Legal Updates

A tender bidder who acts to prevent a subcontractor from contracting the winner may be considered as promoting a restrictive trade arrangement

February 24, 2020

Two companies participated in a Ministry of Defense tender to provide quality control services that required at least 13 quality controllers. The company that did not win solicited the quality controllers with whom the winner was supposed to contract, not to work with the winner and so the winner could not perform more than half the work and the Ministry of Defense transferred the remaining work to the other company.
The Court accepted the claim and held that the other company breached the good faith duty between bidders in a tender and created a restrictive trade arrangement that prevented quality controllers from contracting with the winner. Although tender bidders do not negotiate with each other, they are obliged to act in good faith towards each other and thus, a bidder who did not win a tender may not take any active steps to hinder the winning bidder from perfecting its winnings. An arrangement between persons conducting business, whereby one of the parties at least restricts itself in a manner that may prevent or reduce competition in business between it and the other parties to the arrangement, or some of them, or between it and a person who is not a party to the agreement is a restrictive trade arrangement prohibited by law. Here, the second company worked to reduce competition by causing the quality controllers not to contract with the winner and this is very significant when it comes to a centralized market (there are only 22 qualified quality controllers in the market) and therefore these are actions to create a prohibited restrictive trade arrangement. Thus, the second company is to indemnify the winner for the loss of profits due to its actions.