This presentation explores the competition law and State aid implications of the RegioPost Judgment of the Court of Justice of the European Union. It was presented at the University of Bristol Law School on 9 May 2016

1. Competition and State aid implications of
‘public’ minimum wage clauses in EU public
procurement after the RegioPost Judgment
Dr Albert Sanchez-Graells
Public Procurement & Labour Standards–
Reopening the Debate after RegioPost
University of Bristol Law School, 9 May 2016
9 May 2016
1Debate after RegioPost

2. Agenda
• Discussion of selected issues
re dumping and competition
• Competition law implications
• State aid implications
• Preliminary conclusions
Debate after RegioPost 2
9 May 2016

3. Link to competition law - dumping
• Interestingly, Art 1 LTTG stressed that
‘that law is intended to combat distortions of
competition in the award of public contracts that result
from the use of low-paid personnel’ (AG Mengozzi, [7])
• Is intra-EU ‘dumping’ prohibited/prohibitable?
• Bundesdruckerei [34] points in opposite direction:
‘prevents subcontractors … from deriving a competitive
advantage from the differences between … rates of pay’
Debate after RegioPost 3
9 May 2016

4. Asymmetry between cross-border &
inter-regional provision (of services)
• RegioPost allows for anti-dumping [‘public sector’]
minimum wage requirements for posted workers
• Bundesdruckerei rejects anti-dumping [general?]
minimum wage requirements for non-posted workers
• From an economic perspective, these different rules
make no sense and create difficulties in terms of:
• Alternative (non in situ) provision (of services)
• Hybrid (in situ + remote) provision (of services)
Debate after RegioPost 4
9 May 2016

5. Debate after RegioPost 5
9 May 2016

6. Asymmetry between cross-border &
inter-regional provision (of services)
• Ultimately, this creates reverse discrimination of
domestic undertakings vis-à-vis intra-EU suppliers
• [and foreign ie non-EU suppliers, as a result of GPA?
—Art 25 Dir 2014/24; issue whether Bundesdruckerei and
RegioPost are considered part of Directive or not]
• This makes very poor economic sense [this
protectionism has severe potential impacts on public
sector efficiency] and is likely to trigger further litigation
Debate after RegioPost 6
9 May 2016

7. Can ‘public’ labour standard clauses be
non-protectionist / not anti-competitive?
• Structurally, these clauses raise barriers to entry
• Almost impossible to disentangle protection from social
dumping and protection from competition/
undertakings in other jurisdictions
• Moreover, special rules for ‘public contracts’ are more
likely to have protectionist features (‘good employer’?)
• In my view, this raises complex issues under principle of
competition in Art 18(1) Dir 2014/24
Debate after RegioPost 7
9 May 2016

8. Labour standard [minimum wage or not]
clauses and Art 18(1) Dir 2014/24
• Art 18(1) Dir 2014/24 prevents any artificial narrowing
of competition
• Creation of ‘procurement specific’ labour standards / other
requirements seems to fit this analytical framework
• Difficulty of applying Art 18(1) in a RegioPost scenario
-> issue of mis-transposition of Dir 2014/24?
• Strict proportionality test to be applied to inclusion of
labour standard clauses [under Art 70 Dir 2014/24]
Debate after RegioPost 8
9 May 2016

9. Competition law implications
• Some general competition law impacts
• Crowding out of SMEs and disadvantage vis-à-vis companies
with more ability to delocalise
• Raising participation costs (two-tier industrial relations)
+ intra-MS barriers to participation (red tape, generally)
• Entrenchment of incumbency advantages
• Possibility to cross-subsidise/predate on the basis of different
public/private contract performance cost structures
Debate after RegioPost 9
9 May 2016

10. Competition law implications
from private perspective
• If undertakings with strong public procurement position
engage in predation in private markets
• Possible application of Art 102 TFEU and domestic equivalents
in case there is a dominant position (big if?)
• If undertakings (SMEs?) coordinate their behaviour in
ways that aim to avoid minimum wage clauses
• Possible application of Art 101 TFEU and domestic equivalents
to their ‘employment avoidance’ agreements?
Debate after RegioPost 10
9 May 2016

11. Competition law implications
from public perspective
• There is no clear way of challenging the anti-
competitive aspects not caught by private behaviour
• Issues of ‘State action’ and effet utile of TFEU, but
currently not caught by CJEU case law precisely due to
lack of involvement of private parties
• Unless, there is significant private involvement (including
trade unions) in the setting up of the wages payable under
contract compliance clauses
Debate after RegioPost 11
9 May 2016

12. State aid implications
• Generally, the imposition of (above market) minimum
wage requirements as contract compliance clauses can
result in an undue economic advantage for the
awardees of those contracts
• Directly, particularly if overheads or fixed costs are set as a
proportion of variable costs, or as result of indexation clauses
• Indirectly, due to ability to exploit two-tier employment
structures as discussed
Debate after RegioPost 12
9 May 2016

13. State aid implications
• Generally, if there is an economic advantage, it could be
caught by Art 107 TFEU, but this triggers
• Difficulty concerning ‘seemingly general’ rules
• If it is considered State aid, its exemption is complicated
by the fact that it does not really fit the criteria under
Commission Regulation (EU) No 651/2014 of 17 June
2014 (General BER)
Debate after RegioPost 13
9 May 2016

14. State aid implications
• 2014 General BER: only allows some employment aid
• Recruitment and employment aid for disadvantaged workers
and workers with disabilities [Art 1(1)(f) and Arts 32 & 33]
• Aid oriented towards job creation [Art 17(5)]
• Employment directly created by an investment project shall (a) be
created within 3 years of completion of the investment; (b) be a net
increase in the number of employees in the establishment concerned;
(c) be maintained during a minimum period of 3 years
• Aid to maintain jobs is not covered (operating aid)
Debate after RegioPost 14
9 May 2016

15. State aid implications
• Can it be considered de minimis under Commission
Regulation (EU) No 1407/2013 of 18 December 2013?
• total amount of aid granted per Member State to a single
undertaking shall not exceed EUR 200,000 over any period of
3 fiscal years [Art 3(2)] BUT
• applies only to transparent aid—ie where it is possible to
calculate precisely the gross grant equivalent of the aid ex
ante without a risk assessment [Art 4(1)]
• To me, not clear at all that this criterion can be met
Debate after RegioPost 15
9 May 2016

16. Preliminary conclusions
• The Bundesdruckerei-RegioPost “system” for the use of
Art 70 Dir 2014/24 to enforce labour standards creates
structural restrictions of competition
• Should be controlled under strict proportionality test,
ultimately justified by Art 18(1) Dir 2014/24
• Limited scope for application of competition law, in
particular to “public-side” competition restrictions
• Limited (?) scope for application of State aid rules
Debate after RegioPost 16
9 May 2016

17. Thank you for your attention
Be in touch
a.sanchez-graells@bristol.ac.uk
http://www.howtocrackanut.com
@asanchezgraells
Debate after RegioPost 17
9 May 2016