On October 5, 2011 the Ottawa Business Journal, Ottawa Citizen and Vancouver Sun reported that Ontario Justice Ann Alder ruled that an Ottawa bid-rigging case in the technology sector can go to trial.
In this case, the Competition Bureau alleged that a number of companies, including TGP Technology, Spearhead Management, The Devon Group, Brainhunter, Nortak Software and Tipacimowin Technology, rigged bids in relation to IT contracts totaling about $67 million issued by the Canada Border Services Agency, Department of Transport and Public Works (see: Competition Bureau Announces Charges Against Companies Accused of Rigging Bids for Government of Canada Contracts and Backgrounder). Justice Ann Alder dismissed charges against several of the companies (Nortak Software and Tipacimowin Technology).
In making its original announcement in February, 2009, the Bureau said:
“The Bureau found evidence indicating that several IT services companies in the National Capital Region secretly coordinated their bids in an illegal scheme to defraud the government by winning and dividing contracts, while blocking out honest competitors.
The Bureau’s investigation found evidence of criminal activity in 10 competitive bidding processes from 2005, for contracts worth approximately $67 million. The contracts related to IT professional services provided to the Canada Border Services Agency, Public Works and Government Services Canada, and Transport Canada.”
According to the Bureau’s 2009 Backgrounder issued in this case, the accused allegedly agreed to collectively win and divide Government of Canada contracts, while at the same time blocking competitors who were not part of the arrangement.
Under section 47 of the Competition Act, it is a criminal offence to: (i) agree to not submit a bid or tender, (ii) agree to withdraw a bid or tender already submitted (an offence recently added to the Competition Act as a result of the 2009 amendments to the Act) or (iii) submit a bid or tender that is arrived at by agreement.
Some common types of bid-rigging that can violate section 47 include: (i) “cover”, “courtesy” or “complementary” bidding (some firms submit bids that are too high to be accepted, or with terms that are unacceptable to the party calling for bids, to protect an agreed upon low bidder), (ii) bid suppression (one or more bidders that would otherwise bid agree to refrain from bidding (or withdraw a previously made bid), (iii) bid rotation (all parties submit bids but take turns being the low bidder according to a systematic or rotating basis), (iv) market division (suppliers agree not to compete in designated geographic areas or for specified customers) and (v) subcontracting (parties that agree not to submit a bid (or submit a losing bid) are awarded subcontracts or supply agreements from the successful low bidder).
It is uncommon for bid-rigging or conspiracy cases to go to trial in Canada, with the majority typically settled (i.e., by way of guilty pleas and agreed upon fines). On the other hand, bid-rigging and conspiracy cases are, as the Bureau has acknowledged both in this case and generally, difficult to prove and criminal offences under the Competition Act are, like criminal offences generally, subject to a high burden of proof (the criminal standard, proof beyond a reasonable doubt). In this regard, in the Bureau’s 2009 Bulletin, it said that it relied upon a number of enforcement tools, including cooperation from applicants under its Immunity and Leniency Programs (see: Backgrounder and Immunity & Leniency).
According to media reports, some of the evidence the Bureau may rely upon in this case includes evidence of virtually identical bids and similar pricing. The accused in this case also allegedly shared detailed information about pricing, profit margins and other commercial items.
Such exchanges of “competitively sensitive information” can be an area of significant risk for competing companies, given that they can lead to either agreements that violate the Competition Act (e.g., bid-rigging or conspiracy agreements) or, alternatively, be used as evidence to allow the Bureau or a court to infer the existence of an agreement (see Antitrust Alphabet, definitions of “circumstantial evidence”, “facilitating factors” and “plus factors”).
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