- What is Tender Collusion (Bid Rigging) and is it Prohibited?

Yes, Tender Collusion (Bid Rigging) is considered one of the most serious practices prohibited under the Saudi Competition Law. Article Five specifically prohibits "collusion or coordination in bids or offers in government auctions and tenders or others."

What does Tender Collusion mean?

Collusion occurs when competitors agree secretly among themselves instead of competing fairly to win a project. This agreement usually aims to raise prices or lower the quality of goods and services for the buyer (government or private entity).

Common Forms of Collusion

Prohibited coordination can take several forms, including:

• Cover Bidding: Competitors submitting sham offers (at a very high price or with unacceptable conditions) to ensure a specific pre-agreed entity wins.
• Bid Suppression: Agreement by some competitors to refrain from submitting bids or to withdraw their bids to enable a specific competitor to win.
• Bid Rotation: Agreement by competitors to take turns winning tenders periodically.
• Market Allocation: Agreement not to compete for contracts involving specific customers or specific geographic areas.

Why does the Law prohibit this practice?

The prohibition aims to:

1. Ensure government entities and companies get the best price and best quality.
2. Protect public funds from waste resulting from artificial prices.
3. Provide a fair opportunity for all establishments to compete and grow.

Are "Joint Bids" (Consortiums) considered collusion?

No, the Implementing Regulations clearly stated that submitting joint bids is not considered collusion, but under two essential conditions:

1. That the parties disclose it from the beginning.
2. That the nature of the project requires it.
3. That its purpose or effect is not to violate competition.

This exception allows establishments to cooperate legitimately to submit stronger offers for large and complex projects.

Reference: Competition Law (Article 5) and its Implementing Regulations (Article 8) - General Authority for Competition