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 10: The Japanese construction sector

Law and Economics Approaches to Bid Rigging

Stefan E. Weishaar


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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