Judges: W.A. DREW EDMONDSON, Attorney General of Oklahoma
Filed Date: 9/21/1998
Status: Precedential
Modified Date: 7/6/2016
Dear Representative Sullivan,
This office has received your request for an Attorney General Opinion asking, in effect, the following questions:
1. May the University of Oklahoma enter into a contract with a vendor for multiple years, such as a sole source contract for copier services for five to ten years?
a. Would such an agreement that would guarantee no competition for a number of years be valid?
2. May the University of Oklahoma enter into long-term contracts with vendors, such as a five-year contract for the exclusive right to sell soft drinks at all University facilities?
a. May the University grant a monopoly for any product for long periods of time?
3. Does a provision in a "request for proposal" for copier services, which asks the bidder if there would be a dollar value associated with the distinction of becoming the sole or major supplier to the University of Oklahoma and requests the bidder to indicate if it would contribute to a fund for scholarships or other improvements, constitute a solicitation for a kickback?
Your questions relate, in part, to a request for proposal ("RFP") issued by the University of Oklahoma ("the University") for copier services. After your opinion request was received by this office, the University withdrew the RFP. You have indicated that you are still interested in an opinion on these issues for future reference.
Pursuant to Article
Any department, institution or agency of the state operating on revenues derived from any law or laws which allocate the revenues thereof to such department, institution or agency shall not incur obligations in excess of the unencumbered balance of cash on hand.
Okla. Const. art.
Pursuant to Article
Article
The University recognized the fiscal year limitation in Section 8.4 of its RFP for copier services which provides that "[t]he intended beginning contract period is proposed to end June 30, 1999 with an option to renew annually through June 30, 2003. While it is the intent of the University to maintain the contract for a five (5) year period, as an agency of the State of Oklahoma the University is prohibited from contracting for more than one fiscal year at a time." RFP R-6097-98, § 8.4 (withdrawn).
In regard to your question relating to long-term agreements granting an exclusive right to sell soft drinks at all University facilities, such agreements normally would not implicate the constitutional fiscal year limitation because they typically do not involve the expenditure of State funds; rather, in these increasingly common arrangements the school or university is the recipient of cash bonuses, other incentives, and commissions on the sales of soft drinks in return for granting a soft-drink company a long-term exclusive right to sell its product on campus. To the extent that such agreements involve the commitment of State funds, the fiscal year limitation would apply such that any contract including years beyond the current fiscal year must contain a "non-appropriation clause"; that is, the effectiveness of the contract in succeeding years must be made contingent upon future legislative appropriations.
The Oklahoma Constitution provides that "[p]erpetuities and monopolies are contrary to the genius of a free government, and shall never be allowed. . . ." Okla. Const. art.
Pursuant to the constitutional mandate, in 1908 the Oklahoma Legislature enacted an antitrust act, most recently codified in Title 79. The Legislature recently repealed these statutes in Senate Bill 1357 and enacted the Oklahoma Antitrust Reform Act, 1998 Okla. Sess. Laws ch. 356, to be codified as 79 O.S. Supp.1998, §§ 201-212[79-201-212] ("the Act"). The language in the applicable provision of the Act is identical to Section 1 of the previous antitrust act and, in fact, has remained unchanged since 1908. The pertinent section reads as follows: "Every act, agreement, contract, or combination in the form of trust, or otherwise, or conspiracy in restraint of trade or commerce within this state is hereby declared to be against public policy and illegal." See79 Ohio St. 1991, § 1[
The new Act also includes a provision not found in the previous statutes, but relevant to your question pertaining to monopolies. Section 3(B) of Senate Bill 1357,3 reads as follows: "It is unlawful for any person to monopolize, attempt to monopolize, or conspire to monopolize any part of trade or commerce in a relevant market within this state." This section is similar to Section 2 of the Sherman Antitrust Act,
Recognizing that all contracts are by their nature exclusionary, courts have not given a literal interpretation to the antitrust laws. It is well settled that only undue or unreasonable restraints of trade or commerce and not all possible restraints are prohibited by the Sherman Antitrust Act and the Oklahoma antitrust statutes. Board of Regents of University ofOklahoma v. National Collegiate Athletic Association,
Under Oklahoma law, the fundamental test of reasonableness of an action that restrains trade is the action's effect on the public. To amount to an unreasonable restraint of trade in violation of Oklahoma's antitrust laws, the anticompetitive conduct must have an effect beyond its effect upon an individual competitor, such that the conduct has an adverse impact on competitive conditions in general as they exist within the relevant field of commerce. Harolds Stores v. Dillard DepartmentStores,
In the absence of any purpose to create or maintain a monopoly, the antitrust laws do not restrict the long recognized right of a trader or a manufacturer engaged in a private business to freely exercise his own independent discretion as to the parties with whom he will deal. Rance v. Sperry and Hutchinson Company,
In determining the unreasonableness of a given restraint, courts identify the relevant geographic and product market, then determine whether an unreasonable restraint exists within that market. Teleco,
In addition to the antitrust laws, Article
The Legislature shall pass no law granting to any association, corporation, or individual any exclusive rights, privileges, or immunities within this State.
Okla. Const. art.
Although addressed specifically to legislative acts, this constitutional provision also prohibits the granting of exclusive rights, privileges or immunities by an administrative agency or commission. A.G. Opin. 86-18, 86-19 and 86-78.
