(1) of the Treaty
(70) Article 85 prohibits as incompatible with the common market all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market.
The agreement and the decisions described in recitals 3 to 17 and 24 to 65 above fall within the scope of the ban laid down in Article 85 (1) in so far as they seek to organize the supply side of the market and to alter trading conditions on bases not resulting from the free play of competition.
I. THE BUILDING AND CONSTRUCTION MARKET
(71) According to the SPO, the building and construction market is different from other markets in goods and services because of the immovable nature of the product:
- there is only one purchaser for each building and construction product (the client) who lays down the conditions which the product must meet, its form, content, quality and the date by which it must be supplied, thus constituting a type of partial market with a single buyer,
- building and construction does not allow stocks to be built up, since each product is unique and has to be produced at a given place.
The SPO also claims that the supply side of the market is in a structurally weak position compared with the demand side, resulting in ruinous price competition between building and construction firms. The private rules and regulations to which this proceeding relates are, it claims, intended principally to ensure balanced and economically healthy price formation and to prevent serious disruptions of supply on the market.
However, the Commission cannot accept that the characteristics of the building and construction industry can have the effect of removing the industry from the application of the competition rules laid down in the Treaty.
(72) According to the SPO, the prime characteristic of the industry is the complex and highly specialized nature of the product, placing a particular burden on building and construction firms, since each project is to some extent different, or indeed unique, depending on its nature (building for housing or professional use, roads, bridges, etc.), the physical and geographical conditions (position of the works site, nature of the soil, etc.) and the conditions laid down by the purchaser (specification of the work and contract documents). If a building and construction firm's offer is not accepted, it cannot submit it later to another purchaser.
The Commission notes, however, that most trade and professional services are, in principle, of a highly individualized nature. Furthermore, building and construction firms tend to specialize in certain fields. In each field, projects are often similar or indeed identical, while building and construction methods are tending gradually to become standardized. Furthermore, if the purchaser is a regular purchaser of building and construction works, building and construction firms often know what sort of conditions and specifications they can expect. For these reasons, a building and construction firm which has had one tender refused can normally use the know-how which it has invested in preparing a subsequent tender.
(73) According to the SPO, the second characteristic relates to tendering as the method applied in order to obtain the best offer: there is only one would-be buyer for each product (the client), whereas there is a multitude of tenderers (an indeterminate number in the case of open procedures and a number determined by the client in the case of restricted procedures). In order to obtain the lowest price or economically most advantageous tender, the client can play off tenderers one against another. By contrast, the tenderer is bound by the price which he has tendered.
In the Commission's view, the SPO's argument that each contract constitutes a partial market cannot be taken to mean that there is no such thing as a building and construction market. The putting out to tender of contracts is an almost continuous process. Many building and construction firms, if they consider that they have enough work in the short and medium term, are tempted to refrain from tendering (in an open procedure) or will try less hard to tender the lowest price (in a restricted procedure). In other words, contracts are, for building and construction firms, broadly equivalent alternatives, which shows that there is indeed a building and construction market as such. Other building and construction firms, notably the largest firms, possess, for all the main categories of work, or most of them, almost identical knowledge and know-how, appropriate equipment and machinery, qualified staff, etc. In addition, most of the tenderers, and in particular specialized or large building and construction firms, do not have a passive attitude with regard to the market; they pursue an active promotion policy in order to ensure as far as possible that they have a sufficient and regular quantity of work.
Nor does the Commission accept the SPO's argument that the tendering process tends to 'institutionalize' the dominance of the demand side of the market compared to the supply side and, consequently, to create a structural imbalance on the market. Both the demand side and the supply side comprise widely varying categories of persons and undertakings. In many cases, especially where the client is a private person or a small firm, the knowledge and experience of the suppliers called upon to tender will be superior to those of the would-be buyer. In other cases, especially where the client is an undertaking or body putting many contracts out to tender, it will generally be the large firms (or groups of firms) which will submit a price tender.
Furthermore, the SPO's claim that the tendering method results in artificially low prices is not acceptable either. Far from being unique to the construction industry, the method has the effect of allowing price offers to be compared.
A system of invitations to tender is an ideal way of generating competition (4). This is all the more so with public procurement: Council Directive 71/305/EEC (5) provides for procedural requirements for the public contracting authorities designed to create greater transparency in contracts put out to tender, allowing all interested undertakings to respond on a comparable footing. The equality of opportunity thus created for tenderers must not be distorted by a system of concerted action between them providing systematically for meetings prior to the submission of price tenders. Such a system undermines the tendering instrument.
