2.4.7 What about monopolies and cartels?

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Through ongoing market intelligence and a cross departmental approach to assessing the marketplace, it is possible for a contracting authority to identify when suppliers may be attempting to/ or have eliminated the competition thus forming a locally based monopoly. The monopoly operates as one single seller and will work towards gaining a higher price for a product or service on the basis that they are the only supplier. An example includes when, large management consultancy companies agree collectively to continually under price smaller, lower value contracts for a prolonged period of time (up to 1 year), while gaining high profits on higher added value projects with the contracting authority. In the long term this is likely to eliminate smaller suppliers that depend on these contracts for survival thus ensuring only a few, larger, competitors remain in the marketplace.

It is important to remember that contracting authorities can inadvertently create a monopoly in the marketplace by, for example being too specific or unnecessarily setting standards too high within the specification. 

Where monopolies cannot be maintained some suppliers of a certain group of products may engage into cartels. This is an association of independent companies formed to regulate the price and sales conditions of the products or services they offer. Cartels are illegal and any suspicion must be reported, in the first instance to the Commission for the Protection of Competition with a notification to the Accountant General. Going for a different technical solution may be an option for the contracting authority.


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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