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A significant judgment of the Supreme Court on abnormally low tenders in public procurement

Attorney-at-law Sandor Elias represented a client in a significant dispute in the Supreme Court in administrative matter 3-20-924. In its judgment of 4 November 2020, the Supreme Court found that contrary to the understanding that has taken hold in the current judicial practice, not every tender below its cost price is prohibited. The Supreme Court found that cross-subsidisation with non-contractual revenue is not prohibited, unless separately forbidden by the law applicable in the field or the terms and conditions of the public procurement. However, a tender below its cost price is unacceptable, for example, if it distorts competition, foremost if the tenderer were to thereby abuse its dominant position by freezing out its competitors from the market. In conclusion, the decision of the Supreme Court is significant in shaping the future of the public procurement landscape. First, it brings the logic of public procurements and of private market closer together as a tender below its cost price is also not always prohibited in the usual relationship between entrepreneurs. Secondly, it inevitably places a somewhat higher administrative burden on contracting authorities.