Bid Rigging

AAA

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.

INVESTOPEDIA EXPLAINS 'Bid Rigging'

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.

RELATED TERMS
  1. Sherman Antitrust Act

    Anti-monopoly U.S. legislation which attempted to increase economic ...
  2. Price Discrimination

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

    A non-competitive agreement between rivals that attempts to disrupt ...
  4. Imperfect Competition

    A type of market that does not operate under the rigid rules ...
  5. Clayton Antitrust Act

    An amendment passed by the U.S. Congress in 1914 that provides ...
  6. Antitrust

    The antitrust laws apply to virtually all industries and to every ...
Related Articles
  1. Economics

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  2. Investing

    What is an antitrust law?

    Antitrust laws - also referred to as "competition laws" - are statutes developed by the U.S. Government to protect consumers from predatory business practices by ensuring that fair competition ...
  3. Personal Finance

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  4. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  5. Personal Finance

    The 5 Most Feared Figures In Finance

    Gates, Soros, Icahn, Rockefeller and Morgan caused chills on Wall Street.
  6. Entrepreneurship

    How did Dow Chemical defeat an international monopoly in the 1900s?

    Herbert Henry Dow, a Canadian by birth, was a remarkable man. A chemist and an entrepreneur, Dow was one of the first people to realize that brine, an abundant mixture of chemicals that often ...
  7. Options & Futures

    Why was Microsoft subject to antitrust charges in 1998?

    On May 18, 1998, the Department of Justice filed antitrust charges against Microsoft (Nasdaq:MSFT ). The charges were brought to determine whether Microsoft's bundling of other programs into ...
  8. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
    Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  9. Investing

    What are Business Ethics?

    Business ethics is the system of laws and guidelines by which business professionals and corporations operate in a fair, legal and moral fashion. It’s a broad topic, covering everything from ...
  10. What's a monopoly?
    Economics

    How a Monopoly Works

    In economics, a monopoly occurs when one company is the sole (or nearly sole) provider of a good or service within an industry. This potentially allows that company to become powerful enough ...

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center