January 18, 2022
On January 17, 2021, Canada’s Competition Bureau (Bureau) announced that CPL Interiors Ltd. (CPL) was fined $761,967 after pleading guilty before the Ontario Superior Court for participating in a criminal bid-rigging conspiracy under Canada’s Competition Act.
In making the announcement, the Commissioner of Competition said:
“Cracking down on criminal conspiracies that harm Canadians and the Canadian economy is a top priority for the Competition Bureau. We will continue to pursue all those who plot to increase their profits through criminal bid-rigging schemes.”
CPL admitted to conspiring with several competing businesses between 2009 and 2014 to divide/allocate customers and fix bid prices (i.e., criminal bid-rigging) for 31 refurbishment contracts issued by private condominium corporations in the Greater Toronto Area (GTA). These contracts were collectively valued at more than $19 million.
CPL was charged in March 2021 and granted leniency in sentencing for its ongoing cooperation in the investigation and agreement to testify in future prosecutions under the Bureau’s Immunity and Leniency Programs.
The Bureau’s announcement follows its investigation and criminal bid-rigging charges against CPL and three other companies (TRI-CAN Contract Incorporated, JCO & Associates and LAR Condominium Refurbishment Specialists) and their owners.
The Bureau also alleged that the defendants conspired to commit fraud for condo refurbishment services in the GTA.
Interestingly, according to the Bureau, three of the companies were charged under the Criminal Code (not sections 45 or 47 of the Competition Act, conspiracy and bid-rigging) with CPL being charged under section 45 of the Competition Act.
CONSPIRACY AND BID-RIGGING
Criminal bid-rigging in Canada can be prosecuted under either section 45 (conspiracy agreements) or 47 (bid-rigging) of the federal Competition Act.
Section 45 of the Competition Act prohibits two or more competitors from entering into agreements to fix prices, allocate/divide markets or restrict the supply/output of products or services (i.e., conspiracy (cartel) agreements).
In addition, section 47 of the Competition Act specifically prohibits bid-rigging agreements whereby competing bidders agree to not submit a bid or tender, to withdraw a bid or tender that has already been submitted or to submit a bid arrived at by agreement in response to a call for bids or tenders.
Both sections 45 and 47 are per se illegal in that no anti-competitive effects in a relevant market needs to be established to make out the offence.
Bid-rigging can also be prosecuted under section 380(1) of the federal Criminal Code (the general fraud offence) as “other fraudulent means”, as was the case in R. v. Fedele, 2017 QCCQ 6793.
Some common types of bid-rigging include “cover” or “courtesy bidding”, bid suppression, bid rotation, market division and subcontracting (see: Bid-Rigging).
In this case, the accused appear to have entered into a market division agreement (i.e., an agreement by the companies not to compete for particular customers). Market division agreements can include not competing in particular geographic markets, in certain types of products or services or by dividing/allocating customers.
Calls for tender are commonly used by public and private organizations to secure competitively priced contracts and services, particularly in relation to public works projects and construction contracts. Condominium boards and managers commonly seek, receive and select bids for a wide range of condominium related services and products, including for condo maintenance, repair and management activities.
Companies that collude in relation to condominium construction or maintenance projects (e.g., management, cleaning or security projects) open themselves to potential criminal risk if they are either party to or assist (i.e., aid or abet) illegal price-fixing, market allocation or bid-rigging agreements for the provision of condo related products or services.
COMPETITION BUREAU IMMUNITY
AND LENIENCY PROGRAMS
In this case, CPL appears to be participating in the Bureau’s Leniency Program, as the Bureau has said that it is cooperating with the Bureau’s investigation and has agreed to testify. As such, it appears that another company may have secured full immunity from prosecution under the Bureau’s Immunity Program.
The Bureau has established formal Immunity and Leniency Programs for individuals, companies and other organizations that that have committed a criminal offence under the Competition Act, including price-fixing or other offences under section 45 of the Competition Act or bid-rigging under section 47.
An individual, company or other organization may be entitled to full immunity from prosecution under the Bureau’s Immunity Program or, where unavailable, leniency in sentencing under its Leniency Program for reporting a Competition Act offence to the Bureau and cooperating with the Bureau in an investigation.
The Bureau’s Immunity Program is available for criminal offences under Part VI of the Competition Act (e.g., sections 45 (conspiracy), section 46 (foreign directed conspiracy), section 47 (bid-rigging) and sections 52 to 55.1 (criminal false or misleading representations and deceptive marketing practices).
The Bureau’s Leniency Program is narrower and only applies to available cartel offences under sections 45 to 49 of the Competition Actor for offences under sections 21, 22 or 22.2 of the federal Criminal Code.
In general, full immunity under the Bureau’s Immunity Program will only be granted to a party where either: (i) the Bureau is unaware of an offence and the applicant is the first to disclose all elements of the offence; or (ii) the Bureau is aware of the offence and the applicant is the first to come forward before the Bureau has obtained enough evidence to refer the matter for prosecution.
Full immunity is also only available to the first applicant that successfully meets all the requirements of the Bureau’s Immunity Program. In contrast, under the Leniency Program, applicants must plead guilty to an offence under the Competition Act and are only eligible to receive reductions in fines of up to 50% based on their cooperation.
As such, there is a strong incentive to seek immunity quickly when a potential Competition Act offence is discovered and, where unavailable, to apply for leniency and cooperate as fully as possible with the Bureau in order to secure the largest reduction in fine.
IMPLICATIONS
The Bureau’s announcement reflects the importance for companies, associations and other types of organizations to adopt credible and effective compliance programs to proactively prevent, minimize or detect violations of the Competition Act.
The importance of competition law compliance also reflects the fact that the enforcement of criminal competition offences, including price-fixing and bid-rigging, remains a top priority for the Bureau.
For example, in June 2021, the Bureau announced that it laid criminal charges in connection with an ongoing bid-rigging case involving City of Gatineau infrastructure contracts. In December 2020, CIMA+ was ordered to pay $3.2 million for bid-rigging in relation to municipal infrastructure contracts in Québec City, Montréal, Laval, St-Eustache and Gatineau. In June 2020, SNC-Lavalin was ordered to pay $1.9 million for rigging bids for municipal infrastructure contracts in Montréal and Québec City. And in June 2020, Génius Conseil Inc. was ordered to pay $300,000 for bid-rigging in relation to municipal infrastructure contracts in Montréal and North Shore Quebec municipalities.
For some of our past posts about criminal bid-rigging under the Competition Act, see: Competition Law Compliance Tips for Canadian Trade and Professional Associations, New Competition Bureau Compliance Bootcamp Videos: Avoiding Business Collusion and Bid-rigging and Public Prosecution Service of Canada Continues to Settle Engineering Bid-Rigging Cases Under Competition Act Prohibition Order Provisions,
For more information about conspiracy, bid-rigging and the Bureau’s Immunity and Leniency Programs, see: Association Compliance,Bid-Rigging, Conspiracy (Cartels), Compliance, Immunity & Leniency, Whistleblowers and Whistleblower FAQ.
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