The constitutional prohibition against special privileges and immunities "was enacted to preserve equality between citizens who are similarly situated." State v. Lynch,
A contract between the University and a copier service for one year with a yearly option to renew for a maximum term of five years, such as the one described in the RFP, does not adversely affect competition or the public. Rather, to the extent an exclusive renewable contract results in a lower cost for copier services to a taxpayer-supported university, it is in the public interest. A contract granting a soft drink company a multi-year exclusive right to sell soft drinks on campus does not violate antitrust laws where competing products are readily available in the relevant geographic market, nor does it constitute a grant of an exclusive right or privilege within the meaning of Article V, § 51. In reference to your more general question as to whether the University may grant a monopoly for long periods of time, the answer depends on the factual circumstances surrounding the individual contract and cannot be answered in an Attorney General Opinion. 74 O.S. Supp. 1997, § 18b[
Should a company become the sole or major supplier to OU, would there be a dollar value associated with that distinction? Funds may be used by the President's office for scholarships and other improvements. Indicate if your company would contribute and if so, state the amount. Any monetary contribution should not impact the cost per copy contract.
RFP R-6097-98, § 8.20.7 (withdrawn).
Although you have questioned this provision as a kickback, the referenced contribution is not a kickback under State law. The Anti-Kickback Act of 1974 defines kickback as follows:
[T]he giving of money or any other thing of value either directly or indirectly by or on behalf of any person, or the agent of any person, holding a contract or bidding to obtain a contract with the state for the furnishing of goods or services of any kind to any state employee or any person holding a higher tier contract with the state for the furnishing of goods or services, when the giving of which is for the purpose of acquiring or holding such contract with the state.
74 Ohio St. 1991, § 3402[
Although the provision in question is not an illegal kickback, the question remains as to whether it violates competitive bidding laws. Except for the lease-purchase of data processing equipment, State colleges and universities are exempt from the Oklahoma Central Purchasing Act, which provides that no acquisition or contract in excess of $2,500.00 shall be made without the submission of competitive bids by the State Purchasing Director. 74 Ohio St. 1991, § 85.1[
The purpose of competitive bidding is to secure economy and protect the public from collusive contracts, favoritism or fraud and to promote actual, honest, and effective competition. Hannanv. Board of Education of City of Lawton,
The provision in question is problematic because it is unclear whether the University is merely seeking a discount, or a payment in lieu of a discount, in consideration for granting the vendor an exclusive contract or for the distinction of being a major supplier, as suggested in the first sentence of Section 8.20.7 of the RFP, or whether the University is seeking a contribution or donation unrelated to the contract price, as suggested in the last two sentences of that section. While it is perfectly acceptable for the University to ask a vendor to give a discount or make a payment in lieu of a discount to the University as consideration for an exclusive contract or for being a major supplier, a solicitation for a contribution presents an obvious problem.
"Government agencies are uniquely endowed with the power to implement the public will, and as such, are subject to the highest levels of scrutiny by the people whom they serve."Westinghouse Electric Corporation v. Grand River Dam Authority,
It is, therefore, the official Opinion of the Attorney Generalthat:
1. Article
X , §23 of the Oklahoma Constitution precludes State institutions and agencies from incurring any indebtedness beyond the income and revenues for the current fiscal year. A contract ending within the current fiscal year with an annual option to renew does not violate the constitutional limitation.2. Neither a multi-year exclusive contract between a vendor and the University of Oklahoma for the purchase of goods or services by the University nor the University's multi-year grant of an exclusive right to a soft drink company to sell its products on the campus of the University violates Oklahoma's Constitution or antitrust laws. Whether the University of Oklahoma may grant a monopoly for any product for long periods of time depends on the factual circumstances of each case and thus cannot be answered in an Opinion of the Attorney General. 74 O.S. Supp. 1997, § 18b[
74-18b ](A)(5).3. A provision in a now withdrawn "request for proposal" that asks the bidder if there would be a dollar value for being a sole or major supplier to the university and if the bidder would contribute to a fund for scholarships or other improvements does not violate the Anti-Kickback Act of 1974. 74 O.S. 1991, § 3402(1). There is no legal prohibition against a vendor offering a discount or payment in lieu of a discount as consideration for being a sole or major supplier. However, to the extent that an RFP for a contract under which public funds will be expended for goods or services suggests or requests a donation to the institution, it undermines the principles of competitive bidding.
W.A. DREW EDMONDSON ATTORNEY GENERAL OF OKLAHOMA
KATHRYN BASS ASSISTANT ATTORNEY GENERAL
Harolds Stores, Inc. v. Dillard Department , 82 F.3d 1533 ( 1996 )
t-harris-young-associates-inc-a-florida-corporation , 931 F.2d 816 ( 1991 )
U.C. Leasing, Inc. v. State Ex Rel. State Board of Public ... , 737 P.2d 1191 ( 1987 )
BOARD OF REGENTS OF UNIV. OF OKLAHOMA v. Baker , 638 P.2d 464 ( 1981 )
State v. Lynch , 796 P.2d 1150 ( 1990 )
Westinghouse Electric Corp. v. Grand River Dam Authority , 720 P.2d 713 ( 1986 )
Rance v. SPERRY AND HUTCHINSON COMPANY , 410 P.2d 859 ( 1965 )
Bd. of Regents, Etc. v. Natl. Collegiate Athletic Ass'n , 561 P.2d 499 ( 1977 )
Teleco, Inc. v. Ford Industries, Inc. , 587 P.2d 1360 ( 1978 )
Thomas v. Belcher , 184 Okla. 410 ( 1939 )
J. W. Ripy Son v. Art Wall Paper Mills , 41 Okla. 20 ( 1913 )
Rice v. State , 108 Okla. 4 ( 1924 )
Hannan v. Bd. of Educ. of City of Lawton , 25 Okla. 372 ( 1909 )
Indiana National Bank v. State Department of Human Services , 857 P.2d 53 ( 1993 )
Cooper v. Tanaka , 591 P.2d 1181 ( 1978 )