Anti-competitive practices lead to higher prices. In a report to the Danish Competition Authority, London Economics stated that empirical research suggests that the average overcharge is 46% to 49% of the actual price. But how can a buyer of products and services identify whether the prices charged are a result of such illegal practices? In order to assist procurement officers in both the public and private sectors, the Norwegian Competition Authority has published a list of typical signs of illegal cooperation between suppliers.
Illegal cooperation between suppliers is carried out in many ways and secrecy forms an inherent part of such practices, making them difficult to uncover. Competition authorities rely on information from market players in order to start investigations. Purchasers of goods and services are naturally closest to the cartel process and so have a unique opportunity to reveal such illegal practices. The Competition Authority attempts to enlist public procurement officers and businesses in the process of unravelling cartels and has issued a list of typical signs of illegal cooperation between suppliers, which can be identified in tender procedures.
Procurement officers should take particular care when procuring goods and services in markets that are vulnerable to illegal cooperation. Such markets are characterised by, among other things, a limited number of suppliers, few or no newcomers, stable market structure, generic products and low levels of innovation.
Procurement officers should also be aware of certain typical signals, which might imply that there could be some form of illegal cooperation between suppliers. According to the Competition Authority, these include the following:
- Qualified suppliers do not reply to an invitation for tenders.
- The prices offered in tenders show an unnatural increase compared to previous price levels and are not explained by other factors influencing prices.
- Established suppliers reduce their price level in a material way when new suppliers enter the market.
- For no particular reason, the same supplier continuously submits the most qualified tender.
- Tenders from competing suppliers are similarly structured.
- A supplier reveals detailed knowledge of a competitor's tender before the tender deadline.
- Only one supplier participates at surveys or other meetings subsequent to the submission of tenders, even though there were competing tenders.
- There is a significant difference in price and/or quality between the chosen tender and the other tenders.
- Two or more suppliers switch in submitting the most qualified tender in a regular pattern.
- The chosen supplier usually uses its competitors as subcontractors.
For further information on this topic please contact Monica Syrdal at Advokatfirmaet Hjort DA by telephone (+47 2247 1800), fax (+47 2247 1818) or email ([email protected]).