The Characterization Of A Procurement Process As A 'Call Or Request For Bids Or Tenders' Under Section 47 Of The 'Competition Act'

Courts have recently recognized that the law of tenders can provide useful indications as to what a "call or request for bids or tenders" should consist in for the purpose of section 47 of the Competition Act. In two preliminary inquiry judgments rendered in Quebec (Al Nashar/Industries Garanties) and Ontario (Dowdall) involving bid-rigging charges, courts have made reference to the contract A/contract B scheme of the law of tenders. They also had to assess the weight of "privilege clauses" (i.e. no obligation upon the owner to accept the lowest bid or any tender submitted) and post-selection negotiations in the characterization of a procurement process as an RFP. This paper aims to review these two decisions, along with other case law rendered under section 47 and the law of tendering, in an attempt to propose basic general criteria and a non-exhaustive set of indicia to determine whether a procurement process is contemplated under section 47 of the Competition Act. In particular, the authors assess the weight of the contract A/contract B paradigm, privilege clauses and negotiations in the characterization of a tendering process as a "call or request for bids or tenders."

1. Introduction

   The Competition Act1 (the "Act") makes it a criminal offence for persons to agree not to submit or to withdraw a bid or tender in response to a "call or request for bids or tenders" ("RFP") or to present bids or tenders in response to a RFP where such bids or tenders result from an agreement between multiple bidders or tenderers.2 No offence is committed, however, where a party to such an arrangement either discloses same to the organization which placed the RFP (the "owner") at or before the time when the bid or tender is submitted or withdrawn,3 or where the arrangement occurs between bidders who are all affiliates of one another.4 Section 47 creates a per se offence, in that prosecution does not have to prove anti-competitive effects on the Canadian economy, which would generally require expert evidence. The offences under section 47(1) are punishable by a discretionary fine and imprisonment.5 Where a senior officer of the organization is at fault, the organization's criminal liability may also be engaged.6

   In 2009, Parliament amended the Act by increasing the maximum term of imprisonment for an offence under section 47 from 5 to 14 years, thus recognizing the need for more severe penalties for those participating in bid-rigging schemes of significant size and effect. This increased maximum sentence eliminated the possibility of absolute/ conditional discharges under section 730 of the Criminal Code. Furthermore, with the entry into force of the Safe Streets and Communities Act,7 formerly known as Bill C-10, conditional sentencing is no longer possible for bid-rigging offences committed after November 20, 2012.8 In light of this tougher sentencing, the Federal Court has observed that "[p]rice fixing and other hard core cartel agreements therefore ought to be treated at least as severely as fraud and theft, if not even more severely than those offences."9

   In recent years, the Competition Bureau has been increasingly aggressive in prosecuting individuals participating in price-fixing and bid-rigging schemes. In the past 5 years, more than 70 persons have been charged under sections 45 and 47 of the Act. Since the adoption of the 2009 amendments, such offenders face higher risks of conviction and imprisonment. Recently, a record-setting fine of $30 million was imposed on a Japanese auto parts maker that pleaded guilty to three counts of bid-rigging under...