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Recent Deals / 24.11.2016

Waselius & Wist secures major victory for hospital supply companies

Waselius & Wist successfully represented Bayer Oy, Oy SCA Hygiene Products Ab, Coloplast Oy and Steripolar Oy as appellants in proceedings in the Supreme Administrative Court (“SAC”) against KL-Kuntahankinnat Oy as contracting authority and OneMed Oy as the winning tenderer. To the extent known, this is the first time a Finnish court has considered a framework arrangement restrictive of competition in a situation where the contracting authority received two competing tenders that fulfilled the requirements of the request for tenders. The decision of the SAC (KHO:2016:182, 17.11.2016) was published in the yearbook of the SAC, which means that it is considered a legal precedent to be followed in other similar cases.

The case concerned an appeal against the procurement of health care supplies and related services by KL-Kuntahankinnat Oy through a framework agreement open for all Finnish municipalities and also certain other contracting authorities. KL-Kuntahankinnat Oy is a central purchasing body acting on behalf of municipal and local government customers by tendering framework agreements, conducting negotiations and managing contracts. The appellants are manufacturers of various hospital and health care supplies.

The estimated total value of the framework agreement was, according to the contracting authority, some 16 million euros. However, since the framework arrangement was open-ended, this figure was according to the appellants not reliable and the actual value of the agreement could have been significantly higher. Eventually, in the absence of the SAC’s intervention, the scope of the agreement could have been nationwide corresponding to a value of more than 80 million euros based on population.

The SAC ruled in favor of the appellants on all points concluding that the procurement was unlawful and restricted competition in contradiction with the Act on Public Contracts (348/2007, as amended) and EU Directive 2004/18/EC. The SAC revoked the decision of the Market Court and the procurement decision of KL-Kuntahankinnat Oy and ordered KL-Kuntahankinnat Oy to organise a new contract award procedure subject to a conditional fine of 1 million euros.

The decision of the SAC creates a level playing field for potential tenderers and makes it clear that framework agreements cannot be used improperly to prevent, restrict or distort competition. Due to the discriminatory nature of the request for tenders and certain unproportionate mandatory requirements, the tender was in fact open only to the biggest wholesalers in the market and foreclosed the manufacturers of the products, which had no actual possibilities of participating in the tender.

Further, the decision of the SAC confirms, as argued by the appellants, that the potential tenderers have a right to receive sufficient information for the purposes of submitting a tender, including information on the actual scope of the procurement, the customers participating in the procurement and the purchases to be made by such customers in accordance with the principle of transparency.

Lawyers involved