Para 7.6.8 - Cartel Prevention | KartavyaDesk

Original Rule Text

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.

What This Means

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

• •Cartel formation and pool rates are considered a violation of the Code of Integrity for Public Procurement.
• •Such practices can lead to an 'Appreciable Adverse Effect on Competition' (AAEC) and are punishable under the Competition Act, 2002.
• •Procuring entities can include a 'Cartel Formation/Pool Rates' clause in tender documents, outlining potential punitive actions.
• •Negotiations should not be extended to bidders who didn't originally tender or whose bids were rejected for valid reasons, even if cartel rates are suspected.
• •The procuring entity has several options when cartel formation is suspected, including rejecting all bids, placing orders on select firms from the cartel, or placing orders on firms outside the approved vendor list.

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.