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ISSUE

What law says about the Collusive


Tendering?
How collusive Tendering impact
the business actor?
How Indonesia and Vietnam doing
implementation of the settlement
collusive tender carried out by the
states in the enforcement of
competition law?

INTRODUCTION
Collusive tenderinga.k.a Bid Rigging known as another cartelised
behavior ; hard-core cartel ; an agreement between parties to win the
competitors in a tender. ( Form: written/ unwritten form)
Involves competitors collaborating to restrict competition in response
to a tender, by public authority / private entity, Agreeing to refrain
from submitting bids, or by bidders agreeing on a lower bidder and
then bidding above that firms intended (inflated) price.
Collusive tendering leads to higher prices, the callers of the bid are
affected as they usually end up paying far more than they would have
had to pay otherwise. This increases the cost to the consumers, as the
higher prices are inevitably passed to them.
The conspiracy can occur at any stage of the tender process, ranging
from planning and manufacturing or committee requirements by
implementing the tender, the tender document adjustment between
bidders, to the tender announcement
Research shows that the Industrial sector (building and civil

BACKGROUND
Why it is needed in Indonesian & Vietnam :
They are included in ASEAN which is concerned about the
competition policy and law

Legal Basis
Art 22 Indonesian Competition Law No. 5 of 1999 issued by
(House of Representatives) DPR & Presidential Decree No. 54
of 2010 Concerning Government Procurement states to create
fair competition, tenders or procurement of goods / services
Art 8 Vietnam Competition Law No. 27/2004/QH11
Generally done as per se illegal (Even in countries that do not
have laws limiting business activities)

What Differs VIET - IND


Vietnam :
Vietnam Competition Law No. 27/2004/QH11 says it is
illegal per se.
Enforce by Vietnam competition Authority (VCA)
&VC.Council (VCC).
Element : Unlawful if only some bidders colluded and
someone else submitted a lower bid and got the
contract

Indonesia:
Article 22 of Law No. 5 of 1999 stipulates, that a
violation of this provision will be checked by the rule of
reason
Enforce by competition supervisory commission ( KPPU)
Elements that shall be met to prove specific stated :
1. collusion or conspiracy in a tender. Include requirement

What Differs VIET - IND

Elements that shall be met to prove specific stated (cont) :

2.

The element of business actors, as the subject / actor of the


violation. (Individual / business entity, incorporated or not
incorporated as legal entity, established & domiciled /
conducting activities w/in jurisdiction of the RI, independently
/ jointly based on agreement, of various business act in the
economic field. In vertical collusive tendering, it shall be
proved whether committee or owner of the tender project is
doing a business act / in the capacity as a business actor.

3.

The element of purpose to determine or arrange the tender


winner / awardees. i.e: bid rotation or complementary
bidding

4.

The element of may result in unfair business competition.


This latest element gives a separated character from the
arrangement of the prohibition of collusive tendering which
regulated in Law No. 5 year 1999. It shall be proved whether
the cooperation / communication in a tender has omitted /
injured the competition or not. This element could answer the

THEORY : FORMS
1. Sub-contract Bid Rigging: Where some of the bidders opt out
of the process under the agreement that some parts of the bid
will be sub-contracted to them.
2. Complementary Bidding: Where some of the bidders submit
bids which are either too high or contain unacceptable
conditions, defrauding purchasers in the process by creating
the appearance of genuine competitive bidding.
3. Bid Rotation: Where the bidders take turns winning the bid.
4. Bid Suppression: Where some of the bidders opt out of the bid
so that the designated winning competitors bid will be
accepted.
5. Market Division: Where competing firms allocate specific
customers or types of customers, products, or territories
among themselves and the winning bid is decided in
accordance with such allocation.

