Canadian COMPETITION LAW

According to the United States Department of Justice (Antitrust Division), a former executive of an Illinois refuse disposal container company has been sentenced to 16 months in prison in relation to a city of Chicago bid-rigging case (see: Former Executive of Illinois Refuse Container Repair Company Sentenced to Serve 16 Months in Prison for Conspiring to Defraud the City of Chicago).

In making the announcement, the DoJ said:

“According to the indictment, Fenzl, Ritter and their co-conspirator conspired to deceive city of Chicago officials about the number of legitimate, competitive bids submitted for the contract. Specifically, Fenzl and his co-conspirators fraudulently induced other companies to submit bids for the contract at prices determined by Fenzl and his co-conspirators and greater than the price for which Fenzl’s company had submitted a bid. The department said that included in these bids were fraudulent documents indicating that, if awarded the contract, the bidder would enter into subcontracts to purchase goods or services for a specified percentage of the contract from a minority-owned business and a women-owned business, as required by the city of Chicago. According to the indictment, Fenzl and his co-conspirators also fraudulently certified to the city on Fenzl’s company’s bid that it had not entered an agreement with any other bidder relating to the price named in any other bid submitted to the city for the contract.”

This case is interesting as an example of “cover” or “courtesy” bidding, in which some bidders submit bids that are too high to be accepted (or with terms that are unacceptable to the party calling for tenders to protect an agreed upon low bidder).

Other common forms of bid-rigging that have been prosecuted in the past, both in the U.S. and Canada, include:

Bid suppression – one or more bidders that would otherwise bid agree to refrain from bidding or agree to withdraw a previously made bid.

Bid rotation – all bidders submit bids but take turns being the low bidder according to a systematic or rotating formula.

Market division – suppliers agree not to compete in designated geographic areas or for specified customers.

Subcontracting – some bidders that agree not to submit a bid or submit a losing bid are awarded subcontracts or supply agreements from the successful low bidder.

In Canada, bid-rigging is a criminal offence under section 47 of the federal Competition Act, under which it is an offence to enter into an agreement, in response to a call or request for bids or tenders, to: (i) not submit a bid or tender, (ii) withdraw a bid or tender already made or (iii) submit bids or tenders that are arrived at by agreement.

Like criminal conspiracy agreements under section 45 of the Act, bid rigging is a per se criminal offence, in that it is not necessary to establish any adverse market effects (though all elements of the offence must be proven on the criminal burden of proof – i.e., beyond a reasonable doubt).

Parties contravening the bid-rigging provisions of the Act are liable to unlimited fines (i.e., a fine in the discretion of the court), imprisonment for up to 14 years, or both.   It is also common for the Bureau to seek prohibition orders in bid-rigging cases to prohibit the continuation of an offence.  Private parties that have suffered loss or damage as a result of a breach of the criminal provisions of the Act, including the bid-rigging offences under section 47 of the Act, may also commence private actions.

For more information about Canadian bid-rigging law, see: Bid-Rigging and Bid-Rigging News.  For recent Canadian bid-rigging cases see: Competition Bureau Charges Eight Companies and Five Individuals in Alleged Bid-Rigging Scheme and Competition Bureau Launches Criminal Investigation into Quebec Construction Industry.

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