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PRICE FIXING, BID RIGGING, AND MARKET ALLOCATION SCHEMES: 

WHAT THEY ARE AND WHAT TO LOOK FOR

An Antitrust Primer 

Introduction1

American consumers have the right to expect 

the benefits of free and open competition — the 

best goods and services at the lowest prices. 

Public and private organizations often rely on a 

competitive bidding process to achieve that end. 

The competitive process only works, however, 

when competitors set prices honestly and independently. When competitors collude, prices are 

inflated and the customer is cheated. Price fixing, 

bid rigging, and other forms of collusion are illegal 

and are subject to criminal prosecution by the 

Antitrust Division of the United States Department 

of Justice. 

In recent years, the Antitrust Division has 

successfully prosecuted regional, national, and 

international conspiracies affecting construction, 

agricultural products, manufacturing, service 

industries, consumer products, and many other 

sectors of our economy. Many of these prosecutions resulted from information uncovered by 

members of the general public who reported the 

information to the Antitrust Division. Working 

together, we can continue the effort to protect and 

promote free and open competition in the marketplaces of America. 

Federal Antitrust Enforcement 

Enacted in 1890, the Sherman Act is among 

our country’s most important and enduring pieces 

of economic legislation. The Sherman Act prohibits 

any agreement among competitors to fix prices, rig 

bids, or engage in other anticompetitive activity. 

Criminal prosecution of Sherman Act violations is 

the responsibility of the Antitrust Division of the 

United States Department of Justice. 

Violation of the Sherman Act is a felony 

punishable by a fine of up to $10 million for 

corporations, and a fine of up to $350,000 or 3 

years imprisonment (or both) for individuals, if the 

offense was committed before June 22, 2004. If the 

offense was committed on or after June 22, 2004, 

the maximum Sherman Act fine is $100 million for 

corporations and $1 million for individuals, and the 

maximum Sherman Act jail sentence is 10 years. 

Under some circumstances, the maximum potential 

fine may be increased above the Sherman Act 

maximums to twice the gain or loss involved. In 

addition, collusion among competitors may 

constitute violations of the mail or wire fraud statute, 

the false statements statute, or other federal felony 

statutes, all of which the Antitrust Division 

prosecutes. 

In addition to receiving a criminal sentence, a 

corporation or individual convicted of a Sherman 

Act violation may be ordered to make restitution to 

the victims for all overcharges. Victims of bidrigging and price-fixing conspiracies also may seek 

civil recovery of up to three times the amount of 

damages suffered. 

Forms of Collusion 

Most criminal antitrust prosecutions involve 

price fixing, bid rigging, or market division or 

allocation schemes. Each of these forms of 

collusion may be prosecuted criminally if they 

occurred, at least in part, within the past five years. 

Proving such a crime does not require us to show that 

This primer briefly

describes the most

common antitrust

violations and

 outlines those

conditions and

 events that

indicate

anticompetitive

collusion.
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the conspirators entered into a formal written 

or express agreement. Price fixing, bid rigging, and 

other collusive agreements can be established 

either by direct evidence, such as the testimony of 

a participant, or by circumstantial evidence, such 

as suspicious bid patterns, travel and expense 

reports, telephone records, and business diary 

entries. 

Under the law, price-fixing and bid-rigging 

schemes are per se violations of the Sherman Act. 

This means that where such a collusive scheme 

has been established, it cannot be justified under 

the law by arguments or evidence that, for example, 

the agreed-upon prices were reasonable, the 

agreement was necessary to prevent or eliminate 

price cutting or ruinous competition, or the 

conspirators were merely trying to make sure that 

each got a fair share of the market. 

Price Fixing 

Price fixing is an agreement among competitors 

to raise, fix, or otherwise maintain the price at 

which their goods or services are sold. It is not 

necessary that the competitors agree to charge 

exactly the same price, or that every competitor in a 

given industry join the conspiracy. Price fixing can 

take many forms, and any agreement that restricts 

price competition violates the law. Other examples 

of price-fixing agreements include those to: 

• Establish or adhere to price discounts. 

• Hold prices firm. 

• Eliminate or reduce discounts. 

• Adopt a standard formula for computing 

prices. 

• Maintain certain price differentials 

between different types, sizes, or 

quantities of products. 

• Adhere to a minimum fee or price 

schedule. 

• Fix credit terms. 

• Not advertise prices. 

In many cases, participants in a price-fixing 

conspiracy also establish some type of policing 

mechanism to make sure that everyone adheres to 

the agreement. 

Bid Rigging 

Bid rigging is the way that conspiring competetors effectively raise prices where purchasers — 

often federal, state, or local governments — 

acquire goods or services by soliciting competing 

bids. 