Lastly, the Commission cannot accept the argument that the tendering method creates ruinous competition. In the first place, there is no such thing as a given price which alone is 'the' economically correct price in a specific case: a price which allows an undertaking to cover its costs and achieve a profit margin is a fair price for it, while the same price could mean a loss for another undertaking with higher costs.
Secondly, even if it may be the case that, particularly in periods when the economy is weak, certain building and construction firms are not able to carry out a project at the price which they have tendered, such a possibility, which also exists in the industrial products sector where products may be sold at a loss, cannot justify the introduction of concerted action arrangements between building and construction firms. It is for the client either to negotiate as hard as possible in order to obtain the lowest price, or to accept a higher price while at the same time making sure that the bid is the most advantageous in terms of constituent factors other than the price, such as quality, date of delivery, etc. - all of this in so far as the public rules and regulations on invitations to tender, where applicable, allow it to carry out such an assessment.
(74) According to the SPO, the third characteristic of building and construction relates to the fact that the preparation of a tender generally entails calculation costs, which are frequently high. Such costs can be passed on to the purchaser only if the tenderer wins the contract.
The Commission considers, however, that, in theory, there are two ways of recovering calculation costs: either the client remunerates the price tender separately; or the building and construction firm includes the costs in its general business costs. The first possibility cannot be applied in principle in so far as, in civil law, the invitation to submit a tender and the submission of a tender do not give rise to any contractual payment obligations. The second possibility is thus the appropriate and generally applied method throughout the Community of recovering calculation costs, in the same way as promotion costs and the costs of marketing products form part of the general expenses of an undertaking.
In the joint reply to the Statement of Objections, the SPO put forward the 'theory of transaction costs', under which, when building and construction work is put out to tender, both the clients and the tenderers incur transaction costs which are often high.
While it is true that such costs may be high, it is not evident what precisely the legal consequence of this should be; high costs for the client are his responsibility alone; high costs for the tenderer should not restrict the application of the competition rules laid down in the EEC Treaty to the building and construction industry. It is significant, in this respect, that the competent national authorities of several Member States, including the Dutch authorities (6) and the French authorities (7), have also applied their national competition law to concerted practices in invitations to tender.
The SPO also emphasized that tenderers on the building and construction market do not have any possibility of comparing prices because of the lack of transparency in transactions from the tenderer's point of view. It argues that this, taken together with the high costs, means that the submission of a price tender on the building and construction market is a 'much more hazardous' operation than a similar operation in any other sector of industry.
In this respect, it should be noted that a lack of transparency seems to be a characteristic common to all service sectors where, in particular, there are no price lists. For the rest, transparency between tenderers (as opposed to transparency from the point of view of the consumer) cannot be deemed to be a prior condition for effective competition; on the contrary, a high degree of transparency would rather be liable to give rise to illicit concerted action if the number of tenderers is limited.
II. THE DUTCH BUILDING AND CONSTRUCTION MARKET
(75) Though it does not claim that the Dutch building and construction market is very different from that in other Member States, the SPO has put forward a series of factors which it regards as specific to the Netherlands, namely the organization of the sector and the absence of any public rules and regulations prohibiting the clients from negotiating on the prices tendered. However, the Commission cannot accept the SPO's argument here.
As regards the organization of the sector, it is true that in the Netherlands the 'main contractor' is, in general, responsible for the carrying out of the work as a whole, while the subcontractors operate under his responsibility vis-à-vis the client. However, this situation is not unique to the Netherlands, since similar arrangements exist in other Member States, notably Belgium and France, as the SPO itself has affirmed.
With regard to the other factor, while it is true that national rules and regulations in some Member States restrict or indeed prohibit, expressly or implicity, any negotiation after the tender procedure between the client and the candidates or tenderers in respect of the essential elements of the contracts, such as the price tendered, such restrictions always form part of objective rules and regulations relating to the whole of the conduct of clients at all stages of the tendering procedure. Furthermore, such rules and regulations are generally applicable only to public procurement, while the rules and regulations implemented by the SPO apply to all the contracts put out to tender, whether private sector or public. Furthermore, in the document entitled 'Information on the application for negative clearance or exemption' (p. 38) of 13 July 1989, the SPO itself seems to limit the need for 'private' rules and regulations (UPR rules and Code of Honour) to private-sector contracts alone.
(76) The SPO has also adduced a number of macroeconomic factors. It has in particular stated that the average level of building and construction prices in the Netherlands is not any higher than in neighbouring countries, whereas the profitability of the Dutch building and construction industry is weak even during periods when the economy is strong. It thus attempts to justify in particular the system of recovering calculation costs as provided for in the UPR rules.
