Canada: Increased Criminal Antitrust Exposure in Canada, New Market Sector Inquiry Powers and Immunity Program Explanations

Last Updated: December 8 2005

Originally Published in the Competition bulletin - October 2005

Three New Developments on the Canadian Antitrust Front are Worthy of Attention:

  • The Canadian Government proposes to increase the maximum fine under the Competition Act for hard-core cartels, from C$10 million to C$25 million.
  • The Competition Bureau is to be empowered to carry out "marketplace inquiries" (similar to sectoral inquiries in the EU) to assess the general state of competition in any industry.
  • The Competition Bureau has just released a detailed commentary (in the form of "Frequently Asked Questions") on its successful Immunity Program.

Increased Fines

The Government’s proposal for increased fines for cartels was not preceded by any analysis, leaving some observers to question whether change is necessary.

In proposing increased fines, Minister Emerson clearly linked the change to public concern about retail gasoline pricing - describing the change as "a deterrent to unlawful cartel behaviour in all industries, including the gasoline industry". However, in five major investigations since 1990 into alleged collusion in the gasoline industry, the Bureau has never found evidence of illegal conduct. The linkage of the fine revision to recent gas price spikes thus seems inappropriate.

In cartel prosecutions in Canada, fines have been calculated by considering the sales affected by the cartel and other specific aggravating or mitigating factors. Previous sentences for home grown cartels have never reached the current $10 million maximum. In a few large international cases, where higher fines were justified, multiple conspiracy counts (Section 45) or the unique Canadian foreign-directed conspiracy offence (Section 46) have been charged to increase the level of exposure. In the Bulk Vitamins cartel, one party paid a total of C$48 million on eight counts. In the Graphite Electrodes cartel, two of the main conspirators each paid over C$10 million to settle Section 46 charges, which has no maximum fine.

If the amendment is enacted, it will reinforce the perception that Canada has one of the most stringent anti-cartel regimes in the world.

Market Inquiries

A proposal to give the Canadian International Trade Tribunal the authority to conduct general marketplace inquiries was floated in 2003 in a Bureau Discussion Paper. It generated serious criticism. Commentators argued that the Commissioner’s existing investigatory powers (search and seizure, mandatory production of documents, written returns of information and examination under oath) were sufficient, and that general market studies risked being politicized, and would impose significant unnecessary costs on Canadian industry and divert attention from regular operations.

Mr. Emerson’s revised proposal would shift responsibility for market studies to the Competition Bureau. With the Bureau in charge of such studies, the concept raises additional process concerns relating to self-incrimination and the most effective use of limited Bureau resources.

Where there is legitimate concern about Competition Act violations, the Bureau already has broad investigative authority. A formal inquiry can be undertaken on the Commissioner’s own initiative. The Commissioner is also obliged to initiate an inquiry if so directed by the Minister of Industry or petitioned to do so by any six Canadian residents. The Bureau’s current powers are functionally comparable to the general analytical powers of some foreign regulators. The utility, efficiency and procedural fairness associated with a general market study involves complex issues that are still unresolved and require stakeholder debate.

The Immunity Program: Clarifications and Adjustments

The Competition Bureau this week signalled important changes in the administration of its Immunity Program, by issuing a series of Frequently Asked Questions ("FAQ’s"). The Immunity Program is the Bureau’s most productive tool for the detection and investigation of cartels. This new articulation of policy, which now applies to all criminal offences under the Competition Act, is relevant to antitrust practitioners in Canada and abroad and to international cooperation between the Bureau and foreign competition authorities.

The FAQs clarify the rules of the immunity game in Canada. Greater specificity is offered about the timing and content of an immunity application. An explicit demarcation of the previously ambiguous roles of the Competition Bureau and the Attorney General is laid down. Better definitions are provided, including the internationally elusive concept of an "instigator". Also clarified is a controversial Canadian requirement to disclose all other competition offences, or other criminal offences that negatively impact credibility. There are unequivocal new rules: "immunity markers", based on oral requests, will hold an applicant’s first-in status; joint applications by more than one party will not be entertained; and parties are encouraged to come forward, even if culpability or the precise scope of misconduct is unascertained. This is welcome progress in administrative transparency, predictability and certainty of outcome.

Nevertheless, aspects of the FAQs suggest that the Bureau may be overly focussed on speed in delivery – 30 days from marker to a complete proffer – and there is cause for concern with respect to the future fairness of the Bureau’s program. The drawbacks of attempting to move too quickly through a complex investigation may not be readily acknowledged by the Bureau, despite the now explicit willingness to accommodate delay. Notwithstanding an applicant’s best efforts, it will often be impossible to substantiate an offence fully in the new 30-day time limit. This makes the risk of a marker revocation palpable, potentially in favour of a co-conspirator that has been waiting in the wings. Consequently, a literal application of the FAQs may take the program out of alignment with other competition agencies’ policies.

It will be important for the Bureau not to kill the goose that has laid such golden eggs. The FAQs warrant careful analysis, as they will now guide the judgment of potential immunity applicants and their counsel in an environment of corporate crisis. It remains to be seen whether there is any appetite in the Bureau for dialogue and change, but the early indications are that the FAQs are in final form, and constitute the new rules of the game.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2005 McMillan Binch Mendelsohn LLP

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