A cartel is where two or more organisations secretly collude in relation to bidding for contracts or pricing of equipment, services or materials.

The purpose of a cartel is to prevent genuine competition and so make an illicit profit by raising prices to a higher level than would be the case had there been genuine competition.  

These offences are sometimes known as collusion or anti-competition offences.

A collaboration between organisations which is lawful and disclosed to the customer (e.g. a joint venture) would not normally be a cartel.

A cartel in the infrastructure sector normally constitutes all of:

• a breach of cartel law (if there is such a law)
• fraud on the project owner (as the bidders are fraudulently representing that they are bidding in competition, whereas they have secretly pre-agreed the winner)
• a breach of procurement law (in cases of a public sector project)
• a breach of bid conditions (which normally prohibit cartels).

Examples: 

• Bidding cartels:  Bidders for a contract secretly agree in advance on the bid prices they will submit and on which one of them will win the contract.  There is therefore no genuine competition for the contract and the intended winner as a result can submit a higher bid price.
• Price fixing:  Suppliers (e.g. of concrete) secretly agree that, when they are competing against each other, they will not drop below an agreed price per unit.  There is therefore no genuine competition and their prices will be higher as a result.
• Losers’ fee:  The bidders genuinely compete to win a contract.  However, they secretly agree in advance that they will each include in their bid price an agreed additional sum of money representing the total estimated bid costs of all the competing bidders.  Whichever bidder is awarded the contract will then divide this sum of money between all the unsuccessful bidders who will thereby recover their bid costs.
• Cover pricing:   A bidder is too busy to undertake a project, but wants to stay long term on the customer’s approved bidder list.  It therefore secretly obtains a competitor’s price in advance and puts in a price higher than the competitor so as to lose.

Avoiding cartels: 

You should not participate in any discussion or arrangement with a competitor in relation to bidding or pricing (except as part of a formal joint venture disclosed to the client).  If anyone employed by a competitor tries to discuss such issues with you, you should refuse to do so.

If you know or suspect that an activity involves a cartel, then avoid or withdraw from the activity and do not assist it in any way.