In an interesting story in the Montreal Gazette today, Douglas Quan reports that a Public Safety Canada study calls for “more independent oversight” to “combat bribery, extortion, collusive bidding and other illegal activities in Canada’s commercial construction industry”:
“’Every contractual link provides an opportunity for someone to pay a bribe in return for the award of the contract,’ the study said.
The corruption can take many forms. Contractors have been known to pay bribes in order to obtain a contract. Union officials have threatened work slowdowns unless contractors pay them money. Competing firms have entered into agreements where they share their bid prices with one another prior to bidding in order to pre-determine the winner and then the winning firm pays a kickback to the losing firm. Such corruption can lead to unsafe construction projects because they ‘fail to meet safety requirements as a result of fraud in building materials or the bribery of public inspectors,’ the study warned.”
The construction industry has long been the target of allegations and investigations by competition/antitrust regulators. For example, some of the construction related cases in Canada, many of which have also involved trade associations, have included building contractors, corrugated metal pipe manufacturers, electrical contractors, gypsum dealers and manufacturers, plumbing contractors, among many others.
Some recent construction related competition cases in Canada, largely bid-rigging cases, have involved ventilation contractors (see: Guilty Plea and $425,000 Fine for Bid-rigging in Montreal and Charges Laid in Residential Construction Bid-rigging Scheme in Montreal), sewer maintenance contractors (see: Competition Bureau Exposes Sewer Services Cartel in Quebec) and roofing contractors (see: Competition Bureau Obtains Court Order Against the Saskatchewan Roofing Contractors Association).
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 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).
The Commissioner of Competition has also emphasized in recent public statements that bid-rigging, together with cartels, remains an enforcement priority for the Competition Bureau:
“Cartels and bid–rigging continue to be our focus, given the seriousness of this conduct, and its unambiguously harmful nature. We are committed to advancing cases that matter to Canadians, doing so in a timely manner, and following them through to the end.
For cartels, while it will necessarily take some time before we bring our first case under the new section 45, we do have a number of ‘hybrid’ cases underway that will give us experience with the new provisions.
Unfortunately, large global cartel cases continue to be common, and we maintain close working relationships with key partners, so that we can take coordinated action to effectively combat these pernicious cartels.
In both cartel and bid–rigging cases, we will be appropriately aggressive when dealing with individuals. To date, 38 individuals have been charged in the Quebec Octane case, and last December, five individuals were accused of rigging bids for private sector contracts in residential highrise buildings in the Montreal area.”
Whether this recent Public Safety Canada study results in yet more regulation for the construction sector, however, remains to be seen.
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