In the Commission's view, the SPO's arguments are not pertinent if the intention is to show that, for the reasons adduced by it, its rules and regulations are not caught by Article 85 (1) of the Treaty. The assertion that there is no obvious effect on the level of prices does not alter the fact that an agreement, a decision by an association of undertakings or a concerted practice may have as its object the restriction or distortion of competition. Any beneficial effect of such an agreement such as a less high price level can be taken into consideration only pursuant to Article 85 (3).
(77) It follows from recitals 71 et seq. that, notwithstanding the fact that the building and construction industry has certain specific characteristics, these are not such as to exclude or reduce the application of Article 85 of the Treaty to the industry.
III. RESTRICTIVE NATURE OF THE AGREEMENT AND OF THE DECISIONS WITHIN THE MEANING OF ARTICLE 85 (1)
1. The SPO Statutes (see recitals 3 and 4 above)
(78) The associations of building and construction firms to which this proceeding relates set up the SPO, whose task under its Statutes is to regulate the coordination of prices and tenders on the market. The Statutes consequently constitute an agreement between associations of undertakings within the meaning of Article 85 (1). The setting up by competitors of an association of trade associations (SPO) amounts to the conclusion of a horizontal cooperation agreement. In this particular case, the fact that the undertakings or associations of undertakings have set up an independent legal entity to which they have allocated certain regulatory functions is not sufficient to exempt them from the application of Article 85 (1).
The SPO Statutes have as their object the restriction or distortion of competition within the common market in so far as they make the rules and regulations described in recitals 5 to 13 and 24 to 61 above binding on the SPO associates and their members (permanent or ad hoc). The rules and regulations, which themselves constitute decisions by associations of undertakings within the meaning of Article 85 (1), have as their object or effect the restriction or distortion of competition, since they:
- provide for exchanges of information prior to tendering procedures,
- provide for concerted action on price tenders and directly or indirectly fix in whole or in part selling prices and other trading conditions in respect of building and construction contracts,
- share between members the demand side of the market through the prior designation of successful tendering undertakings, the protection of the entitled undertaking and the possibility of withdrawal or of preferences,
under the conditions outlined below.
2. The decisions taken within the framework of the SPO
A. Restriction of competition between building and construction firms participating in the SPO
(79) 1. Notification of the intention to submit a price tender (see recital 24 above)
The notification mechanism has the object of restricting or distorting competition since it requires the notifying undertaking to limit its freedom of action vis-à-vis its competitors and the client.
Thus, the participating undertakings forgo any independent behaviour as from the stage of determining their intention to submit a tender. This restriction is reinforced by the clause in the UPR rules prohibiting members from waiving the obligations deriving from these trade rules and regulations unless the notifying undertaking is the only tenderer (subject to approval and control by the office).
Furthermore, communicating the number of competitors who will be invited to participate in the meeting reinforces this restriction, since it allows the participants, in particular, to anticipate the price increases and to plan their conduct accordingly.
(80) 2. Agreement on the principle of the designation of an entitled undertaking (See recital 26 above)
The fact that the meeting of the undertakings is empowered to designate from among the participants the undertaking which will have the status of entitled undertaking, i.e. the exclusive right to negotiate the terms with the client, has the object of shielding it from competition from the other participants.
In point of fact, the designation of the entitled undertaking is based on the decision taken jointly by the tenderers to consider tenders as comparable or to make them comparable.
The number of cases in which the meeting of firms decides to forgo such designation, thus allowing undistorted competition to operate, is small. However, there is no doubt that the concerted action between undertakings, whether or not it leads to the designation of an entitled undertaking, constitutes a restriction in the individual capacity of the undertakings participating in the SPO to have access to the market.
(81) 3. Comparing the cost elements of the contract (See recital 27 above)
The cost elements allowing the proposed tender figures to be established are examined at the meeting of undertakings. Although, according to the brochure published by the SPO (mentioned above, recital 16), 'the proposed tender figure (is) the price tender envisaged by a firm, based on its own estimate', the proposed tender figure is in fact established, by each participant during the meeting, on the basis, inter alia, of exchanges of information between competitors. The estimate is thus made on the basis of items of information which have not all been collected, in an independent and autonomous manner, on the market. As the investigations carried out by the Commission show, the meeting allows each undertaking participating to take account not only of the elements which are liable to determine the costs of its competitors and the choice made by the client, but also of various items of information on the terms of the contract, such as the participation or otherwise of 'outsider' competitors and particular features of the contract in question which it would not have been able to obtain without such exchanges of information.
