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On June 21, 2012 the Competition Bureau announced that, together with the Unité permanente anticorruption (UPAC) in Quebec, it has laid 77 charges against 11 individuals and 9 companies in relation to a broad range of allegations that include corruption in municipal affairs, breach of trust, influencing municipal officers, fraud upon the government, production and use of counterfeit documents, accepting reward, advance or benefit, extortion and conspiracy.

With respect to allegations of competition law violations, the Bureau has announced that bid-rigging charges were also laid under section 47 of the Competition Act.

According to the Bureau, this newly announced case is the result of an investigation that ran for more than two years, which uncovered “evidence of a sophisticated collusion scheme giving preferential treatment to a group of contractors to obtain municipal contracts, mainly for infrastructure projects in Saint-Jean-sur-Richelieu and surrounding areas.”

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 to these conspiracy offences, 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, such as price-fixing or market division arrangements) also contains stand-alone bid-rigging offences (under section 47 of the Act).

In this regard, section 47 of the Act makes it a criminal offence to: (i) agree to not submit a bid or tender, (ii) agree to withdraw a bid or tender already submitted (recently added to the Act as a result of the 2009 amendments) or (iii) submit a bid or tender that is arrived at by agreement.  Bid-rigging in Canada is also, like the amended section 45, ”per se” illegal, in that no anti-competitive effects on a relevant market (or markets) need to be established in order to make out an offence (though all of the elements need to be established on the standard criminal burden of proof – i.e., beyond a reasonable doubt).

Some common types of coordinated bidding activities that can contravene the criminal bid-rigging provisions of the Act include: “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); “bid suppression” (one or more bidders that would otherwise bid agree to refrain from bidding or withdraw a previously made bid); “bid rotation” (all parties submit bids but take turns being the low bidder according to a systematic or rotating basis); “market division” (suppliers agree not to compete in designated geographic areas or for specified customers); and “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 association activities involving information exchanges about upcoming or proposed tender opportunities, or that facilitate coordination of bids and tenders, can also raise competition law concerns.

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 more than 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.  Some of the conduct that has been challenged over the past century in the construction industry has included bid-rigging and price-fixing arrangements and concerted refusals to supply and deal (i.e., arrangements to boycott or support boycotts to deal with competing firms).

There have also been a number of recent criminal competition cases in Canada involving construction and construction supply related companies, many of which have involved allegations of bid-rigging activities (see for example: Quebec Construction Companies Plead Guilty to Rigging Bids for the Chicoutimi Hospital, 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).

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 (increased in March 2010 from the previous $10 million per count and 5 years imprisonment).  The potential penalties for contravention of the criminal bid-rigging provisions of the Act can be equally 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, as well as the Competition Bureau’s Immunity and Leniency Programs, see:

Conspiracy (Cartels)

Bid-rigging

Immunity and Leniency

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