Collusive bidding: CCP issues show cause notices to three companies

The Competition Commission of Pakistan (CCP) has issued show cause notices to three companies for prima facie indulging in collusive bidding in Faisalabad Electric Supply Company's tender to procure 3,000 units of LT TOU Meters. According to an announcement on Monday, the CCP had initiated enquiry into possible collusive bidding in Fesco's tender after reviewing details of public procurement carried out by the company in the past few years.
The review was part of the CCP's Bid Rigging Detection Programme aimed at identifying and curtailing collusive bidding in public procurement. The enquiry concluded vide report dated July 18, 2011, according to which, prima facie, three companies were involved in supply of LT TOU Meters and had colluded to rig the Fesco Tender number 6, dated 4 August 2009. The Enquiry report revealed that the bidders prima facie had colluded to fix the price and divided the share of supply of LT TOU Meters deliberately and had rigged the Fesco bid in violation of section 4(2)(a),(b) & (e) of the Competition Act, 2010.
The inquiry report recommended that section 4 of the Competition Act mandates the commission to look into possibilities of bid rigging - a particular form of collusive behaviour of price fixing and/or dividing the market by which firms co-ordinate their bids on public procurement by raising prices to uncompetitive levels.
In the instant case, possibility of bid rigging may have resulted in economic harm to Fesco seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers. On the basis of information and documents available on record a, prima facie, collusive arrangement among the undertakings by offering a pre-determined price and quantity is substantiated. Bids submitted by all the three undertakings/bidders appear to have the object of preventing, reducing, restricting or distorting competition in the market of public procurement of LT TOU Meters. Therefore, it is concluded that the undertakings have entered into an arrangement that, prima facie, violates Section 4 (2)(a), (b) & (e) of the Competition Act.
The companies have been given fourteen days to show cause in writing and to avail the opportunity of being heard by CCP. According to CCP, the undertakings are blowing hot and cold at the same time. On one hand they have taken the stance that capacity for LT TOU meters cannot be determined and then they also admit that components for manufacture of these specialised meters are bought depending on the demand from Pepco/Disco's throughout the year. It also appears to be an attempt to show that the capacity is less or under-utilised. Whereas, all three undertakings are involved in manufacturing of high tech equipment and claim to be profitable, competitive and efficient having invested in diverse portfolio as shown on their respective websites.
Same reply that the capacity cannot be determined makes it further dubious that companies might have colluded, in particular, when all of the three companies offered the same quantity for identical price in the bid documents. The CCP in its earlier enforcement orders held that collusive bidding poses serious concerns for public procurement. Due to the collusion between bidders, the cost of public procurement artificially increases and the taxpayer suffers at the end.