Canada: Proffers To Competition Bureau Must Be Disclosed To Accused, Court Says

Last Updated: February 19 2015
Article by Wendy Sun

Information received by the Competition Bureau at the proffer stage of its Immunity and Leniency Programs is not protected from disclosure to other accused persons by settlement privilege, the Ontario Superior Court of Justice recently held in R. v. Nestlé Canada Inc.

Chocolate bar makers accused of chocolate price fixing

Chocolate bar makers Nestlé Canada Inc. and Mars Canada Inc., and several executives, were charged with numerous counts of price fixing contrary to the Competition Act after an investigation by the Competition Bureau.

As part of its investigation, the Bureau received information from two other chocolate bar makers, Cadbury Canada Inc. and Hershey Canada Inc. Cadbury told the Bureau about an ongoing price fixing cartel in the chocolate confectionery industry under the protection of the Bureau's Immunity Program. Hershey cooperated with the Bureau's investigation under its Leniency Program.

After laying charges, the Crown provided disclosure. It later realized that it had inadvertently disclosed some documents containing information the Bureau had obtained as part of the proffers from Cadbury and Hershey under the Immunity and Leniency Programs. Neither had waived settlement privilege. The Crown asked the accused to return or destroy the documents. The accused refused. They took the position that they were entitled not only to the documents disclosed in error, but also to other materials held back by the Crown on the ground of settlement privilege.

The Crown applied to the court for directions regarding disclosure. Hershey and Cadbury were both granted intervener status.

Does Settlement Privilege Apply?

Justice Nordheimer first narrowed the information at issue to information provided by the interveners through the "proffer process" of the Immunity and Leniency Programs. At the proffer stage, parties seeking leniency or immunity provide the Competition Bureau with information regarding the illegal activities in question. The proffer is typically made orally and on a purportedly hypothetical basis, but in fact, contains detailed information.

Settlement privilege only applies to prevent information from being used against the person who provided it, Nordheimer J. held. It is not designed to prevent other parties to the same proceedings from obtaining evidence relevant to those proceedings.

There was no risk to either Cadbury or Hershey, since neither faced criminal charges or private actions for damages. Cadbury was never charged, because it obtained immunity; Hershey pleaded guilty in 2013 and was fined $4 million. Both had also settled class actions.

Nordheimer J. rejected Cadbury and Hershey's contention that information provided as part of the proffer, before the immunity and leniency agreements were signed, should be distinguished from information provided after the agreements were signed. Cadbury and Hershey both acknowledged that they could raise no objection to the disclosure of the information provided to the Crown after the agreements were signed. Indeed, they were contractually obliged to provide it, on the understanding that it would be used to prosecute other alleged members of the cartel. There was no principled basis for protecting the same information simply because it was provided to the Crown before the agreements were signed, Nordheimer J. held.

Settlement privilege does not apply to prohibit disclosure by the Crown of information given during the proffer stage, Nordheimer J. concluded:

I conclude, therefore, that settlement privilege does not apply to prohibit the disclosure of factual information provided to the Crown in respect of a proposed criminal prosecution in circumstances where the person providing that information does so with the knowledge that the Crown intends to rely on some or all of that information for the purposes of that criminal prosecution.  I would say that that is especially so where the person who is providing the information has committed to providing evidence, in the future, against the accused in that prosecution.

An Exception to Settlement Privilege

Even if the information in dispute were prima facie protected by settlement privilege, an exception to settlement privilege should apply in circumstances where the information would potentially be useful to the accused persons, and should be disclosed to the accused, Nordheimer J. continued. The accused's right to make a full answer and defence overrides the public interest in encouraging settlement, particularly when there is no risk or prejudice to the person who has provided that information to the Crown.

Nordheimer J. did not accept the interveners' argument that allowing an exception to settlement privilege would discourage parties in other cases from participating in the Leniency and Immunity Programs. Any person who decides to participate in these programs would have already given it serious consideration and analysis. The consequence of potential disclosure of information provided pre-agreement in addition to information provided post-agreement, is unlikely to materially affect the person's decision.

Was Settlement Privilege Waived?

Another reason why the information disclosed in the proffer process should be disclosed by the Crown is because both Cadbury and Hershey had already waived any privilege attached to the information, pursuant to the Immunity Agreement and the Plea Agreement. Provisions in these agreements contemplated the possibility that disclosure may be required by law in response to a court order or for enforcement purposes. Nordheimer J. found that these provisions constituted a clear waiver of settlement privileges, which Cadbury and Hershey both signed. Further, the Competition Bureau's 2010 Leniency Bulletin also states that all information provided prior to or pursuant to the agreements may be used in any subsequent prosecutions against other parties to the offence.

Solicitor-client Privilege Does Not Apply

Nordheimer J. also rejected Hershey's position that solicitor-client privilege applied to the information in question. Even if solicitor-client privilege did apply to this case, a party who reveals privileged information to a third party is deemed to have waived the privilege attached to the information. Hershey disclosed its privileged information to the Bureau when it chose to participate in the Leniency Program. Hershey knew that the information would be used by the Crown to prosecute Nestlé, and that the Crown has a general duty to provide disclosure to the accused. Any solicitor-client privilege attached to the information disclosed by Hershey was waived.

Lessons from Nestlé

The Bureau's Leniency and Immunity Programs are designed to solicit information from cooperating parties that the Bureau can use to investigate, and the Crown can use to prosecute competition offences.

In exchange for immunity or leniency, these programs require parties to cooperate fully with the Bureau's investigation. This includes disclosing all relevant information and making witnesses available.

Parties that choose to participate in these programs must be aware that the Bureau will use the information they provide, and the Crown will disclose this information pursuant to its disclosure obligations, once charges are laid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Wendy Sun
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