Bid Rigging & Price Fixing - Accounting Fraud

What is bid rigging?

Otherwise known as price fixing, bid rigging has to be one of the most common accounting frauds
ongoing in the market even today. The whole idea behind bid rigging basically involves the fact that
market competitors will decide to come to an agreement and artificially increase the prices of goods
and services that they offer. This is usually done so as to survive in a market where the business trends
are not all that favorable for quick profits hence the companies decide to collude to their own benefit.
It’s inception into the market can be traced way back a number of years and it is very much likely to
continue.

Basically, the competitors will decide to raise, fix or even maintain the market price of their goods or
services. They will definitely agree to this as it means that they will make quick profits. The time fixation period will usually be agreed on and after they have reached their target profits, they can resume to their previous competitive prices. This is usually done when the business times are quite bad and they still need to stay afloat. The period will usually be agreed on so they can recoup their monies and once that has been done, they will get back to their usual trends as though nothing happened.

How price fixing is done

In as much as the competitors are usually involved in price fixing, it should be noted that they will not
necessarily agree on charging the same price. It is not even assured that the other competitors will
join in the conspiracy. There are a number of methods of trickery used to execute this successfully. It
can take many forms such as establishing price discounts, holding prices firm, eliminating discounts,
adopting a standard formula for computing prices, adhering to a minimum fee or price schedule, fixing
credit terms just to mention but a few of those involved.

How are bid riggers caught?

The fact of the matter is that detecting bid rigging can be a very difficult thing to do. Remember that
were dealing with collusions, which are difficult to uncover as all the parties involved are on the same
page. What makes it even more difficult is that the collusive agreements are usually done in secret and
only those conspiring will know what is going on, and there is no documentation of the same. It only as
a result of suspicions aroused by unusual pricing patterns or statements by one of the vendors that can
reveal exactly what is going on.

The consequences of price fixing

Should the suspicion of price fixing be followed upon, the parties involved are likely to face a very tense period. It all depends on the respective body that will be pursuing the charges as some are known to
be quite pressing while others will just be looking for evidence which can be hard to find. The exerted
pressure and threats can cause one of the conspirators to crack and that would definitely spill the beans.
It is however difficult to do so especially when there is no evidence at hand.

Read more about Accounting Fraud today.

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