On February 17, 2012, the Competition Bureau announced that Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc. and Enterprises de Construction OPC Inc. pleaded guilty to bid-rigging in Quebec Superior Court in a case relating to the expansion of the Chicoutimi Hospital in 2003 (see: Quebec Construction Companies Plead Guilty to Rigging Bids for the Chicoutimi Hospital).
In making the announcement, the Bureau said:
“The court ordered Construction G.T.R.L. to pay a fine of $50,000, and Acoustique JCG and Entreprises de Construction OPC to pay a fine of $25,000 each. The companies are subject to a court order for a period of 10 years.
‘Bid-rigging harms everyone but the criminals who cheat the system for their own financial gain,’ said Melanie Aitken, Commissioner of Competition. ‘In this case, the bid-rigging scheme ultimately harmed the Chicoutimi Hospital and Saguenay residents, by preventing the hospital from obtaining a competitive price for its renovation.’”
The construction industry has long been a target of competition/antitrust regulators. For example, some of the construction related cases in Canada, many of which have also involved trade associations and have gone back about a century, have included building contractors, corrugated metal pipe manufacturers, electrical contractors, gypsum dealers and manufacturers, plumbing contractors, road surfacing contractors, chain link fence contractors, among many others.
There have also been a number of recent bid-rigging cases in Canada involving construction and construction supply related companies.
See for example: Guilty Plea and $425,000 Fine for Bid-rigging in Montreal, Charges Laid in Residential Construction Bid-rigging Scheme in Montreal, Competition Bureau Exposes Sewer Services Cartel in Quebec, Competition Bureau Obtains Court Order Against the Saskatchewan Roofing Contractors Association.
This is the third in a series of posts on Canadian bid-rigging law, which will conclude with practical steps for companies to take to reduce potential risk in light of historical risk and current heightened enforcement.
For Parts 1 and 2 see: here and here.
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WHAT IS NECESSARY TO PROVE BID-RIGGING?
To prove a bid-rigging offence under section 47 of the Competition Act, all of the following elements must be established: (i) an agreement or arrangement between two or more persons (or bidders or tenderers); (ii) to not submit a bid or tender, withdraw a bid or tender already made, or submit bids or tenders arrived at by agreement; (iii) intent; (iv) a call or request for bids or tenders; and (v) the agreement or arrangement is not made known to the person calling for bids or tenders at or before the submission or withdrawal of a bid or tender by any party to the agreement.
Agreement or Arrangement
The first necessary element to establish bid-rigging is the existence of an agreement or arrangement to not submit a bid, withdraw a bid already made or submit a bid arrived at by agreement.
It has been held, as under the conspiracy offences of the Act (section 45), that an agreement is an essential element to establish bid-rigging under section 47. Also as under the criminal conspiracy offences of the Act, Canadian courts have articulated this element as requiring a “consensus of minds” or “mutual understanding” between the parties to an agreement.
It has been held, however, that mere consultations between parties bidding in relation to pricing, where there has been no agreement or arrangement between the parties and their respective bids are not communicated to the other before tenders are submitted, does not contravene section 47.
However, discussions or interaction with co-tenderers, where such interaction is not part of a bid consortium or other legitimate joint bidding arrangement, may well raise significant issues and risk for the parties – for example, lead to the formation of an actual illegal agreement or allow the Competition Bureau or a court to infer the existence of an agreement.
As with criminal conspiracies, a bid-rigging agreement may also be inferred from mere circumstantial evidence – for example, the submission of identical bids following a meeting of bidders or identical (or highly similar) terms in bid documentation.
Intent
The second necessary element to establish bid-rigging is intent.
It must be established that an accused intentionally entered into an agreement or arrangement with one or more persons (or bidders) to not submit a bid, withdraw a bid already made or submit a bid arrived at by agreement.
It is worth noting, however, that while it must be established that an accused intended to engage in conduct prohibited under section 47, motive is irrelevant to establish an offence.
Call or Request for Bids or Tenders
It must also be established that a bid or tender is made “in response to a call or request for bids or tenders”.
This requirement will not be met where mere price quotations are submitted where there is “no specific direction or call” for bids or tenders – for example, where price quotations by subcontractors are submitted to a general contractor, where the call for tenders or bids has been made to general contractors not subcontractors.
Agreement Not Made Known to Person Calling for Bids or Tenders
Finally, to establish a bid-rigging offence, it must be proven that an agreement or arrangement has not been made known to the person calling for bids or tenders at or before the submission or withdrawal of a bid or tender by any party to the agreement.
The Act in essence provides a defense for parties that are engaged in joint bidding projects, such as bidding consortia or other types of joint ventures that may involve the submission of joint bids.
The time when a bid or tender is made is, however, critical to ensuring that this requirement is met, which has been held to be when the contents of a tender are communicated to the party calling for tenders (i.e., when a tender is opened).
It is also crucial that communication of any joint tendering be expressly made. Merely inferring the submission of joint bids – for example, by the fact that bids are identical – has been held to be insufficient.
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