Legal Definitions - collusive bidding

Collusive bidding occurs when competing companies secretly agree to manipulate the bidding process for contracts. Instead of genuinely competing to offer the best price or terms, these companies coordinate their bids to ensure a pre-determined outcome, often leading to higher prices for the buyer and unfair profits for the companies involved. This practice undermines fair competition and is illegal under antitrust laws.

Here are some examples to illustrate collusive bidding:

• Imagine three major landscaping companies bidding on a contract to maintain all public parks in a large city. Instead of each company independently preparing their most competitive offer, their executives meet in secret. They agree that Company A will submit the lowest bid, Company B will submit a slightly higher bid, and Company C will submit an even higher bid. This ensures Company A wins the contract at a price higher than what true competition would have yielded, and the other companies might be promised future "wins" or subcontracts in return.

  This is collusive bidding because the competitors (landscaping companies) agreed to manipulate their bids rather than compete honestly, leading to a pre-determined winner and an inflated cost for the city's taxpayers.

• A state department of transportation issues a request for proposals (RFP) for a multi-year contract to supply road salt for winter maintenance. Four qualified suppliers are capable of fulfilling the contract. Before submitting their proposals, representatives from these suppliers hold private discussions. They decide that Supplier X will submit the winning bid at a pre-agreed inflated price, while Suppliers Y and Z will submit intentionally high or non-compliant bids, and Supplier W will simply decline to bid, perhaps in exchange for a subcontract from Supplier X later.

  This illustrates collusive bidding because the road salt suppliers conspired to eliminate genuine competition, ensuring one firm won at an artificially high cost to the state government and its citizens.

• Several commercial cleaning services regularly bid to provide janitorial services to a chain of large retail stores. Over time, the retail chain notices that bids from these services are consistently very close, and the same service often wins for specific regions or store types, seemingly on a rotating basis. Unbeknownst to the retail chain, the cleaning services have an informal arrangement: for certain contracts, they decide amongst themselves who will submit the lowest bid, and the others submit higher, non-competitive bids. This allows them to maintain higher profit margins than if they were truly competing.

  This is collusive bidding because the cleaning services secretly coordinated their bids to avoid genuine competition, ensuring predictable wins and inflated prices for the retail chain.