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The call follows the announcement that fines totalling £129.5 million have been imposed on 103 construction firms by the Office of Fair Trading (OFT).
The LGA believes the fines should be given back to councils and other public bodies which have been victims of the unlawful practices.
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Cllr Eaton said: "It will come as a shock to residents that some construction companies have rigged bids for contracts at taxpayers' expense. Local authorities strive to ensure that any new building which they pay for is delivered at the best value for the taxpayer, but it appears that some firms have failed to abide by the law.
"Firms that are found to have colluded to inflate prices should not only have to apologise to the public but also should consider giving money back to local areas where this activity has taken place."
(CD/BMcc)
