Press release – Public procurement, competition and barriers to competition

• The Competition Authority has today urged public bodies to monitor the application of competition law in the conduct of tenders. A special checklist has been prepared to help tenderers spot illegal collusion.
• The Competition Authority also directs that public bodies should use tendering procedures where this is cost-effective and practicable. In the Competition Authority's view, this is important for strengthening competition and improving the use of the funds spent on public procurement of goods, services and construction works. Local authorities are particularly encouraged to use tenders when purchasing goods and services.

These recommendations are set out in the Opinion of the Competition Authority. No. 4/2009, Public procurement, competition and barriers to competition.

The opinion states that public procurement can deliver significant results. Reference is made to Nordic reports on public procurement, which state, among other things, that the value of goods and services subject to tender in Sweden in 2006 amounted to approximately 15-18% of the country's gross domestic product that year. It is clear to the Competition Authority that although precise figures on the scale of public tenders or procurement subject to tendering requirements in this country are not available, the sums involved are substantial. It is therefore important to ensure that competition law is followed and that tenders are held to harness the forces of competition when it is feasible and cost-effective to do so.

The opinion also refers to examples where companies have attempted to influence tenders unlawfully. The opinion cites several domestic examples of this, particularly concerning the oil market, but also shipping, etc. Through such barriers to competition, the companies in question have negated the expectations of those running the tenders for lower prices, higher quality and increased innovation. International research shows that prices can increase by 10-30% and, in certain cases, by as much as 50% when competitors engage in illegal collusion. It is therefore crucial to curb illegal collusion and other anti-competitive practices in tendering.

Background information
In the report of the Competition Authority No. 2/2008, Robust development – opening up markets and boosting business activity, published in November 2008, addressed the importance of public procurement in individual chapters. It states, among other things, that public procurement by public bodies is generally conducive to promoting competition, facilitating the entry of new operators into the market and fostering innovation. In a joint report the Nordic competition authorities which was published in September 2009, Competition Policy and Financial Crises – Lessons Learned and the Way Forward It was made clear that public tenders could achieve an important economic incentive.

Following the publication of the aforementioned report, the Minister of Finance was informed that the Competition Authority intended to issue an opinion regarding public tenders. A letter of the same content was also sent to Ríkiskaup and the National Procurement Service, as these bodies are generally concerned with tenders. Furthermore, the Competition Authority has spoken with various parties and obtained information in this regard, and has taken this information and these viewpoints into account in this opinion.

Under competition law, the Competition Authority is tasked with ensuring that the actions of public bodies do not restrict competition and with advising the government on ways to make competition more effective and to facilitate the entry of new competitors into the market. The Competition Authority does this, among other things, by issuing public opinions to the government.

See detailed opinion No. 4/2009.