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Author: Antonio Di Domenico
Foreword: John Pecman, Commissioner of Competition (2013-2018)
Publisher: Emond Publishing
Page Count: 1100
Publication Date: October, 2018
Regular Price: $249 (print), $211 (e-book)
Excerpt: Chapter 4, Section IV, Bid Rigging, pages 118-125. [Footnotes omitted. They can be found in the original in this PDF version]
Section 47 of the Act is a specific offence prohibiting bid-rigging. Broadly speaking, bid-rigging ensues when two or more persons agree that, in response to a call for bids or tenders, one or more of them will not submit a bid, withdraw a bid, or submit a bid arrived at by agreement.
Section 47 of the Act is a per se offence (that is, bid-rigging behaviour captured by section 47(1) is deemed illegal without requiring proof of anticompetitive effects). The bid-rigging provision of the Act was enacted in 1976. The Act contains not only section 47 but a general conspiracy offence, section 45. The coexistence of a general conspiracy provision and a specific bid-rigging provision in the Act is unlike antitrust/competition legislation in other jurisdictions, where bid-rigging is addressed by a general conspiracy offence. The historic rationale for this coexistence arises from the general conspiracy provision that was in place when the separate bid-rigging provision was enacted in 1976. The conspiracy provision in place in 1976 required the Crown to prove beyond a reasonable doubt that competition had been lessened unduly. The Crown was unsuccessful prosecuting bid-rigging conduct under this provision, largely due to the difficulty in meeting this burden. A separate bid-rigging offence sought to overcome this obstacle. Currently, the Act’s conspiracy provision is now a per se offence, which has led some people to argue that sections 45 and 47 ought not to coexist and that section 47 ought to be repealed.
The most common types of bid-rigging agreements or arrangements include cover bidding (giving the impression of competitive bidding when suppliers, in reality, agree to submit token bids that are usually too high), bid suppression or withdrawal (suppliers that agree to either abstain from bidding or withdraw bids), bid rotation (a preselected supplier that submits the lowest bid on a systematic or rotating basis), and market division (agreements among suppliers not to compete in designated geographic regions or for specific customers).
When analyzing conduct that may be captured by section 47, one should have regard to section 47, applicable jurisprudence, and the Bureau’s Competitor Collaboration Guidelines, all of which are described more fully below. Section 45 should also be considered, since it may capture bid-rigging conduct that does not fit within the parameters of section 47.
B. Elements of the Offence
The elements of bid-rigging are outlined in sections 47(1) and (2):
47(1) In this section, “bid-rigging” means
(a) an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders, or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request, or
(b) the submission, in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers,
where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is submitted or withdrawn, as the case may be, by any person who is a party to the agreement or arrangement.
(2) Every person who is a party to bid-rigging is guilty of an indictable offence and liable on conviction to a fine in the discretion of the court or to imprisonment for a term not exceeding 14 years, or to both.
Accordingly, prohibited conduct under section 47 is divided between agreements or arrangements between persons and those between bidders or tenderers.
Pursuant to section 47(1)(a), two or more persons commit an offence if (1) in response to a call or request for bids or tenders, these persons (2) intentionally and advertently agree or arrange between or among them (a) not to submit a bid or tender, or (b) to withdraw a bid or tender already submitted.
Under section 47(1)(b), two or more bidders or tenderers commit an offence if, (1) in response to a call or request for bids or tenders, these bidders or tenderers (2) intentionally and advertently submit a bid that they arrived at by an agreement or arrangement.
As noted, bid-rigging is a per se offence. Section 47 does not capture all forms of bid-rigging but only what is statutorily defined in section 47(1). Accordingly, conduct not captured by section 47(1) does not trigger an offence under section 47 even if the conduct may amount to bid-rigging in the ordinary sense. However, bid-rigging conduct not captured by section 47 may nevertheless be captured by section 45 of the Act. As a practical matter, an analysis of conduct that may be considered bid-rigging should have regard to the general conspiracy provision (s 45) and specific bid-rigging provision (s 47) of the Act.
