Moneyzine
Contents
/Careers Guides/Bid Rigging

Bid Rigging

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
September 25th, 2023
Advertiser Disclosure

Definition

The term bid rigging is used to describe an agreement between competitors as to who will submit the winning bid when a company solicits proposals to purchase goods or services. In a bid rigging scheme, competitors will collude so the winning bidder will receive a contract for goods or services that results in profit margins that are higher than under a truly competitive structure.

Bid rigging is illegal in many countries, and may also be considered a criminal offense in the United States under antitrust laws.

Explanation

Bid rigging oftentimes occurs when a company issues a request for proposal for the supply of goods or services. In these schemes, "competitive" bidders agree in advance who is going to submit the winning bid. Generally, bid rigging falls into the following categories:

  • Complementary Bids: occurs when one or more competitors submit bids that fail to address all of the requirements in the contract or provide bids that are high.

  • Bid Rotation: occurs when competitors agree to submit bids, but take turns being the low bidder. Bid rotation typically occurs when a series of contracts will be awarded.

  • Bid Suppression: occurs when one or more competitors withdraw bids or fail to submit a bid.

These types of arrangements all have one common theme: the purchasing company awards a contract to a bidder that is providing a higher price than that found in a truly competitive market. When the schemes involve complementary bids or suppression, those competitors that agree not to bid, or submit "uncompetitive" bids, do so with the understanding they will be awarded subcontracts from the successful bidder. In the case of bid rotation, competitors can achieve abnormally high profits when it's their turn to win a contract.

In addition to bid rigging, anti-competitive practices may include dividing markets, boycotts, disparagement, dumping, exclusive dealing, price fixing, tying, as well as the unethical collection of business intelligence.

Anti-competitive laws in the United States were passed to promote fair competition for the benefit of consumers. This includes a collection of both federal and state laws that are an extension of antitrust laws such as the Sherman Antitrust Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.

Related Terms

Related Content

7 Essential Financial Moves After Losing Your Job
Navigating the stormy seas of job loss? You're not alone.
February 23rd, 2024
The Most In-Demand Skills to Get Hired in 2024
Every job requires a combination of vital skills, but what skillset is valued most in 2024? As the job market evolves, staying ahead means it’s key to understand and acquire the skills that employers value most.
February 20th, 2024
Key Productivity in the Workplace Statistics for 2024
In 2023, global employee engagement saw a slight uptick, with 23% of employees engaged, up by two percentage points. However, a sizable 59% are categorized as disengaged, while actively disengaged employees, known as "loud quitting," declined to 18%. These figures highlight the persistent challenge for organizations to cultivate happiness and productivity in the workplace.
January 31st, 2024
December 6th, 2023
Here’s a whopping list of 250+ sales statistics across 25 different categories. We’ve scoured numerous rabbit holes on the internet, scanned reports, and examined credible studies, to compile the most comprehensive list of sales statistics. We raked through the most trusted sources, like The Harvard Business Review, The Pew Research Center, HubSpot, and more, so you don’t have to.
December 1st, 2023

Contributors

Moneyzine 2024. All Rights Reserved.