April 20, 2017
What is a cartel?
A cartel refers to an agreement that businesses form to control production or marketing arrangements and not compete with one another. For example, two or more businesses may engage in a cartel to agree to fix prices, restrict output, allocate markets, or rig bids for goods or services. Cartels harm other businesses and consumers by artificially raising prices, restricting choice or reducing product quality or service. Cartels can operate in almost any industry or service sector and can span across national borders or be limited to within Canada.
Price‑fixing occurs when two or more businesses agree on pricing for goods or services.
Output restrictions are agreements between competitors that limit the quantity of goods or services produced or supplied in a market.
Market allocation occurs when two or more businesses agree to assign territories, customers or product markets amongst themselves.
Bid‑rigging occurs when, in response to a call or request for bids or tenders, bidders agree:
- not to submit a bid; or
- to submit bids that have been arrived at by agreement amongst themselves, where the person calling for the bids or tenders is not informed of the agreement.
Cartels and the Competition Act
Section 45 is the cornerstone provision of the Competition Act. It makes it a criminal offence when two or more persons agree or arrange to prevent or lessen competition unduly or to unreasonably enhance the price of a good or service. This offence is known as a “conspiracy” and is punishable by fine or imprisonment, or both.
To convict a person or a business of a conspiracy offence, the prosecutor must prove “beyond a reasonable doubt” that the accused participant carried out the specific conduct prohibited by section 45 and that the accused intended to commit the offence.
In addition to determining whether an agreement or arrangement was entered into, the court must determine whether the agreement, if implemented, would or would likely prevent or lessen competition unduly. The courts have ruled that the word “unduly” expresses a notion of seriousness and significance; it is a combination of market power and behaviour likely to injure competition that makes a lessening of competition undue.
Bid‑rigging may be prosecuted under section 45 and is also covered by a specific cartel offence under section 47 of the Competition Act.
How do cartels affect me?
Competitive markets encourage innovation and promote lower prices and wide product choice for businesses and for consumers.
Cartels limit these benefits by enabling businesses to charge purchasers higher prices and to sell a poorer range and quality of goods and services to consumers. When suppliers conspire to fix prices, purchasers throughout the supply chain, both businesses and consumers, can be harmed; higher prices will be paid by someone. The ability of small and medium‑sized businesses to compete may also be affected by artificial cost increases resulting from a cartel. Bid‑rigging targeting private or government procurement increases the cost of goods and services. Where government procurement is affected, the cost increase caused by the cartel means less public money is available for other important needs. Anti‑cartel enforcement to stop cartels and the serious harm they cause Canadians and the Canadian economy is a priority for the Competition Bureau.
What is the role of the Competition Bureau?
The Competition Bureau is responsible for the enforcement of the Competition Act. Often investigations are the result of complaints received by the Bureau from individual consumers or from businesses. These complaints are first investigated using all available sources of information and if there is reason to believe that an offence has been committed or is about to be committed, the Commissioner of Competition may commence a formal inquiry.
Once an inquiry has begun, investigators have access to powers under the Competition Act or the Criminal Code that can be used to gather evidence including subpoenas requiring a person to give oral evidence, produce records or provide written responses, warrants authorizing the search of premises and seizure of evidence and wiretaps.
Where there is sufficient evidence of a cartel offence the Commissioner may refer the matter to the Director of Public Prosecutions for criminal prosecution.
What are the penalties for cartels?
Charges may be laid against both individuals and corporations that engage in cartel offences of conspiracy or bid‑rigging.
Penalties for conspiracies include fines of up to $25 million with unlimited fines for bid‑rigging, imprisonment for up to 14 years, or both. Courts also can impose orders to prevent the parties to a conspiracy from continuing or repeating the offence.
Cartel victims who have lost money as a result of a conspiracy may take private legal action against cartel participants for damages.
What can I do?
Cartels usually act in secret making them difficult to detect.
- If you have any evidence of cartel activity, please contact the Competition Bureau.
- If you are an employee of a company which you believe may be involved in a cartel, you can report your concerns to the Competition Bureau. The whistleblowing provisions of the Competition Act will protect your identity and guard against retaliation by your employer. Any information provided will be kept strictly confidential.
- If you are involved in a cartel and wish to terminate the illegal activity, you may be eligible for full immunity from prosecution if you come forward to disclose the activity and cooperate under the Bureau’s Immunity Program.
The Director of Public Prosecutions may grant immunity from prosecution to a business or an individual for a particular criminal offence or offences under the Competition Act.
Individuals and businesses can apply for immunity but only the first one to come forward and meet the program criteria will receive immunity. A party who is not the first to apply for immunity, or who does not meet all the criteria, may still qualify for lenient treatment in return for cooperating with the Bureau’s investigation.
If you believe you have been involved in an offence under the Competition Act and want to participate in the Immunity Program, you should contact the Bureau as soon as possible.
For more information about the Bureau’s Immunity Program, please view the Information Bulletin: Immunity Under the Competition Act and Responses to Frequently Asked Questions about the Immunity Program.
The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
The Competition Act is a federal law that applies to most business conduct in Canada and is aimed at preventing anti‑competitive practices in the marketplace.
Examples of cartels
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