Archive for the 'Competition Law' Category
November 13, 2012
Given the ongoing testimony at the Charbonneau Commission in Montreal, which has included allegations of bid-rigging among Quebec construction firms, I thought I would post a short overview of bid-rigging under the Competition Act – a sort of “bid-rigging 101” list of FAQs. While much of this will likely be intuitive to most, Canadian bid-rigging law has a number of interesting aspects (and, like criminal cartels, can be very difficult for tendering authorities to detect).
What is bid rigging?
Unlike some jurisdictions, notably the U.S., Canada has a standalone bid-rigging offence, or to be more accurate related offences. Under section 47 of the federal Competition Act it is a criminal offence to:
1. Agree to not submit a bid or tender;
2. Agree to withdraw a bid or tender already made (an offence recently added to the Competition Act as a result of amendments in 2009); or
3. Submit a bid or tender arrived at by agreement.
In essence, the Competition Act prohibits most types of agreements or arrangements between competing bidders or tenderers (though there is one key exception).
Is it necessary to prove
anti-competitive effects on a market?
No. In Canada bid-rigging is referred to as a ”per se” offence, in that no anti-competitive effects need to be proven to make out an offence – in other words, the offence lies in the agreement to not submit a bid, withdraw a bid already made or submit bids arrived at by agreement.
Like the other criminal offences in the Competition Act, however, and criminal offences generally in Canada, it is necessary to prove all elements under section 47 on the criminal burden of proof (i.e., beyond a reasonable doubt).
What are some common types of bid-rigging
(i.e., ways parties attempt to avoid detection)?
Like criminal cartel (i.e., conspiracy) agreements, bid-rigging agreements are often structured in a handful of key ways to avoid detection. These include:
1. “Cover”, “courtesy” or “complementary” bidding: Some firms submit bids that are too high to be accepted (or with terms that are unacceptable to the tendering authority) to protect an agreed upon low bidder.
2. Bid suppression: One or more bidders that would otherwise bid or tender agree to refrain from bidding (or withdraw a previously made bid).
3. Bid rotation: All parties submit bids but take turns being the low bidder according to a systematic or rotating basis.
4. Market division: Suppliers agree not to compete in designated geographic areas or for specified customers.
5. 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.
The above types of bid-rigging arrangements are typically intended to achieve several goals, including keeping the bid-rigging arrangement secret and dividing contracts/markets among the parties.
What must be proven to establish
an illegal bid-rigging agreement?
To establish an illegal bid-rigging agreement under section 47 of the Competition Act, all of the following elements must be established:
1. An agreement or arrangement between two or more persons (or bidders or tenderers as the case may be).
Like section 45 of the Competition Act (criminal conspiracy agreements), an agreement is an essential element to establish a bid-rigging offence under section 47. Also like the criminal conspiracy provisions, Canadian courts have held this element to require a “consensus of minds” or “mutual understanding” between the parties.
Mere consultations between parties bidding in relation to pricing, where there has been no agreement or arrangement between the parties and their respective bids are not communicated to the other before tenders are submitted, has been held not to contravene section 47.
November 12, 2012
The Antitrust Law Section of the American Bar Association has published a new issue of its Antitrust Law Journal that includes contributions on the U.S. Supreme Court’s new approach to implied antitrust immunity; antitrust and innovation; antitrust, innovation and product design in platform markets; the Google books settlement; and the rule of reason and goals of antitrust. For a copy of the new issue see: Antitrust Law Journal.
November 11, 2012
In an interesting note earlier today, the National Post reported (from The Canadian Press) that the federal Competition Bureau was working with Quebec’s corruption unit in the ongoing Quebec corruption and competition investigation which has so far led to the resignations of the mayors of Montreal and Laval and involved testimony that working in this area for some years now I can only describe as astonishing.
The articles published earlier today confirmed that the Bureau is working with Quebec’s provincial anti-corruption authorities in relation to a number of cartel and bid-rigging cases under investigation in Quebec (which was also recently confirmed by the Acting Senior Deputy Commissioner of Competition, Criminal Matters Branch, Matthew Boswell in recent remarks, including the fact that Bureau officers have been included in recent dawn raids in Quebec – see: here).
