Ohio leaders must ensure market has no king

Published 10:13 am Thursday, April 2, 2009

As abuses by Wall Street are on the minds of many of us today, it is a good time to remember John Sherman, who represented Ohio in the U.S. Senate in the late 19th century and was the brother of famous Civil War General William Tecumseh Sherman.

Both hailed from Lancaster. Brother John also left a lasting legacy – the federal Sherman Antitrust Act, which helped to outlaw monopolies.

In 1890, the Sherman Act made it illegal for a business to use unfair competition or artificial tactics to dominate a market. Among its targets was John Rockefeller of Cleveland.

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Rockefeller became the world’s richest man through his ownership of Standard Oil, which was later convicted of monopolistic practices under the Sherman Act and broken up.

Sherman said monopolies represented “a kingly prerogative, inconsistent with our form of government.” He recognized that competition was the key to a truly free market.

Of course, it is typically not one “king” that dominates a marketplace, but a group of supposed competitors who secretly work together to assert lordship over us consumers in that market.

One practice that some businesses use to stifle competition is bid-rigging, which is a violation of state and federal antitrust laws. My office’s Antitrust Review Program, in partnership with local governments, is working to thwart this harmful practice.

Local governments – responsible for projects such as building bridges, installing sidewalks or paving roads – must make sure that the public funds used to pay for them are used wisely. A competitive bidding process is required under Ohio law.

For example, if a city plans to pave a road, it first approves the project and then opens it to bidders. Businesses submit their qualifications and their best price for the project, and the contract is to be awarded to the lowest responsive and responsible bidder.

However, so-called competitors might rig bids by secretly agreeing to divvy up local government projects, taking turns at submitting winning and losing bids.

For example, businesses that provide similar services in a region may agree to submit unrealistic bids on some projects, clearing the way for a predetermined bidder to “win.” They may forgo bidding on other projects, allowing a competitor to take the work.

Eventually, their prearranged turn will come and with it an assured outcome of winning the business. Local governments, which usually do not coordinate or monitor purchases made in neighboring communities, would not even realize that they are being deceived.

Suppliers can submit higher bids and make more money if they don’t have to worry about a competitor underbidding them. But that disserves taxpayers, who are denied the benefits of a competitive bidding process.

That is where the Ohio Attorney General’s office can help. At the request of any government body – county, city, village or township – attorneys in our Antitrust section can comprehensively analyze the process for bidding local projects and search for evidence of bid-rigging and other anticompetitive practices.

This review is not an audit of the local government, but simply a way for local leaders to be certain that they are not being exploited.

To be the best stewards of their public resources, they are entitled to benefit from free and fair market competition – and so are Ohio taxpayers.

To echo the sentiments of Sen. John Sherman, the market has no king.

Richard Cordray is the Ohio Attorney General.