A study found significant evidence of bidder collusion in Idaho state timber sales. The estimated loss to Idaho was approximately $43 million from May 2004 through 2015.
About 86% of Idahos forests are owned and managed by government entities. Six percent is under state ownership. The state of Idaho owns and manages 1,123,000 acres of timberland.
Eight commercial softwood species account for more than 85% of the timber volume in Idaho’s forestlands. These species include: Lodgepole Pine, Western Hemlock, Western Larch, Western White Pine, Douglas-Fir, Ponderosa Pine, Western Red Cedar, and Grand (White) Fir.
Idaho state timber sales
Timber sale bid suppression
Timber auction bids can be rigged by the bidders (bidder collusion) in order to achieve lower prices (bid suppression).
Bid Suppression: In bid suppression schemes, one or more competitors who otherwise would be expected to bid, or who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so that the designated winning competitor’s bid will be accepted.U.S. Department of Justice
As Marshall et al. (2019) point out, there have been several legal cases involving allegations of bidder collusion at timber auctions in the United States.
For example, a court found that during the period from 1959 to 1975, two large lumber companies bid against each other only three times out of 143 sales primarily in the Tongass National Forest in southeastern Alaska.
Timber sale bid suppression results in a loss of revenue for the forest owner(s). In many jurisdictions it’s illegal under fair trade and competition laws.
An estimated $43 million loss
In an attempt to estimate the loss of revenue to the Idaho Department of Lands (IDL) from bidder collusion in timber sale auctions, economists from the University of Pittsburgh analyzed all IDL timber auctions from 2004 through 2015.
We find significant evidence of bidder collusion at the IDL sales. The loss to the State of Idaho from bidder collusion over the time 2004 through 2015, estimated by Gaussian quadrature and corroborated by simulation, is approximately $43million with a standard deviation of $2.4million. Thus, the estimate of the loss is also a finding of bidder collusion at these auctions.Marshall et al. (2019)
Who loses from timber sale bid suppression?
The public school system in Idaho is the largest beneficiary of money generated from state endowment lands and funds. In 2020, the endowment lands and fund distribution for Idaho schools was $52,586,400.
Timber sales from state endowment lands have historically been responsible for more than 85% of revenue from the use of endowment lands.
While timber buyers gain under collusive bids, they do so at the expense of the forest owner who loses revenue. In the case of Idaho state forests, the public school system stands to be the biggest loser from timber sale bid suppression.
Concerned about legal risks in timber supply chains? Join TimberCheck™ or check the Timber Risk Map. Want to explore the declared origin of a wood product? Start a WoodFlow™. Curious what the forest looks like after the presumed harvest, request access to TimberSat™.