The High Court of Catalonia upholds contracting ban imposed by competition authorities

On September 28, the High Court of Catalonia issued a judgment rejecting the administrative appeal filed by MCV against the sanction imposed by the Catalan competition authority banning it from contracting with public bodies for 18 months.

 However, two judges issued a dissenting opinion against competition authorities’ power to ban companies from contracting.

 Appealed decision and sanctioned conduct

 Last September, the High Court of Catalonia (“TSJC”) issued a judgment resolving an appeal filed by MCV against the contracting ban imposed by the Catalan competition authority (“ACCO”) at the end of 2019 in case 94/2018 - LICITACIONS SERVEI METEROROLÒGIC DE CATALUNYA.

 ACCO’s resolution sanctioned two direct competitors —MCV and ADASA— for bid rigging practices in the framework of several public tenders called by the Meteorological Service of Catalonia between 2011 and 2019, for the installation, maintenance and supply of radars and weather stations.

In addition to the €918,795.63 fine, the resolution imposed an 18-month contracting ban on both companies. During that period, MCV and ADASA were not allowed to participate in any tenders called by the Meteorological Service of Catalonia for the installation of radars or weather stations and the maintenance or supply of (spare) parts for the Catalan weather radar and weather station network.

 Grounds of the appeal

MCV filed an appeal for judicial review against the sanction imposed. In addition to questioning the existence of an anticompetitive agreement, the grounds of the appeal focused on ACCO’s lack of competence to impose contracting bans. 

MCV argued that competition authorities —whether national, such as the Spanish Markets and Competition Commission (“CNMC”), or regional, such as ACCO itself— do not have the power to impose contracting bans. Additionally, it held that the duration and scope of the ban (i.e., which tenders were affected) were disproportionate.

Ruling

According to the majority opinion of the TSJC, Spanish competition authorities are entitled under Spanish law to define the scope and duration of contracting bans. The court argues that Public Procurement Act 9/2017, of November 8, empowers competition authorities both to impose contracting bans and to determine their scope and duration. Only when competition authorities fail to specify these parameters in the resolution will the Minister of Finance and Civil Service do so — following a proposal issued by the State Public Procurement Advisory Board.

To reach this conclusion, the court also relies on Regulation 1/2003, of December 16, 2002, on the implementation of the rules on competition laid down in articles 81 and 82 of the Treaty (now articles 101 and 102 of the Treaty on the Functioning of the European Union). Under that Regulation, competition authorities of the Member States are responsible for imposing fines, as well as “any other penalty provided for in their national law.” Following this line of argument and considering that article 71 of the Public Procurement Act provides for contracting bans, the court recognizes ACCO’s power to impose a prohibition to contract with public entities and to establish the scope and duration of such ban.

Dissenting opinion

Two of the five judges of the TSJC issued a dissenting opinion disagreeing with the above reasoning. In their view, neither the CNMC nor the ACCO have the power to impose contracting bans, since such competence is not expressly provided for in the Spanish Act for the Defense of Competition 15/2007, of July 3 (“LDC”). This Act regulates the powers of the CNMC (and, by extension, of regional competition authorities such as the ACCO). According to the dissenting opinion, this omission reflects the legislature’s intention not to confer that competence to competition authorities.

The dissenting judges hold that the Public Procurement Act, applicable to all public authorities and bodies, does not empower them to impose contracting bans. In this sense, they understand that the Public Procurement Act does not exclude that option, but that, for it to be applicable, the sector-specific legislation must expressly provide for it.

To reach such conclusion, the dissenting judges rely on the constitutional principle that any restriction of rights is conditional on prior legal authorization. Since the LDC does not expressly include contracting bans among the sanctions available to competition authorities, neither the CNMC nor ACCO should be entitled to impose them.

Conclusion

This judgment fuels the legal debate on whether Spanish competition authorities can impose public contracting bans on companies. In this regard, the CNMC has submitted for public consultation the Communication on criteria for contracting bans, thus showing its willingness to determine their scope and duration directly in its resolutions.

However, only a final judgment by the Spanish Supreme Court can settle this issue (it is worth noting that appeal for reversal is possible against the judgment of the TSJC). Another solution would be for the legislature to amend the LDC —expressly empowering competition authorities to impose contracting bans on companies that commit serious infringements.

At EU level, the Court of Justice of the European Union is dealing with this matter through a request for a preliminary ruling from the Portuguese Supreme Court (Case C- 66/22). In this instance, the question is whether a national provision empowering a competition authority (to the detriment of the public procurement body) to determine the scope and duration of a contracting ban is compatible with EU law.