In a competitive market economy, ensuring fairness and transparency in bidding processes is crucial for fostering a healthy business environment. However, anti-competitive agreements, particularly bid-rigging agreements, undermine fair competition and lead to inefficiencies in resource allocation. This document examines the legal framework governing bid-rigging agreements in Vietnam, their consequences, and the conditions under which restricted competition agreements may be exempted under the Competition Law 2018.
1. Anti-Competitive Agreements Related to Bid-Rigging
According to Article 12 of the Competition Law 2018, certain anti-competitive agreements are strictly prohibited. Among them, bid-rigging agreements—whereby one or more parties collude to ensure a predetermined bidder wins a tender—are explicitly banned. These agreements often involve information exchange on pricing, contract terms, or competitive strategies among participants, which significantly undermines fair competition.
The prohibition of bid-rigging aims to ensure transparency, fairness, and a level playing field in procurement processes. Strict enforcement of these regulations helps prevent market distortions, safeguards public resources, and ensures that businesses submit competitive and fair bids.
Anti-competitive agreements in Vietnam are not limited to horizontal and vertical arrangements but also extend to closed bidding networks. The issue has been a subject of debate in the National Assembly, where it has been identified as a major contributor to inefficiencies and financial losses in public investment projects. Notably, bid-rigging not only harms the government but also disadvantages law-abiding businesses committed to offering high-quality services at competitive prices.
In many cases, vertical collusion occurs between enterprises and regulatory authorities. This is particularly evident in sectors such as construction and transportation, where major infrastructure projects are often handled internally by government agencies, restricting fair competition. The Minister of Planning and Investment has highlighted these concerns, particularly in the Ministry of Transport, where all aspects of project implementation, from surveying and designing to construction, remain under the ministry’s control.
The lack of transparency and collusion between businesses and government agencies has led to significant concerns regarding fair competition and market integrity. Despite efforts to reform bidding laws, detecting and penalizing bid-rigging remains a complex challenge requiring continuous legal and institutional improvements.
2. Consequences of Bid-Rigging Agreements
Bid-rigging agreements have far-reaching economic and social consequences, including:
- Resource Misallocation and Waste: Firms engaging in bid-rigging often submit inflated bids, leading to excessive project costs and inefficient use of public funds. This practice results in financial losses for contracting authorities and exacerbates budgetary constraints.
- Decline in Project Quality: When competition is eliminated, firms have little incentive to optimize quality and cost efficiency. As a result, infrastructure projects and public services may suffer from substandard execution, negatively impacting long-term economic growth and development.
- Economic Stagnation: Reduced competition discourages innovation and efficiency improvements, leading to a decline in overall economic dynamism. Without competitive pressure, firms may lack motivation to enhance productivity or offer cost-effective solutions.
- Lack of Transparency and Fairness: Bid-rigging agreements erode public trust in procurement processes and discourage fair market participation. The resulting lack of confidence among investors and businesses weakens economic competitiveness and market integrity.
- Distorted Competitive Environment: Anti-competitive agreements create disparities among businesses, limiting market access for new entrants and stifling industry advancement. This imbalance hampers economic diversification and slows progress in emerging sectors.
- Social and Ethical Implications: The adverse effects of restricted competition extend beyond economic dimensions, leading to increased inequality and unfair wealth distribution. Unethical business practices foster corruption and undermine social trust in regulatory institutions.
Given these detrimental effects, it is imperative for governments, regulatory bodies, and businesses to work collaboratively in fostering a transparent and competitive bidding environment.
3. Temporary Exemptions for Prohibited Anti-Competitive Agreements
Conditions for Exemption
While anti-competitive agreements, including bid-rigging, are generally prohibited, Article 14 of the Competition Law 2018 allows temporary exemptions under specific conditions. Exemptions are granted only if the agreement provides substantial benefits to consumers and meets one or more of the following criteria:
- Promotion of Technological and Technical Advancements: If an agreement facilitates technological innovation and knowledge sharing that enhances product or service quality, an exemption may be considered. Collaborative efforts to advance technical capabilities can yield consumer benefits and market efficiencies.
- Enhancing International Competitiveness of Vietnamese Enterprises: Agreements aimed at strengthening Vietnamese firms’ global market positioning, such as strategic alliances for scaling production and improving product standards, may qualify for exemption.
- Standardization of Quality and Technical Standards: Agreements that help establish uniform quality and technical benchmarks can contribute to market efficiency. Ensuring standardized production processes benefits both businesses and consumers by reducing uncertainty and improving product reliability.
- Harmonization of Contract Terms, Delivery, and Payment Conditions: Certain agreements that solely focus on standardizing contractual obligations and operational logistics—without affecting pricing or competitive dynamics—may be exempted. This ensures business efficiency without compromising market fairness.
Regulatory Oversight: The exemption process requires stringent oversight to ensure that granted exceptions align with public and economic interests. Authorities must regularly assess exempted agreements to prevent potential abuses that may distort market competition. Continuous monitoring and policy adjustments are necessary to balance regulatory flexibility with competition protection.
In conclusion, bid-rigging agreements represent a significant challenge to fair competition, economic efficiency, and public trust. By enforcing strict regulations and promoting transparency in bidding processes, Vietnam can foster a more competitive and sustainable business environment. While temporary exemptions may be permitted under certain conditions, they must be carefully regulated to prevent market distortions. Strengthening enforcement mechanisms, enhancing regulatory transparency, and promoting fair competition are essential steps in ensuring a dynamic and resilient economy.
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Dinh Phuong Thao