THEORY
GENERAL PRINCIPLE TENDER

Transparency*
Respect,
Effective competition*
Efficient*
Open*
Fair Negotiation/ Non-discriminatory*,
Accountable*
Assessment in processes

* stated in Indonesian Presidential decree no.54 year


2010

THEORY: Characteristic of tender


that lead to collusion / conspiracy:
The market from the tendered product is a
concentrated market.
There is high entry barrier
The transaction is transparent or easy to be
known by business actors which
attend the tender (so that it is easy to know
if there is cheating or violations to the
arrangement of tender awardees)
The frequency of competition between
business actors which is quite high, so it
could be identified all business actors which
are in the market.

THEORY : RISK & TYPE


RISK COLLUSIVE TENDERING:
Offer price manipulation.
Tend to benefit those involved in the conspiracy.
Fraud
Adverse effects on government spending and the state budget.
Few companies dominate local markets
May lead to inflation due to mark-up
Damage the credibility of lending institutions because of misused loan ( ie:
World bank, for lending fund )
TYPE COLLUSIVE TENDERING:
horizontal : cooperation actions carried out by the bidder bidding, for
example to strive for one of the parties is determined as the winner by
way of exchanging information and raise or lower the price of the offer
price.
Vertical : the agreement made between the bidder with the executive
committee of the tender. In this case, the committee usually provide
various facilities on the requirements for a bidder, so that he can win the
bid.
Combined vertical and horizontal : conspiracy between the tender
committee or committees of auctions or users of goods and services or
employers with businesses actor or providers of goods and services. This
conspiracy may involve two or three parties involved in the bidding

THEORY : EVIDENCE
Submission of similar bid documents, e.g., similar cover
letter, similar bid price, similar wording and typographical
errors, similar office address, similar telephone and fax
number, similar shareholders, and similar directors.
Submission of documents used in previous bids for the
same party, without revision.
Post bidding practices, e.g. allowing submission of
incomplete tender documents, allowing continued
participation despite the bidders incapability to complete
administrative requirements, and allowing submissions
after the deadline.
Communication by way of e-mails and letters discussing
the bid/offer price. The subsequent adjustment of those
bid/offer prices has been cited as evidence of collusion.

THEORY : EVIDENCE
Goods or services specifications are directed and only
available exclusively to certain producers
Lack of transparency as regards the tender
announcement, i.e., publication in only one local
newspaper.
The promise of work to a losing bidder by the winning
bidder.
A statement from the tender committee that the sole
purpose of the tender is to ascertain the true market
price (although the rules do not contain mention of such
an exercise).
Members of the same group of companies submitting
several separate bids.
The failure of the tender committee to conduct surveys or

THEORY

Increasing in collusive tendering


characterized by:
The presence of a few sellers of a small leading
group of sellers that control most of the market;
Lack of ready substitution with other products;
Standardized products.

Often, the mere exchange of information between


competitors before the award of a tender is enough to
establish an irrefutable presumption that collusive
tendering has occurred.

THEORY : SANCTIONINDONESIA
The KPPU can only apply administrative sanctions against parties
associated with bid rigging. If the "other party" is a tender
committee (governments representative) shown to support the
conspiracy, KPPU can not impose administrative sanctions, but
can only give recommendations to superiors of governments
representative to impose administrative sanctions.

Sanctions are binding but shall not be applied to the execution of


the District Court. While on the "other party" of the elements of
business, KPPU has the authority to impose administrative
sanctions, such as fines or restitution, as well as to the
businesses reported.

Administrative sanctions may be requested execution to the


District Court. However, in the case of KPPU to impose sanctions
and penalties that are not tangible or compensation, then it shall
not be applied to the execution of the District Court.
District court execution may be criminal fines and imprisonment,

THEORY : SANCTION VIETNAM


Monetary fine
Up to10% of the total revenue of the violating
enterprises in the fiscal year proceeding the year of
violation

Additional sanctions
Revocation of the business registration certificates
Deprivation of licenses and practicing certificates
Confiscation of exhibits and means used for
committing violations