An Ontario jury recently found nine defendants not guilty of 60 charges of bid-rigging and conspiracy to rig bids, following an eight-month trial and six days of deliberation.1
This case is another example of the fact that while the Competition Bureau (Bureau) has been successful in using the immunity and leniency programs, and in securing guilty pleas, it has been less successful in prosecuting bid-rigging and other criminal offences such as cartel activity under the Competition Act. That being said, the length of the investigation and trial underscores the benefits of good compliance practices so as to minimize the likelihood of running afoul of the Competition Act in the first place.
Bid-rigging under the Competition Act
Section 47 of the Competition Act prohibits bidders, in response to a call for bids or tenders, from agreeing to not submit a bid or to submit a bid that is the product of an agreement, when such an agreement is not disclosed to the person calling for the bids. It is an indictable offence for which the sentence is a fine, in an amount at the court’s discretion, and/or imprisonment for up to 14 years. Collusion in the bidding process, the decision to not submit bids, bid rotation, and bid sharing among bidders rank among the most widespread forms of bid-rigging.
One difficulty with the wording of the bid-rigging offence is that “bid or tender” is not defined in the Competition Act, meaning that it is unknown whether a request for proposal is judicially viewed as a bid or tender or whether it is simply the first step in obtaining an actual contract for goods or services.
The Bureau closely monitors companies that could be tempted to engage in bid-rigging. The bid and tender process, common in both government and construction contracts, is generally intended to provide the lowest prices for the tendering party.
Investigation and trial
In 2005 the Bureau began an investigation into the supply of IT services to two government departments on 10 contracts worth approximately $67 million, following a tip from Public Works and Government Services Canada officials.
The Bureau laid criminal charges against 14 individuals and seven companies in 2009, following its lengthy investigation. The Public Prosecution Service of Canada (PPSC) prosecuted the nine defendants who elected for a trial by jury, resulting in one of the largest-ever trials in Canada involving allegations of white-collar crime. The trial, the first-ever jury trial under section 47, included 90 days of testimony, over one million pages of exhibits, and judge’s instructions to the jury of close to 300 pages.
Because the not-guilty verdict was made by a jury, there are no reasons provided for the decision. The Bureau has indicated it will consider, along with the PPSC, whether to appeal the not guilty verdicts.
A further trial involving the five defendants who elected for a trial by judge alone is expected to start in May.
Managing compliance risks
There are a few ways that compliance risks can be proactively managed. For example, it is important to proactively ensure your front-line sales people are aware of and knowledgeable about the Competition Act’s requirements, and that they understand the requirements in the context of your specific industry.
Up-front disclosure to the entity calling for or requesting the bids or tenders is always a defence, where the entity is told at or before the time when a bid or tender is submitted or withdrawn.