According to the Post’s reporting, the Competition Bureau, in addition to cooperating in searches, is “keeping tabs” on the ongoing Charbonneau inquiry, where testifying witnesses have made criminal and competition law allegations in relation to a wide range of conduct that includes bribery of public officials, illegal political campaign contributions and competition law violations, including criminal bid-rigging and conspiracy under sections 47 and 45 of the Competition Act. The Post also cites correspondence with the Bureau stating that criminal bid-rigging remains an enforcement priority for the Bureau.
While the Bureau’s enforcement powers include the ability to obtain court orders for search warrants and wiretaps, and uses enforcement partnerships as part of its efforts to detect and investigate Competition Act offences, it may be some time yet until any charges or laid or formal Bureau announcements are made given the relatively slower pace of criminal matters under the Act. For example, developments (e.g., pleas) and announcements are still being made in the Quebec’s Quebec gas price fixing investigation, which first began about five years ago.
November 10, 2012
Derek Ireland (djirel@sympatico.ca) has recently presented a new paper to the Canada Law and Economics Association entitled “Behavioural Economics and Competition Policy and Law in Emerging Market Economies”. Abstract:
“The literature on how behavioral economics should be applied to competition policy and law in the more advanced OECD economies has expanded greatly over the last ten years. However, behavioral economics and antitrust have to date not addressed the obvious relevance of these behavioral insights for the design and enforcement of competition policies and laws in the more than 80 emerging market economies that in the past 20 years have established new or more modern competition policies, laws and authorities. The purpose of this working paper and our research program is to make a modest start to filling this research gap.
The major argument of this working paper is that selective application of the insights from the behavioral, information and related literatures will improve the analysis and decisions of emerging economy competition authorities, reduce the risk of Type I errors/false positives (e.g. blocking a good merger) and Type II errors/false negatives (e.g. clearing a bad merger), and enhance the competence, credibility and visibility of new, recently established and other competition authorities in emerging economies.
One of the guiding principles from the research is that behavioral economics and related literatures must be able to reduce both Type I and Type II errors in order to be helpful to inexperienced and under resourced competition authorities in emerging economies. On the positive side, emerging economy competition authorities, enterprises and other economic agents operate in a world of rapid change, complexity, ambiguity, and unpredictability. When: (i) the complex objectives functions and the management challenges of business groups and other companies are brought together with; (ii) aversions to risk, losses, disappointment, complexity and ambiguity and to making difficult decisions in complex market contexts; enterprises more often employ simple decision rules and strategies and other heuristics and shortcuts.
November 9, 2012
I am attaching below a copy of our PowerPoint presentation from the recent Canadian Society of Association Executives’ (CSAE) 2012 National Conference & Showcase, held in Ottawa last week. Our presentation focused on competition law and compliance for trade and professional associations, including in relation to key association activities (e.g., fee schedules and compensation, data collection and information exchanges, association membership). Also included are a number of association related case studies: Competition Law and Associations in Canada.
November 9, 2012
Guest contribution by Dr. Derek Ireland, Ottawa (djirel@sympatico.ca)
Introduction and Background
My 2008 PhD dissertation was on the interactions between India’s business groups and the country’s competition policies and laws over the past four decades. Since then, I have continued my research on these interactions and the special challenges posed by state-owned and privately owned business and enterprise groups for competition authorities in emerging market economies as well as the more advanced OECD competition law jurisdictions. My work on this question includes several articles, working papers and conference presentations.
There is little published material on competition law cases involving state-owned and privately owned enterprise and business groups located in emerging market economies. Enterprise and business groups from emerging markets have been entering OECD country markets in a major way only in the past 10-15 years; and many emerging economies with large business group sectors such as India, China and Indonesia started to enforce their competition laws only in the past few years. However, this situation could change dramatically in the future given the “going global” strategies of many emerging economy enterprise and business groups and the more than 80 developing and emerging market economies that now have competition laws and authorities (see e.g. Ireland 2008a and 2011a).