This concerted action prevents or at least distorts and restricts competition between the participants. It has as its object the elimination as far as possible of the risk inherent in independent competitive behaviour.
(82) 4. Handing over of the proposed tender figures (see recital 28 above)
The proposed tender figures established by each of the participants are handed to the chairman of the meeting.
The order of sequence of the proposed figures provides the order of sequence of the final tender prices to be submitted by the participants (except in the case of withdrawal and preference). Furthermore, once the proposed tender figures have been handed in, they cannot be changed.
By thus deciding, on a common basis, the proposed tender figures which, in their turn, determine the order of sequence of the final tender prices, the participants substitute practical cooperation amongst themselves for the risks of competition. Since the initial order of sequence is maintained, the participants do not run any risk against each other as regards possible price increases. The restrictive effect of such cooperation is reinforced by the ban on submitting an alternative price tender without the meeting being informed of any such intention and having been able to take a decision on it.
(83) 5. Possibility of withdrawal (see recital 29 above)
Any withdrawal decision is taken in full knowledge of the proposed tender figures of all the other participants.
It is thus only the exchange of information at the meeting which allows each participant to gain knowledge of the prices proposed by its competitors and to decide, on the basis of comparison of such prices, not to maintain its own initial price.
Thus, the normal conditions of competition are artificially changed in such a way as to allow the participants to take a decision on maintaining or withdrawing their tender which they would not have been able to take without the concerted arrangements, since only the client would have been in a position to make such a comparison.
(84) Although, in the notification and in their joint reply to the Statement of Objections, the parties to which this Decision is addressed imply that exercise of the right of withdrawal is reserved to cases in which a manifest and serious error of calculation has been made, the UPR rules do not provide for any particular condition governing the exercise of such right.
The argument put forward in the joint reply to the Statement of Objections, namely that the arrangement was used only in such cases, is not convincing and, furthermore, is contradicted by the information obtained during the proceeding. Such information points to a number of examples of withdrawal on other grounds, for example because the firm was not interested in the contract.
The possibility of withdrawal on the basis of a comparison of the proposed tender figures confirms the conclusion that such figures are established on the basis, inter alia, of economic or accounting information exchanged between the participants at the meeting and liable to determine prices.
Exercise of the right of withdrawal results in the tendering of prices other than those which would have been tendered to clients if there were no concerted approach, notably through the abstention of undertakings exercising such right, and this means that the final tendering procedure is different from that which would have prevailed in a system in which building and construction firms submit their tenders independently.
(85) 6. Preference (see recital 30 above)
The right of preference has the object of changing the initial order of sequence of the prices to be tendered, with the tenderer with the lowest bid in the 'first round' being replaced by the tenderer who has been granted preference.
This provision is thus designed to strengthen cooperation between building and construction firms at the expense of true competition. This system allows the participants to share markets. The client thus receives tenders whose structure is in line with the scale of price tenders established during the initial round, but with the actual contractors submitting such tenders possibly being changed through substitution as a result of concerted action between the members of the arrangement. Such substitution of the firms making price tenders could not exist in a system of competition which left tenders entirely up to each tendering firm.
(86) 7. Price increases (see recitals 31 to 37 above)
The joint establishment of the price increases amounts to the direct fixing of selling prices, or at least of part of them, within the meaning of Article 85 (1) (a). Furthermore, such price increases result in tender procedures having a different outcome than those which would have resulted if each of the participants had independently determined the prices to be tendered.
Since the order of sequence of the proposed tender figures is in principle maintained, the participants do not run any risk one against the other in each increasing the proposed tender figures by the increases provided for.
This system prevents the most competitive undertakings whose relative costs for preparatory studies and drawing up estimates are lowest from making use of this advantage, since the price increases, which are flat rate, do not take account of the individual situation of each participant. On the contrary, it shields the less efficient undertakings from competition and dissuades them from improving their productivity.
The inclusion of the value of materials to be supplied and/or work to be carried out by the client or by third parties, in calculating the basic amount used in establishing the amount of reimbursement of calculation costs, reinforces the restrictive nature of this system.
(87) The concerted increases in prices have the additional effect of prompting undertakings to establish token price tenders, their objective being merely to recover the reimbursement amounts paid to the SPO, but also to encourage clients to invite only a very limited number of building and construction firms to make tenders, since they have to bear the calculation costs of all tenderers for each contract.
Such a system has the effect of limiting the number of tenderers for each contract and thus of restricting competition in the building and construction industry.
