Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What does bid-rigging involve?

1. Insider trading among real estate brokers

2. Agreement among competitors for one bidder to have the lowest bid

3. Collusion with appraisers to inflate property values

4. Manipulating market conditions for profit

The correct answer is: Agreement among competitors for one bidder to have the lowest bid

Bid-rigging involves an agreement among competitors where they collude to ensure that one particular bidder submits the lowest bid. This practice undermines fair competition and violates antitrust laws. In real estate and other sectors, bid-rigging can distort the pricing process, leading to inflated costs for consumers and clients who expect a fair bidding process. The practice typically occurs when companies or individuals agree ahead of time who will win the bid, which can involve taking turns on contract awards or coordinating bid submissions to set prices at an agreed level. This is harmful because it restricts competition and can result in less favorable outcomes for buyers or entities that should be able to access competitive pricing. Other choices such as insider trading, collusion with appraisers, and manipulating market conditions refer to different types of unethical or illegal practices but do not accurately define bid-rigging. Each of these actions either deals with different parties or manipulates different aspects of the market, but they do not specifically capture the essence of what bid-rigging entails.