Bid rigging
Also called: Collusive bidding · Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
Bid rigging happens when bidders in a tender secretly agree to cut or remove competition among themselves. The buyer, often a government department, believes it is getting competitive offers but ends up paying more. Common methods:
- Bid rotation: the bidders take turns to win.
- Cover bids: some firms put in deliberately high bids just to look like competition.
- Bid suppression: some firms agree not to bid at all.
Under the Competition Act 2002, bid rigging is a horizontal agreement under Section 3(3). It is therefore presumed to harm competition.
Example
The CCI has acted in bid-rigging cases involving suppliers to Indian Railways and other public buyers. In a typical pattern, four suppliers agree that firm A wins this tender, B the next and C the one after. The others quote higher prices each time.
Don't confuse with
- Cartel (general): a cartel can fix prices, limit output or share markets in any setting. Bid rigging is the form of collusion found specifically in tenders and auctions.
Related concepts
- Anti-competitive agreements
- Appreciable adverse effect on competition
- Horizontal agreement
- Vertical agreement
- Resale price maintenance
- Leniency programme
- Dominant position
- Relevant market
- Abuse of dominance
- Predatory pricing