1 / 12

Atypical Cartels: The Use of Shadow Companies in Bid-Rigging Schemes

Learn about the use of shadow companies in bid-rigging schemes, the penalties for bid-rigging, and real-life examples. Understand the importance of outreach with procurement authorities to combat cartel activity.

carolynm
Download Presentation

Atypical Cartels: The Use of Shadow Companies in Bid-Rigging Schemes

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Remarks of Kristen PinheyCompetition Law OfficerCompetition Bureau Canada Atypical Cartels: The Use of Shadow Companies in Bid-Rigging Schemes Cartel Working Group SG 1 Teleconference on Atypical Cartels January 21, 2014

  2. Competition Act • The Competition Bureau is responsible for the administration and enforcement of the Competition Act • The Competition Act applies to both businesses and individuals, and contains criminal and civil provisions • Criminal penalties include fines and imprisonment

  3. Bid-Rigging – Section 47 • Bid Rigging is an agreement or arrangement between two or more persons whereby one or more of those persons agrees or undertakes: • Not to submit a bid or tender in response to a call or request for bids • To submit a bid or tender that is arrived at by agreement or arrangement between or among two or more bidders or tenderers • To withdraw a bid or tender in response to a call or request for bids • The agreement or arrangement is not made known to the person calling for, or requesting, the bids or tenders • Section 47 does not apply in respect of agreements between affiliated corporations

  4. Bid-Rigging Penalties • Imprisonment of up to 14 years • Fine at the discretion of the court • Civil damages recovery • Criminal record for convicted individuals

  5. Common Forms of Bid-Rigging • Cover bidding – fake bidding • Bid suppression – withholding bids • Bid rotation – rotating agreed best bid • Market allocation – carving up the market

  6. The Use of Shadow Companies • In several recent cases, the Bureau has seen the use of ‘shadow’ or ‘shell’ companies to facilitate bid-rigging schemes • These types of bid-rigging arrangements normally involve public tender contracts where there is more than one potential winner • Bidders have been using ‘shadow’ or ‘shell’ companies to gain a larger market share or higher prices

  7. Example 1: Real Estate Advisory Services • In May 2009, the Bureau received a complaint from Public Works and Government Services Canada (PWGSC), the principal procurement agency of the Canadian Federal government • The complaint involved a contract for real estate advisory services, which could have 3 potential winners • The Bureau’s investigation revealed that CRG and Louis Facchini, carrying on business as First Porter Consultancy, agreed to rig bids • CRG invoiced PWGSC $312,000 under the work package that was subject to the Bureau’s investigation

  8. Example 1: Real Estate Advisory Services (cont) • In July 2012, the Corporate Research Group Ltd. (CRG) pleaded guilty to a criminal charge of bid-rigging and was fined $125,000 • On June 13, 2013, Louis Facchini, an individual was charged with bid-rigging and also faces one count of fraud under the Criminal Code for allegedly submitting a false invoice with a value exceeding $5,000 to PWGSC • Criminal proceedings are ongoing with respect to Mr. Facchini

  9. Example 2: Information Technology Services • In 2009, the Bureau received a complaint from another government department regarding contracts in the information technology ("IT") services sector • The two companies involved in the allegations were IT consulting services firms • The complaint alleged that Company A, the incumbent supplier, entered into an agreement with Company B: that Company A would ensure that Company B was invited to the procurement process and that Company A would not submit a bid in response to several calls for tenders

  10. Example 2: Information Technology Services (cont) • As the incumbent, Company A was restricted by the prices of its ceiling rates from a pre-qualified suppliers list as to how much it could increase its rates, whereas Company B's rates were higher • Company A agreed to provide all its consultants and the completed bid submissions to Company B, who bid those consultants at higher rates • The investigation is ongoing

  11. Importance of Outreach with Procurement Authorities • The Bureau provides anti bid-rigging presentations to all levels of government, including PWGSC • These outreach presentations provide procurement authorities with knowledge of how to detect, deter and report bid-rigging • The Bureau recently entered into a Memorandum of Understanding with PWGSC, outlining that the two agencies will work together to combat cartel activity in procurement processes and real property transaction processes under the responsibility of PWGSC

More Related