Bid rigging

Cartel Agreements

Bid rigging is a form of cartel agreement, which is an agreement between competitors where bidders for a public contract, who should be competing with each other in accordance with competition rules, secretly collude on the outcome of the tender process.

It is therefore a prohibited agreement on bid manipulation between bidders for a public contract. This mechanism leads to rigged bids, which can result in disproportionate price increases and a reduction in the quality of contract performance. The goal of bid rigging is to achieve more favorable conditions for the winner of the procurement procedure.

Bid rigging damages not only the contracting authority but also competition, involving elements of both price-fixing and market-sharing agreements.

Selected Forms of Bid Rigging

Cover bidding – some competitors submit bids that are intentionally high in price or technically non-compliant so that the designated winner is guaranteed to win. In such cases, however, the lowest price may still be tens of percent higher than the real value of the contract performance. The contracting authority then logically selects the seemingly lowest, yet still very high price, which is advantageous for the competitors.

Bid suppression/withdrawal – some companies agree to withdraw their bids at the last minute (e.g., due to capacity or other reasons), whereby the contract is then awarded to the second competitor in line. This form can be combined with cover bidding.

Bid limiting – this is an agreement among competitors to limit the participation of bidders in the competition. Other potential bidders do not submit their bids or withdraw them before the end of the tender process. This form is often supplemented by a system of rotation of winning suppliers, who divide contracts among individual contracting authorities. If the bidders do not rotate individual contracts, they may create systems of mutual compensation or reciprocal performance for the acquisition of a contract by a specific bidder.

Economic Impacts of Bid Rigging

According to estimates, bid rigging can increase the price of a contract by up to 50%. This type of illegal conduct reduces market efficiency, hinders innovation, and creates an unequal playing field for new competitors wishing to enter the market.

Sanctions for Bid Rigging

Administrative law level. For bid rigging, a fine of up to 10% of the net annual turnover of the entire business group to which the competitor belongs may be imposed.

Civil law level. All entities damaged as a result of bid rigging, especially contracting authorities, can claim damages in civil proceedings.

Criminal law level. It can even involve criminal offenses: violation of competition rules, securing an advantage in a public procurement procedure, collusion in public procurement, subsidy fraud, or damaging the financial interests of the EU.

Leniency Program

An effective tool in the fight against bid rigging is the so-called leniency program, which allows companies that disclose a cartel agreement and cooperate with the Office for the Protection of Competition to achieve, under certain conditions, a reduction in fines or even escape sanctions entirely. This program is key to motivating cartel participants to cease their unlawful conduct.

Final Summary

Bid rigging is a serious problem that undermines the principles of fair competition and damages contracting authorities. Detecting and preventing these practices is essential for maintaining a competitive market environment.

To learn how bid rigging is detected and prevented, about strategies and measures for preventing bid rigging, how to recognize bid rigging in practice, the criminal law consequences of distorting competition, and much more, you can consult professional articles, publications, lectures, and seminars organized by Mgr. Antonín Hajdušek, LL.M., an attorney specializing in public procurement under Czech legislation, and Mgr. Petr Hanzel, LL.M., an attorney specializing in criminal law within our Prague-based legal team.