On 28 August 2024, the Court for the Defense of Competition and Protection of Intellectual Property (INDECOPI) published the Guide to Identify Unusual Consortiums in Public Procurement under the Law for the Repression of Anticompetitive Conduct ("Guide").
The Guide sets out criteria for public entities to identify consortia whose participation in public procurement processes may violate competition law, referred to as "Unusual Consortia." It also offers relevant recommendations and specifies that the criteria do not bind INDECOPI nor the contracting entities or specialized procurement bodies.
The main provisions of the Guide are as follows:
These are consortia that do not originate from a need for complementarity between the economic activities of the consortium members but have been formed for the sole purpose of disguising, consolidating or facilitating a collusive agreement to coordinate positions, exchange commercial information, share markets, or other similar conduct — in other words, with the purpose of committing a horizontal collusive practice (cartel), which is penalized under the Law for the Repression of Anticompetitive Conduct.
An Unusual Consortium is one that does not meet the following criteria:
The formation of a consortium must find an objective explanation or justification in the fact that the consortium members are able to offer goods or services at lower production or supply costs, of better quality or in a more innovative manner, and/or share financial or technical risks among themselves.
The formation of a consortium should benefit the contracting party by offering lower supply prices, higher quality or innovation due to the contribution that each of the consortium member companies can complement the others.
The following situations could indicate absence of complementarity for the formation of the consortium:
Efficiencies are not achieved, or it would be more efficient for consortia members to compete individually.
Competition is reduced by reducing the number of bidders in concentrated markets.
No benefits are identified for the contracting entities.
The consortium members could be direct competitors for the contract because they have similar knowhow and specializations.
The risks for the contracting could be assumed individually.
The consortium companies have presented themselves individually in other similar calls for proposals.
The consortium companies have the capacity to perform the contract independently.
The consortium companies submit individual quotations during the market research phase and then present themselves as a consortium.
The consortium is awarded a contract and then subcontracts the execution to a competing company or consortium.
Carry out cooperation with the other consortium members must within the limits of the object of the call, the selection process, and the performance of the service.
Ensure information is kept confidential and avoid exchange of information not related to the contract or not necessary for the performance of the service.
Not make agreements on prices or conditions that are unrelated to the solicitation or the contract, especially if these agreements are not necessary for its purposes.
Have an effective compliance program that can mitigate the risks of committing anticompetitive behavior with the formation of consortiums in bids with the state.
Document and record the rationale for the formation of a consortium with a competitor in case it is required by the contracting entities, the state contracting authorities or the competition authority.
You can find the Guide at this link.
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We hope that this information will be of relevance to you and your company. If you require any further information, do not hesitate to contact us.
