BY SHIVAM GUPTA AND PRAYAS DAS, THIRD-YEAR STUDENTS AT NLU,ODISHA
INTRODUCTION
When the Competition Commission of India (“CCI”) exposed the strategic deployment of zero-turnover proxy bidders in the landmark Pune Municipal Corporation tender cartel case, it laid bare a critical enforcement vulnerability in state procurement. Conventionally, Indian competition jurisprudence under the Competition Act, 2002 has treated bid-rigging as a harm that is curable ex-post through post-facto investigation and monetary penalties under Section 27. Bid-rigging produces a market tipping effect, similar to the network monopolies created in digital markets, and establishes cumulative incumbent advantages, such as pedigree, scaled infrastructure, and insider influence, which together dissuade any legitimate competition from competing for future procurement.
Bid-rigging further creates a closed ecosystem in which colluding insiders dominate the bid process and use their knowledge of the bidding process to tip the market for specific government contracts into a state of permanent monopoly. Once the market has tipped into a state of permanent monopoly, the ability to restore competition through robust ex-post enforcement is extremely limited since the structural foreclosure of competition cannot be easily undone. Once colluding parties are discovered and are subject to sanctions, the number of true competitors may have been reduced to the point where there are no longer viable bidders. Thus, bid-rigging not only produces overcharges associated with one procurement but also undermines the fundamental framework needed to create a legitimate bidding process for future procurements. In this article, the authors argue that bid-rigging in public procurement is better understood as a structural marketplace failure that causes permanent distortion. While public procurement is designed to optimize price and quality through competition, it remains uniquely vulnerable to systemic disruption. To address this gap, the discussion is structured in three parts: firstly, it demonstrates how proxy bidding induces market tipping; secondly, it examines the resulting penalty gap under existing turnover doctrines; and lastly, it proposes a shift toward ex-ante tender design and institutional reform.
ANALYTICAL FRAMEWORK OF COLLUSION: THE PMC CASE STUDY
The CCI, with its decision in the Pune Municipal Corporation Tender Cartel case (2015), shows how vulnerable the public procurement systems are. On November 10, 2025, the CCI found that Bipin Salunke set up a scheme for bid rigging that used Mahalaxmi Steels and Sanjay Agencies’ entities as proxy bidders to submit complementary and manipulated bids that were inflated between the years 2013 and 2015.
This investigation highlights some of the limitations of evaluating tender processes based on the number of tenders received as valid competitive offers. Complementary bids establish an artificial price floor for the tender and distort the benchmark used by the procuring entity. Therefore, even though the primary bidder may have appeared to be a real competitor, this determination was based upon artificially created comparisons, not the true value of the market, thereby allowing the cartel to extract excessive profits from public funds.
THE PENALTY PARADOX: NAVIGATING THE EXCEL CROP JURISPRUDENCE
Proxy bidding is a significant flaw in antitrust protection. The Supreme Court in Excel Crop Care Ltd v Competition Commission of India (2017) stated that penalties for antitrust violations must be based on relevant turnover or else be proportionate to the offender’s total turnover. In the Commission proceeding against proxy bidders such as Sanjay Agencies and Mahalaxmi Steels, those bidders argued that they had no relevant turnover as there was no activity on the solid waste management market.
The application of the relevant turnover standard in this case creates an enforcement gap; the bidders that utilised their proxies may not be subject to penalties for their actions or may be subject to disproportionate penalties compared to primary cartel members. The CCI found that proxy bidders would be liable for their involvement in the bid rigging as opposed to their participation in the market. Applying a strict relevant turnover standard to proxy bidders in bid-rigging cases creates a major enforcement vacuum that undermines the statutory purpose of the Competition Act, 2002; which, under its Preamble and Section 18, is enacted to prevent practices having an Appreciable Adverse Effect on Competition and to sustain fair market contestability by allowing non-market facilitators to evade legal liability entirely.
THE EU “LADDER SYSTEMS” AND FACILITATORS
The need to find a balance between deterrent and turnover-based penalties can also be seen in EU competition law. According to the 2006 Guidelines on Fines, there is a structured ‘ladder’ system for calculating fines that begins at the undertaking’s turnover in the relevant market and is adjusted for factors such as the seriousness of the infringement, duration of the infringement, and aggravating factors. In addition, the cap for any fine will not exceed 10% of the undertaking’s worldwide turnover to ensure that the fine is proportionate while retaining a deterrent effect.
A significant development occurred when the Court of Justice in AC-Treuhand AG v European Commission (“AC-Treuhand Case”) upheld the European Commission’s decision to impose calibrated lump sum fines on the undertaking that facilitated the cartel and did not have any turnover in the relevant market. Applying the normal methodology would have resulted in zero penalty for the undertaking. The Court of Justice stated that participation in a product market is not necessary for a finding of liability under Article 101 of the Treaty on the Functioning of the European Union (“TFEU”), and therefore, authorities can deviate from turnover-based methodologies to achieve effective deterrence in cases involving facilitators.