Essentially, competitors agree in advance who 

will submit the winning bid on a contract being let 

through the competitive bidding process. As with 

price fixing, it is not necessary that all bidders 

participate in the conspiracy. 

Bid rigging also takes many forms, but bidrigging conspiracies usually fall into one or more of 

the following categories: 

Bid Suppression: In bid suppression schemes, 

one or more competitors who otherwise would be 

expected to bid, or who have previously bid, agree to 

refrain from bidding or withdraw a previously 

submitted bid so that the designated winning 

competitor’s bid will be accepted. 

Complementary Bidding: Complementary 

bidding (also known as “cover” or “courtesy” 

bidding) occurs when some competitors agree to 

submit bids that either are too high to be accepted 

or contain special terms that will not be acceptable to 

the buyer. Such bids are not intended to secure 

the buyer’s acceptance, but are merely designed to 

give the appearance of genuine competitive 

bidding. Complementary bidding schemes are the 

most frequently occurring forms of bid rigging, and 

they defraud purchasers by creating the appearance of competition to conceal secretly inflated 

prices. 

A corporation or

individual

convicted of a

Sherman Act

violation may be

ordered to make

restitution to the

victims for all

overcharges.

Victims of bidrigging and

price-fixing

conspiracies also

may seek civil

recovery of up to

three times the

amount of

damages

suffered.
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Bid Rotation: In bid rotation schemes, all 

conspirators submit bids but take turns being the 

low bidder. The terms of the rotation may vary; for 

example, competitors may take turns on contracts 

according to the size of the contract, allocating 

equal amounts to each conspirator or allocating 

volumes that correspond to the size of each 

conspirator company. A strict bid rotation pattern 

defies the law of chance and suggests collusion is 

taking place. 

Subcontracting: Subcontracting arrangements 

are often part of a bid-rigging scheme. Competitors 

who agree not to bid or to submit a losing bid 

frequently receive subcontracts or supply contracts in exchange from the successful low bidder. 

In some schemes, a low bidder will agree to 

withdraw its bid in favor of the next low bidder in 

exchange for a lucrative subcontract that divides 

the illegally obtained higher price between them. 

Almost all forms of bid-rigging schemes have 

one thing in common: an agreement among some 

or all of the bidders which predetermines the 

winning bidder and limits or eliminates competition 

among the conspiring vendors. 

Market Division 

Market division or allocation schemes are 

agreements in which competitors divide markets 

among themselves. In such schemes, competing 

firms allocate specific customers or types of 

customers, products, or territories among themselves. For example, one competitor will be allowed 

to sell to, or bid on contracts let by, certain 

customers or types of customers. In return, he or 

she will not sell to, or bid on contracts let by, 

customers allocated to the other competitors. In 

other schemes, competitors agree to sell only to 

customers in certain geographic areas and refuse 

to sell to, or quote intentionally high prices to, 

customers in geographic areas allocated to 

conspirator companies. 

Detecting Bid Rigging, Price Fixing, 

And Other Types Of Collusion 

Bid rigging, price fixing, and other collusion 

can be very difficult to detect. Collusive agreements are usually reached in secret, with only the 

participants having knowledge of the scheme. 

However, suspicions may be aroused by unusual 

bidding or pricing patterns or something a vendor 

says or does. 

Bid or Price Patterns 

Certain patterns of bidding or pricing conduct 

seem at odds with a competitive market and 

suggest the possibility of collusion: 

Bids 

• The same company always wins a 

particular procurement. This may be more 

suspicious if one or more companies 

continually submit unsuccessful bids. 

• The same suppliers submit bids and each 

company seems to take a turn being the 

successful bidder. 

• Some bids are much higher than published 

price lists, previous bids by the same firms, 

or engineering cost estimates. 

• Fewer than the normal number of 

competitors submit bids. 

• A company appears to be bidding 

substantially higher on some bids than on 

other bids, with no apparent cost 

differences to account for the disparity. 

• Bid prices drop whenever a new or 

infrequent bidder submits a bid. 

• A successful bidder subcontracts work to 

competitors that submitted unsuccessful 

bids on the same project. 
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• A company withdraws its successful bid 

and subsequently is subcontracted work by 

the new winning contractor. 

Prices 

• Identical prices may indicate a price-fixing 

conspiracy, especially when: 

• Prices stay identical for long periods 

of time. 

• Prices previously were different. 

• Price increases do not appear to be 

supported by increased costs. 

• Discounts are eliminated, especially in a 

market where discounts historically were 

given. 

• Vendors are charging higher prices to local 

customers than to distant customers. This 

may indicate local prices are fixed. 

