Presentation given at the Scottish Competition Forum on public procurement issues concerning potential unfair competition from the public sector in commercial markets.
Procurement issues SCF unfair competition from the public sector (glasgow, sept 2017)
1. Public procurement issues
Dr Albert Sanchez-Graells, Reader in Economic Law
Unfair competition from the public sector in commercial
markets: crowding out and state aid after Brexit
Scottish Competition Forum, Glasgow, 7 September 2017
7 September 2017
1Unfair competition from the public sector after Brexit
2. Agenda
• Raise some issues concerning the increasing
gaps that (EU) procurement rules leave for
public intervention in the market (via purchases)
• Revisit interaction with EU State aid rules
• Suggest some possible (post-Brexit) solutions
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3. Narrowing scope of procurement rules in
atomised / intermediated markets
• Recent tendency to limit the scope of (EU) public
procurement rules
• Falk Pharma – non-procurement systems for the
delivery of goods/services in atomised markets
• Creates an incentive for a substitution of
procurement with licensing that can benefit
incumbent (quasi/formerly public) providers
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4. Expansion of in-house, public-public
collaboration and centralisation
• New rules on in-house, public-public and
centralised procurement allow for direct awards
to less than full-arms’ length entities that can
then compete in commercial markets
• In-house + public-public up to 20%
• Centralised without (explicit) limits
• Does competition law apply here?
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5. Reservation of contracts
• For special & social services up to €750k /3 years
• Creates difficulties in small markets where private
providers are bound to become sub-contractors of
the (mutuals) beneficiaries of the reservation
• Particularly problematic if combined with local
aggregation; can create local dominant positions
(cf Manchester out-of-hospital care tender and
English NHS STPs under 5 year forward view)
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6. State aid through ’secondary policies’
• Inclusion of special performance conditions,
particularly labour / wage requirements, can
also result in de facto reservation of contracts
• Theoretical need for regional legislation, but much
going on de facto (local value, apprenticeships, etc)
• Can also have an element of State aid, in particular if
any increased contract price is not (monitored to be)
transferred down to workers / community
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7. Summary of regulatory gaps
• Shortcomings in application of standard
competition law, depending on market
definition
• Shortcomings in application of EU State aid rules
due to threshold values
• Shortcomings in judicial review of procurement
decisions unless strict proportionality test
adopted (+ principle of competition)Unfair competition from the public sector after Brexit 7
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8. Potential solutions
• Legislation of principle of competitive neutrality
• Creation of domestic ‘public aid’ rules that
replicate EU standards with lower value
thresholds
• Regulation of use of carve-outs from
procurement rules + strict (public interest)
judicial review of that discretion
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9. Conclusions
• In the procurement context, there is an
expanding regulatory gap that may result in
distortions of competition in the medium term,
in particular in small markets
• Need for strict review under procurement rules
• Functional need for ‘public aid’ controls at lower
value levels than EU rules
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10. Thank you for your attention
• Stay in touch
a.sanchez-graells@bristol.ac.uk
@asanchezgraells
http://howtocrackanut.com
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