Anonymised, illustrative composite. Two funds reached the final round of the same auction. Days before final bids, one agreed to withdraw in exchange for a stake in the other's holding company. The seller never heard about it — and that omission, not the co-investment itself, is what made it an offence.
At a glance
A privately owned specialty foods manufacturer ran a competitive sale process through its investment bank. Two private equity funds, Fund A and Fund B, made it to the final round, each having submitted an indicative bid and completed confirmatory diligence. The bank's process letter, standard for the format, asked each bidder to certify that its bid had been arrived at independently. See choosing between a broad auction and a quiet approach for how that kind of process is usually structured.
A few days before final bids were due, Fund A and Fund B reached a private arrangement: Fund B would withdraw its bid, and in exchange would receive a co-investment stake in the holding company Fund A would use to acquire the target, on terms negotiated between the two funds. Neither fund told the seller or the bank.
The arrangement is bid-rigging as the Competition Act defines it, and the definition is worth reading closely because the wrong it targets is narrower than “bidders cooperating” and broader than most people assume. s.47(1): “In this section, bid-rigging means (a) an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders, or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request, or (b) the submission, in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers, where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is submitted or withdrawn, as the case may be, by any person who is a party to the agreement or arrangement.”
The “not made known” clause is written after both paragraph (a) and paragraph (b), as a single proviso covering the whole definition rather than a qualifier attached only to (b) — the official text sets it apart as a continuation of the definition as a whole, not nested inside either paragraph. That matters here: Fund B's conduct is squarely paragraph (a), an agreement to withdraw a submitted bid, and the concealment requirement governs it exactly as it would govern the complementary-bidding scenario in paragraph (b).
Fund A's eventual winning bid was $140,000,000. Fund B's withdrawn bid had been $137,000,000 — close enough that its withdrawal plausibly affected the price the seller ultimately received. The co-investment stake negotiated between the two funds was 18% of Fund A's acquisition vehicle, on terms the seller never saw and had no opportunity to weigh against a genuine second bid.
Two things decide whether this is lawful or criminal, and neither is the amount of the co-investment. First, disclosure: had Fund A and Fund B told the seller and the bank before bids were submitted or withdrawn that they intended to combine, the arrangement would have been an ordinary, lawful consortium bid — sellers see these regularly, and nothing in s.47 forbids two bidders from teaming up openly. Second, timing: the concealment has to run “at or before the time when any bid or tender is submitted or withdrawn”, so disclosure after the fact does not cure it.
The penalty mirrors s.45's: s.47(2), “every person who is a party to bid-rigging is guilty of an indictable offence and liable on conviction to a fine in the discretion of the court or to imprisonment for a term not exceeding 14 years, or to both.” s.47(3)(a) exempts an arrangement “entered into or a submission that is arrived at only by parties each of which is, in respect of every one of the others, an affiliate” — two unrelated private equity funds are not affiliates of each other, so that exemption does not apply here.
Read the unit. The offence is not the co-investment relationship itself — funds co-invest with each other constantly, including with the knowledge of the seller they are jointly bidding. The offence is running that same economic arrangement as if the two bids were independent, when the person calling for the bids had no way to know they were not.
The arrangement surfaced three years later, when Fund A brought the platform to market again and its own disclosure schedule listed Fund B's co-investment stake with an origination date that matched the timing of the original auction. The original seller's advisors, engaged again on the new process, flagged the potential bid-rigging exposure. Because the conduct had never been prosecuted and the evidence of exact timing — whether the agreement was reached before or only after Fund B's formal withdrawal — was not fully documented, the parties to the new transaction addressed the risk through disclosure and a specific indemnity rather than litigation.
The episode is a reminder that the exposure does not expire on its own once a deal closes. It sits in the corporate history of whichever entity holds the platform until someone with reason to look finds it.
Beyond the s.47(2) criminal exposure to the individuals involved, an undisclosed bid-rigging arrangement taints the process itself — a seller who later learns of it has a real argument that the price it accepted was not the product of genuine competition, independent of anything the Competition Bureau ever does about it.
The tell was the process letter's independent-certification language sitting unused. Both funds had certified their bids were arrived at independently as a matter of course, without either treating that certification as a live constraint on a conversation happening between them at the same time.
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