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The IT-company KMD's strategy to urge municipalities to sign it-contracts with KMD and refrain from initiating public tenders

28. marts 2012

This case concerns whether the Danish IT-company KMD has breached section 11 in the Danish Competition Regulation and TEUF article 102 by pursuing a strategy to urge municipalities to sign it-contracts with KMD and refrain from initiating public tenders.

The Danish IT-company KMD provides IT-products and IT-services to public authorities including municipalities. The DCCA presumed that KMD was dominant on a possible market for providing it-systems for handling payroll management in Danish municipalities and regions.

Documents obtained during an unannounced inspection at the premises of KMD revealed that KMD had been active in urging municipalities to sign contacts with KMD without initiating public tenders in four specific cases. KMD conducted this strategy by offering small rebates as a mean to encourage the municipalities not to initiate public tenders and instead sign contracts with KMD.

The value of the contracts exceeded the threshold of the public procurement rules and the municipalities were obliged to make public tenders according to the public procurement regulation. The documents from the unannounced inspection showed that both KMD and the municipalities were aware of this.

When municipalities do not initiate public tenders other providers of similar it-systems have limited acces to sell their it-systems to the municipalities. The Danish Competition and Consumer Authority (DCCA) therefore assessed that KMD had a strategy to urge municipalities not to initiate tender procedures and instead sign contracts with KMD.

The DCCA therefore examined whether this strategy and behaviour constituted an abuse of KMD’s possible dominant position (Section 11 of the Danish Competition Act and TFEU article 102).

The DCCA concluded that this type of behaviour is not a per se infringement of Section 11 of the Danish Competition Act and TFEU article 102. This is due to the fact that only public authorities (municipalities) are responsible for complying with the public procurement rules. Therefore a private company cannot determine whether a municipality does or does not initiate tenders. The deciding factor was therefore whether the rebates that KMD offered the municipalities infringed Section 11 of the Danish Competition Act and TFEU article 102. The rebates given by KMD were of a limited size and the DCCA therefore decided not to initiate any further investigation in this regard.