Canadian Procurement Changes are Good News for the Bureau's Leniency Program

Written By Emrys Davis

On July 3, 2015, the Government of Canada announced changes to its Integrity Regime for suppliers. Under the existing regime, suppliers convicted of certain offences, including Competition Act offences such as price-fixing and bid-rigging, were automatically disqualified from government supply contracts. The disqualification applied broadly: even affiliates of a convicted supplier faced automatic disqualification.

Of the several changes, two are particularly relevant for suppliers in the context of offences under the Competition Act.

Increased Attractiveness of the Bureau's Leniency Program: The Competition Bureau's Leniency Program offers significant fine reductions in exchange for cooperation and a guilty plea. However, long-term disqualification from government contracts may discourage some suppliers from admitting guilt and thus may reduce participation in and the effectiveness of the Bureau's Leniency Program. The July 3 changes do not eliminate disqualification for leniency applicants but they do significantly shorten its duration. Suppliers can reduce their period of disqualification from ten years to five years if they cooperate with the authorities and take remedial action. Thus, at least in the case of Competition Act offences, if a supplier participates in the Bureau's Leniency Program, it will likely cut its disqualification period in half. While not as attractive as a complete reprieve from disqualification, such a significant reduction to the disqualification period for leniency applicants should increase the Program's attractiveness.

Protection for Innocent Affiliates: Under the old Integrity Regime, conviction of a foreign affiliate for certain foreign antitrust offences could disqualify a supplier even if the supplier had no control over the foreign affiliate and was not involved in the foreign conduct. Going forward, the government will not automatically disqualify a supplier unless that supplier had a degree of control over the convicted affiliate. Given that many recent Competition Act convictions have involved foreign, not Canadian, corporations, the July 3 changes should insulate many Canadian subsidiaries from disqualification.

It is important to note that the July 3 changes do not apply to provincial and municipal procurement rules which still apply to contracts with those levels of government.

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