The overall amount of the price increases thus agreed within the SPO in the sectors of the building and construction market described in recital 6 above is far from being negligible, since in the period 1987 to 1988 it amounted to an annual sum which may be estimated at Hfl 300 million net of VAT by way of reimbursement of calculation costs and at Hfl 100 million net of VAT by way of trade contributions (more than 50 % of which is intended to cover the organization costs of the cartel - offices and SPO).
(88) 8. Concerted fixing of the final prices to be tendered (see recital 38 above)
The concerted establishment of the price tenders to be submitted by the building and construction firms to the client also constitutes a restriction of competition, within the meaning of Article 85 (1), between the tenderers attending the meeting.
Certainly, the final prices to be tendered to the client are established in such a way as to maintain the order of sequence of the proposed tender figures (unless changes are made due to withdrawal or preference). However, such final prices are not determined merely by adding the price increases indicated above to the initial tender figures. The highest prices which would result from such addition may be changed by means of an overall decrease (even to a level below the corresponding initial proposed figures), so as to prevent the presentation of excessive price differences to the client.
Such elimination of excessive price differences serves to protect certain tenderers deemed to be 'too expensive' against the risk of being eliminated, a priori, from subsequent contracts, involving restricted or single tendering procedures.
Conversely, when preference is granted to a building and construction firm, the final price tenders of the other participants may be increased so as to present the client with a set of prices comprising price differences which reinforce the position of the building and construction firm granted preference.
In both cases, the UPR system restricts the freedom of choice of clients and distorts the choices they make. The presentation to the client of final prices which have been concerted and predetermined in this way provides him with artificial information on the level of prices, misleading him on the real state of the market and of tenders (also as regards comparison of the prices tendered by outsiders), and also possibly leading him to make major errors of judgment in implementing subsequent tendering procedures or private contracts.
(89) The same view must be taken of the concerted fixing of prices for specific parts of the contract and of unit prices, etc. In so far as the meeting deems it necessary, such prices are fixed, in respect of each participating building and construction firm, in such a way as to safeguard the position of the building and construction firm that will tender the lowest price. Thus, the client is dissuaded from awarding parts of the contract to several building and construction firms or from awarding the entire contract to another building and construction firm than that which tendered the lowest price.
(90) It is clear from the investigations carried out by the Commission that the concerted action between building and construction firms may also relate to contract conditions other than the price and the elements making up the price, such as the time limit for completion of the work to be indicated in the price tender.
(91) Lastly, the concerted action on the content of the information to be communicated by the building and construction firms with their price tender as regards the elements making up the price and the increases applied similarly constitutes a restriction of competition designed to distort the comparison of tenders. It is clear from the Commission's investigations that it is not uncommon for deliberately misleading information to be communicated to the client.
(92) In short, the concerted establishment of tender prices involved in the UPR system constitutes in itself a restriction or a distortion of competition within the meaning of Article 85 (1) (a).
The Commission considers that the concerted fixing of prices relating to specific parts of the contract, unit prices, etc., elements making up prices, conditions other than the price and the content of the supplementary information to be provided to the client in price tenders is not inherent in the concerted fixing of the final prices, as expressly provided for in the UPR rules.
These are separate restrictions of competition which, even if they are not expressly provided for in the UPR rules, necessarily result from the fixing of the final prices and are in a way complementary to it.
(93) 9. Protection of the entitled undertaking (see recitals 39 to 41 and 52 to 59 above)
The designation of the entitled undertaking, as such, prevents or at least distorts and restricts competition. It should be borne in mind that, ultimately, it is the meeting of tenderers which decides whether tenders are comparable or not, i.e. whether the would-be buyer has formulated his request in an identical manner vis-à-vis each of the tenderers invited. The meeting replaces the freedom of choice of the client and his capacity to negotiate with several tenderers by a decision taken jointly by the tenderers and constraining the client in so far as it prevents him from allowing competition to operate between the various building and construction firms that have submitted a tender.
In the same way, the tenderers deprive the competitors of the entitled undertaking of any right to negotiate with the client after the prices have been tendered.
Where non-simultaneous price tenders are involved, the system aims to prevent competitors from tendering a lower price than the price tendered by the entitled undertaking.
This system confers on the entitled undertaking a temporary monopoly of two or five years in respect of a given contract and thus prevents competition from operating.
If the client decides not to award the contract, for whatever reason, and to issue a new invitation to tender or to award a contract by private agreement, the system for protecting the entitled undertaking makes his freedom of choice totally illusory and in practice prevents any competition between the building and construction firms.
