This blog was co-authored by James Donald, Candidate Attorney
According to the Competition Appeal Court (CAC) the competition authorities cannot apply the same test to all types of collusive behaviour when investigating whether such conduct had ceased. A firm accused of collusive conduct may be able to extricate itself from the collusive conduct without proving that it has clearly and unambiguously distanced itself from other cartel members.
One of five firms who were in the business of supplying and installing fire control and protection systems allegedly engaged in collusive tendering. They were found to have engaged in such conduct and were subsequently fined by the Competition Tribunal for their role. The firm appealed both the finding and penalty to the CAC.
A complaint regarding a prohibited practice that ceased more than three years before such complaint is time-barred from being referred to the Tribunal. It was thus necessary for the CAC to investigate when the collusive behaviour in this matter ceased. The CAC confirmed that the conduct does not in fact cease when the last collusive was agreement was entered into but rather continues for as long as the adverse effects are felt in the market.
The Tribunal had held that in order to withdraw from a cartel, the firm needed to distance itself from the collusion by way of clear and unambiguous communication to its competitors. Absent this, the collusion may continue on the basis of coordination. Since it was not disputed that the firm did not communicate in such a way with their competitors within the relevant timeframe, they were found guilty.
On appeal, the CAC distinguished collusive tendering from price-fixing and held that the approach adopted by the Tribunal was inappropriate in the case of collusive tendering. It has previously been held that where discussions among competitors are plainly collusive, such circumstances give rise to a duty to speak or clearly and unambiguously to distance themselves from competitors because silence or inactivity may otherwise result in parties implementing the collusive arrangement on the understanding of consensus. However the CAC held that this notion of “clear and unambiguous communication” or distancing cannot simply be applied to a bid-rigging cartel without consideration of the distinguishing features between price-fixing and bid-rigging or collusive tendering.
In a case of price-fixing, there exists an agreement to charge a particular price. The absence of a distancing communication may result in other cartel members continuing with the collusive deal on the assumption that silence can generally be seen as acquiescence. In the case of collusive tendering, the basis for harm requires communication between cartel members in respect of each tender and thus one would generally expect engagement among all the cartel members for each and every tender. The CAC held on the current facts that the fire control and protection system cartel involved sporadic approaches between parties and was based on the understanding that such engagement was acceptable. If a cartel member ceases to participate in the collusive tendering, such contribution to harm had come to an end, save for any lasting effects.
Ultimately, a firm’s silence or inactivity in relation to prohibited conduct is relevant where such conduct has the ability to produce competitive harm through assumptions relating to the parties’ stance on a previous illicit understanding. As a result, in certain circumstances such as that of collusive tendering, silence or inactivity does not in itself preclude a firm from submitting that it had extricated itself from the prohibited conduct. It is certainly better to clearly distance oneself in writing from any collusive behavior that may have taken place sooner rather than later. However the acknowledgement that a uniform test cannot be applied, as a result of the varying nature of cartels, is welcomed given the significant consequences of cartel conduct.