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Competition and State aid implications of
‘public’ minimum wage clauses in EU public
procurement after the RegioPost Judgment
Dr Albert Sanchez-Graells
Public Procurement & Labour Standards–Reopening the Debate after RegioPost
University of Bristol Law School, 9 May 2016
9 May 2016
1Debate after RegioPost
Agenda
• Discussion of selected issues re dumping and competition
• Competition law implications
• State aid implications
• Preliminary conclusions
Debate after RegioPost 2
9 May 2016
Link to competition law - dumping
• Interestingly, Art 1 LTTG stressed that ‘that law is intended to combat distortions of competition in the award of public contracts that result from the use of low-paid personnel’ (AG Mengozzi, [7])
• Is intra-EU ‘dumping’ prohibited/prohibitable?
• Bundesdruckerei [34] points in opposite direction: ‘prevents subcontractors … from deriving a competitive advantage from the differences between … rates of pay’
Debate after RegioPost 3
9 May 2016
Asymmetry between cross-border &
inter-regional provision (of services)
• RegioPost allows for anti-dumping [‘public sector’] minimum wage requirements for posted workers
• Bundesdruckerei rejects anti-dumping [general?] minimum wage requirements for non-posted workers
• From an economic perspective, these different rules make no sense and create difficulties in terms of:
• Alternative (non in situ) provision (of services)
• Hybrid (in situ + remote) provision (of services)
Debate after RegioPost 4
9 May 2016
Debate after RegioPost 5
9 May 2016
Asymmetry between cross-border &
inter-regional provision (of services)
• Ultimately, this creates reverse discrimination of domestic undertakings vis-à-vis intra-EU suppliers
• [and foreign ie non-EU suppliers, as a result of GPA?—Art 25 Dir 2014/24; issue whether Bundesdruckerei and RegioPost are considered part of Directive or not]
• This makes very poor economic sense [this protectionism has severe potential impacts on public sector efficiency] and is likely to trigger further litigation
Debate after RegioPost 6
9 May 2016
Can ‘public’ labour standard clauses be
non-protectionist / not anti-competitive?
• Structurally, these clauses raise barriers to entry
• Almost impossible to disentangle protection from social dumping and protection from competition/ undertakings in other jurisdictions
• Moreover, special rules for ‘public contracts’ are more likely to have protectionist features (‘good employer’?)
• In my view, this raises complex issues under principle of competition in Art 18(1) Dir 2014/24
Debate after RegioPost 7
9 May 2016
Labour standard [minimum wage or not]
clauses and Art 18(1) Dir 2014/24
• Art 18(1) Dir 2014/24 prevents any artificial narrowing of competition
• Creation of ‘procurement specific’ labour standards / other requirements seems to fit this analytical framework
• Difficulty of applying Art 18(1) in a RegioPost scenario -> issue of mis-transposition of Dir 2014/24?
• Strict proportionality test to be applied to inclusion of labour standard clauses [under Art 70 Dir 2014/24]
Debate after RegioPost 8
9 May 2016
Competition law implications
• Some general competition law impacts
• Crowding out of SMEs and disadvantage vis-à-vis companies with more ability to delocalise
• Raising participation costs (two-tier industrial relations) + intra-MS barriers to participation (red tape, generally)
• Entrenchment of incumbency advantages
• Possibility to cross-subsidise/predate on the basis of different public/private contract performance cost structures
Debate after RegioPost 9
9 May 2016
Competition law implications
from private perspective
• If undertakings with strong public procurement position engage in predation in private markets
• Possible application of Art 102 TFEU and domestic equivalents in case there is a dominant position (big if?)
• If undertakings (SMEs?) coordinate their behaviour in ways that aim to avoid minimum wage clauses
• Possible application of Art 101 TFEU and domestic equivalents to their ‘employment avoidance’ agreements?
Debate after RegioPost 10
9 May 2016
Competition law implications
from public perspective
• There is no clear way of challenging the anti-competitive aspects not caught by private behaviour
• Issues of ‘State action’ and effet utile of TFEU, but currently not caught by CJEU case law precisely due to lack of involvement of private parties
• Unless, there is significant private involvement (including trade unions) in the setting up of the wages payable under contract compliance clauses
Debate after RegioPost 11
9 May 2016
State aid implications
• Generally, the imposition of (above market) minimum wage requirements as contract compliance clauses can result in an undue economic advantage for the awardees of those contracts
• Directly, particularly if overheads or fixed costs are set as a proportion of variable costs, or as result of indexation clauses
• Indirectly, due to ability to exploit two-tier employment structures as discussed
Debate after RegioPost 12
9 May 2016
State aid implications
• Generally, if there is an economic advantage, it could be caught by Art 107 TFEU, but this triggers
• Difficulty concerning ‘seemingly general’ rules
• If it is considered State aid, its exemption is complicated by the fact that it does not really fit the criteria under Commission Regulation (EU) No 651/2014 of 17 June 2014 (General BER)
Debate after RegioPost 13
9 May 2016
State aid implications
• 2014 General BER: only allows some employment aid
• Recruitment and employment aid for disadvantaged workers and workers with disabilities [Art 1(1)(f) and Arts 32 & 33]
• Aid oriented towards job creation [Art 17(5)]• Employment directly created by an investment project shall (a) be
created within 3 years of completion of the investment; (b) be a net increase in the number of employees in the establishment concerned; (c) be maintained during a minimum period of 3 years
• Aid to maintain jobs is not covered (operating aid)
Debate after RegioPost 14
9 May 2016
State aid implications
• Can it be considered de minimis under Commission Regulation (EU) No 1407/2013 of 18 December 2013?
• total amount of aid granted per Member State to a single undertaking shall not exceed EUR 200,000 over any period of 3 fiscal years [Art 3(2)] BUT
• applies only to transparent aid—ie where it is possible to calculate precisely the gross grant equivalent of the aid ex ante without a risk assessment [Art 4(1)]
• To me, not clear at all that this criterion can be met
Debate after RegioPost 15
9 May 2016
Preliminary conclusions
• The Bundesdruckerei-RegioPost “system” for the use of Art 70 Dir 2014/24 to enforce labour standards creates structural restrictions of competition
• Should be controlled under strict proportionality test, ultimately justified by Art 18(1) Dir 2014/24
• Limited scope for application of competition law, in particular to “public-side” competition restrictions
• Limited (?) scope for application of State aid rulesDebate after RegioPost 16
9 May 2016
Thank you for your attention
Be in touch
http://www.howtocrackanut.com
@asanchezgraells
Debate after RegioPost 17
9 May 2016