Hungary: Authorities stress the importance of the fairness of public procurements

By neub9
3 Min Read

In November 2023, the Hungarian Competition Authority (HCA) and the Public Procurement Authority published technical guidance on their websites regarding corruption risks and cartel agreements that can affect the fairness of public procurements. The purpose of this guidance is to increase awareness among contracting authorities about ensuring effective competition and preventing situations of corruption in public procurement procedures. It also aims to help them recognize warning signs of anti-competitive behavior by tenderers. In addition to refreshing and updating the content of previous publications, the guidance covers topics such as the risks of corruption and anti-competitive behavior stemming from conflicts of interest, what constitutes an anti-competitive call for tender, and the concept of a public procurement cartel and its legal implications.

A public procurement cartel occurs when independent competing companies collaborate to divide the market for goods or services being procured through public procurement. They also agree on prices or other terms of sale, thereby eliminating or restricting competition among themselves. Legal consequences for participating in a cartel include fines imposed by competition authorities, exclusion from public procurement procedures, imprisonment, and private enforcement.

So, what can a contracting authority do to ensure fair competition in preparing and conducting a public procurement procedure? During the initial request for proposals and the preliminary market consultation, the contracting authority should withhold details such as the opening date of the procedure, supply needs, quantity, and delivery schedule to avoid restricting competition. Suitability requirements should also be set in a manner that does not limit competition. While involvement of interested economic operators is allowed, the contracting authority must disclose relevant information to all other economic operators. Using an external expert is possible, but a declaration of conflict of interest should be obtained to prevent collusion with potential tenderers. Additionally, choosing the open procedure over other options can ensure broader competition, and potential tenderers should have equal opportunities to address any deficiencies in their proposals.

If a potential tenderer believes that the terms of a public procurement procedure restrict competition, they can initiate a preliminary dispute settlement procedure. If the contracting authority fails to modify the restrictive terms, potential tenderers can pursue legal remedies. On the other hand, if the contracting authority detects restrictive behavior by tenderers, they are required to notify the HCA for further investigation. Various behaviors such as price-fixing, false bidding, bid-rigging, and market-sharing are considered infringements of antitrust rules. The decision to initiate an investigation is made by the HCA after considering factors such as the impact on the relevant market, estimated value of the public procurement procedure, and potential advantages and disadvantages of conducting an investigation.

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