Abstract
In 2015, a supposed bid-rigging cartel that operated in the Brazilian implantable cardiac devices market was announced and public authorities began to investigate it. This paper evaluates if there is systematic correlation between the bids that are placed by competitors in the sealed phase of procurement auctions, which is a situation that may suggest coordinated and fraudulent behaviour. By applying Moran’s I statistic to the residuals of controlled bid regressions and using a novel and public database, we show that the bids that were placed by the investigated companies have positive and statistically significant autocorrelation. In addition, when we separate the data into two subperiods, namely, the period in which the cartel probably existed (2005–2015) and the period in which the cartel probably did not exist due to the conclusion of a leniency agreement (2015–2017), the Moran’s I statistic only points to autocorrelation in the first sub-sample. Our result has remained robust when we eliminate transitional periods and use alternative economic screens. Finally, we show the main practical advantages and disadvantages of the implementation of the screen based on Moran’s I statistic.
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Notes
As emphasized by Harrington (2008), the objective of economic screens is to identify the markets with high probabilities of collusion. Thus, the screens do not definitively prove the existence of a cartel and, like any other statistical test, may result in false positives or false negatives. Therefore, economic screens function as a step to determine in which markets it is necessary to open an investigative process or to conduct searches and seizures.
The implantable cardiac device market involves the following types of products: (I) implantable dual-chamber and unicameral defibrillator cardioverters; (II) cardiac resynchronizers; and (III) pacemakers and accessories, which include (IV) temporary and definitive endocardial electrodes, (V) sets of introducers and (VI) catheters.
Only 18 of the 1351 ICD contracts that we analysed were from live auctions.
An important advantage of using this row standardized matrix is that any operation with the weights can be associated as the averaging of neighbouring values (collusive bidders in our case), which facilitates the interpretation of the spatial parameters (Elhorst 2014).
A single public procurement may involve several different contracts. Thus, competition occurs at the contract level.
There are 366 different categories of implantable cardiac devices.
The estimated value of the item or reference value is a cost estimate that the requesting public agency stipulates as a forecast of how much will be spent on the contract.
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Funding was provided by Escola Superior do Ministério Público da União (ESMPU) (Grant No. 01129/2017).
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de Andrade Lima, R.C., Resende, G.M. Using the Moran’s I to detect bid rigging in Brazilian procurement auctions. Ann Reg Sci 66, 237–254 (2021). https://doi.org/10.1007/s00168-020-01018-x
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DOI: https://doi.org/10.1007/s00168-020-01018-x