Bid Rigging


DEFINITION of 'Bid Rigging'

A scheme in which businesses collude so that a competing business can secure a contract for goods or services at a pre-determined price. Bid rigging stifles free-market competition, as the rigged price will be unfairly high. The Sherman Act of 1890 makes bid rigging illegal under U.S. antitrust law. Bid rigging is a felony punishable by fines, imprisonment or both.


There are four main types of bid rigging: bid suppression, complementary bidding, bid rotation and subcontracting. In the most common of these schemes, complementary bidding, some of the "competitors" submit offers that they know the buyer will reject because the price is too high or the terms are unacceptable in order to create the appearance of legitimate bidding while ensuring that a prearranged "competitor" will win the bid.

  1. Sherman Antitrust Act

    Anti-monopoly U.S. legislation which attempted to increase economic ...
  2. Imperfect Competition

    A type of market that does not operate under the rigid rules ...
  3. Federal Trade Commission - FTC

    An independent federal agency whose main goals are to protect ...
  4. Price Fixing

    Establishing the price of a product or service, rather than allowing ...
  5. Collusion

    A non-competitive agreement between rivals that attempts to disrupt ...
  6. Price Discrimination

    A pricing strategy that charges customers different prices for ...
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