Para 7.6.8 — GOODS_MANUAL

2. Cartels implement this anti-competitive bid-rigging. Sometimes, a cartel of bidders quotes equal/ marginally different rates (pool rates) against a tender, whereas possibly:

a) Rates quoted (and breakup thereof) are equal, despite their manufacturing/ logistics costs being different due to their scale of production/ location. b) The rate manages to be L1. c) In a variation, the rates may not be exactly equal but may be close enough to make the Cartel members L1, L2, L3, etc. d) Respective quoted quantities by these bidders are much less than the tendered quantity, leaving no option but to distribute quantities among these bids. e) Their bids have other uncanny similarities, i.e., the same layout or typographical errors. Bids from the same IP address raise suspicion, but by itself may not be a strong indicator of a cartel. In such cases, other factors mentioned in this para should be assessed to judge cartelisation.

3. If this rate is unreasonably high, this may be an attempt to force acceptance of higher rates by undermining the negotiating power of the buyer as per rules. Even when rates are reasonable, this may be an attempt to force the Procuring Entity to distribute quantities as decided by the bidders among them, even in tenders where splitting of quantities is not envisaged.

4. Cartels, by their very nature are secretive and thus it may not be possible to find the direct concrete evidence of their presence. The orders of the Competition Commission of India (CCI) clearly mention reliance on circumstantial evidence, both economic and conductbased, to conclude the existence of a cartel agreement.

7.6.8 Cartel Formation/ Bid Rigging 1. The Competition Act defines bid rigging as agreements that have the effect of eliminating or reducing competition or adversely affecting or manipulating the process of bidding. There are various forms of bid rigging - Collusive bidding (dividing the market, setting prices, or limiting production – involves misrepresentation of independent bids); Bid Rotation/ suppression; Complementary Bidding; etc. (Refer to Appendix-2, para 6)

5. Such cartel formation/ pool rates abuse the transparency of Public Procurement and are a violation of the code of Integrity for Public Procurement. Such and similar tactics (please refer to para 7.8-7) by bidders to avoid/ control true competition in a tender leading to an "Appreciable Adverse Effect on Competition" (AAEC) is an offence under the Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007. Please refer to para 6.0 of Appendix 2. 6. Such abnormal practices need to be severely discouraged with strong measures. To discourage such practices, the Procuring Entity may include in all tender documents a Cartel Formation/ Pool Rates clause, stating inter-alia that the Procuring Entity reserves its rights to take the following actions, without assigning any reasons thereof, in case a Cartel/ Anti-competitive practice is suspected in a tender: a) Specify in the Tender Document for requirements that are prone to such practices that bidders must bid for at least a quantity that is more than a minimum specified percentage (say 25%) of the tendered quantity; otherwise, their offer shall be rejected. b) Warn that Procuring Entity may take any/ all punitive actions available under the Code of Integrity for Public Procurement against such bidders, including removal from the list/ panel of registered sources or debarment, besides reporting the transgression to Competition Commission, and concerned trade associations like FICCI, ASSOCHAM, NSIC for suitable punitive action. c) Please note the following in para 7.6.9 below: In no case, including where cartel rates are suspected, should negotiations be extended to those who had either not tendered originally or whose tender was rejected because of unresponsiveness of bid, unsatisfactory credentials, inadequacy of capacity or unworkable rates. d) The procuring entity may decide the tender as per one or more of the following provisions: i) Reject all bids from the suspected cartel formation and decide the tender accordingly. ii) Place an order on any one or more firms from among the cartel for any quantity with the exclusion of the rest, with or without negotiation or counteroffering.

Note: The selection of firms for this may be based on a transparent logistics parameter, i.e., quicker delivery, nearer location of source, relatively better past performance, etc. iii) Whenever tender is floated for purchase exclusively from approved vendor list, and cartel formation is suspected among all such sources; the Procuring Entity may place orders on bidders who are not in the approved vendor list for any quantity. iv) Wherever a specified ratio for splitting of quantities among 2/ 3 sources is stipulated in the tender document, and cartel formation is suspected among lower 2/3 bidders, place orders on any number of bids beyond such ratios or decide tender as per sub-para-i) or ii) above.