What is cartel conduct in Australian government tenders?
- November 15, 2021
- Posted by: Madrigal Admin
- Category: Tender Success Blog
Federal public servants are being warned (in ACCC media release 1 November 2021) to monitor for bidders colluding (defined as cartel conduct) during government tender or procurement processes. The Australian Competition and Consumer Commission (ACCC) has found one department that may have been advocating it.
The ACCC says in a cartel fact sheet, Cartel conduct—how it affects you and your business, that a “cartel” “exists when businesses agree to act together instead of competing against one another. This agreement is designed to drive up the profits of cartel members while maintaining the illusion of competition. By controlling markets and restricting goods and services, cartels can put honest and well-run companies out of business while stifling innovation and protecting their own inefficient members.”
Public sector procurement is a $60 billion sector and a major part of the Australian economy. It contributes to the wellbeing and cost of living of Australian citizens and residents. It is fundamental to the process that all Australian businesses have fair and equitable access to Government work. Reduction in competition means that the government is not getting the best value from taxpayers’ money.
The ACCC is raising concerns that public servants and businesses might not be aware of “cartel conduct”. Cartel conduct is prohibited by Part IV, Division 1 of the Competition and Consumer Act 2010, which defines and prohibits cartel conduct. The definition of cartel conduct is lengthy but encompasses agreements between competitors to:
- fix or maintain prices
- divide markets between them
- rig tender bids
- prevent or restrict outputs
The ACCC recently uncovered processes in a Federal department that seemed to be advocating cooperation between competing businesses on government tenders. The ACCC has declined to comment further on which department was involved.
ACCC Chair, Rod Sims, said actions that encouraged businesses to discuss their bids with each other or agree about who will bid for a particular tender would likely amount to cartel conduct.
“Cartel activities may start with a small encouragement or an innocent remark, but this can create an environment that enables, condones or facilitates collusive conduct between competing firms,” Sims said.
In February this year the Federal Court of Australia used criminal cartel conduct to convict Norwegian shipping firm, Wallenius Wilhelmsen Ocean AS, and imposed AUD $24 million fine. WWO were found to have been entering into anti-competitive agreements and submitting bids or quotes to customers in what should have been competitive tender processes.
For more information read our post on Why is probity in tendering so important?