Consortium participation, public procurement cartels, and bid rigging in competitive procedures:

The world of tenders, including public procurement and private purchasing, offers significant business opportunities for most companies. At the same time, this is the area where the Hungarian Competition Authority (“GVH”) takes the strictest possible action against cartelizing undertakings. A “small favor,” such as requesting a cover bid from a competitor, or a “friendly conversation” with a local business about participation in a tender, often carries unforeseeable and serious risks — including fines amounting to hundreds of millions or even billions of forints, exclusion from public procurement procedures, and even criminal consequences.

In the following summary, we review what constitutes a public procurement cartel or collusion in tender procedures, in which cases consortium bidding is unlawful, and who may be held responsible for committing such infringements.

What is a public procurement cartel and how can it be committed?
A cartel exists when competing companies secretly agree on certain matters — for example prices or market allocation — thereby eliminating or reducing competition between them. When bidders collude with each other in public procurement or other tender procedures, this is generally referred to as a public procurement cartel, and we will use this term throughout. It is important to emphasize that not only collusion during public procurement procedures is prohibited, but also collusion in any state purchasing that does not qualify as public procurement and in tenders issued by private companies.

Bidders can collude in many different ways during tender procedures. Among these, the following — partly overlapping — forms are worth highlighting:

1. Market allocation and possible price fixing
   Market allocation occurs when competitors agree on which bidder will win a given tender and submit coordinated bids accordingly. In many cases, this is accompanied by price fixing, where the bidders also coordinate the prices of the bids they submit.

2. Withholding bids “as a favor”
   In many cases, competing companies agree that only the pre-selected winner submits a valid bid, while the others either do not submit a bid, submit an invalid bid (bid suppression), withdraw their bids afterward, or “fail” to complete missing documentation. In such cases, the companies that voluntarily withdraw from competition typically receive some form of compensation from the winning bidder (e.g. profit-sharing, allocation of future projects or tenders, or later consortium or subcontracting opportunities).

3. Cover (sham) bidding
   A cover bid occurs when one or more companies submit sham bids to maintain the appearance of competition and help another company win the tender. This may involve submitting a higher price than the intended winner or a clearly uncompetitive offer, or even submitting an intentionally invalid or late bid. In many cases, the eventual winner prepares the unfavorable cover bids for competitors, who then only need to sign and submit them.

4. Cover bids arranged with the contracting authority
   Here, the bidder agrees with the contracting authority to obtain the required number of cover bids from competitors to ensure that the procedure is formally valid and that the bidder is selected as the winner. This type of infringement is particularly common in GVH practice.

5. Bid rotation
   In bid rotation schemes, bidders decide in advance who will submit a winning bid, where and when, taking turns to win different tenders. The role of the winner rotates among them, so that different bidders win repetitive or geographically separated tenders.

6. Exchange of information
   Prohibited information exchange occurs when competing companies inform each other — either during the preparation phase or after the call for tenders is published — about their intention to participate and even their interest in winning a particular tender. This behavior is important to highlight because many companies are unaware that simply informing competitors whether they intend to participate in a tender may already constitute an infringement. It is not necessary to establish explicit cartel intent or a full agreement to allocate the tender.

The infringement exists even without profit
A common misconception is that conduct is only unlawful if profit is made through coordination with competitors. This is not the case. The forms of collusion listed above are independent of profit: for example, a company is not exempt from liability if it only does “favors” for others but never wins a tender itself, nor if a company submitting a cover bid is not actually active in the relevant market.

It also does not matter whether the allocated tender is ultimately realized. Collusion remains unlawful even if the contracting authority later cancels the tender, or if bidders coordinate in relation to a non-binding (indicative) tender but do not submit binding bids later. These factors may only affect the amount of the fine, but not the finding of the infringement itself.

What about consortium bidding?
Consortium bidding requires careful assessment from a competition law perspective. Many assume that submitting bids as a consortium is always lawful, but this is not true.

Consortium bidding is lawful if the bidders would not be able to meet the essential requirements of the tender or the contract individually. However, it is unlawful if there is no objective economic justification for forming a consortium, as it reduces the number of competitors who could otherwise submit independent bids.

It should also be noted that subcontracting arrangements between competitors can resemble joint bidding. Therefore, involving a subcontractor may also be unlawful if the participants could have submitted independent main contractor bids but instead agreed that the main contractor would involve the cartel member as a subcontractor as compensation for withdrawing from the tender.

Before entering into subcontracting or consortium arrangements, these factors should always be assessed, and contacts between competitors and the lawful intention of cooperation should be properly documented. It is advisable to record in the consortium agreement — with the involvement of competition law experts if necessary — the reasons for forming the consortium, as well as the limits, framework and purpose of the cooperation.

Relationship with the contracting authority
Contact with the contracting authority is fundamentally different from contact with competitors. Such contact is natural and part of participating in procurement procedures. However, it must not lead to corruption or restriction of competition.

From a competition law perspective, it is important that bidders do not coordinate with each other — even at the request of the contracting authority — regarding prices or market allocation, and do not attempt through intermediaries involved in preparing the tender to overspecify the requirements in order to increase their chances of winning.

If a cartel is formed involving the contracting authority, not only the colluding competitors but also the authority itself may be subject to proceedings by the GVH, as it may bear competition law liability as a facilitator. For example, if the authority encourages a preferred bidder to obtain parallel cover bids, the authority may also become subject to investigation.

Trends in the practice of the GVH
Cartels are among the most serious and harmful competition law infringements, and combating public procurement cartels has always been a priority for competition authorities.

According to the GVH’s 2025 report, 18 cartel investigations were ongoing in 2025 alone, with three cases closed with fines and five new cases initiated. More than 1,800 tenders were examined, around 1,000 involving public funds.

In cases closed in 2025, the GVH imposed fines exceeding HUF 2.2 billion in total, even after reductions due to cooperation. These figures show that enforcement is intensive and cartel conduct can have severe consequences. The statute of limitations is also long: five years from the last infringement, which prolongs exposure to legal risks.