How to recognise and deter bid rigging – guidelines for procurers

These guidelines are intended to be a practical tool to assist procurers (purchasers) to ensure open and effective competition and achieve best value for money by:

  • spotting and reporting potential bid rigging; and
  • designing tender processes that deter bid rigging.

Bid rigging, or collusive tendering, occurs when there is an agreement among some or all of the bidders as to which of them should win a bid. Bid rigging is a form of cartel conduct, and is prohibited by the Commerce Act 1986. Cartels are formed when companies collude with their competitors to increase or maintain prices, divide geographical territories, customers or projects between themselves, agree to limit production, and/or engage in bid rigging. This is usually done in secret.

Cartels may consist of one or more anti-competitive agreements that direct how the involved parties will act (eg, a minimum price to be charged for a product or service, or no discounting), or in some cases not act (eg, not bidding on a tender). An anti-competitive agreement can be very informal (a 'nod and a wink') and still remain illegal. Although there are different types of cartels, the aim of each is the same - to maximise the profits of cartel members, while maintaining the illusion of competition. When competitors engage in bid rigging (or other cartel conduct) you, as a customer, risk being overcharged for your purchases. Cartel conduct can damage the welfare of New Zealanders generally by raising prices, and also by negatively affecting other factors such as choice, innovation, quality and investment.

In recent years, the Commerce Commission has investigated a large number of alleged cartels, involving a wide variety of goods and services from electrical infrastructure equipment to towing services, wood preservatives and cardboard boxes.

The guidelines are availble to download as a PDF below.

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