August 19, 2021
The Competition Bureau (Bureau) recently began posting new Compliance Bootcamp compliance videos. In this regard, on August 19, 2021 the Bureau posted its Avoiding Business Collusion and Bid-rigging Compliance Bootcamp videos. These compliance videos set out guidance to avoid engaging in bid-rigging under section 47 of the Competition Act and conspiracy, and in particular price-fixing, under section 45 of the Act.
In general, the bid-rigging provision of the Competition Act (section 47(1)) makes it a criminal offence for two or more bidders or tenderers to collude where the agreement is not made known to the person calling for or requesting the bid or tender. To establish a bid-rigging offence under section 47, all of the following must be established: (i) an agreement or arrangement between two or more persons (or bidders or tenderers as the case may be); (ii) to not submit a bid or tender, withdraw a bid or tender already made or submit bids or tenders arrived at by agreement; and (iv) a call or request for bids or tenders.
In its compliance video on bid-rigging, the Bureau identifies a few common types of bid-rigging that may contravene section 47 of the Competition Act, including: (i) cover bidding (where one or more bidders agree to submit an over-priced bid or a bid with unacceptable terms to favour a more attractive bidder); (ii) bid suppression or withdrawal (where one or more bidders agree to refrain from bidding or to withdraw a bid that has already been made); (iii) bid rotation (where one of more parties agree to submit bids on a systematic or rotating basis to submit the most attractive bid); (iv) market division (where a party agrees not to compete in a designated geographic area or for a specified customer in favour of another party) (see also market division under section 45); and (v) subcontracting (whereby one or more parties agrees not to submit a bid or to submit a losing bid in exchange for receiving a subcontract or supply agreement from the successful bidder).
The potential penalties for any person found guilty of bid-rigging are a fine in the discretion of the court (i.e., there is no ceiling to a potential fine imposed by a court), imprisonment for up to 14 years, or both (section 47(2)). Like section 45 of the Competition Act (criminal conspiracy agreements), section 47 is a per se criminal offence (i.e., there is no requirement to prove any adverse market effects).
The criminal price-fixing provision of the Competition Act (section 45(1)(a)) makes it a criminal offence for two or more competitors to fix, maintain, increase or control the price for the supply of a product. Section 45 also makes it a criminal offence for competitors to divide markets or customers or restrict the supply of a product (sections 45(1)(b) and (c)).
In its compliance video on price-fixing, the Bureau reminds companies that price-fixing remains a top enforcement priority. The potential penalties for any person found guilty of price-fixing are imprisonment for up to 14 years, a fine not exceeding $25 million, or both (section 45(2)).
The Competition Bureau has significant enforcement powers to investigate potential violations of the Competition Act. These include the ability to obtain court orders to search premises and seize documents, search and seize computer records, tap phone lines, compel individuals to testify under oath or require companies or individuals to produce documents or responses to written information requests.
To avoid bid-rigging and price-fixing, the Bureau generally recommends avoiding calls or meetings between competitors who carry out business in the same small geographic area to discuss or share information on prices or how to submit more favourable bids. While the exchange of competitively sensitive information is not itself an offence under the Competition Act, it can lead to an agreement that violates either the conspiracy or bid-rigging provisions of the Act or make it easier for the Bureau or a court to infer the existence of an agreement (for more information, see Information Exchanges).
The Bureau also recommends that businesses proactively prevent employees from engaging in illegal behaviour by: (i) creating a culture of compliance in their organization (e.g., by developing a competition law compliance program); (ii) updating their websites to make public their code of conduct and pledge to do business ethically; (iii) preparing and distributing detailed documents that set out appropriate behaviour in the highest risk areas of their businesses; and (iv) updating their code of conduct to explicitly include price-fixing and bid-rigging, including disciplinary measures for employees that engage in illegal behaviour.
The Bureau has established Immunity and Leniency Programs for individuals, companies and other organizations that have committed a criminal offence under sections 45 to 49 of the Competition Act, including bid-rigging, price-fixing and other cartel offences.
Under the Bureau’s Immunity and Leniency Programs, applicants must successfully complete multiple steps to receive full immunity from prosecution or leniency in sentencing. Under the Bureau’s Immunity Program, there are four steps: (i) marker; (ii) proffer; (iii) grant of interim immunity; and (iv) final grant of immunity. Under the Leniency Program, there are seven steps: (i) marker; (ii) proffer and limited disclosure; (iii) leniency recommendation; (iv) plea agreement; (v) full disclosure; (vi) court proceedings; and (vii) ongoing cooperation and testimony (for more information, see Immunity and Leniency Programs).
Overall, the Bureau’s new Avoiding Business Collusion and Bid-rigging compliance videos provide useful recommendations on how individuals, businesses and other organizations can mitigate their risk of knowingly or unknowingly participating in criminal price-fixing or bid-rigging. The Bureau’s ongoing determination to crack down on price-fixing and bid-rigging reflects, in part, the importance of competitive markets and tender processes to the Bureau.
For the Bureau’s full compliance videos, see: Avoiding Business Collusion and Bid-rigging.
For more information on avoiding or reporting bid rigging, price fixing and other criminal conspiracy offences under the Competition Act, see: Conspiracy (Cartels), Conspiracy FAQs, Bid-Rigging, Bureau Enforcement, Whistleblowers and Whistleblowers FAQs.
********************
SERVICES AND CONTACT
We are a Toronto based competition and advertising law firm offering business and individual clients efficient and strategic advice in relation to competition/antitrust, advertising, Internet and new media law and contest law. We also offer competition and regulatory law compliance, education and policy services to companies, trade and professional associations and government agencies.
Our experience includes advising clients in Toronto, Canada and the United States on the application of Canadian competition and regulatory laws and we have worked on hundreds of domestic and cross-border competition, advertising and marketing, promotional contest (sweepstakes), conspiracy (cartel), abuse of dominance, compliance, refusal to deal and pricing and distribution matters. For more information about our competition and advertising law services see: competition law services.
To contact us about a potential legal matter, see: contact
For more information about our firm, visit our website: Competitionlawyer.ca
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
