We have five simple ways to avoid price fixing and other anti-competitive practices:
- Be aware of anti-competitive risks.
- Understand which conversations are off limits when meeting competitors.
- Spot and react to price-fixing red flags.
- If you're in a dominant market position, don't abuse it.
Price fixing is a felony, and the Department of Justice frequently seeks prison sentences and fines in the tens of millions of dollars for "hard-core" price-fixing.
Ask questions if prices or proposals look suspiciously low or high. Do not split the contract between two proposers with identical bids. Provide staff training on how to recognize bid rigging. Report antitrust violations, which include bid rigging, to the appropriate state or federal authority.
BID RIGGING occurs when competitors coordinate their actions to manipulate the outcome of a bidding process to their benefit. Bid rigging is illegal under Republic Act No. It undermines the essence of a competitive bidding process, which purpose is to achieve better value for money.
Bid rigging can take many forms, but one frequent form is when competitors agree in advance which firm will win the bid. For instance, competitors may agree to take turns being the low bidder, or sit out of a bidding round, or provide unacceptable bids to cover up a bid-rigging scheme.
First, that price-fixing agreements are illegal per se regardless of whether they are reasonable or not (310 U.S. 150, 224). According to Socony, price-fixing agreements are unlawful per se regardless of any justification (310 U.S. 150, 218).
Example of Price FixingIn a small town, there are only two gas stations. The two gas stations are engaged in a tough competition with each other, undercutting prices to attract the most customers. Given no other options, consumers are forced to pump gas at $200.
A time-honored method of detecting collusion is finking by a dissident cartel member or an ex- employee, or the complaints of customers. Such evidence has obvious attractions, but one should be suspicious of complaints by a rival firm not party to the conspiracy.
Economists generally agree that horizontal price-fixing agreements are bad for consumers. Price-fixing agreements, since they reduce competitors' ability to respond freely and swiftly to one another's prices, diminish consumer surplus by interfering with the competitive marketplace's ability to keep prices low.
Yes, shill bidding is an officially illegal practice. You are going to be sued in accordance with antitrust law under the Donnelly Act, which prohibits bid rigging and price fixing. Yet, shill bidding can go to the federal level, so then: Additionally, you can be charged under 18 U.S. Code Section 1343 for wire fraud.
Bid splitting is a form of procurement fraud where a procuring entity's employee in collusion with a vendor splits a specific procurement of goods and services into smaller amounts in an effort to avoid certain levels of requirements, authority and approvals.
Bid-pooling A process by which several bidders conspire to split contracts, thereby ensuring that each gets a certain amount of work.
Horizontal price fixing occurs when companies decide to fix prices or price levels for a good or service at a premium or a discount. For example, several retail companies may fix the sale prices of television sets at a premium thereby earning higher profits.
An agreement among two or more competitors to change the bids they otherwise would have offered absent the agreement. Under Section 1 of the Sherman Antitrust Act, collusive bidding is per se illegal.
