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 has been successful in using the immunity and leniency programmes and securing guilty pleas, it has been less successful in prosecuting bid rigging and other criminal offences such as cartel activity under the Competition Act. However, the length of the investigation and trial underscores the benefits of implementing good compliance practices in order to minimise the likelihood of running afoul of the Competition Act in the first place.
Bid rigging under the Competition Act
The bid and tender process, common in both government and construction contracts, is generally intended to provide the lowest prices for the tendering party. Section 47 of the Competition Act prohibits bidders from agreeing not to submit a bid or submitting a bid that is the product of an agreement, where either such agreement is not disclosed to the person calling for the bids. It is an indictable offence punishable with a fine in an amount at the court's discretion and imprisonment for up to 14 years. Collusion in the bidding process, the decision not to 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' are 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 Competition Bureau closely monitors companies that could be tempted to engage in bid rigging.
Investigation and trial
In 2005 the Competition 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.
Following a lengthy investigation, the bureau laid criminal charges against 14 individuals and seven companies in 2009. 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 white-collar crime trials in Canada. The trial – the first-ever jury trial under Section 47 – included 90 days of testimony, over 1 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 Competition Bureau has indicated that 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 2015.
Managing compliance risks
There are a few ways whereby compliance risks can be proactively managed. For example, it is important to ensure that front-line sales staff are familiar with the Competition Act, including industry-specific requirements.
Upfront disclosure to the entity calling for or requesting 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.
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