Law and Economics Approaches to Bid Rigging
New Horizons in Competition Law and Economics series
Chapter 1: Introduction
Well-organized public procurements have become more important in recent years. In these times of tight public budget constraints, and in the presence of increasing investment demand owing to the financial crisis, cost-effective public procurements are a growing focus of attention. The Organisation for Economic Co-operation and Development (OECD), the World Trade Organization (WTO) and the European Union (EU), for example, are promoting well-structured public procurement systems and competition law regimes as being essential to foster economic prosperity and social welfare. A central element of concern for public tenders involves bid rigging conspiracies – in other words, cartels. Bid rigging is frequently described as a particular form of coordination between firms which can adversely affect the outcome of any sale or purchasing process in which bids are submitted. For example, firms may agree their bids in advance, or decide which firm will be the lowest bidder. Alternatively, they may agree not to bid or to rotate their bids by number or value of contracts.