The Belgian Competition Authority ("BCA") published Guidelines, addressed to procurement officials, with a view to preventing and detecting "bid-rigging". The Guidelines find their inspiration in texts such as the OECD Guidelines for Fighting bid rigging. They provide an overview (i) of indications that bid-rigging practices occur, (ii) of market circumstances that facilitate bid-rigging, and (iii) of best practices to prevent bid-rigging.
First, after identifying the different forms of bid-rigging schemes (cover bidding, bid suppression, bid rotation and market allocation) and concomitant compensation schemes within a cartel (e.g. through sub-contracting to competitors), the Guidelines list several indicators that may hint at the existence of a bid-rigging cartel including:
- the bids being submitted: e.g. when a company suddenly and unexpectedly withdraws its bid, or when the same companies appear to be winning the tenders within certain regions;
- the documents submitted by the tenderers: e.g. where bids by competitors feature identical language or calculation errors;
- pricing practices: e.g. where a tenderer charges a much higher price than expected;
- in the declarations of the companies concerned: e.g. where it is suggested that a certain region 'belongs' to a particular supplier; or
- in their behaviour.
Second, the document identifies market circumstances that can facilitate bid-rigging. These circumstances include:
- the supplier(s): bid-rigging cartels are easier to establish where there are only few market participants and entry barriers are high, or when suppliers meet on a regular basis in the context of a trade association;
- the product/service itself: products or services that are not easily substitutable, or that are not subject to technological changes or innovation more easily lend themselves to bid-rigging;
- the procurement agency: bid-rigging is facilitated where there is a constant demand, and similar contracts are tendered on a recurrent basis. Interestingly, in spite of the emphasis on transparency in public procurement law, the Guidelines warn that transparency (e.g. regarding the names of the tenderers) may increase the risk that competitors join hands and rig the procurement process.
Third, the Guidelines spell out steps that procurement officials may take to prevent bid-rigging:
- good preparation and understanding of the market (in terms of potential candidates for the contract, average pricing, etc.);
- enable as many companies as possible (including smaller companies and companies from other regions or countries) to participate, and make sure that the number of tender lots is lower than the number of expected tenderers;
- do not share too much information with (possible) tenderers and avoid publicly accessible information meetings during which competitors could meet;
- include anti-cartel clauses in the tender documents (e.g. requiring tenderers to notify any suspicious behaviour to the competition authorities); and
- train procurement officials and introduce an audit system.
In the end, if procurement officials suspect bid-rigging they are urged to contact the BCA with a view to further investigations (without notifying the companies concerned) and to keep a record of all relevant information.
This article was published in the Competition Law Newsletter of March 2017. Other articles in this newsletter:
1. European Commission opens three investigations in the e-commerce sector
2. European Commission approves German measure to support electric charging infrastructure for green vehicles
3. Implementation of Antitrust Damages Directive: Dutch legislation effective as of 10 February 2017