Formal Bidding Process Required to Find Bid-Rigging Violation, Quebec Court Rules
March 1, 2018
The Superior Court of Québec (Court) recently acquitted an individual charged with bid-rigging under the Competition Act in R. v. Rousseau because the prosecution failed to prove that the alleged bid-rigging occurred in the context of a call or request for bids or tenders.
- The prosecution must establish that the customer calling for bids held a formal process, including defining the bid scope, treating all bidders fairly and creating an expectation that one of the conforming bidders will win the contract.
- Companies that call for bids or tenders should consider carefully whether to deviate from their formal bidding process.
BID-RIGGING UNDER THE COMPETITION ACT
The Competition Act makes it a criminal offence to engage in bid-rigging. Bid-rigging involves an agreement or arrangement where one or more of the potential bidders agrees not to submit a bid, to withdraw a bid or tailors its bid. In each case, the process in issue requires a “call or request for bids or tenders”.
WHAT IS “A CALL OR REQUEST FOR BIDS OR TENDERS”?
In R. v. Rousseau, a general contractor invited bids for ventilation work in a large residential project. According to the prosecution, the principals of three companies entered into a cover bidding arrangement whereby two companies would submit intentionally high bids to ensure the contract was won by the third company.
The Court considered four attributes when assessing whether the contracting process in issue was “a call or request for bids or tenders”:
- There must be a close relationship between the call or request and the submitted bids or tenders
- The project must be defined and sufficiently circumscribed
- The person making the call or request must undertake to treat all bidders fairly
- There must be an expectation that the call or request for bids or tenders will create a contract between conforming bidders and the person making the call or request.
The invitation for bids, however, was unusual and did not, in the Court’s view, contain the essential attributes of “a call or request for bids or tenders”. The general contractor was allowed to consider non-conforming bids and intended to invite one or more bidders to negotiate the eventual contract for ventilation work without making the negotiation criteria known in advance and without undertaking to select the lowest bidder.
As R. v. Rousseau confirms, the offence of bid-rigging under the Competition Act will not apply to all invitations to submit bids. Instead, it will apply only to a bidding process that has the essential attributes of a more formal call or request for bids or tenders. We caution, however, that agreements between competitors can still give rise to contraventions under different provisions of the Competition Act or the Criminal Code. As such, suppliers should be careful when coordinating their conduct with competitors.
If you have any questions regarding these developments, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition & Antitrust or Business Crimes, Investigations & Compliance groups.
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