Canadian COMPETITION LAW

March 18, 2013

Readers of this blog will know that I often write about bid-rigging (see for example: here, here, here, here, here, here, here and here).  Frequently I write about a recent case, investigation, newly announced guilty plea, key types of bid-rigging and penalties and convictions (e.g., the elimination of conditional sentencing for bid-rigging).

While the basics of bid-rigging offences in Canada are pretty straightforward – there are essentially three types: agreeing to fix the terms of a bid, not bid or withdraw a bid already made – the seemingly endless variations on bid-rigging that parties come up with, combined with the sometimes devilishly difficult time enforcement agencies and tendering authorities have detecting bid-rigging, always strikes me as rather astonishing.

There has as well certainly been no shortage of criminal bid-rigging investigations, including in the construction, real estate advisory and IT industries, among others.  Recent penalties have included $125,000 (real estate advisory services), $50,000 (sewer services), $50,000 (construction) and $425,000 (ventilation services) (see: here).  The Interim Commissioner of Competition, like other global agencies, also continues to highlight criminal Competition Act matters, including bid-rigging under section 47, as an ongoing enforcement priority (see e.g., his remarks from recent speeches: here, here and here).  The Competition Bureau also recently updated its bid-rigging pamphlet as part of its March, 2014 Fraud Prevention Month efforts.

I don’t recall, however, ever posting a note on tips and strategies for tendering authorities to detect and deter illegal bid-rigging.  Of course, that is precisely what antitrust enforcement agencies, including the Canadian Competition Bureau, and many public and private tendering authorities and organizations spend a lot of their time doing.

So, with that said, the following are a few tips and strategies to detect and deter bid-rigging without the benefit of the tools that the Bureau and other competition/antitrust enforcement agencies have access to – for example, wiretaps, search warrants or immunity/leniency programs:

1. Competition Bureau bid-rigging detection tools.  Consider using some of the tools available from the Competition Bureau.  These include the Bureau’s Certificate of Independent Bid Determination (which is intended to require bidders to disclose all material facts about any communications/arrangements with competitors relating to calls for tenders).  Other Bureau tools include its Bid-Rigging pamphlet and its bid-rigging multi-media tool (see here and here).

2. Tender documentation.  Include “no collusion” language and terms in RFP documents.  Useful examples in this regard may include Federal Public Works precedents (which has also itself recently toughened its stance on eligibility for public sector contracts).

3. Warning signs.  As with other types of cartel activities, watch for warning signs that competing bidders are engaging in illegal coordination.  This may include (but is by no means an exhaustive list): identical or similar bids or language from competing bidders in bid documentation; bids from competing bidders that are received together (or very close together); a bidder that would ordinarily bid does not submit a bid (or submits an unusually high bid or withdraws a bid already made); one bidder is frequently the successful bidder; arrangements where successful bidders sub-contract work to unsuccessful bidders; evidence of patterns that bids are being rotated among competing suppliers; unusual and unexplained large differences in bids; ranges of bids suddenly moving up together from one tender to another; and information that only one bidder (or a small number of bidders) has contacted a wholesaler(s) for pricing information.

4. Watch for “Hot” language/communications.  Also like other forms of cartels (e.g., price-fixing, market allocation or output restriction agreements), certain types of express or inferred language by competing bidders can be very important and be an indication that bids have been illegally coordinated.  Some examples include: language or suggestions from bidders that bids have been coordinated, arranged, agreed upon, rotated, made / not made / withdrawn by agreement or arrangement, that bidders have “preferred” customers, that bidders would not poach or compete for one another’s customers or any other language, either express or inferred, suggesting that bids have been arrived at by agreement, not submitted based on an agreement or withdrawn by agreement.

5. Opportunities for competing bidders to meet.  For example, trade or professional associations, particularly those without compliance programs / policies.  Of course, potential opportunities for covert coordination are endless, as has been illustrated by countless cartel cases over the past century or more.

6. Competition law compliance programs.  Require bidding companies and/or their trade and professional associations to have competition law compliance programs as a condition of bidding.  No program, no bids.  Of course, again, like opportunities to meet, companies and associations have historically been littered with compliance programs that aren’t read, followed or both.

7. Disqualify convicted companies.  Consider including RFP terms that companies with bid-rigging (or other competition law) convictions are ineligible to bid or ineligible for a specified period of time.

8. Training/audits.  Periodically brief and train staff on bid-rigging prevention, review tender history/results and interview unsuccessful vendors or past suppliers.

9.  Other Bureau suggestions. Consider adopting some of the other suggestions made by the Bureau in its Bid-Rigging pamphlet, bid-rigging multi-media tool and other bid-rigging prevention resources.  These include the following: (1) establish a bidding pool (to maximize the number of bidders, better know suppliers and market prices, and be aware of price changes for key inputs); (2) use tender specifications to reduce the chances of coordination (e.g., require disclosure regarding potential subcontractors and pricing, allowing for substitute products whenever possible, avoid preferential treatment of certain suppliers, and avoid predictability); and (3) avoid splitting contracts between suppliers with identical bids and ask questions if bids don’t make sense.

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