While the AC-Treuhand case is not binding on the CCI, it offers persuasive support for reading Section 27 of the Competition Act, 2002 expansively- treating turnover as a statutory penalty ceiling rather than an indispensable prerequisite for liability. Thereby permitting lump-sum penalties on facilitators lacking relevant turnover.
FROM EX-POST TO EX-ANTE: LESSONS FROM THE DIGITAL MARKETS ACT
The limitations of entirely ex-post penalties are also illustrated by the European Union’s Digital Markets Act (‘DMA’), which marks a paradigm shift from reactive to proactive regulation. Traditional ex post enforcement is typically too slow to recreate market contestability where markets are at risk of tipping; e.g., the investigation in the Google Shopping case lasted 7 years (2010-2017). During those 7 years, the market was tipped in such a way that, when the fine was eventually imposed, it would be impossible for the fine to restore market contestability.
The DMA takes the position that there are markets that are too weak for post-event regulations to be effective. Instead, it focuses on gatekeepers, meaning large platforms that meet certain user and financial measures, and it will have a pre-existing list of dos and don’ts. The DMA adopts an ex-ante approach to prevent market-tipping, address enforcement delays, and proactively preserves open markets before anti-competitive conduct becomes irreversible. While digital platforms rely on multi-sided network effects and procurement operates as a single-buyer monopsony, both exhibit identical tipping dynamics: repeated bid-rigging creates entrenched incumbent advantages such as artificially inflated contract pedigree, financial capacity, insider access. These acts as insurmountable entry barriers for outsiders. Once honest bidders exit the market due to perpetual foreclosure, ex-post fines cannot revive market contestability. By targeting gatekeepers with pre-existing obligations, the DMA’s core regulatory philosophy (replacing slow ex-post fines with proactive structural constraints) applies with equal force to public procurement to prevent irreversible market tipping before collusive dynamics become permanent.
A NEW MODEL FOR PROCUREMENT: EX-ANTE TENDER DESIGN
Embedding transparency requirements into the procurement authority’s system will increase the cost of collusion and deter cartels, enabling proactive market surveillance rather than reactive enforcement. The first mechanism is common-link disclosure, whereby bidders disclose shared directors, major shareholders, prior joint ventures, or common technological infrastructure (i.e., IP addresses), thereby transferring the burden of transparency to participants, similar to compliance models established under the DMA. The second mechanism is certification of independent infrastructure, whereby bidders must certify that they do not share bidding infrastructure (i.e., consultants, financial instruments, etc.). If the certification is false, the bidder will be disqualified and subject to enforcement action. The third mechanism is a warning in tender documents of potential penalties (based on the global turnover of the controlling entity and not just contract value) that proxy bidders or facilitators may incur, thereby deterring proxies from participating. These proposals represent a shift towards preventive market design while ensuring procedural fairness through objective and reviewable disclosures and allowing expert adjudicative bodies to make collusion decisions.
WAY FORWARD: INSTITUTIONAL COORDINATION AND IMPLEMENTATION
Indian legislations such as the Rule 149 of the General Financial Rules (GFR), 2017 mandates the use of pre-approval/e-permission arrangements to be integrated within online platforms, e.g., the Central Public Procurement Portal and Government e-Marketplace. Adopting this ‘compliance-first’ methodology can maintain and enforce an obligation from the initial point of entry, as the greatest number of risk factors occur at that point of entry.
The effectiveness of this will be maximised through efficient communication between the CCI and the various authorities involved in the procurement processes. Even if procurement practitioners identify any flags indicating non-compliance or anti-competitive behaviour; they do not possess the authority to investigate or act upon the competition issues; They need to refer it to the CCI as per Section 19(1)(b) of the Competition Act, 2002. To address this issue, a framework could be developed for providing information about suspected behaviours to the CCI, to allow for preliminary scrutiny before a full investigation is undertaken.
It will be necessary to gradually introduce ex-ante disclosures in the highest-risk sectors of procurement to protect against discouraging small bidders from participating. By introducing ex-ante disclosures in phases, the preventative actions taken to promote competition will still continue to be achievable and applicable within the principles of fairness and equity to all participants in public procurement.
CONCLUSION
Bid-rigging creates a distortion that can hamper competition in public procurement for the foreseeable future. In cases where individuals are culpable for their participation in a collusive operation, relying on relevant turnover is inadequate as a basis for imposing an appropriate penalty. The establishment of a penalty regime for facilitators of collusion based on global turnover by the CCI closes a significant enforcement gap. By incorporating ex-ante protective mechanisms into the tender design process and developing ex-post adjudication processes, India will be better able to protect market structures while ensuring that the purpose of imposing penalties aligns with the goals of creating and preserving open, fair and competitive markets for the public good.
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