This presentation by UNCTAD was made during Break-out Session 3: Creating Legitimacy in the framework of the discussion on “Overcoming adversity and attaining success: Small and developing competition agencies” held at the 16th meeting of the OECD Global Forum on Competition on 8 December 2017. More papers and presentations on the topic can be found out at oe.cd/sda.

1. OECD GLOBAL FORUM ON COMPETITION
Competition Policy and Public
Procurement
Teresa Moreira
Head, Competition and Consumer Policies Branch
UNCTAD
Paris, 7-8 December 2017

2. The Size of Public Procurement
 WTO estimates the share of Public procurement in GDP globally
to be between 10 and 15%.
 In the European Union, the average share of Public procurement
in the GDP of its 28 Member States is estimated to be 16%.
 The share of Public procurement in GDP of 35 OECD countries
is 12% on average (2015).
 Low-income countries have the largest share of Public
procurement in GDP, at 14.5%; followed by upper-middle income
countries, at 13.6% (World Bank data for 123 countries for 2015).
 In Eritrea, Public procurement is 33% of GDP. In Angola, the
share is 26% of GDP; in the Netherlands and India 20%; whereas
in China only 2,8% (World Bank).

3. The benefits of Competition in Public
Procurement
 Public procurement is an important area in terms of allocation and use of public
resources.
 Modern design and reform of existing Public Procurement systems will help
developing countries and countries with economies in transition to fully
benefit from trade liberalization, services privatization and deregulation. It will pave
the way for increased FDI and will provide opportunities for SMEs.
 Competition policy may help Public procurement to be more transparent and
more efficient: it will benefit consumers and will make good use of taxpayers’
money.
Competitive Public Procurement will ensure best value for money

4. Key Factors to Promote Competition in
Public Procurement
 Design of the regulatory framework - principles of non-discrimination, equal
treatment, due process, access to information and transparency.
 Guidance of 2011 UNCITRAL Model Law on Public Procurement - explicit
reference to the principle of Competition.
 Careful drafting of the scope of Procurement law to apply to all economic sectors
and to all undertakings, limiting exceptions due to exceptional and specific
purposes.
 Clear bid-rigging prohibition in Competition law as a complement to Public
Procurement legislation: often with very harsh sanctions (criminal).
 Allow for appeals and review procedures of Public Procurement decisions.
 Centralized vs. decentralized procurement systems.

5. Key Factors to Promote Competition in
Public Procurement (2)
 Promoting Competition – widening the circle of potential bidders
• Liberalizing Public Procurement markets: see WTO Agreement on
Government Procurement (last revised in 2014): 47 WTO members.
31 WTO members are observers (developing countries and economies
in transition) 10 acceding to the Agreement as parties.
 Facilitating access through on-line platforms, the standardization of
Procurement systems, the launch of E-Procurement, encouraging the
participation of SMEs.
 Balancing Competition with other public policy objectives of Public
Procurement: fostering innovation, a greener economy and
economic & social development.

6. Prevention, detection and prosecution of
anti-competitive practices in Public
Procurement
 See OECD 2009 Guidelines for fighting bid-rigging.
 Market monitoring activities focused in key sectors - infrastructures,
health-care goods and services.
 Advocacy activities: Government bodies, business associations,
consumer organizations, media - it is crucial to raise awareness and to
create a competition culture.
 Effective competition law enforcement: appropriate and effective
tools, sanctions and remedies (“blacklisting”).
 Cooperation and coordination between Competition Authorities and
Public Procurement Authorities is extremely important.

7.  Success stories - Russia, Mexico, Japan,
Republic of Korea and Russia
 UNCTAD Voluntary Peer Reviews of
Competition Law and Policy

8. Success stories – Mexico
 Mexico’s Cofece detected bid rigging in the pharmaceutical sector in
2006.
 The Authority took measures in both ways.
Sanction Advocacy
Imposing a fine of
Mex$151.7 million on
the bid rigging in 2010
• Consolidated purchases
• Reverse tendering
• Reduced reference prices
• Opening of bidding
procedures to international
suppliers
Mexican Government saved approximately Mex$ 46 billion
between 2006 and 2011

9. Efforts of the Japan Fair Trade Commission (JFTC) against bid-rigging
 Vigorous law enforcement
- 43 Cease-and-desist orders and surcharge payment orders of approximately
200 million euros against bid-rigging cases in public procurement sector
(FY2012-2016).
 Outreach activities toward the public procurement agencies
- Liaison meetings JFTC - Procurement agencies (FY2016: 10 times).
- Nation-wide seminars for Procurement agencies' officials (FY2016: 287 times).
 Status survey
- Periodic surveys to analyze the competition status in procurement sectors
and recommend measures for improvement to Proc. Agencies.
 The Involvement Prevention Act (enacted in 2002)
- JFTC demands the Procurement agency to take necessary measures to
eliminate the involvement of its officials in the bid-rigging case.
Source: Yukinari SUGIYAMA, JFTC ,“Prevention of bid rigging in public procurement in Japan”, ICN
Cartel Workshop (October 6, 2017)

10. Korea Fair Trade Commission (KFTC) experience against bid-
rigging
 Strengthening competition law enforcement
- Launching the bid-rigging investigation division (2013).
 Preventive measures
- Bid Rigging Indicator Analysis System (BRIAS, 2006).
- Introduction of mandatory prearranged damage clause in
the contract (2010).
- Disqualification of bid riggers (2009).
 Advocacy activities
- Staff exchange program between the KFTC and the Public
procurement agency.
- Operates education sessions for bidders to prevent bid-
rigging.

