Procurement professionals purchase goods and services based on many factors, including quality, service, and price. Part of the process can involve competitive bidding between vendors for contracts to supply necessary goods or services to the purchasing entity. 

Both the vendor and the purchaser should want the competitive process for these contracts to be fair, legal, and honest. While the majority of vendors are fair competitors, price-fixing and bid-rigging schemes can and do happen.

Competition Matters will feature a “Red Flag” series of articles in this and future editions of our newsletter with tips for purchasing professionals on spotting possible vendor collusion. We hope this series will help you spot some warning signs, or “red flags,” that might indicate illegal activity.

Communication or Collusion?

Effective communication between purchasers and bidders during the procurement process is critical to enhancing competition. While it is not uncommon for competing bidders to communicate with each other, when their conversations turn into agreements to allocate specific customers, products, or territories among themselves, they can violate antitrust laws.  

Words can be key indicators that collusion might be occurring between the competitors. How does one tell when a bidder’s words and statements might be more than a sales pitch? Collusion is a secretive business, and certain statements by bidders for your service or contract may alert you that the words are more than business chitchat. 

Here are some red flags:

• References to “industry-wide” or “association set” price schedules
• Statements that indicate advance (non-public) knowledge of a competitor’s pricing or the specifics of a competitor’s bid
• Statements that a bid was a “courtesy,” “token,” or “cover” bid
• A suggestion that the bidder has discussed prices with competitors
• Statements by a bidder that it is their “turn” to win a bid or contract
• A reference to “my customer,” “my contract,” or “my territory” (except when referring to territories established by a distributor)
• Blanket statements such as “all the businesses in this industry charge the same” or “there’s no difference in product, and that’s why prices are the same”
• Any statements that a company has been meeting with its competitors – whether at a social outing, a trade association conference or a business meeting – where pricing and contract specifics were discussed

Common sense and intuition can be your best weapons in detecting collusive activity. Bid rigging occurs when competitors agree on who will submit the winning bid, how much they will bid, or any other terms of the contract. 

If you suspect something is not quite right, or there is evidence of bid rigging, please contact the Ohio Attorney General’s Antitrust Section at 614-466-4328, or submit an Antitrust Bid-Rigging Web Tip, which you may provide anonymously.