Have you been accused of bid rigging? This has been illegal under the Sherman Act since 1890, and it could come up in any industry where bids are used to secure jobs. For example, it's often referenced in relation to the construction industry, in which many construction companies will all bid and the one with the lowest bid will typically win. However, it could come up in many other industries, such as when two suppliers are bidding for a government contract. So, what is bid rigging?

Collusion

There are a few different types of bid rigging, with the main four known as complementary bidding, bid suppression, subcontracting and bid rotation. However, in most cases, bid rigging is used to refer to complementary bidding. This is a type of collusion. To do it, high bids are placed by "competing" companies. One company is chosen to win from the beginning, and it undercuts these high bids. This creates artificial competition and inflated bids.

An Example

For instance, there could be four construction companies all bidding for the same job. In real competition, the winning bid would be $1 million. However, the four collude, with three of them bidding in the range of $2.5 million. The fourth then bids $2 million. This would clearly have been a losing bid in a typical scenario, but it then wins the contract and the company is paid twice as much as it should have been awarded. There was never really any competition at all, eliminating the free market economy.

Legal Ramifications

Some business owners may be tempted to see this as a gray area, something that's not all that important. However, violating the Sherman Act can lead to felony charges. Those who do it could be fined, the companies involved could be fined and guilty parties could even wind up behind bars. You must take it seriously and look into all of the legal options that you have if you are accused of collusion.