Friday, 12 August 2022

Press Release - Market Investigation in the Construction Sector

Subject: Market Investigation in the Construction Sector pursuant to Article 11 Law 3959/2011 – Second Interim Report and Launch of the Second Public Consultation

On January, 8th 2021, the Hellenic Competition Commission (“HCC”) has decided ex officio to launch a market investigation in the construction sector pursuant to Article 11 Law 3959/2011(see here

On April, 7th 2021, the HCC has issued its first interim report with respect to the conditions of competition in this sector and launched a public consultation inviting interested parties to comment. See here (in Greek) .

Following the first interim report and the submissions in the first public consultation (see here the HCC, based on article 11 (3) Law 3959/2011, today publishes its second interim report. The second interim report concludes that there is a lack of effective competition in the specific sector and announces specific remedies.

The repeated and significant changes that occurred in the shareholdings of the two largest companies in the sector, in the period March-September 2021, led the rapporteur to update his research, as well as to take further investigative measures following an HCC Plenary Decision. Specifically, the HCC in the second phase of the investigation found again that in the construction sector and in particular in the market for public works, there is a lack of effective competition, which cannot be remedied with the application of Articles 1,2 and 5-10 Law 3959/2011.

The first interim report found that there has been significant concentration of the construction industry over the past decade with increasing barriers to entry in some of its submarkets. In addition, it examined the horizontal common ownership of a specific fund in the two largest construction companies of the country, which may lead to theories of harm related to unilateral effects of reducing competition or mitigating the incentives (to compete) as well as coordinated effects.

According the second interim report, despite the significant reduction of the scale of horizontal common ownership in the two largest construction companies, the remaining common ownership and the structural conditions of the market for the construction of large public works which is an oligopoly with high barriers to entry, remains favourable - in line with the theory of horizontal common ownership - to competitive distortions.

In addition, there is a relative symmetry of market shares in the construction of large public works as well as a symmetry of cost structure and production capacity between competing companies, in this sub-sector. These characteristics are factors that contribute to possible parallel common interests, due to horizontal joint shareholding and to possible joint market power of the associated companies, distorting competition in the relevant oligopolistic market.

A specific fund seems to have operated considering its overall interests in both companies (maximizing portfolio theory). For a significant period, there has been significant horizontal common ownership in both of the industry's biggest competitors. During the period under examination, a probable indirect result of "passivity, i.e. failure of aggressive competition", was identified in a series of public tenders, according to the quantitative analysis performed.

According to the second interim report, it appears that the recent partial disinvestment of the specific fund in one of the two companies, limits, but does not effectively neutralize, the negative effects of the horizontal common ownership in the two most important companies in the sector. We sould note here, the impact on this result of possible structural or other financial links between the fund and the aforementioned companies (as well as their managements) as can be seen from the findings of the HCC research.

According to the econometric analysis, as well as the relevant model of competition under asymmetric common ownership (which effects competition both between the commonly owned undertakings and between the latter and non-commonly owned enterprises), the risks for theories of harm, related to possible, uncoordinated anti-competitive effects, as well as coordinated anti-competitive effects, have been identified.

The second interim HCC report proposes the following remedies for the examined sector:

  • Independent Management – ​​Chinese Walls – Code of conduct, in cases of horizontal common ownership of competing companies, concerning the members of the management and the shareholders of these companies, as well as the manner and type of information (sensitive and not) that will be transmitted by the common Shareholders to competing businesses and vice versa;
  • Imposing a notification obligation to the HCC, to carry out a relevant economic analysis of competitive effects, in cases of an increase in the percentage of horizontal common ownership, when any legal entity, acquires a percentage of more than 5% in the share capital of more than one competing company in the examined industry;
  • Additional obligations to "active common shareholders" present in the examined sector, and the specific sub-sector/markets involved.

Also, other issues deriving from the legislative framework, taking into account the concerns expressed by companies in the sector (during the first consultation as well as the supplementary investigation by the HCC), about their effects on competition are (among others):

  • With regard to the more intensive and wider use of PPPs and concessions without prior systematic analysis of their (possible) effects on competition, it is proposed to establish a procedure for formulating an opinion by the HCC regarding the effects of each infrastructure project on competition, at the stage of designing the project, as well as in its implementation and development stage.
  • Regarding construction consortia (joint ventures), it is proposed to provide specific guidance, in collaboration with the Hellenic Single Public Procurement Authority (HSPPA).

The HCC in its second interim report considers the above measures to be necessary and proportionate for the creation of effective competition in the construction sector, based on Article 11(3) Law 3959/2011.

The second interim report is available here in Greek

The public consultation lasts from 10-08-2022 until 09-09-2022. Interested parties are invited to submit their comments (in editable format) to This email address is being protected from spambots. You need JavaScript enabled to view it. until 09-09-2022.

Following the second consultation phase, the HCC will issue its final report.

Please note that any submission beyond this deadline will not be accepted.

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