(94) With regard to the system for protecting the entitled undertaking, as provided for in the UPR rules and the Code of Honour, it is claimed, in the joint reply to the Statement of Objections, that the objective pursued by the private-law rules and regulations in question, governing the relations between building and construction firms, is identical to the objective pursued by the public-law rules and regulations in force in Member States other than the Netherlands and by the Community rules laid down in Directive 71/305/EEC governing the behaviour of the contracting authorities. Consequently, it is claimed, this private-law system cannot be deemed to run counter to Article 85 (1) of the Treaty.
In addition, it is maintained by the parties to which this Decision is addressed that the system is intended merely to create the most favourable conditions for effective and efficient competition on the building and construction market and to prevent ruinous competition.
(95) The Commission cannot accept these arguments. The Community and national rules and regulations to which the SPO refers are, for the reasons already set out in recital 75 above, not comparable with the system for protecting the entitled undertaking, which disregards all the constituent elements governing the behaviour.
For the rest, the SPO has not succeeded in showing that, if there were no protection of an entitled undertaking, tenderers would be open to 'pressure' by the client. In addition, it has not provided any evidence of the allegedly ruinous nature of the competition which would result.
(96) 10. Paying over of the amounts of price increases (see recitals 42 to 46 above)
The system and arrangements for paying over the amounts of reimbursement for calculation costs and trade contributions have as their object or effect the restriction or, at least, the distortion of competition, since the firms which obtain the contracts benefit much more from the paying over of such increases than their competitors whose tenders are unsuccessful. Their competitive position is thus artificially strengthened compared with such competitors.
(97) 11. Monitoring compliance with the obligations deriving from the UPR rules (see recitals 47 and 48 above)
The provisions of the UPR rules and of the Code of Honour (including the disciplinary rules) providing for the imposition of penalties in the event of non-compliance with the obligations deriving from the rules have as their object the strengthening, in particular, of the anti-competitive commitments entered into by the participants in the SPO (including member associations).
B. Measures to protect the SPO with regard to non-member building and construction firms (see recitals 49 to 51 above)
(98) The systematic exchange of information within the SPO regarding non-member building and construction firms as a concerted response by the SPO to tenders by outsiders constitutes a practice having as its object the prevention or distortion of competition within the common market within the meaning of Article 85 (1).
The exchange of information within the SPO makes it possible to exert pressure, often effective, on non-member undertakings so as to induce them to comply with the UPR rules on a more or less permanent basis.
Such pressure is applied not only with regard to undertakings bound by the Code of Honour but not affiliated to the SPO, and thus subject in principle only to the requirements that they notify their intention to submit a tender and that they respect the position of the entitled undertaking, but also with regard to undertakings which are wholly outside the SPO, i.e. which are subject neither to the rules of the Code of Honour nor to those of the SPO.
The exchange of information carried out during the meeting of building and construction firms that is organized by the office also enables such firms to take account of the risk of any outside competition in establishing the proposed tender figures and the final figures, allowing them to dispense with the designation of an entitled undertaking and/or the increases described in recitals 31 to 37 above. Conversely, when it is apparent that there is no risk of intervention by known outsiders, the meeting may be induced to increase the proposed tender figures by the maximum amount of such increases.
(99) A building and construction firm not belonging to the SPO and wishing to submit a price tender is not in a position to measure its competitive economic capacity within the normal framework of a tender by a number of different firms, but is faced with a concerted and flexible tender designed to limit or impede its ability to enter the market.
In the case of a foreign building and construction firm not participating in the SPO, its position is aggravated by the fact that, in general, it is involved in the building and construction market in the Netherlands only through the intermediary of cooperation with a building and construction firm established in the Netherlands, which as a general rule is bound by the UPR rules and must therefore comply with the concerted action arrangements.
This restriction is all the more appreciable as the SPO ensures strict protection for the designated entitled undertakings and has substantial economic resources deriving from the concerted price increases paid over to the SPO.
The investigation has shown that the number of contracts on which there was concerted action within the SPO and which were nevertheless obtained by non-member undertakings is very low. The number varies depending on the sectors and geographical areas concerned (from 0,7 to 10,5 % of the number of contracts handled by the SPO, and from 0,8 to 6,6 % of the value of such contracts).
C. The treatment of private contracts (see recitals 60 and 61 above)
(100) A client who concludes a private contract negotiated with a single building and construction firm is nevertheless subject to the effects of the restrictions of competition imposed by the SPO. The building and construction firms protect themselves against the risk of having to pay the office 3 % of the price of the building contract by applying a corresponding increase in their price tender in case, having won the contract, the SPO office reveals to them that other building and construction firms had also been consulted.
This arrangement (which is also found in the context of subcontracting: see recitals 55 to 59 above) thus has the effect of bringing about a general and uniform increase in all the prices of private contracts, whether negotiated with one or several building and construction firms.
