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Bid-rigging, price-fixing and other agreements between competitors — Common types of illegal agreements that hinder competition

Many types of agreements between competitors can enhance competition and benefit the economy. However, certain agreements, such as cartel agreements, can result in significant harm to competition.

Transcript

Like any business owner,

you want to grow your company and make a profit.

But there are many hazards to watch out for, like cartels.

A cartel is a group of independent businesses

that agree to engage in anti-competitive activities

like fixing prices, allocating customers or markets,

restricting production or rigging bids.

Cartels are harmful and illegal because they lead to

higher prices, decreased product choice

and less innovation.

They can be big or small,

with various degrees of formality and secrecy

from a loose arrangement made over dinner

to highly structured agreements

with exclusive membership rules.

In fact, you might be taking part in illegal behaviour

and not even know it!

Say you and another company are bidding for the same work.

You agree to drop your bid or raise your prices

so the other guy wins the contract.

Or maybe you and a competitor agree not to expand

into each other's markets,

ensuring both sides remain profitable.

Many business owners aren't aware

that these kinds of agreements

are illegal under the Competition Act

and can result in fines, jail time or both.

If you think you're involved in a cartel but are worried

about the consequences of disclosing your actions

there are advantages to talking to the Competition Bureau.

For instance, you may be granted immunity from prosecution

if you're the first to tell us about your cartel's activities.

If others have already come forward, you may

receive lenient treatment by sharing what you know.

And if you're not directly involved in a cartel,

you can still provide information to us

as a whistleblower, confidentially if requested.

What you don't know about cartels can hurt you.

Visit our website today

to learn more about the tools and programs available

to help protect you and your business.

Video length: 2 minutes, 38 seconds

A cartel forms when two or more competing businesses make an illegal agreement (for example, to fix prices or allocate markets) and agree not to compete with one another. A cartel can be created through a simple verbal agreement made by a group of business people over lunch or it could be a highly structured arrangement with strict rules that are monitored and enforced. Cartels can operate in almost any industry and can be local, regional, national, or international.

There are four common types of illegal agreements between competitors (or potential competitors):

Price‑fixing
is when two or more competing businesses agree to set the same prices for goods or services.
Market allocation
is when two or more competitors or potential competitors agree to divide up a market, customers or territory among themselves.
Restricting supply
is when competitors or potential competitors agree to limit the amount of goods or services they produce or supply to a market.
Bid-rigging

is a form of collusion where bidding companies agree that a specific supplier will win a contract. For example, as part of an agreement with another company or companies, one company might agree not to submit a bid, to withdraw a bid, or to submit an agreed upon bid.

However, bid-rigging occurs only if the person who has issued the call for bids is not informed of the proposed agreement between the companies at or before the tender period closes.

Coming into force June 23, 2023


Wage-fixing and no-poaching agreements

With the June 2022 amendments to the Competition Act, agreements between employers to agree to fix, maintain, decrease or control wages or other terms of employment, as well as to refrain from hiring or trying to hire one another’s employees, will be a criminal offence beginning on June 23, 2023.


Penalties

Also with the 2022 amendments, the current maximum fine of $25 million for offences under the conspiracy provision (section 45) will be removed. Beginning on June 23, 2023, all fines for offences under section 45—including agreements to fix prices, allocate markets, restrict supply, fix wages or refrain from hiring—will be determined at the court’s discretion.


Guidance for businesses

The Competition Bureau will update its guidance for businesses found in the Competitor Collaboration Guidelines to reflect these changes. For more information about these and other amendments, visit our Guide to the 2022 amendments to the Competition Act.

Preventing bid-rigging

Penalties for illegal agreements

Under the Competition Act, it is a criminal offence to engage in an illegal agreement, cartel or conspiracy. Anyone convicted of bid-rigging, price-fixing, allocating markets, or restricting supply will have a criminal record.

In addition, victims have the right to sue perpetrators to recover damages.

Bid‑rigging

Individuals convicted of bid-rigging may be sentenced to up to 14 years in jail and/or fined. Corporations (corporate persons) can also be convicted and fined. (There is no limit on the size of the fine; amounts are at the discretion of the court.)

Price-fixing, allocating markets, and restricting supply

Individuals convicted of price-fixing, allocating markets, or restricting supply (also known as conspiracy) may receive fines of up to $25 million and/or be sentenced to a jail term of up to 14 years. Corporations (corporate persons) can also be convicted and fined.

How to ensure compliance with the Competition Act

If you are unsure about what complying with the Competition Act means for your business, we recommend that you seek legal advice.

You can protect your business by having an effective compliance program in place. This will help your company comply with the law and it could reduce the risks associated with non-compliance. Like an early-warning system, a compliance program can help you detect and correct unlawful conduct quickly before it damages your company, your reputation, and your bottom line.

We also facilitate compliance by providing written opinions (fees apply) on proposed practices. A written opinion is binding if the material facts on which the opinion is based are accurate, complete, and remain substantially unchanged.

Further reading

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