What are Bid ridding Agreements in India?

Bid rigging is an illegal practice in which competing parties collude to determine the winner of a bidding process. Bid rigging is a form of anticompetitive collusion and is an act of market manipulation; when bidders coordinate, it undermines the bidding process and can result in a rigged price that is higher than what might have resulted from a free market, competitive bidding process. Bid rigging can be harmful to consumers and taxpayers who may be forced to bear the cost of higher prices and procurement costs. Bid rigging practices can be present in an industry where business contracts are awarded through the process of soliciting competitive bids.

Under the Indian Competition Law regime, the concept of bid-rigging finds indirect recognition. Section 3 of The Competition Act of 2002 which deals with the concept of anti-competitive agreements which empowers the Competition Commission of India to prohibit any agreement between enterprises or persons engaged in identical or similar trade of goods or services, directly or indirectly resulting in bid-rigging or collusive bidding. These agreements effect the competition prevailing in the market; hence they are prohibited by Law. In determining whether the agreement has an appreciable adverse effect on competition, we have to analyse various factors like creation of barriers to new entrants in the market and foreclosure of market etc. 

The following case laws will illustrate the various scenarios of bid-rigging/collusive bidding. 

  1. Excel Crop Care Ltd v. Competition Commission of India and Anr.
  2. Western Coal Fields Ltd. v. SSV Coal Carriers Pvt Ltd.
  3. Chief Material Manager, North Indian Railways v. Bic Auto Pvt Ltd.
  4. Rajasthan Cylinders and Containers Ltd. v. Union of India.
  5. Xyz v. Hindalco Industries Ltd.

On 2nd January 2019 Supreme Court Of India marked 2nd Landmark Judgment On Cartels In India. It dismisses legalistic findings Of CCI and compact of Bid Rigging in tender floated by IOCL for LPG Cylinders based on market conditions.  Bid-rigging is harmful for the competitive environment of the country as it can lead to false price escalation. Majority of the bids in India are invited by the public, and bid-rigging can lead to loss of public money. Bid-rigging can also result in important projects being marked to incompetent parties, which could lead to disastrous consequences.

The abovementioned case-laws show that the Commission has played an active role in prosecuting cartels who are indulging in bid-rigging. In these digital times it is imperative that the investigative powers of the Commission are further enhanced and the Commission is given widen powers to investigate bid-rigging in various sectors of the economy. A fair competition is beneficial to all market sectors. The consumers got a wide variety of choice and the enterprises put in greater productivity to be able to compete in the market. Restriction of bid rigging gives the government an optimal realization from the Sale of assets. Thus making the government able to provide enhanced availability of resources for the social sector.  

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