How to identify cartels

If you are a victim of a cartel you will almost certainly be paying more for your goods and services than you should be. This will impact your competitive position in the marketplace.

Protecting yourself against cartels is good risk management. If you become aware of suspicious activity you should contact the ACCC. If cartel conduct is proved, there may be scope for you to seek compensation.

Role of purchasing officers

If you do procurement work for your company, you will be in the best position to notice the first warning signs of collusion. By comparing bids with what your experience tells you should be the norm, you can detect suspicious bidding patterns. While talking with suppliers’ representatives, you may also pick up valuable information or tips that indicate something may be amiss. In these circumstances, we encourage you to report your concerns.

Warning signs

There is rarely a simple indicator of cartel activity, but some warning signs suggest you need to take a closer look. Cartels often go to great lengths to remain secret and are usually very hard to detect. Many warning signs can be ambiguous. That is why it is important to gather evidence and take notes that can assist you in making inquiries or reports to the ACCC. The information you provide, no matter how seemingly inconsequential, might be the missing piece of a puzzle that the ACCC needs to commence an investigation.

It is important to look out for:

  • Signs of possible bid rigging
  • Signs of possible price fixing
  • Signs of possible customer, supplier or territory allocation
  • Unusual mistakes
  • Information from whistleblowers

Do

  • ask yourself, do my records suggest that bidders seem to be taking turns at winning tenders? This may indicate tender rotation
  • ask yourself, do tenderers seem to win around the same percentage of the contracts from year to year? This may indicate market allocation
  • ask yourself, do suppliers seem to win contracts in certain areas but not in adjoining areas? This may also indicate market allocation
  • question bidders about their pricing. Note their replies and carefully record them for future reference
  • check your records against the checklist and warning signs for any suspicious signs
  • continue with the tender process, including awarding the contract.
  • act normally, so as not to alert the bidders
  • report your suspicions to the ACCC.

Do not

  • accuse the bidders of illegal behaviour—if you are right, this may give them time to cover their tracks; if you are wrong, you might open yourself to accusations of slander
  • launch your own internal investigation without contacting the ACCC—this might alert a cartel that they may be exposed and give them time to destroy evidence
  • attempt to apply your own penalty, rather than reporting to the ACCC

It is not enough to know how to identify cartels. To avoid rip-offs you should also find out: How protect yourself against cartels.