Conspiracies, bid-rigging and other agreements that may harm competition

• fines
• criminal record
• jail time for individuals

• civil court order

New owners promoted compliance

There was strong pressure to increase sales, cut costs and boost profitability. Still, the new owners and management team continued to emphasize compliance with the company’s employees.

Widget World consistently emphasized the importance of compliance to all employees and conducted regular training, audits and risk assessments.

New owners focused on profits at all cost

The new owners and management team shifted the company’s priorities toward cutting red tape and boosting profitability above all else.

Widget World slashed training resources for compliance and stopped in-person sessions. The company removed the employee “speak-up” system. It also transferred oversight of the company’s compliance program to a junior legal staffer with no compliance experience.

Widget World tried to steer clear of misconduct

Thanks to Widget World’s training and emphasis on compliance, its team knew that this was a clear violation of competition law. Widget World’s team declined the offer and also informed the company’s legal and compliance departments about the conversation.

Widget World continued to obey competition law and made sure to document any suspicious price-fixing behaviour it saw in the industry.

Rogue employee reached out to competitors

Despite complying with competition law and having a positive approach to compliance, Widget World ended up exposed to competition law risk due to the conduct of a rogue employee. One sales manager decided to reconnect with the instigators from Azure and Zenith to help boost his sales.

Unknown to management, he engaged in price-fixing and collusion with the other companies.

The drive for profits led to a conspiracy

Widget World’s team agreed to the plan to try to keep pace with the other two companies because of its disregard for competition law. Above all else, the business’ drive for profitability pushed the team in this direction.

For two years, the three companies took part in price-fixing and bid-rigging, driving up costs for customers purchasing widgets and reducing competition in the industry. Sales margins were higher than in markets not affected by the scheme.

Management was fully aware of the unusual results and patterns but failed to look into them further. The sales team won large bonuses for the results.

Outcomes

News of Widget World’s involvement in the illegal activity came as a shock to the company’s leaders.

Widget World fully cooperated with investigators and took immediate action against the perpetrators within the company. Restitution was made to customers by repaying the amount the customers overpaid as soon as the violations were uncovered.

Widget World approached the Bureau and obtained a “first-in” marker for immunity under the Bureau’s program thanks to its existing compliance program and the swift action it took once the activity was revealed.

Outcomes

During the investigation, Azure’s lawyers gave information to the Bureau about the price-fixing agreement among the three companies. As a result, Azure received a “first-in” marker for immunity under the Bureau’s program. Widget World did not cooperate with the Bureau’s investigation.

Eventually, the Bureau recommended to the PPSC that they lay criminal charges against Widget World and Zenith.

Management was distracted from the core business operations by long meetings with lawyers and time in court. The companies faced high legal fees.

Given that Widget World and Zenith did not have effective compliance programs, the companies were not able to detect the conduct. They now face harsh penalties, which includes jail time for certain employees, fines and financial damages from class action lawsuits. They had to make significant changes to their operations to prevent future violations.

Canada 123’s strong culture of compliance

Canada 123’s compliance program was led by its business manager. The company used resources from the Bureau to create a list of dos and don’ts that was posted inside the company’s offices and on its intranet and handed out to employees on wallet-sized cards.

Management often spoke about the importance of compliance and about the company having zero tolerance for violations. The code of conduct was also updated to tell employees where to go to ask questions and report possible illegal behaviour safely.

Reporting mechanism led to early detection

Canada 123’s owner read in the news that government agencies were getting tougher on companies that were convicted of bid-rigging. Since most of Canada 123’s business came from bidding processes, she wanted her company to be as protected and prepared as possible. She instructed her business manager to ensure their program addressed competition law issues.

Management informed employees in informal meetings about the importance of competition law compliance and reminded them that they could use the company’s reporting mechanism without fear of retaliation.

This reminder prompted a junior-level employee to report to the company’s external auditor that his manager, a newer Canada 123 employee previously at Acme Maintenance, had met with his counterpart outside of work to discuss pricing and bidding intentions.

Acme’s weak culture of compliance

Acme had no compliance program.

Management and staff were unaware of compliance with competition law and had no training, monitoring or enforcement measures in place.

Senior leaders often spoke of maximizing profits above all else and rewarded the most cutthroat salespeople.

Management involved in misconduct

Several months before the city’s purchasing department complained to the Bureau, a senior sales rep met with Acme’s president and proposed the bid rotation agreement with Canada 123. Acme’s president immediately saw the potential to boost profits and encouraged the rep to pursue the agreement.

When the agreement was finalized, the sales rep emailed the president to let him know. The president replied: “Well done! This agreement was a great idea. Now, we can all win without butting heads with Canada 123 anymore.”

When Acme won its first contract after setting up the bid rotation agreement, the president gave the sales rep a large bonus.

Outcome for Canada 123 Landscaping

In its investigation, the Bureau found that Canada 123 had an effective compliance program, even though a violation occurred.

Its owner’s actions strengthened Canada 123’s position. She was not involved in the scheme, yet she quickly contacted the Bureau to offer cooperation when she found out. She took steps to protect the whistleblower as well.

The Bureau recommended to the PPSC that charges be laid against Canada 123, but suggested lenient treatment for the business and no consequences for the owner.

Outcome for Acme Maintenance

The Bureau considered that management’s involvement in the bid rotation agreement was an aggravating factor. It showed their lack of commitment to compliance with the law.

The Bureau recommended to the PPSC that charges be laid against the owner of the business, the senior sales rep as well as the business. It recommended that the PPSC seek high fines and jail time for the owner and senior sales rep.

Employee training helped identify risks early

Both companies had a comprehensive compliance program. They especially identified and mandated training for all employees in at-risk roles. Both companies conducted training through different methods with special emphasis on games and do’s and don’ts checklist.

The commercial terms of the joint venture were discussed at a high level by the senior business development managers of both companies.

When the junior members of the business development teams received a high-level indication of the terms that their respective management teams wanted to pursue, they suspected that some of the provisions might raise concerns under the Competition Act. They highlighted the issue with the legal team, who confirmed that some of the provisions could be viewed as lessening or preventing competition in the market.

Alpha and Beta immediately hired competition lawyers to advise them in the negotiations. The companies worked with their in-house lawyers and the outside competition lawyers to draft revised joint venture terms, which complied with competition law.

Outcomes

Since they took these measures, both companies removed some of the provisions from their joint venture agreement and revised others. They proceeded with their joint venture without intervention from the Competition Bureau.

The founders of the companies recognized the gap in the training of senior managers. As a result, they strengthened compliance training for senior management.

Lack of compliance measures exposed companies to risk

Both companies had no compliance program for competition law. Some members of senior management were aware that competition law has some conditions for interaction with competitors, but to save costs, they did not engage a competition lawyer.

The commercial terms of the joint venture agreement were reviewed and negotiated by the business development teams of both companies. They did not actively involve the compliance team in the negotiations. Their lawyers did not have competition law expertise.

The two companies signed the agreement with certain restrictive clauses.

The Bureau learned of the JV and investigated

The Bureau’s intelligence gathering team saw discussions about the joint venture in online forums used by industry insiders and the Bureau started an investigation.

Outcomes

The Bureau pursued civil action against Alpha and Beta. It obtained a court order that meant the joint venture never went into effect. Management for both companies spent long hours meeting with lawyers and sitting in court. They had to pay high legal fees.