Therefore, OECD country competition authorities and other government agencies may soon be facing complex and less familiar competition and other issues and cases as privately owned or state-owned business groups and networks in emerging economies become more prominent and influential in many advanced economies through exports, greenfield investments, mergers and acquisitions, R&D partnerships and joint ventures, strategic alliances, and other mechanisms.
The CNOOC-Nexen Transaction
Canada is currently facing such a matter under its Investment Canada Act. This matter involves the proposed CAD 15.1 billion acquisition of Nexen by CNOOC: the China National Offshore Oil Corporation. Nexen is a comparatively smaller privately owned Canadian oil and gas producer and participant in the oil sands and the Canadian and global oil and gas markets. Nexen is located in the Canadian province of Alberta.
CNOOC is a large and quite diversified state-owned corporation/enterprise group that is involved in a large number of products, services and markets. CNOOC was established by the Government of China soon after the start of the reform period in 1982 in order to exploit offshore oil and gas resources. This state-owned corporate entity has many of the attributes of an enterprise group. While CNOOC largely focuses on the oil and gas sector, the corporation now has six business sectors, including exploration and development of oil and gas, technical services, logistics services, chemicals and fertilizer production, natural gas, power generation, and financial services and insurance. The Government of Canada has recently announced that a decision on this transaction will be delayed for a month and is now expected to be provided in the middle of December 2012.
The CNOOC acquisition of Nexen is a “friendly” takeover, which has already been approved by the Nexen shareholders apparently because of the large premium over the current market valuation of the company. It is reported that the Nexen purchase represents China’s largest overseas acquisition to date and the first time that a Chinese state-owned enterprise has attempted to fully acquire a Canadian oil and gas producer.
As a consequence, this acquisition represents and important benchmark and unfamiliar territory for all of the company and government players that are involved in the transaction in Canada and China. The federal government decision under the Investment Canada Act will provide an important precedent that will strongly influence future transactions and related commercial relationships between Canadian and Chinese companies and between our two economies.
Insights for Future Mergers
and Other Competition Law Cases
While subject to Competition Bureau and Investment Canada review, the focus of this transaction has been on the Investment Canada Act review. Canadian debates on applying the “net benefit test” and national security considerations under the Investment Canada Act to this transaction, and a previous unsuccessful attempt by CNOOC to purchase an American oil company Unocal, have raised a number of difficult issues that could be relevant to the review of future mergers and other competition law cases in the OECD jurisdictions that would involve state-owned enterprises and enterprise groups from emerging market economies.
November 8, 2012
The Canadian Intellectual Property Office (CIPO) will be hosting a series of roundtable discussions across Canada, including in Gatineau/Ottawa, Halifax, Montreal, Edmonton and Toronto from November 14th to December 12th on intellectual property issues for small and medium-size enterprises. From CIPO:
“CIPO will host a series of roundtable discussions with small and medium sized enterprises (SMEs) to better understand their challenges and barriers in using the IP system. These discussions are taking place as part of CIPO’s regulatory and mandate reviews, and will assist in developing new products and tools to better serve SMEs.”
For more information, including cities and dates, see: CIPO invites innovative SMEs to participate in roundtable discussions.
The Global Competition Review has published its November 2012 edition of GCR that includes a survey of some current issues in Canada including the departure of Canada’s Commissioner of Competition (Melanie Aitken), Canadian competition litigation and an interview with the former Commissioner:
“The enforcer departs
Melanie Aitken took over Canada’s Competition Bureau three years ago with a mandate to improve antitrust enforcement in the country. She’s done that, bringing scores of cases resulting in guilty pleas and courtroom victories. While critics of her enforcement agenda and approach remain, she insists her time at the bureau was good for Canadians. Ron Knox reports from Ottawa.
Canada’s antitrust bar
Over the past two years, a revised antitrust law and a more active enforcer – coupled, of course, with a sputtering merger market – has ushered in a new era of competition litigation in Canada and a more prominent focus on contentious matters generally.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
