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In a curious story that caught my eye today, CTV reported that the City of Ottawa is threatening to terminate its contracts with companies found to have conspired to fix the price of gas in Ottawa and ban all future City purchases from them.

According to CTV, City of Ottawa Councilors Stephen Blais and Steve Desroches sent a letter to Canadian Tire, Mr. Gas and Pioneer in Ottawa, all of which pleaded guilty in Ontario Superior Court last week to fixing the price of gas in 2007 and were fined $2 million (see: Competition Bureau Announces $2 Million Fines in Ontario Gas Price-fixing Case).

This case is the second major gasoline price-fixing investigation that the Bureau has disclosed in the past several years (the Bureau is currently concluding the largest criminal investigation in its history in relation to gasoline price-fixing in Quebec – see: Further Individual Pleads Guilty in Quebec Gasoline Price-fixing Cartel).

According to CTV, the Councilors letter read:

“Dear Sir or Madam:

It is with grave concern that we write you following the news of price fixing in two Ontario municipalities following an investigation by the competition bureau. We are looking for assurances from your company that such activity is not occurring within the City of Ottawa.

For many years, there has been suspicion that this kind of illegal activity was being conducted within your industry and these most recent admissions of guilt have caused Canadians from coast to coast to collectively say “I knew it.”

The City of Ottawa, under By-law 2002-189, issues licenses for gas stations within our municipality. The City licenses these venues for the purpose of protecting public health and safety and eliminating nuisance activity. When the City deems it appropriate to license certain businesses or activities, it does so for the aforementioned reasons and or for consumer protection.

As you know, the City of Ottawa is a major purchaser of fuel. In 2011, the City purchased 7.2 million litres of gasoline and 51.5 million litres of diesel at a total value of $61.7 million.

In order to protect the taxpayer, all contracts issued by the City of Ottawa include the important provision that the Contractor “shall comply with all laws applicable to the performance of the work” as well as protections to prevent fraud against the City.

In respect of these provisions, we can tell you that, should illegal price fixing or manipulation be found taking place in the City of Ottawa, we will be asking that City Council review the penalties available under our municipal bylaws including the cancellation and termination of ALL contracts with the guilty companies, their subsidiaries and affiliates.

Additionally, we will advocate for a ban on ALL purchases made from the affected companies and for the exclusion of the companies from current and future City procurement.

As such, we are asking on behalf of concerned residents and taxpayers, that you provide demonstrable assurances to us that price fixing and manipulation is not taking place in Ottawa.”

This recent action by some of the City of Ottawa’s Councilors appears to signal that companies engaged in price-fixing activities may now be exposed to greater risk than only criminal fines and other penalties under the Competition Act.

Under section 45 of the Competition Act, three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be shown):

1.  Price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product).

2.  Market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product).

3.  Output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product, which may include group boycotts).

Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters provision.

For more about Canadian conspiracy law see:

Conspiracy (Cartels)

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