The investigations carried out by the Commission showed a large number of examples of application of the above rule, with 3 % of the prices of the contracts being paid over, a posteriori, by the building and construction firms to the various offices.
D. Conclusion
(101) The restrictions of competition noted above are the result of each of the constituent elements of the system and of the system as a whole. The SPO has itself emphasized that its rules and regulations form a whole, the main elements of which are the protection of the entitled undertaking and the spreading of calculation costs. The restrictions are appreciable, since virtually all contracts in the Dutch building and construction industry put out to tender are subject to the SPO's rules and regulations. As stated in recital 87 above, the total amount of the price increases agreed within the SPO is far from negligible. The cumulative effect of applying the rules and regulations to all the works contracts covered is crucial.
IV. EFFECT ON INTRA-COMMUNITY TRADE
(102) In view of the above, the Commission considers that the implementation of the UPR rules, and of similar previous rules, and the implementation of the Code of Honour are liable to affect trade between Member States in the following way:
1. Impact on supply from the other Member States
A. Interpenetration of building and construction markets
(103) The Commission wishes to point out firstly that the market for public and private works put out to tender in a Member State is not and must not be reserved only to undertakings from that Member State. Furthermore, as far as the public works market is concerned, directives such as Directive 71/305/EEC require Member States to open up such markets to undertakings from all Member States.
(104) In the building and construction industry, the interpenetration of markets in the various Member States is still relatively low, but real (8). The factors restricting such interpenetration include the specific conditions of the building and construction market at Community level at present, such as the different rules on building and construction and the different standards from one Member State to another, and the particular characteristics of building and construction firms, but these factors are not in themselves such as to prevent such interpenetration.
(105) In the joint reply to the Statement of Objections, the SPO argued that the setting of the threshold provided for in Directive 71/305/EEC meant that any interest by building and construction firms in contracts outside their own Member State of a value below such amount, currently ECU 5 million, was without significance for the operation of the common market. It also argued that the number of contracts put out to tender and covered by its rules and regulations, with a unit value above the threshold of ECU 5 million, was too low for the operation of the common market to be influenced. The number of such contracts was 199 for the whole of 1987 and 1988, equivalent to 0,35 % of the total number of contracts processed by the SPO during that period.
The Commission cannot accept such arguments. In the first place, the non-applicability of Directive 71/305/EEC does not mean the non-applicability of the competition rules, since these are two categories of different legal norms pursuing parallel, but separate objectives. Secondly, whether or not the effect on intra-Community trade of such restrictions of competition is appreciable must not be assessed only in relation to the number of individual contracts concerned, but in terms of the total value which such contracts represent as a whole. According to the statements made by the SPO at the hearing on 12 June 1990, the 199 contracts represented more than 23 % of the total value, which cannot be described as 'negligible'. Lastly, it should be pointed out that the threshold of ECU 5 million was introduced pursuant to Council Directive 89/440/EEC (9), i.e. after the period taken into account by the SPO. During such period, the threshold was still set at ECU 1 million.
B. Participation of foreign undertakings in the SPO
(106) After having, in its notification of 13 January 1988, stated that there were no statistics on the participation of building and construction firms from other Member States in the Dutch market, the SPO nevertheless communicated certain figures on the participation of such undertakings at meetings which two offices (considered to be representative) organized in 1987. These were the ZNAV office (building and water engineering sectors, south region of the country) and the WAC office (roads and road marking, the whole of the country).
The figures are as follows:
- ZNAV: 5 200 contracts were the subject of a meeting, 32 of which involved foreign participation. This figure represents 5,9 % (Hfl 117 million) of the total value of the contracts.
- WAC: 6 900 contracts were the subject of a meeting, 19 of which involved foreign participation, representing 3,5 % (Hfl 77 million) of the total value of the contracts.
In their joint reply to the Statement of Objections, the parties to which this Decision is addressed state that, in the period 1986 to 1988 (up to 1 October), 241 contracts involving foreign participation were the subject of a meeting within the SPO, which is equivalent to 3,6 % (Hfl 1 172 million) of the total value of such contracts.
It should be pointed out in addition that the participation of undertakings from other Member States in the meetings resulted in a positive outcome for such undertakings in only an even more limited number of cases.
(107) Although these figures do not cover the whole of the building and construction activities of undertakings from other Member States in the Netherlands (such as the figures relating to private contracts and to subcontracting, and those concerning contracts put out to tender and won by an outsider foreign undertaking), they confirm that there is actual interpenetration.
