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.
A cartel forms when two or more parties 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 six common types of illegal agreements: price-fixing, market allocation, restricting supply, bid-rigging, wage-fixing and no-poaching.
- Price fixing
- When two or more competing businesses agree to set the same prices for goods or services.
- Market allocation
- When two or more competitors or potential competitors agree to divide up a market, customers or territory among themselves.
- Restricting supply
- When competitors or potential competitors agree to limit the amount of goods or services they produce or supply to a market.
When 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.
New as of June 23, 2023
Wage-fixing and no-poaching agreements
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, are illegal as of June 23, 2023.
Guidance for businesses
The Competition Bureau has published guidance for businesses related to these amendments.
Penalties for illegal agreements
Under the Competition Act, it is a criminal offence to engage in an illegal agreement. Anyone convicted of participating in bid-rigging, price-fixing, allocating markets, restricting supply, wage-fixing or no-poaching agreements will have a criminal record.
The penalty for violating the illegal agreements provisions includes a fine to be set at the discretion of the court, imprisonment for up to fourteen years, or a combination of both.
In addition, victims have the right to sue perpetrators to recover damages.
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.
- Gasoline prices: Illegal activities versus normal competition
- Competitor Collaboration Guidelines
- Tips for bidders
- Tips for contracting authorities
- Immunity and Leniency programs
- Protection for whistleblowers
- Tips for members of a trade association
- Competition Act: