Law and Economics Approaches to Bid Rigging
New Horizons in Competition Law and Economics series
Chapter 10: The Japanese construction sector
The previous chapter examined, from a law and economics perspective, whether the current Japanese legal framework addressing bid rigging conspiracies is well designed to effectively contain cartels. This chapter examines the ways in which the insights into industrial economics presented above could be employed to prevent bid rigging conspiracies. It first gives a brief introduction to the Japanese construction sector and bid rigging. The economic theory is then applied to the Japanese construction industry to give an example of how general insights can be used to alert procurement agencies to the industry with which they are dealing. Unlike other research, it is not the objective here to prove the existence of bid rigging conspiracies; such research empirically proves – often taking convictions of cartels as a starting point – that bid rigging conspiracies have been taking place. The research has an ex post orientation since cartels are proved to exist on the basis of past behaviour. The section presented here takes a precautionary approach and assesses the structural determinants of an industry that is believed to facilitate bid rigging conspiracies. By simple economic analysis that draws from industrial economics insights, procuring entities can examine a relevant market, assess if cartelization is likely to be possible and take precautions against bid riggings. The focus here, therefore, is on prevention rather than on ex post detection or conviction.
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