The Competition Authority is to clamp down on bid rigging for contracts in the public sector. It has also pledged to use its new powers to target price-fixing. Pubic sector contracts are worth around £4 billion a year and the authority said yesterday it was "concerned" that there may be collusion on prices by firms tendering for them.

Such collusion occurs where two or more firms agree not to submit competitive prices for supplying goods or services or when they all agree beforehand on the price they will tender.

The effect is to increase the price which public agencies have to pay for goods and services, a bill which is eventually picked up by the taxpayer.

The authority's chairman, Mr Paddy McNutt, said he believed it may be occurring in Ireland. He said collusive tendering had been found to be a common practice in other countries, such as Britain and the US. The authority published guidelines yesterday aimed at helping public sector agencies to identify possible collusive tendering on such public tender contracts.

Firms can also collude by dividing up the country between them and agreeing not to sell in each other's designated area. The guidelines also outline measures which agencies can take to make it more difficult for those submitting tenders to collude.

The authority published a range of guidelines yesterday on competition law for small business, the public sector and the consumer. It said it would make price-fixing "in all its forms" a priority and declared it would bring criminal prosecutions in such cases.

The courts can impose stiff penalties on those who breach competition law. Penalties may include fining a firm 10 per cent of its turnover, or up to £3 million. A jail sentence may also be imposed.