Cartels, Competition and Public Procurement
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Cartels, Competition and Public Procurement

Law and Economics Approaches to Bid Rigging

Stefan E. Weishaar

Stefan Weishaar explores the ways in which economic theory can be used to mitigate the adverse effects of bid rigging cartels. The study sheds light on one of the vital issues for achieving cost-effective public procurement – which is itself a critical question in the context of the global financial crisis. The book comprehensively examines whether different laws deal effectively with bid rigging and the ways in which economic theory can be used to mitigate the adverse effects of such cartels. The employed industrial economics and auction theory highlights shortcomings of the law in all three jurisdictions – the European Union, China and Japan – and seeks to raise the awareness of policymakers as to when extra precautionary measures against bid rigging conspiracies should be taken.
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Chapter 7: The effectiveness of the legal regime applicable to bid rigging in China

Law and Economics Approaches to Bid Rigging

Stefan E. Weishaar


This chapter analyses whether the Chinese legal arsenal governing bid rigging conspiracies deals effectively with them so as to allow government entities to buy at competitive prices. In order to be able to analyse whether or not the current legislation in China is optimally addressing bid rigging conspiracies the chapter measures the current legal framework against the law and economics findings and examines whether the incentives created are sufficient to induce bidders to comply with the law. This approach is necessary since there is no hard empirical evidence available to confirm that bid rigging conspiracies in China are widespread and inflict considerable damage upon society. Anecdotal evidence reported earlier which suggests a general dissatisfaction with price levels and the quality procured is therefore complemented by this theoretic treatment. The legislation reviewed includes the Anti-Unfair Competition Law, the new Chinese Anti-Monopoly Law, the Penal Code, and the public procurement laws. For a long period of time the Anti-Unfair Competition Law was the only means of addressing competition issues. The Chinese Anti-Monopoly Law is a new addition to the legal arsenal that can be brought to bear on bid rigging cartels. Its promulgation took place on 30 August 2007 and it entered into force on 1 August 2008. It is generally hoped that this new law will make a significant contribution to the creation of a market-based economy.

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