On November 22, 2011, the Competition Bureau announced that criminal charges had been laid against six companies and five individuals accused of rigging bids for provincial and municipal contracts for sewer services in the Montreal area (see: Competition Bureau Exposes Sewer Services Cartel in Quebec and Backgrounder – Competition Bureau Exposes Sewer Services Cartel in Quebec).
In making the announcement, the Bureau said:
“The evidence gathered by the Bureau reveals that the companies secretly agreed to coordinate their bids to pre-determine the winners of municipal and provincial contracts for the cleaning and maintenance of sewers.
‘This bid-rigging scheme misled officials into believing that tendering processes were competitive,’ said Melanie Aitken, Commissioner of Competition. ‘In reality, those charged had submitted token bids designed to ensure that a pre-determined company would win the contracts. The scheme deliberately evaded requirements created to protect taxpayer dollars in the government procurement process.’”
According to the Bureau, the charges in this case relate to 37 calls for tender between 2008 and 2009 with a total value of $3.3 million.
As with other recent bid-rigging cases brought by the Bureau, it relied on its Immunity and Leniency programs as part of its investigation. According to the Bureau’s Backgrounder in this case, it also relied on search warrants and witness interviews (several types of production orders are available to the Bureau under the Competition Act, including search warrants and “section 11 orders” for the compulsory production of documents).
Under the Bureau’s Immunity Program, a party or company implicated in criminal conduct under the Competition Act may offer to cooperate with the Bureau in its investigation and request immunity (i.e., full immunity from prosecution for criminal offences under the Act). Under the Bureau’s Leniency Program, parties that have contravened criminal provisions of the Act that are not entitled to full immunity may nevertheless be eligible for leniency in sentencing (see: Immunity Program, Leniency Program and Immunity & Leniency).
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).
This alleged bid-rigging case appears to have involved cover bidding and bid rotation. In this regard, the Bureau’s Backgrounder states:
“The conspiring companies pre-determined the winners of the calls for tender by agreement. The companies then submitted inflated token bids on calls for tenders that they were not pre-selected per their secret agreement to win, so that the contract was won by a pre-determined conspiring company. This practice led the tendering authorities into believing that their tendering processes were competitive.”
While the Competition Bureau has not yet brought a conspiracy case under the amended conspiracy provisions of the Competition Act (section 45), the Bureau has been very active in investigating criminal bid-rigging cases under section 47. For recent cases in 2011 see: Ottawa Bid-rigging Case to Go to Trial, Guilty Plea and $425,000 Fine for Bid-rigging in Montreal, Judge Orders Trial in Federal Bid-rigging Case, Montreal Company Pleads Guilty in Montreal Bid-rigging Case.
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