11. KFTC experience against bid-rigging (2)
KFTC data on bid-rigging cases
• 2014
• 2015
• Source: Korea Fair Trade Commission
• 2016
Year 2012 2013 2014 2015 2016
No. of case 14 22 51 66 39
Fine 10 million 56 million 877 million 53 million 140 million

12. • Public procurement law enacted in 2005 (Law 94-FZ): process more
transparent and competitive.
• Transition to e-auctions as the main form of PP placement on a limited
number of e-platforms to ensure effectiveness of tenders and
minimization of risks of digital (electronic) fraud (collusion).
• E-auctions: an effective measure to prevent collusion and instrument for
the creation of competitive environment with strictly set quality
requirements.
• Positive impact: sharp drop in prices in public procurement; Government
savings reached 1448 billion Rubles (approximately 36 billion Euros);
openness and transparency as key achievements.
Source: Contribution of the Russian Federation on Competition Policy and Public Procurement,
UNCTAD, IGE on Competition Law and Policy, July 2012.
RUSSIAN FEDERATION

13. • Significant Antitrust legislation amendments in 2016: namely,
improvement of investigation in cartel cases and more severe penalties.
• Public procurement in Russia reaches 30% of GDP. More than 80% of
the total number of cases of Russia cartels identified by FAS Russia are
in the area of bid-rigging, where the damage to the parties can reach
40% of the initial price of the contract.
• In 2016, FAS reported on the audit and completed the investigation of
cases of several major cartels: the delivery of medicines through 700
auctions for regional hospitals; and the delivery of uniforms for law
enforcement agencies in 18 auctions (by 3.5 billion rubles).
Source: Global Legal Insights, Cartels 2017, Russia at:
https://www.globallegalinsights.com/practice-areas/cartels/global-legal-insights---cartels-5th-
ed./russia
RUSSIAN FEDERATION (2)

14. UNCTAD’S VOLUNTARY PEER REVIEWS ON
COMPETITION LAW AND POLICY
Developing Countries/Economies in Transition
• Since 2005: 24 member States, 1 regional economic organization (WEST
AFRICAN ECONOMIC AND MONETARY UNION), 1 tripartite Peer Review
(Zambia-Zimbabwe-Tanzania);
• Explicit reference, assessment and/or recommendations on Public
Procurement in the Reports of:
- Indonesia (2009) – successful KPPU fight against bid-rigging;
- Serbia (2012) – harmonization with EU law was not yet achieved, it
was recommended to strengthen policies to fight bid-rigging in
procurement at central and local Governments levels.;
- Mongolia (2012) – increased thresholds for tenders, electronic bidding
for Government orders and inter-agency coordination were
recommended;

15. UNCTAD’S VOLUNTARY PEER REVIEWS ON COMPETITION
LAW AND POLICY (2)
Explicit reference, assessment and/or recommendations on Public
Procurement in the Reports of:
- Ukraine (2013) – although Procurement responsibilities had been
assigned to the Competition Agency and the framework had been
amended to meet EU law and World Bank requirements but it was
still recommended to refine Public Procurement law;
- Albania (2015) – through the Authority’s advocacy and following
Peer Review's recommendations, the Public Procurement law was
amended to include “blacklisting”, amongst other points;
- Uruguay (2016) – Competition Commission study (2014) was
followed by recommendations to public bodies on this issue;
- Argentina (2017) – highlight of recent enforcement case in the
health-care sector.

16. FINAL REMARKS
o Competitive Public Procurement is a main goal for Developing countries
and countries with Economies in Transition to fully benefit from their
integration in the world economy through the trade liberalization,
privatization and deregulation;
o This goal entails the modernization and/or review of legal frameworks, for
which it will be advisable to follow international guidance and best
practices - see UNCITRAL Model Law;
o Small and young Competition Authorities may feel challenged by Public
Procurement: however, the infringement cases (bid-rigging) are cartels,
anticompetitive practices they are familiar with in law enforcement;
o Different solutions may be implemented to achieve a competitive Public
Procurement: Competition authorities may not have special responsibilities
in the field of Public Procurement but need to cooperate and coordinate
with Public Procurement bodies and to do strong advocacy to Government
bodies, business and civil society;

17. FINAL REMARKS (2)
o Technical assistance and capacity building projects are crucial to
support developing countries and countries with economies in
transition and raise awareness on this issue: a change of culture
may be needed and the experience and practical and successful
tools (checklists; Government and business awareness raising
road-shows; appropriate sanctions - harsh fines; "blacklisting",
disqualification) of other Competition Authorities may prove very
helpful;
o International organizations and development partners should
 join efforts,
 pool resources,
 share information and knowledge and
 implement multi-agency cooperation programmes to better assist
the beneficiaries for a more effective assistance.

18. THANK YOU !
Teresa.Moreira@unctad.org
http://www.unctad.org/Competition