On October 24, 2008, the Canadian Competition Bureau released its revised bulletin on corporate compliance programs. The Bulletin provides the Bureau's perspective on the "essential components" for credible and effective corporate compliance programs designed to ensure compliance with the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act (collectively referred to as the "Acts"). While the core essential elements have not changed since the Bulletin was first published in 1997, the revised Bulletin provides more detailed guidance on how to ensure these elements are reflected in any compliance policy. The updated Bulletin also provides, for the first time, specific guidance as to how the presence (or absence) of an effective compliance program may influence the Competition Bureau's enforcement decisions.
For companies looking to implement a corporate compliance program, the updated Bulletin now includes a template for such a program. Where businesses already have a compliance program in place, it may be prudent to take the opportunity to ensure that the essential components highlighted in the Bulletin are all present, where relevant. A brief overview of the main points of the Bulletin is provided below.
Requirements for Credible and Effective Corporate Compliance Program
The Bureau views the following five elements as essential to a credible and effective corporate compliance program regardless of the actual compliance program adopted, its complexity or the size of a particular business:
- senior management involvement and support for the program;
- development and documentation of corporate compliance policies and procedures;
- ongoing training and education of employees;
- implementation of monitoring, auditing and reporting mechanisms; and
- consistent disciplinary procedures and incentives.
Firstly, and not surprisingly, the Bureau views active senior management involvement as a key element of any credible and effective compliance program. Specifically, the Bureau recommends that senior management expressly commit to compliance with the Acts and voice support for the compliance program. The Bureau also recommends that businesses appoint a member of senior management as compliance officer and that senior management be held accountable in the event of any breach.
The second key element requires the development and documentation of a set of clear compliance policies and procedures which are specifically tailored to the business' operations. These policies and procedures should be continuously updated and be available to all employees in a readily accessible format. The Bureau also recommends that employees be asked to sign a certification letter stating that they have read and understood the compliance program materials.
Thirdly, in order to ensure the ongoing effectiveness of the compliance program, the Bureau recommends that training be offered to all employees at all levels who are in a position to potentially engage in, or be exposed to, conduct in breach of the Acts. The training provided should address the general principles of compliance as well as specific situations which may arise. Senior management should also play an active role in ensuring ongoing compliance by undertaking the necessary compliance training and reminding employees of the existence of the program in speeches and presentations.
The fourth key element requires the implementation of monitoring, auditing and reporting mechanisms to encourage employees to detect and report possible contraventions of the Acts. The exact format and frequency of the mechanisms may depend on the business' particular needs and should be commensurate with the risk of contravening the Acts. However, all monitoring efforts and reporting mechanisms should be well-documented since evidence of an effective monitoring program may (where applicable) support a "due diligence" defence if a company is found to be in contravention of the Acts. The role of an effective compliance program in a "due diligence" defence is discussed in greater detail below.
Lastly, an effective compliance program should contain a disciplinary code or policy for those who engage in conduct that is in breach of the Acts or do not abide by the compliance program. The compliance program should specifically state that disciplinary actions (e.g., suspension, demotion, dismissal and even legal action) will be taken where an employee contravenes the Acts. Again, all disciplinary actions and procedures should be documented since such efforts may be used to support the credibility and enforcement of the program or potentially a defence of due diligence.
To help companies design a compliance program that adequately reflects all of these elements, the Bulletin includes a compliance program template as well as a checklist of prescriptive actions to ensure compliance with the Acts. However, the template and checklist are provided only for illustrative purposes and companies will need to tailor their corporate compliance programs to suit their specific needs.
Consideration Given to a Corporate Compliance Program
The updated Bulletin also provides guidance as to when the presence of a program may be considered a mitigating or aggravating factor in the Bureau's enforcement decisions. For instance, under the false or misleading representations of the Competition Act, the Bureau may choose to pursue the matter under either a criminal or a civil track. In making this determination, the Bureau may take into account whether a company has in place a credible and effective compliance program. That is, the Bureau may be less likely to pursue criminal charges where a company has an effective compliance program in place.
Similarly, the Bulletin provides that the Commissioner will be more inclined to consider an alternative form of resolution (e.g., consent agreement rather than litigation) where it can be demonstrated that:
- the company terminated the conduct as soon as it was detected;
- the company attempted to remedy the adverse effects of the conduct;
- the conduct was contrary to corporate policy in existence at the time of the contravention; and
- the contravention occurred at a lower level in the business and was not endorsed by senior management.
The existence of an effective corporate compliance program may help a company ensure that these four goals are met.
In addition to potentially influencing the Bureau's enforcement decisions, the presence of an effective compliance program may assist a company in defending itself against any enforcement actions taken. For instance, under certain provisions of the Acts (e.g., certain misleading representations provisions of the Competition Act), a company may successfully defend itself from any litigation if it can demonstrate that it exercised due diligence to prevent the conduct. In such cases, the presence of a corporate compliance program and well documented efforts to enforce the program may help to support a claim of due diligence.
An effective compliance program may also help a company to quickly detect contraventions of the criminal provisions of the Competition Act. In certain circumstances, businesses or individuals may approach the Competition Bureau and request immunity from prosecution in exchange for co-operating with the Bureau's investigation and any ensuing prosecutions. Immunity is generally available only to the first company to report the conduct. Thus, early detection may enable a company to seek immunity under the Bureau's Immunity Program, if appropriate.
Where immunity is not available, the Bulletin provides that a credible and effective program may nonetheless be treated as a mitigating factor warranting a reduction in the penalty that the Commissioner would otherwise recommend to the Director of Public Prosecutions. Similarly, in civil matters, the existence of a credible and effective program may have a positive impact on the magnitude of the remedy sought by the Commissioner. For instance, the presence of a program might reduce the amount of the administrative monetary penalty sought by the Commissioner in a deceptive marketing practice case.
Just as the presence of an effective compliance program may be viewed as a mitigating factor in certain circumstances, the wilful disregard of a compliance program may be treated as an aggravating factor and negatively influence the Bureau's enforcement decisions. For instance, where an individual knowingly contravened the law (despite the presence of a compliance program), this may be treated as an aggravating factor and increase the likelihood that the Commissioner will recommend that criminal charges be laid against individuals as well as the company. Similarly, if a program has been implemented as a sham in order to conceal or deflect liability, this would be considered an aggravating factor for sentencing purposes or any other form of resolution (including determining the quantum of administrative monetary penalties).
Although the Bulletin provides helpful examples of when the Bureau may take into account the presence (or absence) of an effective and credible compliance program, it is important to remember that the Bulletin is not binding upon the Commissioner. As a result, the Commissioner's enforcement decisions in any particular case may vary from what is stated in the Bulletin.
An effective compliance program can be a valuable tool to minimize legal risk and increase the chances of early detection of any violations of the Acts. The Corporate Compliance Bulletin provides useful guidance on structuring and maintaining an effective compliance program. The Bulletin also provides helpful insight regarding the Competition Bureau's views on the essential elements of a credible and effective program. Since the presence or absence of these elements may influence the Competition Bureau's enforcement decisions, businesses are well-advised to review any existing compliance programs to ensure that these elements are addressed where relevant.
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.