On January 6, 2012, the Competition Bureau announced that two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of $12.5 million (see: Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, the Bureau said:
“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’
The charges are the first to arise from the Bureau’s investigation into price-fixing cartel in the polyurethane foam industry. Anyone with information relating to this investigation is encouraged to contact the Competition Bureau.
The Bureau’s investigation benefitted from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.
Under the Competition Act, an agreement between competitors to fix prices, allocate markets or restrict output in Canada is a criminal offence. In March 2010, amendments to the conspiracy provision of the Act came into force.”
Canada’s amended criminal conspiracy provision (section 45 of the Competition Act) makes price-fixing, market division/allocation and output/supply restriction agreements between competitors illegal and subject to penalties of up to $25 million (per count), imprisonment for up to 14 years, or both.
In recent public remarks, the Commissioner has indicated a desire to bring new cases under the amended conspiracy offence provisions of the Act – see for example Commissioner of Competition, Keynote Speech at the Canadian Bar Association 2011 Fall Conference, where the Commissioner said:
“In our Criminal work, we continue to concentrate on the, admittedly, lengthy process of ‘changing the game’— reorienting our approach at the Bureau, our processes, and our mindset to a more appropriately aggressive stance to respond, as we must, to our new more powerful criminal provisions.
As we move forward with our new criminal regime, consistency, consistency, and consistency is our focus.
There will be no arbitrary relaxing of standards under the Bureau’s watch — a practice that can only impair predictability and fairness in enforcement. Further, we will use our investigative tools such as searches, wiretaps and section 11 orders.
Cartels and bid–rigging continue to be our focus, given the seriousness of this conduct, and its unambiguously harmful nature. We are committed to advancing cases that matter to Canadians, doing so in a timely manner, and following them through to the end.
For cartels, while it will necessarily take some time before we bring our first case under the new section 45, we do have a number of ‘hybrid’ cases underway that will give us experience with the new provisions.”
See also: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks.
Whereas before March, 2010 Canada’s conspiracy offences required a competitive effects test to be proven (i.e., that an agreement prevented or lessened competition “unduly”), this is no longer required and proof of an agreement between competitors alone is sufficient to establish a conspiracy under section 45 (see: Conspiracy (Cartels) and Competition Act amendments).
According to the Bureau, it relied on both its formal Immunity and Leniency Programs in this case, under which applicants may obtain full immunity from prosecution (or reductions in penalties) where they satisfy all elements of the Bureau’s Programs (see: Competition Bureau Immunity Program, Competition Bureau Leniency Program and Immunity & Leniency). The Bureau also relied on wiretaps, search warrants and cooperation with international enforcement agencies as part of its investigation.
The Bureau also indicates that the price-fixing agreement in this case may have involved both identical pricing and price increase ranges for the supply of polyurethane foam. In this regard, the definition of “price” under section 45 of the Competition Act is very broad and includes discounts, rebates, allowances or price concessions. The Bureau has also taken the position in its Competitor Collaboration Guidelines that price-fixing agreements include all “agreements between competitors to fix or control the price, or any component of the price, to be charged by competitors”:
“In the Bureau’s view, [price-fixing agreements include] agreements to fix prices at a predetermined level, to eliminate or reduce discounts, to increase prices, to reduce the rate or amount by which prices are lowered, to eliminate or reduce promotional allowances and to eliminate or reduce price concessions or other price-related advantages provided to customers. For paragraph 45(1)(a) to apply, the agreement need not establish an actual price for the relevant product; rather, this section also prohibits agreements between competitors on methods of establishing prices or other indirect forms of agreements to fix or increase the price paid by customers. Such price-fixing agreements could include agreements between competitors to use a common price list in their negotiations with customers, agreements to apply specific price differentials between grades of products, agreements to apply a pricing formula or scale and agreements not to sell products below cost. In addition, the Bureau interprets paragraph 45(1)(a) as applying to agreements between competitors on a component of a price, such as a surcharge or credit terms.”
The Bureau’s investigation is ongoing.
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