1. What Constitutes an Agreement or Arrangement?
An agreement or arrangement—the actus reus for a section 47 offence—involves a mutual arrival at an understanding. An agreement or arrangement under section 47 has been characterized as a “meeting of the minds” between the parties, either explicitly or tacitly, to engage in the prohibited conduct described in section 47. It has also been characterized through a “consensus” approach—namely, as “a consensus of minds relative to conduct performed, or to be performed.” The agreement or arrangement does not have to be in relation to all aspects of the bids to be submitted in order to constitute an agreement or arrangement under section 47 of the Act.
The “meeting of the minds” to engage in bid-rigging may be inferred from all of the circumstances under section 47 (as it may under section 45). However, a mere accommodation by another bidder does not constitute an “agreement or arrangement” under section 47 of the Act.
The mens rea for section 47 arises from the agreement or arrangement, and is met when the Crown proves beyond a reasonable doubt that the accused intentionally and advertently entered into the agreement or arrangement. The motive of the accused in entering into the agreement or arrangement is irrelevant to the existence of mens rea.
As noted, to constitute an offence under section 47(1)(b), a bid must be arrived at by an agreement or arrangement, and, as a result, the outcome of the agreement or arrangement must lead to the bid and not simply relate to steps in the preparation of the bid.
2. Call or Request for Bids or Tenders
The phrase “call or request for bids or tenders” or the terms “bids” or “tenders” are not defined in the Act. The phrase “call or request for bids or tenders” is broad in nature, the interpretation of which is evolving in jurisprudence. Some have characterized the phrase as carrying “the highest degree of uncertainty.”
At a minimum, an agreement or arrangement to bid-rig requires a direct relationship, or nexus, between the person calling for the bids and tenders and the person submitting the tenders. Determining what is captured by a “call or request for bids or tenders” focuses on the intention of the parties to create contractual relations. For example, requests for a quotation to supply motor vehicle manufacturers with motor vehicle components have been found to be captured by a “call or request for bids or tenders.”
The courts have relied heavily upon the law of tendering and contract law in respect of requests for proposals (RFPs) in interpreting the phrase “call or request for bids or tenders.”
The jury in Durward returned a finding of not guilty. As with all findings in jury proceedings, no written reasons are provided. Accordingly, the basis for the jury’s finding is unknown. Interestingly, the preliminary inquiry judge in Dowdall determined that there was sufficient evidence for a jury to consider at trial. In so doing, the preliminary inquiry judge found that an RFP may be captured by a “call or request for bids or tenders” even when it contains a term permitting the party issuing the RFP to retain the discretion not to proceed to call up work or services.
In contrast, in Al Nasher, a contested proceeding involving several charges under section 47 of the Act, the preliminary hearing judge concluded that there was insufficient evidence to commit the accused to trial. The judge relied largely on the fact that the condominium owner had no obligation to award a contract to any complaint bidder and no obligation to accept the lowest complaint bid.
Because the courts rely heavily upon the law of tendering rather than upon a statutory definition in interpreting the phrase “call or request for bids or tenders,” a determination of whether bid-rigging conduct is captured by the phrase is very contextual.
1. The “Make Known” Defence or Notification Defence
There is no offence under section 47(1) where the agreement or arrangement is made known to the person requesting the bid or tender at or before the bid or tender is submitted or withdrawn (as the case may be) by any person who is a party to the agreement or arrangement (s 47(1)). As a practical matter, this defence legitimizes joint bidding arrangements. The accused must expressly notify the person requesting the bid or tender of the agreement or arrangement, or take all reasonable care to make an agreement or arrangement known. Notification cannot be inferred by the person requesting the bid or tender.
The “make known” defence or notification defence is not a defence for the general conspiracy offence under section 45(1). Accordingly, an act of bid-rigging that does not trigger sections 47(1) and (2) due to the “make known” defence or notification defence may nevertheless trigger section 45(1).
2. Affiliate Companies
There is also no offence under section 47(1) where the agreement or arrangement is arrived at only by companies each of which is an affiliate company (s 47(3)). As noted, “affiliate” is defined in the Act, but the definition refers to affiliated corporations, not to affiliated companies.
According to section 47(2) of the Act, “Every person who is a party to bid-rigging is guilty of an indictable offence and liable on conviction to a fine in the discretion of the court or to imprisonment for a term not exceeding 14 years, or to both.”