Competition Matters

Many articles in past editions of Competition Matters have emphasized that firms supplying the same goods or services in the same geographic area should be competing, not working together.  When competitors make deals with each other to refrain from vying for the same contracts, that is generally a violation of the antitrust laws.

But companies joining forces to submit joint bids is a fairly common occurrence.  Surely not all of those companies are breaking the law, are they?  The answer is no.  Not all joint bidding arrangements constitute illegal bid-rigging or market allocation agreements.  Like the wolf in sheep’s clothing, however, one must look beneath the surface to know for sure.

Boiled down to its simplest terms, the question is whether (1) the companies involved in the joint bidding arrangement have each made meaningful contributions of assets to the venture, and (2) the arrangement enables them to offer a better product or service than either could offer on their own.  The assets contributed could be money, know-how, technology, or other value, but the important thing is that they each contribute. 

The other part of the analysis is whether the individual participating companies could perform the contract on their own without the joint bidding arrangement.  If they could not, then the joint bidding arrangement has in reality created a new competitor.  That result can be great for competition and for you as the purchaser.  But what if the joint bidders could have each performed the contract on their own?  If so, then the joint bidding arrangement has reduced the number of competitors available to bid on the contract, and may have caused you, the purchaser, to spend more than you would have in a competitive market.

Antitrust analysis of joint bidding arrangements is far from cut-and-dried, and usually involves looking at factors such as: how robust the competition is in the rest of the market, and whether the joint bidders could have achieved the same results through other means besides bidding together. Procurement professionals, however, need to keep only one question in mind:  are these joint bidders capable of performing this contract just as well on their own, or are they able to offer a more valuable product or service by working together?

If you encounter a joint bidding arrangement that seems to be reducing competition but not adding value, reach out to the Ohio Attorney General’s Antitrust Section.  We’re happy to take a closer look.