Suspicious Statements or Behavior 

While vendors who collude try to keep their 

arrangements secret, occasional slips or carelessness may be a tip-off to collusion. In addition, 

certain patterns of conduct or statements by 

bidders or their employees suggest the possibility 

of collusion. Be alert for the following situations, 

each of which has triggered a successful criminal 

antitrust prosecution: 

• The proposals or bid forms submitted by 

different vendors contain irregularities 

(such as identical calculations or spelling 

errors) or similar handwriting, typeface, or 

stationery. This may indicate that the 

designated low bidder may have prepared 

some or all of the losing vendor’s bid. 

• Bid or price documents contain whiteouts 

or other physical alterations indicating 

last-minute price changes. 

• A company requests a bid package for 

itself and a competitor or submits both its 

and another’s bids. 

• A company submits a bid when it is 

incapable of successfully performing the 

contract (likely a complementary bid). 

• A company brings multiple bids to a bid 

opening and submits its bid only after 

determining (or trying to determine) who 

else is bidding. 

• A bidder or salesperson makes: 

• Any reference to industry-wide or 

association price schedules. 

• Any statement indicating advance 

(non-public) knowledge of 

competitors’ pricing. 

• Statements to the effect that a 

particular customer or contract 

“belongs” to a certain vendor. 

• Statements that a bid was a “courtesy,” 

“complementary,” “token,” or “cover” 

bid. 

• Any statement indicating that vendors 

have discussed prices among 

themselves or have reached an 

understanding about prices. 

A Caution About Indicators of Collusion 

While these indicators may arouse suspicion of collusion, they are not proof of collusion. 

For example, bids that come in well above the 

estimate may indicate collusion or simply an 

incorrect estimate. Also, a bidder can lawfully 

submit an intentionally high bid that it does not 

think will be successful for its own independent 

business reasons, such as being too busy to 

handle the work but wanting to stay on the 

bidders’ list. Only when a company submits an 

intentionally high bid because of an agreement 

with a competitor does an antitrust violation exist. 

Thus, indicators of collusion merely call for further 

investigation to determine whether collusion exists 

Collusion is more

likely to occur if

there are few

sellers. The fewer

the sellers, the

easier it is for

them to get

together and

agree on prices,

bids, customers,

or territories.
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or whether there is an innocent explanation for the 

events in question. 

Conditions Favorable To Collusion 

While collusion can occur in almost any 

industry, it is more likely to occur in some industries than in others. An indicator of collusion may 

be more meaningful when industry conditions are 

already favorable to collusion. 

• Collusion is more likely to occur if there 

are few sellers. The fewer the number of 

sellers, the easier it is for them to get 

together and agree on prices, bids, 

customers, or territories. Collusion may 

also occur when the number of firms is 

fairly large, but there is a small group of 

major sellers and the rest are “fringe” 

sellers who control only a small fraction of 

the market. 

• The probability of collusion increases if 

other products cannot easily be substituted 

for the product in question or if there are 

restrictive specifications for the product 

being procured. 

• The more standardized a product is, the 

easier it is for competing firms to reach 

agreement on a common price structure. It 

is much harder to agree on other forms of 

competition, such as design, features, 

quality, or service. 

• Repetitive purchases may increase the 

chance of collusion, as the vendors may 

become familiar with other bidders and 

future contracts provide the opportunity 

for competitors to share the work. 

• Collusion is more likely if the competitors 

know each other well through social 

connections, trade associations, legitimate 

business contacts, or shifting employment 

from one company to another. 

• Bidders who congregate in the same 

building or town to submit their bids have 

an easy opportunity for last-minute 

communications. 

What You Can Do 

Antitrust violations are serious crimes that can 

cost a company hundreds of millions of dollars in 

fines and can send an executive to jail for up to ten 

years. These conspiracies are by their nature 

secret and difficult to detect. The Antitrust 

Division needs your help in uncovering them and 

bringing them to our attention. 

If you think you have a possible violation or 

just want more information about what we do, 

contact the Citizen Complaint Center of the 

Antitrust Division: 

E-mail: 

antitrust.complaints@usdoj.gov 

Phone: 

1-888-647-3258 (toll-free in the U.S. and 

Canada) or 1-202-307-2040 

Address: 

Citizen Complaint Center 

Antitrust Division, U.S. Dept. of Justice 

950 Pennsylvania Ave. NW, Suite 3322 

Washington, DC 20530 

 

1

 This Primer provides only internal Department 

of Justice guidance. It is not intended to, does not, 

and may not be relied upon to create any rights, 

substantive or procedural, enforceable at law by any 

party in any matter civil or criminal. No limitations 

are hereby placed on otherwise lawful investigative 

and litigation prerogatives of the Department of 

Justice. 

Antitrust violations

are serious crimes

that can cost a

company hundreds

of millions of

dollars in fines and

can send an

executive to jail

for up to ten years.

These conspiracies

are by their nature

secret and difficult

to detect.

The Antitrust

Division needs

your help in

uncovering them

and bringing them

to our attention.