A. What is Bid Rigging?
Bid rigging (or collusive tendering) occurs when competitors conspire and agree as to who will be the winning bidder. It may take the following forms, amongst others:-
i) Cover/ Complementary/ Courtesy bidding
This is the most frequent way in which bid-rigging is implemented. It occurs when competitors agree on a winner through submitting a bid that is known to be too high to be accepted or one that contains terms that are known to be unacceptable to the purchaser.
ii) Bid Suppression
It involves an agreement among competitors, for one or more of them to refrain from bidding or to withdraw a previously submitted bid so that the designated winner’s bid will be accepted.
iii) Bid Rotation
This entails various ways in which competitors agree to take turns in being the winning bidder.
iv) Market Allocation
This occurs when competitors allocate the market amongst themselves and agree not to submit bids for markets outside their allocations.
B. Prohibition of Bid Rigging
All forms of bid rigging are prohibited. Section 2 of the Competition Act [Chapter 14:28] (theAct) defines an unfair business practice as a restrictive practice or conduct specified in the First Schedule. In terms of Section 42 of the Act, acts or omissions specified in the First Schedule are unfair business practices for the purposes of the Act. Paragraph 6 (1) of the First Schedule defines bid rigging as follows: –
“Entering into or giving effect to an agreement, arrangement or understanding, whether enforceable or not, with another person whereby—
(a) any of the parties to the agreement, arrangement or understanding undertake not to submit a bid or tender in response to a call or request for bids or tenders; or
(b) in response to a call or request for bids or tenders, some or all the parties to the agreement, arrangement or understanding submit bids or tenders that have been arrived at by agreement between themselves.
An exception is where the agreement, arrangement or understanding is between companies which are all part of a group of companies.
C. Anticompetitive Effects of Bid Rigging
When bidders coordinate : –
i) undermines the bidding process and results in rigged prices that are higher