Bid Rigging Initiated by Government Officials: The Conjuncture of Collusion and Corruption in Japan

Abstract

Bid rigging among companies is sometimes aided by government officials when the officials provide information concerning the yearly schedule for public tendering or when they reveal the maximum and minimum contract prices set in advance by the procuring office. Officials sometimes suggest that the bidders should agree upon the winner in advance. They can be further involved in collusion by suggesting bidders that a particular company should win a contract and require bidders to coordinate their bids accordingly. To counter the problem, legislation specifically addressing government officials’ involvement in bid rigging was enacted in 2002 and has been enforced by the FTC for about a decade. Under this law, conduct which promotes and aides bid rigging is specified as unlawful, including nominating the winning bidder in advance and disclosing confidential information to bidders. When the FTC discovers such activities, it will demand that the procuring department investigate the issue and implement measures to eliminate the problem. The investigation is obligatory for the procuring department. It is also obliged to publish the outcome of the investigation, take action against procurement officials to recover damages and issue disciplinary action against them. Through the investigations performed by the procuring office, the practices by which procurement officials rig bids have been uncovered. The cases also demonstrate under what circumstances collusion and corruption is likely and what motivates a procurement official to get involved in collusion. The paper presents the lessons learned from enforcement cases regarding how procurement officials start acting anti-competitively; review the function of the law and observe the interaction between the FTC and the procuring department; and consider remaining issues in resolving the confluence of collusion and corruption in Japan.