Decision n. 454189, 17 June 2022, Council of State, Société Lacroix City Saint-Herblain, classé B, France
Article(s) in Directive 2014/24/EU: Art. 57 (4)(d)
Topic: Consequences of an illicit collusion on the restitution of expenses
Member State: France
Court/rev. board: Conseil d’Etat
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Art. 57(4)(d) of Directive 2014/24/EU was implemented by the Public Procurement and Concession Code (PPCC), Art. L. 2141-9. The wording of French law is more precise than the European Directive in that Article L. 2141-9 of the PPCC, which authorises the exclusion from a contract award procedure of persons “in respect of whom it has sufficiently convincing evidence or constituting a body of serious and concordant evidence” to deduce a cartel or collusion with other economic operators having the effect of distorting competition.
While the commented case concerns the restitution of expenses after the execution of three public contracts following final convictions of the contractor for collusion, it is part of the more general subject of exclusions from award procedures in which French law bases its decision on the wilful misconduct of the co-contractor during his application and his tender.
2. FACTS
The Seine-Maritime department signed three road signage supply contracts with the applicant company in 1999, 2003 and 2006. In Decision n° 10-D-39 of 22 December 2010, the French Competition Authority condemned eight companies, including the applicant company, for having colluded between 1997 and 2006 on the allocation and pricing of contracts having such a purpose. In 2017, the Rouen administrative court, seized by the Seine-Maritime department, annulled the contracts concluded with this company in 1999, 2003 and 2006, and commanded it to return to the department all the sums paid under these contracts, i.e. EUR 2,630,016.11, EUR 862,209.41 and EUR 1,741,563.49 respectively. The Douai Administrative Court of Appeal overturned these decisions, upholding only the subsidiary conclusions of the Département Seine-Maritime seeking compensation for the additional costs incurred regarding the company’s anti-competitive practices, and ordered the company to pay the Département Seine-Maritime the sums of EUR 1,525,409.34, EUR 206,930.26 and EUR 818,534.84. This judgment was then censured by the Conseil d’Etat in 2020, insofar as it had ruled on the financial consequences of the annulments of the contracts concluded between the department of Seine-Maritime and the company. The Conseil d’Etat referred the case to the Douai Administrative Court, which confirmed the company’s conviction. The applicant company then sought the annulment of the Douai Administrative Court of Appeal, which prescribed it to pay the Département Seine-Maritime the sum of 2,752,093.04 euros for several contracts annulled between 1999 and 2006 for anti-competitive practices.
3. JUDGMENT
It will be remembered that the Conseil d’Etat has allowed the victim of a cartel during the award of a public contract to request the annulment and “restitution” of the price paid by the public entity, but that the ex-contractor may request compensation for useful expenses in the name of unjust enrichment (CE 10 July 2020, Société Lacroix signalisation, n°420045). The question of what can be included in these useful expenses has just been clarified by the Conseil d’Etat in the judgment commented on, still in relation to the cartels that affected the road signs sector in the 2000s. This is the same case as the one judged on 10 July 2020, since on referral the Douai Administrative Court of Appeal ordered the applicant to pay the Département Seine-Maritime the sums of EUR 1,608,254.85, EUR 256,076.20 and EUR 887,761.99 in respect of the 1999, 2003 and 2006 contracts, as well as the sum of EUR 425,616 as compensation for the Département Seine-Maritime’s loss due to the unavailability of the sums corresponding to the excess price of the cancelled contracts for the period prior to 26 March 2015.
The appeal in cassation gives Conseil d’Etat the opportunity to recall, but also to specify, what is possible to obtain as useful expenses and the methods that can or cannot be used to calculate them. Thus, it states that “useful expenses include, to the exclusion of any profit margin, the expenses that have been directly incurred by the co-contractor for the realisation of supplies, works or services intended for the administration”. Only the part of the overheads, which contributes to the performance of the contract and is, therefore, useful to the public authority, may be considered. Communication costs and, where the contract in question is a public contract and except in the case of a partnership contract, the financial costs incurred by the co-contractor cannot be considered as having been usefully incurred for the performance of the contract. As much as the case of financial costs has already been included for concessions (CE 16 November 2005 MM. Auguste and Commune de Nogent-sur-Marne, n. os 262360, 263709, Rec.) and partnership contracts (CE 9 June 2020, Société Espace habitat construction, n° 420282, Rec.), and is therefore confirmed for partnership contracts, the case of communication costs had never been considered by the Conseil d’Etat, which must, therefore, be excluded from the useful expenditure.
