidder shall be the one who accepts the amount offered by the initially selected bidder who subsequently withdrew.

Specifically, the CCA issued an opinion regarding the Decision on the lease and other use of public use areas of the City of Zagreb (Official Bulletin of the City of Zagreb, 8/23, 42/23, and 12/25). In this opinion, the CCA analysed the provisions of the Decision in the sense of competition law.

The CCA particularly concluded that Article 15 paragraph 1 of the Decision contravenes with the principles of market competition. The provision reads as follows:

“The right of priority for the allocation of a location or site in the public tender procedure for the installation of kiosks and mobile facilities shall, under equal conditions, be granted to the existing lessee or user of the location or site, provided that they accept the highest offered one-time fee for the location or site in the public tender procedure.”

The CCA proposed that this provision be amended so that the right of priority is granted to the bidder who meets a defined, objective, alternative or additional condition, which primarily ensures that the quality of the bid is duly evaluated.

The CCA also drew attention to Article 39 paragraph 8 of the Decision, which provides:

“If the bidder whose offer has been determined as the most favourable fails to conclude the contract in accordance with paragraphs 5 and 6 of this Article, or fails to pay the one-time fee, the Mayor may, upon the proposal of the Commission, select the next most favourable offer of a bidder who has accepted the highest offered one-time fee for that location or site in the public tender procedure.”

The CCA found that this provision is likewise not aligned with the principles of market competition and proposed that it be amended so that, in cases where the contract cannot be concluded or the one-time fee is not paid, the next most favourable offer shall be selected in accordance with the tender criteria, or alternatively, the tender shall be annulled if no selection is possible.

In this context, the CCA emphasises that the contracting authority is entitled to set the conditions of the tender and the selection criteria; however, such provisions must not distort the principles of market competition or restrict equal access to the tender and the market.

In cases where it is not possible to conclude a contract with the most favourable bidder, the contracting authority should allow for the selection of the next most favourable offer or cancel the tender procedure.

Where a right of priority is introduced in a tender procedure, it should be ensured through clearly defined, objective, alternative, or additional conditions which primarily enable the evaluation of the quality of the offer.

Tender conditions must not be discriminatory, restrictive, or excessive, nor may they be based on non-objective criteria that could prevent equal access to the tender and the market.

In conclusion, the CCA has emphasised that the objectives of market regulation — including the management of public areas — must be harmonised with the principles of market competition, in order to ensure effective competition, benefits to end users, and transparent and equitable management of public resources.

The full opinion of the CCA in the Croatian language can be accessed at the following link