Price fixing is serious legal offense, it also calls bid rigging.
It is very common practice in some countries across south east Asia. Well, what can I say that is 3rd word counties without proper legal system, lack of government monitoring mechanism.
Fix pricing hurts business environment, very bad for consumers. Head of Competition Katie Rusbatch said “Businesses that agree to rig bids do so primarily to protect or boost their profits. The result is higher prices and lower quality of services as those involved are not openly competing in the market.” At the end, consumers are paying more may receive lower quality products and services.
Katie Rusbatch pointed out that “It doesn’t matter whether businesses or individuals set out to bid rig, even attempting to bid rig with competitors, whether it’s acted on or not, is unlawful under the Commerce Act. It also doesn’t matter if the agreement to bid rig with competitors is formalised in writing or is just an understanding.”
Accountant supposed to play a key role to protect clients’ best interest on business operation, who acts unique position spotting issues suggest clients are at risk of, or involved in, big rigging.
Here you are some suggestion regarding price fixing:
- Suspicious bidding patterns eg, a pattern of winning bidders revealed over time
- Suspicious bidding behaviour eg, likely bidders not submitting a bid or a bidder withdrawing at short notice
- Suspicious pricing eg, all bids surprisingly high
- suspicious arrangements amongst bidders eg, if a successful bidder later subcontracts to another supplier, particularly one who had submitted a higher bid
- Frequent communications amongst competitors
- Regularly meeting with competitors eg, expense claims of clients showing a lot of meetings amongst competitors
- Indications that competitors have communicated with each other about a tender eg, if a bidder appears to have had inside knowledge of a competitor’s bid
- Secret or fictitious payments to or from competitors eg, unexplained gifts or payments to competitors
There is a real case – Christchurch Transport
The CEO of Christchurch Transport Limited approached its next biggest competitor in the market for subsidised passenger bus services in metropolitan Christchurch. He proposed an exchange of tender information with a view to bid rigging to ensure the retention of the routes historically held by each of the companies. Despite the discussions, the businesses did not enter into a bid-rigging arrangement.
Accordingly, this conduct amounted only to an attempt to breach the Commerce Act. However, the High Court accepted that if major competitors had exchanged sensitive information or bid-rigged, there would have been considerable scope for profit to be made in the form of an increased subsidy to be paid by the Regional Council to the successful tenderer. The High Court ordered Christchurch Transport Limited to pay a fine of $380,000, and its CEO a fine of $10,000, for an attempt to fix prices by bid rigging.