But it is on the implementation of the principles relating to the calculation of useful expenditure that the judgment is most interesting, since it sanctions the Court’s reasoning twice.
The first censure concerns the calculation of useful expenses. The Court relied on the method proposed by the Department, which consisted of deducting from the contract price the extra cost attributable to the company’s anti-competitive practices and then applying a normal margin rate to the remainder resulting from this first operation. It evaluated this extra cost at an average rate of 58% of the amounts paid to the contractor for the 1999 contracts, 24% for the 2003 contract and 47% for the 2006 contract. By basing itself solely on the comparison between the prices charged by this company in the contracts concluded between 1999 and 2006 and those of a single contract concluded in 2010 by the department with another company, “without taking into account any exogenous factor likely to have influenced price formation, and whereas it was clear from the documents in the file submitted to it that the Competition Authority, in its decision of 22 December 2010, estimated the average price increase attributable to this agreement at 5 to 10%, the Douai Administrative Court of Appeal distorted the facts of the case”.
One might have expected the judgment of 10 July 2020 to provide a framework for calculating the Administrative Court of Appeal, which would have saved time, but it does little better here. It began by rejecting the method proposed by the department, on the same grounds as those that led to the annulment of the Administrative Court of Appeal’s judgment, before also rejecting the method proposed by the applicant. The latter thought it could, in substance, calculate this useful expenditure on the basis of the results of an economic study that it had commissioned, consisting, for the 2003 and 2006 contracts, of estimating the production costs of certain articles and services for the 2016-2017 fiscal year and then reconstructing “the evolution of the main cost items contributing to the formation of the full cost of these articles, such as adhesive film, aluminium and steel, labour and structural costs, up to 2003 and finally reconstructed the total cost of the articles in question, which was the same as that of the articles in question”, and finally reconstituted the total cost of supplies and services sold to the department in the context of these two contracts”, while for the 1999 contracts, not having the necessary data to apply the same method as for the later contracts, it argued that the analysis of its tax returns for this period showed that its operating costs for the period under consideration represented 86.9% of its operating income, and proposed to apply this rate to the amount invoiced to the department in the context of the contracts.
However, the Conseil d’Etat rejects both methods. With regard to the contracts signed in 1999, it cannot be used “in the absence of any element tending to demonstrate that the ratio between the company’s operating expenses and operating income, taken as a whole, would be representative of the activity that was the subject of the disputed contracts, and when the road signage activity represented only 44% of the turnover of Lacroix Signalisation in 2009, according to the Competition Authority. Moreover, such a method does not allow for the exclusion of those of the company’s costs that were not useful to the public entity, such as financial costs. Regarding the 2003 and 2006 contracts, it considers, in a lapidary manner, that the documents produced by Lacroix Signalisation in support of the economic study carried out at its request “do not allow us to ensure the accuracy of the reconstruction that it proposes”. It therefore referred to an expert the task of assessing, on the one hand, the amount of expenditure incurred by the company for the execution of these contracts and which were useful to the Département Seine-Maritime, i.e. “the expenditure directly incurred by the co-contractor for the execution of supplies, works or services intended for the administration” and, on the other hand, the effects of monetary erosion up to 26 March 2015.
The only clarification concerns the discounting date that the expert must consider for the calculation of monetary erosion, in this case the date of registration of the claim at the Rouen Administrative Court, as proposed by the rapporteur public.
As for the prejudice linked to the unavailability of the sums corresponding to the additional cost of the contracts until the date of its request for interest, it rejected the department’s cross-appeal, the only prejudice “relating to the impossibility of reducing its debt by the corresponding amount not being compensable”, without any further explanation.
