Antitrust Compliance 2.0: The Use of Structural Analysis and Empirical Screens to Detect Collusion and Corruption in Bidding Procurement Processes

Abstract

Collusion among bidders is a recurring problem in both public and private procurements. This is evident from recent U.S. enforcement actions and those of other jurisdictions across the globe targeting bid-rigging cartels and resulting in substantial fines, civil damages, and terms of incarceration for individuals in jurisdictions with criminal penalties. The harm caused by such cartels is perhaps most keenly felt by government entities in emerging markets with limited budgets to develop and maintain infrastructure and obtain necessary goods and services. But private companies making significant purchases through tender or bidding processes are similarly vulnerable.

Moreover, collusive conduct between horizontal competitors is not the only means by which the integrity of such procurement processes can be undermined; individuals with purchasing authority have facilitated bid-rigging cartels in return for bribes or kickbacks. Such corruption can therefore operate hand-in-hand with bid-rigging, often increasing the potential harm and likelihood of detection by enforcers and civil litigants.

Instead of waiting for the proverbial “knock on the door” by an enforcer, companies are increasingly adopting proactive detection methods to assess risk and target compliance efforts ― a trend that will arguably be encouraged by recent statements by the U.S. Department of Justice (“DOJ”) warning that compliance programs are expected to incorporate auditing and testing functions. Similarly, in recent years some enforcers have eschewed waiting for leniency applicants to come forward with evidence of a cartel in favor of examining market structures and behavioral patterns to detect collusive conduct.

This article explores how the increase in enforcement actions targeting bid-rigging and corruption globally raises the risk of detection, and how screens can be used as a proactive tool to successfully uncover this conduct.

Keywords: Bid Rigging, Screens, Detection, Deterrence, Collusion

JEL Classification: C51, C52, D40, C19