On January 6, 2012, the Competition Bureau announced its first conspiracy (i.e., cartel) case under Canada’s amended Competition Act, partially brought under the amended section 45 of the Act.
In this case, two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of C $12.5 million (see: Cartels Update: Bureau Announces $12.5 Million Fine in First Price-fixing Case Under Amended Competition Act and Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, believed to be one of a number of ongoing cartel cases currently being investigated, the Bureau described its stepped-up enforcement of cartels as “reinvigorated”:
“’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.’
In other recent remarks, the Bureau has similarly indicated that it intends to enhance its investigation of cartels under Canada’s new conspiracy (cartel) rules:
“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.”
(See: Commissioner of Competition, Keynote Speech at the Canadian Bar Association 2011 Fall Conference).
Based on these and other recent developments, we have posted a series of posts on Canadian conspiracy law (for Parts 1, 2 and 3 see: here, here and here). This is the final post – practical steps for companies to take to reduce cartel risk.
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PRACTICAL STEPS FOR COMPANIES TO TAKE TO REDUCE CARTEL RISK
Compliance programs. Adopt an effective compliance program or update the competition law section of an existing compliance program. Some of the benefits of a compliance program include reducing the risk of violating the Competition Act, reducing the costs of investigations and proceedings and potentially mitigating penalties. Options range from formal and extensive compliance programs encompassing all company activities to compliance guidelines for key activities (e.g., meetings, information exchanges and specific initiatives, such as benchmarking, research and development initiatives, joint ventures and strategic alliances with competitors, etc.). For more information on competition law compliance programs see: Compliance Programs and the Competition Bureau’s Corporate Compliance Programs Bulletin.
Compliance programs for trade associations. Ensure that any trade associations personnel participate in have effective and up-to-date compliance programs. Consider requiring that any associations employees participate in have compliance program as a condition of participation.
Written agendas and minutes. Ensure that all meetings with competitors, such as through industry trade or professional associations, include a written agenda and minutes. Discussions at all such meetings should stay within the boundaries of legitimate agenda items and discussions (or “exchanges”) of “competitively sensitive information” should be avoided (see below).
Adopt and follow conduct of meeting guidelines. Adopt and strictly follow conduct of meeting guidelines for any meetings with competitors, such as trade and professional association meetings, industry events, or conferences. Such guidelines commonly include restrictions on the exchange of competitively sensitive information (see below) and on discussions of topics that may lead to conspiracy risk under section 45 of the Act (e.g., discussions relating to pricing, markets, concerted refusals to deal or limiting the production or supply of goods or services). Such guidelines also commonly include guidance on steps to take if inappropriate discussions or activities arise during such meetings or events.
Information exchanges. Remind company personnel that they should avoid discussing competitively sensitive information with competitors. This includes information relating to prices, costs, markets, market shares, suppliers, specific customers and business or strategic plans. The risks of engaging in these types of discussions, whether orally or in documents (including e-mails and social media), is that they either lead to an agreement that violates the Competition Act or can be used by the Competition Bureau, a court or private plaintiff to infer the existence of an agreement that violates the Act.
Informal meetings with competitors. Avoid informal meetings with competitors on the “fringes” of association meetings.
Conduct competition compliance orientations for new executives and board members. In this regard, the Bureau’s view in its Corporate Compliance Programs Bulletin (see link above) is that “senior management’s clear and unequivocal support is the foundation of a credible and effective corporate compliance program.”
Compliance audits. Conduct periodic audits of company activities for competition law compliance. This may include a review of existing compliance programs and policies, sales/marketing personnel activities, industry association participation, board meetings and the use by personnel of social media – for example, whether sales and marketing personnel are communicating with competitors through traditional or new media (e.g., Linked In, Facebook, chatrooms, Twitter, SMS messaging, etc.).
Legal advice for key initiatives. Consider obtaining legal advice for key initiatives that may raise conspiracy concerns – e.g., association participation, joint ventures, strategic alliances, pre-merger negotiations and discussions, commercial agreements or arrangements with parties that could be considered to be competitors in relation to price, markets or output, information exchanges or benchmarking activities involving competitors and joint negotiation or buying group activities.
Review and update document retention programs. It is worth remembering that enforcement agencies, including the Competition Bureau, commonly rely heavily on a company’s own internal documents in investigations. As such, an effective document retention program can both reduce the burden and cost in the event of an investigation, but also significantly reduce potential liability.
Competition Bureau Immunity and Leniency Programs. Be aware that the Competition Bureau has formal Immunity and Leniency Programs, under which full immunity from prosecution (or reductions in penalties) may be available for cooperating with a Bureau investigation. These programs can significantly reduce liability in the event a company or its personnel have been involved in potentially criminal conduct under the Competition Act. For more information see: Immunity & Leniency.
Generally review all key initiatives involving competitors through a “competition lens”. Finally, it is useful to review all key initiatives involving competitors – for example, association activities, joint ventures, strategic alliances, joint marketing, production or negotiation initiatives and commercial agreements – through a competition lens, particularly as such initiatives may impact price, markets or output.
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