The low degree of such interpenetration compared with the activities of building and construction firms established within the Netherlands (or, in general, within any Member State) is attributable to the specific characteristics of the market and product in question.
This fact cannot be interpreted, from the point of view of the application of Article 85 of the EEC Treaty, as demonstrating the negligible nature of intra-Community trade. On the contrary, the restrictive practices described above are all the more harmful as they occur in a domaine where the interpenetration of national markets is relatively limited, thus affecting intra-Community trade in all the more appreciable a manner.
(108) Examination of the information gathered during the investigations shows that some 150 undertakings established in other Member States subscribe, on a more or less permanent basis, to the UPR rules. Such undertakings are established mainly in Germany and Belgium, including all the largest German and Belgian undertakings, the others being French, Luxembourg or Italian undertakings. Sometimes, the Syndicale Kamer voor de Bouwnijverheid in Antwerp (or an organization belonging to it) communicates to an SPO office the intention of Belgian undertakings subscribing to the UPR rules to submit a price tender in the Netherlands.
C. Position of 'outsider' foreign undertakings
(109) More generally, undertakings from other Member States wishing to obtain a contract in the Netherlands, but refusing to subscribe to the SPO must, in addition to the natural barriers to market entry resulting from their remoteness, overcome a substantial additional obstacle resulting from the existence of the SPO, grouping together as it does virtually all the Dutch building and construction undertakings interested in the contracts put out to tender, to which must even be added building and construction firms from other Member States. Competition on the supply side is no longer fragmented and multiple, bur concerted and collective, and all the more difficult to deal with. In so far as the machinery established by the SPO actually dissuades the public authorities and private sector clients from making use of the open tendering procedure, it has the effect of restricting at least indirectly the scope for building and construction firms from other Member States to participate in the Dutch market.
D. Appreciable nature of the effect on trade between Member States
(110) The Commission considers that trade between Member States is affected appreciably by the agreement and the decisions by associations of undertakings described above. The very nature of the rules and regulations has the effect of influencing trade flows between Member States. The UPR rules can operate effectively only if all (or nearly all) the undertakings liable to subscribe to them actually form part of the arrangement. It is for this reason that the UPR rules are open to undertakings from the other Member States.
The SPO and its member associations carry out promotional activities in respect of such undertakings in order to get them to subscribe to the arrangement.
(111) In this context, the effect on intra-Community trade is all the more appreciable as the SPO groups together virtually all the building and construction firms in the Netherlands interested in the contracts put out to tender and covers virtually all of such contracts.
On top of this, there is the fact that a building and construction firm from another Member State wishing to operate in the Netherlands seeks to cooperate with a Dutch partner for practical and other reasons, on a case-by-case basis or in a more regular manner. Since the Dutch partner generally subscribes to the UPR rules, the undertaking from the other Member State cannot avoid the application of the UPR rules.
2. Impact on demand from the other Member States
(112) Since the UPR rules apply to any invitation to tender for a contract in the Netherlands, any foreign organizer of a tender procedure (and any national organizer of an invitation to tender acting on behalf of a foreign client) who wishes to put out to tender a building and construction contract in that Member State cannot escape the application of the UPR rules imposed under the SPO. The only way to ensure the inapplicability of the concerted action measures within the SPO is to resort to a private contract negotiated with a single building and construction firm. However, even recourse to this procedure cannot afford protection against the general and uniform increase in prices as described in recitals 60, 61 and 100 above.
The same applies to the contracts put out to tender in the Netherlands by (or for the account of) international organizations such as NATO and Eurocontrol, in so far as they apply their own regulations concerning international invitations to tender.
3. The impact on supply from participating undertakings in the other Member States
(113) The Commission considers that trade between Member States is also liable to be affected appreciably on the building and construction markets in other Member States by the implementation of the agreement and decisions described in this Decision.
The (Dutch) undertakings participating in the SPO can, through the application of the UPR rules, recover, at least in part, the calculation costs of the work relating to contracts put out to tender in the Netherlands and not awarded to themselves. They thus obtain, through the intermediary of the SPO, an economic advantage in terms of the financing of their tender-preparation activities and thus a corresponding decrease in their general expenses, giving them a competitive advantage over competing building and construction firms from other Member States as regards contracts put out to tender in the other Community countries.
V. THE RULES AND REGULATIONS PREVIOUS TO THE UPR RULES
(114) In so far as the UPR rules currently in force are, essentially, merely the continuation of the previous rules and regulations, as described in recitals 62 to 65 above, the legal assessment set out in recitals 70 to 76 and 79 to 113 above also applies mutatis mutandis, to such rules and regulations.
Section II
