Recent Competition Tribunal and Competition Bureau Developments

Prior to 1999, a settlement before the Tribunal took the form of a "consent order", which had to be approved by the Tribunal as satisfying certain substantive elements. The approval process involved pleadings (including a competitive impact statement and sometimes an agreed statement of fact) and a hearing which, in a few cases, became protracted.

In an effort to streamline the process and provide greater certainty to parties negotiating settlements with the Commissioner, the Competition Act, R.S.C. 1985, c. C-34 (Competition Act) was amended in 1999 to provide for the much simpler "consent agreement" registration process that exists today. While achieving speed and certainty, this process has been subject to the criticism that it has become too abbreviated and does not provide adequate context for understanding the rationale for the consent agreement. This informational vacuum may compromise the Tribunal's ability to address subsequent contested applications to rescind or vary the agreement.

In 2014, the Commissioner and four e-book publishers entered into a Consent Agreement designed to address the Commissioner's concerns that certain agreements or arrangements regarding the pricing of e-books were substantially preventing or lessening competition, contrary to section 90.1 of the Competition Act. (For a discussion of section 90.1, see Practice Note, Canadian Conspiracy (Cartel) Law.) The consent agreement prohibited the publishers from directly or indirectly restricting or impeding an e-book retailer's ability to set the retail price (or offer discounts or other promotions) on any e-book for sale to consumers in Canada.

Kobo, an e-book retailer that was not a party to the consent agreement, challenged the validity of the consent agreement, alleging that it was not within the authority of the Tribunal. The Commissioner brought a reference application to seek clarification of the scope for Kobo, as a third party, to challenge the agreement. The Tribunal issued its reference decision, Kobo Inc. v. Commissioner of Competition, 2014 CarswellNat 3434 (Competition Trib.), in September 2014.

This most recent Kobo decision applies the standards set out in the reference decision. In essence, the Tribunal has now rescinded the consent agreement for failing to adequately specify the factual and legal basis to support the Tribunal's jurisdiction. The Tribunal held that the consent agreement failed to provide sufficient information for all of the following:

In the result, the Tribunal rescinded the consent agreement. However, it did so without prejudice to the Commissioner, entering into a new consent agreement that addresses these deficiencies. In that regard, the Tribunal stressed that there must be a clear conclusion (not merely an allegation) that competition is likely to be prevented or lessened substantially (the statutory precondition for the Tribunal's jurisdiction under section 90.1 of the Competition Act).

The Kobo decision reflects a desire by the Tribunal to strike an appropriate balance that maintains a streamlined settlement process, while requiring greater disclosure to facilitate better understanding of the rationale for the consent agreement.

Going forward, parties to a consent agreement should expect that the agreement will require sufficient detail to describe the factual basis underlying the agreement, as well as meet the legal elements supporting the Tribunal authority to issue orders.

Practical implications:

In general, section 47 of the Competition Act makes it a criminal offence for two or more persons to agree not to submit a bid or tender or withdraw a bid or tender already made. It is also an offence to submit bids or tenders that are arrived at by agreement.

Like section 45 of the Competition Act (criminal conspiracy agreements), bid-rigging offences under section 47 of the Competition Act are per se offences in that no anti-competitive effects need to be proven. For more information, see Practice Notes, Canadian Bid-Rigging Law and Canadian Conspiracy (Cartel) Law. See also, Detecting Bid-Rigging Checklist.

Industries that are more susceptible to bid-rigging include those with homogeneous products, simple products or services that have not seen recent technological change, and where there are relatively few suppliers. Illegal bid-rigging agreements can also take a variety of forms, including cover bidding, bid suppression, bid rotation, market division and subcontracting. For more information, see Practice Note, Canadian Bid-Rigging Law.

With respect to awareness, the Commissioner recently announced that the Bureau was taking action to heighten awareness about bid-rigging and equip the procurement community with tools for prevention, detection and deterrence.

This initiative closely follows the new Liberal Government's announcement of significant infrastructure spending in Canada, as well as other bid-rigging awareness efforts, including a recent cartel panel discussion in collaboration with the Canadian Chamber of Commerce. The Bureau's new awareness efforts will include workshops for procurement officials and industry members.

An increased focus on bid-rigging and procurement is also central to the Bureau's 2016-2017 draft Annual Plan where, according to the Bureau, it plans to apply "innovative data-screening mechanisms" to detect potential illegal bid-rigging. For more information, see Competition Bureau: Competition, Innovation and Infrastructure: Remarks by John Pecman, Commissioner of Competition (May 25, 2016) and Competition Bureau: 2016-2017 Annual Plan: Strengthening Competition to Drive Innovation.

Section 47 of the Competition Act also continues to be a top enforcement priority for the Bureau, which relies heavily on its Immunity and Leniency Programs to detect illegal bid-rigging activities. For more information, see Practice Note, Competition Bureau Immunity and Leniency Programs.

In this respect, the Bureau recently launched a major new criminal investigation in the Canadian condominium repair market. According to media reports, the Bureau's investigation relates to condominium renovation services between 2006 and 2014, with more than 100 condominium boards being compelled to produce records. The production orders in this case reportedly follow those earlier served on Canadian condominium renovation companies themselves. For more information on Bureau Investigations, see Practice Notes, Competition Bureau Investigations and Criminal Competition Law Enforcement.

Other recent Bureau bid-rigging enforcement includes its long-running and ongoing auto parts bid-rigging investigation, as well as recent cases in relation to public and private construction tenders in Quebec.

The developments discussed above follow a number of other recent construction and bid-rigging-related efforts by the Bureau. These include the launch of a Bureau construction and competition law web page, Competition Bureau: Competition in the Construction Industry, which includes facts about construction and competition law, FAQs and practical tips to avoid violating the Competition Act.

Late last year, the Bureau also made a detailed submission to the Organisation for Economic Co-operation and Development (OECD) on industries that appear prone to endemic collusion. The Bureau's submission sets out market characteristics that increase the likelihood of bid-rigging, with a specific focus on the construction industry. In its submission, Competition Bureau: Serial Offenders: A Discussion on Why Some Industries Seem Prone to Endemic Collusion, the Bureau indicated that it planned to work with domestic and international stakeholders to refine its compliance and enforcement efforts in the construction sector.

Some of the implications of the Bureau's recently enhanced bid-rigging enforcement and awareness efforts for companies and procurement bodies include: