Bid Rigging

A fraud where a marketable contract is promised to one party even though for the sake of entrance of several other parties also contemporary bid. Bid rigging is one of the most used methods to do such a fraud. Bid Rigging is a type of price fixing in places where the contracts are decided through the call of bids.

In the Indian context around 30% of GDP, with the total annual expenditure of around Rs 15-20 lakh crore, and that for the central government alone in the range of Rs 2.5-3 lakh crore. This government activity is most vulnerable to corruption, not only between the suppliers and government staff but also within the dealers themselves.

Factors leading to Bid Rigging

The common factors such as

  • market concentration or a limited number of producers,
  • high and inelastic demand,
  • the absence of substitute products
  • how great the incentives are for the firms in the industry to form a cartel and how sustainable the cartel is likely to be.

The incentives to create a cartel depend on the difference between the productivity of the firms in the presence of a cartel and in the absence of a cartel. A sustainability of a cartel, in turn, be contingent on two factors.

  • Whether the inducements of the firms to cheat on the lobbying agreement outweigh the likelihood of dishonest being detected and punished by other cartel members
  • The reputation of a strong enforcement authority ensuring fast detection of cartel and inevitability of meeting with the very harsh punishment given in the law and whether there are precedents of success in such investigations with the help of expert antitrust advocates/legal advice.

Prevention of Bid Rigging

Competition Commission of India took into account that the parties had recognised as they were independent entities and even the IP addresses of computers from which bids were submitted were found to be distinct. No evidence of any collusion/cartel was found, which would have resulted in the violation of the Act. Thus, an objective defence provided by the main accused party was accepted by Competition Commission of India.

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