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 Competition 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 new cartel cases currently being investigated, the Bureau highlighted its stepped-up enforcement of cartels described 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 will be posting overviews of Canadian conspiracy and bid-rigging laws, each concluding with practical steps companies can take to reduce potential criminal liability (and overviews of the Bureau’s Immunity and Leniency Programs, which are increasingly key to Bureau investigations and parties implicated in criminal conduct to reduce liability).
For Parts 1 and 2 see: here and here.
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ENFORCEMENT
The Competition Bureau has broad powers of investigation under the Act in relation to conspiracies, including search warrants and wiretaps.
In Canada, prosecution of criminal conspiracies is the responsibility of the Public Prosecution Service of Canada (“PPSC”), which is headed by the Director of Public Prosecutions (“DPP”).
Criminal matters are referred to the PPSC by the Competition Bureau, which has the authority to determine whether to commence criminal proceedings.
Criminal prosecutions are brought in provincial criminal courts (e.g., the Quebec Superior Court in the case of the ongoing Quebec gas price-fixing cartel) and, while the DPP has official responsibility for criminal competition matters, the Bureau typically works closely with the PPSC during an investigation.
PENALTIES
The potential penalties for violating the criminal conspiracy provisions of the Act are severe and include fines of up to $25 million (per count), imprisonment for up to 14 years, or both. These have been increased from the previous $10 million per count and 5 years imprisonment prior to March, 2012.
Canadian courts may also issue “prohibition orders”, a type of court order ordering that conduct stop and that a party (or parties) take steps to avoid future offences and comply with the law.
CIVIL ACTIONS
Under section 36 of the Act any person that has suffered actual loss or damage as a result of a contravention of the criminal provisions of the Act, including the criminal conspiracy offences under section 45 of the Act, may commence a damages action. Class actions are also possible for violations of the criminal provisions of the Act.
IMMUNITY & LENIENCY PROGRAMS
The Competition Bureau has formal Immunity and Leniency Programs under which applicants may receive full immunity from prosecution (or reductions in penalties) for cooperating with an investigation.
Immunity Program
Under the Bureau’s Immunity Program, a party or company implicated in criminal conduct under the Act may offer to cooperate with the Bureau in its investigation and request immunity (i.e., full immunity from prosecution for criminal offences under the Act). The criminal provisions of the Act include section 45 (conspiracy), section 47 (bid-rigging) and section 52 (criminal misleading advertising).
In general, to be eligible under the Immunity Program, the Bureau must either be (i) unaware of an offence (and the immunity applicant is the first to disclose it) or (ii) the Bureau is aware of an offence, but does not yet have enough evidence to refer the matter for prosecution.
There are a number of other requirements including: (i) termination of participation in the illegal activity, (ii) not being the “ringleader” (i.e., not having coerced others to be a party to the illegal activity) and (iii) providing “complete, timely and ongoing co-operation” with the Bureau during an investigation, including confidentiality obligations, disclosing any other offences and securing the co-operation of current directors and officers.
Generally speaking the process for obtaining immunity is a multi-step process that involves seeking a “marker” from the Bureau (essentially a place in line, typically made on a hypothetical basis by counsel), making an initial “proffer” of information to determine eligibility in the Program (also typically made by an applicant’s counsel on a without prejudice basis), the negotiation of an immunity agreement (setting out the obligations of the immunity applicant and their protections if the requirements of the Program are met) and disclosure and cooperation with the Bureau in an investigation and any resulting criminal prosecution.
Importantly, obtaining immunity is a “race” in that full immunity is only available to the first applicant that complies with the Bureau’s requirements under its Program. As such, it is critical for counsel advising individuals or companies that may have been involved in criminal conduct under the Act to immediately explore the potential benefits of seeking immunity, which can significantly reduce potential liability.
Recognizing this “game theory” aspect of its Immunity and Leniency Programs, the Bureau has described these programs as among its most important tools for detecting illegal conduct under the Act.
The Bureau has also issued guidelines that describe the requirements an applicant must meet to obtain immunity (see: Immunity Program under the Competition Act (Bulletin)).
Leniency Program
Under the Bureau’s Leniency Program, parties that have contravened criminal provisions of the Act that are not entitled to full immunity (e.g., they are not “first in”) may nevertheless be eligible for leniency in sentencing.
In general, in order to be eligible, an applicant must: (i) have terminated its participation in the illegal conduct, (ii) provide full, frank, timely and truthful cooperation with the Bureau in its investigation and (iii) agreed to plead guilty (not required for Immunity Program applicants).
Importantly, as under the Bureau’s Immunity Program, timing is critical for immunity applicants under the Bureau’s Leniency Program. This is because the first leniency applicant is eligible to receive a 50% reduction of the fine that would have otherwise been recommended, the second leniency applicant is entitled to receive a 30% reduction in fine with subsequent applicants possibly receiving reductions in fines. In addition, once the Bureau has referred a matter to the DPP for prosecution, leniency is no longer available.
In addition, a leniency applicant that discloses evidence of another criminal offence under the Act may be eligible for “Immunity Plus” – i.e., full immunity from prosecution under the Bureau’s Immunity Program for a second previously unknown offence, if the applicant meets all the requirements of the Bureau’s Immunity Program.
Generally speaking the process for obtaining leniency, like immunity, is a multi-step process that involves: (i) seeking a “marker” from the Bureau (a place in line which is, like an immunity application, typically made by an applicant’s counsel on a hypothetical basis), (ii) making an initial “proffer” of information to determine eligibility in the Program, (iii) the negotiation of a plea agreement (a guilty plea is, unlike for immunity, a necessary condition) and (iv) full disclosure and cooperation with the Bureau in an investigation and any resulting criminal prosecution.
Successful leniency applicants may also be required to attend interviews and testify in prosecutions of other parties involved in the criminal conduct.
The Bureau has also issued guidelines that describe the requirements an applicant must meet to obtain leniency under its Leniency Program (see: Leniency Program (Bulletin)).
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