Industry reacts to Competition Bureau inquiry
03 June 2016
By Michelle Ervin
It’s too soon to know what the ultimate fallout from the Competition
Bureau’s investigation into allegations of bid-rigging and conspiracy
in the supply of condo refurbishment services might be. A media
spokesperson for the independent law enforcement agency said in a May
31 email that the inquiry is “ongoing” and that “there is no conclusion
of wrongdoing at this time.”
In the short term, it looks as though condo corporations subject to
orders for information will have to absorb the costs of compliance. In
the long term, if the investigation finds that corporations overpaid
for condo refurbishment services as a result of bid-rigging, victims
may be entitled to pursue the recovery of any associated damages. And
in the meantime, experts suggest, news of the investigation is likely
to prompt boards to raise their contract-tendering standards.
CondoBusiness independently confirmed reports last week that the
Competition Bureau applied to the Ontario Superior Court of Justice on
May 10 for 142 orders requiring specified condo corporations in the GTA
to produce records and provide written returns of information.
Corporations have 90 days to deliver the requested materials, which
relate to contracts spanning from August, 2006, to September, 2014.
Since news of the investigation made headlines, condo boards and
property managers — who do not appear to be implicated — have faced
questions from owners as they set about understanding the situation
As orders were served to subject buildings, it set off a series of
events. Site staff called their head offices, property management firms
advised their clients to consult their legal counsel and condo lawyers
fielded inquiries from their clients. The general consensus that has
emerged is that corporations must comply with the orders.
As the clock ticks down on the three-month deadline, managers have the
arduous task of collecting the requested materials, which may include
contracts, RFPs and specifications as well as emails and meeting
minutes. That may involve searching through archive boxes and
contacting ex-directors to track down details about events that in some
cases date back nearly a decade — which exceeds the seven-year audit
requirement for retaining records.
“To our knowledge, the cost of the managers’ extra time, the cost of
reproducing the documents, and the legal fees associated with
compliance will all be borne by the condominium corporations,” said
Allan Rosenberg, vice president of Del Property Management, who is
aware of 20 corporations within the firm’s portfolio that received
Condo lawyer Mario Deo, whose firm represents upwards of 30 clients subject to orders, recently wrote about what directors need to know
about the investigation. He said that not only do corporations risk
prosecution if they fail to comply, but they risk incurring liabilities
if they do not obtain proper legal advice on how to fulfill the
particulars of the requests.
The Competition Bureau’s queries suggest that its current focus is
communication between parties bidding on contracts for the supply of
condo refurbishment services, making the involvement of directors
“highly unlikely,” Deo noted. Bid-rigging essentially occurs when two
or more parties communicate amongst themselves to arrange for one or
more of them to withhold, withdraw or submit bids or tenders based on
an agreement, unbeknownst to the persons requesting bids or tenders.
Now directors and owners are wondering how they might have been
victimized, but it could be years before they get answers, said the
“Many of these contracts are $2-million and higher,” Deo observed. “If
there was bid-rigging and it cost them $200,000 or $300,000 or even
more, and information comes out in these investigations that they were
a victim, do they have a cause of action?”
Robert Weinberg, president of the Association of Condominium Managers
of Ontario (ACMO), predicts that news of the investigation will spur
boards to bring increased scrutiny to the tendering process. For its
part, ACMO requires association members to adhere to codes of ethics,
which set general standards such as exercising diligence in
safeguarding the interests of their clients.
“As it relates to major expenditures for our clients, if we know, for
instance, a project should cost $100,000 and the quotes are coming in
at $300,000, we should be notifying them that further investigation is
warranted rather than advising them to proceed and blindly issuing
purchase orders based on the quotes received,” said Weinberg. “I
believe every management company has its own established procedures
which will differ in levels of complexity.”
The association expects ACMO 2000-certified companies to follow best
practices, which should include conducting sealed bidding and using
Canadian Construction Documents Committee (CCDC) contracts, where
applicable. Recent Condominium Act reforms introduced contract
procurement requirements, which will be outlined in forthcoming
As for the investigation, a media spokesperson for the Competition
Bureau said that “should evidence indicate that the Competition Act has
been contravened, the commissioner will not hesitate to take
appropriate action.” The agency relies on enforcement tools ranging
from information letters to litigation.
Bid-rigging and conspiracy, which includes price-fixing, among other
activities, are criminal offences under the Competition Act. Both carry
possible penalties of fines — unlimited for bid-rigging and up to
$25-million for conspiracy — and prison sentences of up to 14 years.
Information about bid-rigging awareness and prevention is available on the Competition Bureau’s website.