On July 30, 2012, the Competition Bureau announced that the Corporate Research Group Ltd. (CRG) has pleaded guilty to a criminal charge of bid-rigging for federal government contracts in relation to real estate advisory services and was fined $125,000. In making the announcement the Bureau reflected its continuing focus on criminal competition law matters and reliance on its Immunity and Leniency Programs:
“The Bureau’s investigation benefited from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.
Cracking down on cartels, including bid-rigging offences, is a top priority for the Bureau. Under the Competition Act, it is a criminal offence for two or more bidders, in response to a call or request for bids or tenders, to agree among themselves on the bids submitted, to agree that one party will refrain from bidding or to agree to withdraw a submitted bid, without informing the person calling for the bids of this agreement.”
Under section 45 of the Competition Act (the criminal conspiracy offences of the Act) three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product or service), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product). Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters agreement provision (section 90.1).
In addition, the Competition Act, somewhat in contrast to for example the U.S. where bid-rigging is challenged under Section 1 of the Sherman Act together with other types of cartels, also contains stand-alone bid-rigging offences. Under section 47 of the 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 or (iii) submit a bid or tender that is arrived at by agreement. Bid-rigging in Canada is also, like the offences under section 45 (conspiracy agreements), ”per se” illegal in that no anti-competitive effects on a market (or markets) needs to be established.
Some common types of coordinated bidding activities that can violate the bid-rigging provisions of the Act 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.
Trade associations – for example, construction associations that assist or facilitate the coordination of bids or tenders for projects – can also be exposed to liability, together with their directors, officers and other personnel (either as parties to a conspiracy or bid-rigging agreement, or under the aiding and abetting offences of the Criminal Code). Compliance programs or conduct of meeting guidelines are therefore very important for associations in which there is a risk that prices, terms of supply or bids/tenders may be coordinated or discussed, which may lead to criminal exposure for both the members of the association and the association itself.
The potential penalties for violating the criminal conspiracy provisions of the Act include fines of up to $25 million (per count), imprisonment for up to 14 years, or both. The potential penalties for contravention of the criminal bid-rigging provisions of the Act can also be severe and include unlimited fines (i.e., fines in the discretion of the court), imprisonment for up to 14 years, or both.
For more information about Canada’s conspiracy and bid-rigging laws and the Competition Bureau’s Immunity and Leniency Programs, see:
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