Antitrust Law and Bid Rigging Jennifer Hunt First

Antitrust Law and Bid Rigging Jennifer Hunt First Assistant Attorney General Devin Laiho Senior Assistant Attorney General Abigail Smith Assistant Attorney General 10/21/2021 1

Antitrust & Bid Rigging Materials • Before you start taking notes… • Resources – Handout: Bid Rigging Quick Reference – U. S. Department of Justice Primer – www. justice. gov/atr/price-fixing-bid-rigging-and-market-allocation-schemes • Send an email to Jennifer. Hunt@coag. gov 10/21/2021 2

Colorado Antitrust Enforcement • Enforce state and federal antitrust laws – Sherman Act & Clayton Act – Colorado Antitrust Act • Recover money on behalf of state agencies 10/21/2021 3

How does antitrust affect government operations? • Government entities are large consumers of goods and services • They are also frequent targets of antitrust conspiracies • Manipulation of the procurement process 10/21/2021 4

What is it? How do I know? What should I do? • Price Fixing • Market Allocation • Bid Rigging • “This won’t happen to me” 10/21/2021 5

What is Price Fixing? Agreement to… • Raise, lower, or maintain prices • Not negotiate price with purchasers • Limit discounts, rebates or promotions • Use price formulas or guidelines 10/21/2021 6

Price Fixing Examples • Conversation between competitors: – “If you raise your price to $5 per gallon tonight, I will too. ” – “Ok, let’s do it. ” • Email between competitors: – “Our costs are going way up. If prices don’t go up industry-wide, we’ll all be in trouble. ” (Luke 9: 57) I will follow you wherever you go 10/21/2021 7

What is Bid Rigging? Agreement to… • Rotate Winning Bid • Suppress Bidding • Make a Complementary Bid 10/21/2021 8

Bid Rigging Example “I can make a great return on the contract to build out the new Wi. Fi network if I can with a bid of $300, 000. If you let me take this one, I’ll give you the next one. ” “No worries – I’ll put in a comp bid for $350, 000. Since we’re going to be the only two bidders this time, you’ll get it. I’ll take the next one. ” 10/21/2021 9

What are Allocation Schemes? Agreements to divide up… • Territories 10/21/2021 10

Territory Allocation Scheme “Each of us already wins about half of the bids out there. Instead of competing over price, let’s just agree that we won’t bid in the same areas. ” “Sounds good. I’ll bid on everything south of I-70, and I’ll let you bid on everything to the north. That way we each get half and the prices stay high. ” 10/21/2021 11

What are Allocation Schemes? Agreements to divide up… • Customers 10/21/2021 12

What are Allocation Schemes? Agreements to divide up… • Products 10/21/2021 13

Trade Association Meeting as Cover 10/21/2021 14

Warning Signs – Bid Submission • Simultaneous bids • Similarities in submission • Bid is modified after submission • Meetings prior to bid submission • Company stops bidding 10/21/2021 15

Warning Signs – Bid Submission • Fewer companies submit bids • Company refers you to one of its competitors • Bid package is “sloppy” • Multiple bids • Something “just doesn’t seem right” 10/21/2021 16

Warning Signs – Statements • Similar language • Correspondence on decisions not to bid • “Industry” or “standard” pricing, or price lists • Advance knowledge about others’ bids • A bid “belonging” to a certain company • Price discussions • “Gentleman’s Agreement” or “Friendly Agreement” 10/21/2021 17

Warning Signs – Bid Terms/Pricing • Identical bid amounts • Same price increment • Exceptionally high priced items • Large total difference between winning and losing bids • Very similar bids • Unbalanced bid 10/21/2021 18

Warning Signs – Bid Terms/Pricing • Unexpected increases or decreases • Identical transportation costs • High bids in a lagging economy • Different bids for the same item • Losing bidders continue high pricing 10/21/2021 19

Warning Signs – Bid Terms/Pricing • Common errors • Wholesaler contacts • Bids change when competitors change • Discounts 10/21/2021 20

Warning Signs – Bid Outcome • Rotation of winning bids • Same winners and losers • Competitor meetings • Subcontracts • Refusal to accept contract 10/21/2021 21

Preventing Collusion: Action Required 10/21/2021 22

Preventing Collusion: Specification Drafting • Inclusive specifications • Allow substitute products • Consolidate or break up bids • Disclose subcontractors • Require certification • Electronic copies 10/21/2021 23

Preventing Collusion: Pre-Bid Diligence • • • Maximize the bidding pool Familiarity with suppliers Industry developments Similar purchasers Confidentiality 10/21/2021 24

Preventing Collusion: Awarding Contracts • Be vigilant • No split contracts • Subcontractor rates • Ask questions 10/21/2021 25

Preventing Collusion: Follow. Up • Review historic bid results • Contact companies that have stopped bidding • Train staff 10/21/2021 26

We need your help • When something just doesn’t seem right, please let the Attorney General know. – Don’t worry about raising a “false alarm” – We’ll work through the situation with you 10/21/2021 27

“I don’t want to get anyone in trouble” • Information is the first step • There may be a reasonable explanation • Reasonable basis for any investigation • We will only file a lawsuit after we have conducted an investigation that has uncovered substantial evidence of an antitrust violation 10/21/2021 28

“I can’t prove anything” • We don’t expect you to – that’s our job • We’re just asking you to keep your eyes and ears open • Contact us when something doesn’t seem right 10/21/2021 29

Contact Information Jennifer Hunt First Assistant Attorney General Devin Laiho Senior Assistant Attorney General Abigail Smith Assistant Attorney General Consumer Protection Section Colorado Department of Law 1300 Broadway, Seventh Floor Denver, Colorado 80203 Jennifer. Hunt@coag. gov 720 -508 -6215 10/21/2021 30