Would you make a major financial decision in the digital economy on behalf of yourself or your corporation on the basis of a flip of a coin? The probabilities on this coin flip are equal at 50%, provided that the person flipping the coin does not see the starting state of the coin before the flip.1 Most participants in the digital economy would not be so precipitative as to base a major financial decision on the flip of a coin. If the odds were just slightly changed to 50.1% in your favour, would that change your risk analysis? In linguistic terms, would you make a decision risking millions of dollars on the basis that is "more probable than not"? In legal terms, would you make a decision involving the future of your corporation on a balance of probabilities?2
After answering the above questions, it may surprise you to learn that in some jurisdictions such as Canada, the innocence or liability of your company may be decided by administrative tribunals on this same 50.1% standard. For example, the Canadian Competition Tribunal applies the 50.1% standard in determining whether it will impose an administrative monetary penalty ("AMP").3 Under some regimes these AMPs may be in the millions or even billions of dollars, described as "King Kong" AMPs.4 In Canada, a recent example of the potential magnitude of AMPs is the decision by Justice Little in the Cineplex case, imposing an AMP in the amount of $38.978 million with respect to deceptive drip pricing.5 We use this case only as a recent example of a large AMP, but we believe that it was correctly decided on the merits and the constitutionality of the AMP was not challenged in that case.
AMPs are increasingly used to police the digital economy. In Europe, a record EU antitrust fine of 4.3-billion-euro ($4.5 billion) imposed on Google is being appealed.6 EU antitrust regulators imposed the first penalties under the Digital Markets Act (DMA) doling out total fines of 700 million euros ($797 million) to Apple and Meta.7 In the European Union, while the term "balance of probabilities" is not commonly used in the same way as in common law jurisdictions, the standard applied in competition law proceedings is widely understood to be more stringent. The European Commission is required to present evidence that is "sufficiently precise and consistent to support the firm conviction that the alleged infringement took place.8 This formulation has been upheld in several decisions of the General Court and the Court of justice of the European Union (CJEU), and is considered stricter than the civil standard of proof applied in Canada.
It is the thesis of this article that the danger lurking beneath AMPs is the risk of a wrongful finding of a violation. By contrast, in criminal law there is a collective worry about the risk of a wrongful conviction. The requirement of an exacting standard of proof for criminal conviction dates back centuries. English jurist William Blackstone wrote in the 18th century, "[As the] law holds, it is better that ten guilty persons escape than that one innocent suffer" (Blackstone 1769, p. 352).9 The standard of proof beyond a reasonable doubt has been defined by the Supreme Court of Canada using its contrast with the balance of probabilities standard:
In my view, an effective way to define the reasonable doubt standard for a jury is to explain that it falls much closer to absolute certainty than to proof on a balance of probabilities. As stated in Lifchus, a trial judge is required to explain that something less than absolute certainty is required, and that something more than probable guilt is required, in order for the jury to convict. Both of these alternative standards are fairly and easily comprehensible. It will be of great assistance for a jury of the trial judge situates the reasonable doubt standard appropriately between these two standards.10 [emphasis added]
The importance and significance of the burden of proof is illustrated by the Finkelstein11 case. Former Toronto Bay Street lawyer, Mitchell Finkelstein, was sanctioned by the Ontario Securities Commission ("OSC") for misusing confidential information which he obtained while acting on deals and through his access to his firm's document management database. The OSC found that in passing on the material non-public information to a friend and investment advisors, who then traded on that information, Finkelstein had abused his position of trust.12
On appeal the Divisional Court found that Finkelstein provided material non-public information to his friend on the basis that this was "at least probable, if not compelling." At the very least, it was open to the Panel to conclude that it was more likely than not that the source was Finkelstein. The Divisional Court stated that ," one must always remember that the standard of proof before the Panel is proof on a balance of probabilities. It is not the higher criminal standard of proof beyond a reasonable doubt."13
The implications of the balance of probabilities standard in that case are clear. Had Finkelstein been charged with the regulatory offence or crime of insider trading, he would have been acquitted on the same evidence. There has been no academic discussion about whether or not Finkelstein might have been wrongfully found liable. The potential reputational damage arising from a wrongful finding of a violation has largely been ignored in the literature. For someone like Finkelstein, who was a lawyer at a major Toronto Bay Street firm, the finding of liability was devastating. "In the case of Mr. Finkelstein, the panel took into account his age, that he had a young family, the significant professional and reputational damage the proceeding and the decision had on him, and the fact that it was unlikely he'd ever work in a major law firm again and therefore he would have a significantly diminished earning potential."14
The collective worry about the risk of a wrongful conviction has not translated into the world of AMPs. There is very little, if any, discussion in the literature or jurisprudence about the risk of a wrongful finding of a violation in administrative proceedings. Historically, this lack of attention may be attributed to the fact that jail is not a risk in administrative proceedings and the AMPs were considered to carry much lower stigma than criminal penalties.15 As AMPs have now joined the million or even billion dollar club, it is time to re-evaluate the risks of wrongful findings of liability and the potential reputational harm that will flow from such a finding.
We argue that as a matter of policy and legislative reform, a more sophisticated and fair regulatory scheme would have two streams with different burdens of proof with the following typology:
- At higher levels where AMPs are in the millions of dollars that may inflict significant reputation damage, a higher standard of proof of "clear and convincing" (75% in mathematical terms) would be appropriate. This would be an intermediate standard between the criminal law burden of proof and the civil balance of probabilities.
- At levels below this, the more efficient balance of probabilities standard (50.1%) is more suited. In addition, we argue that procedural rights and appellate rights should escalate in proportion to escalating penalties.
This article is divided into five sections.
Part I reviews the constitutional challenges to AMPs in Canada, with the backdrop of global AMPs in the digital economy. Not only are AMPs decided on a lower standard of proof than criminal law, they are decided in administrative settings with relaxed rules of evidence. If the penalty were found by a court to rise to a punitive level identical to the penalties in criminal cases, the argument is that the constitutional protections afforded to defendants fall short. In Guindon, the Supreme Court of Canada articulated a balancing test to determine whether an outcome is punitive:
Whether this is the case is assessed by looking at considerations such as the magnitude of the fine, to whom it is paid, whether its magnitude is determined by regulatory considerations rather than principles of criminal sentencing, and whether stigma is associated with the penalty.16
A significant factor in the decision was the finding that "no stigma comparable to that attached to a criminal conviction flows from the imposition of the penalty".17 As AMPs have increased in scope and magnitude, the door is open for renewed constitutional attacks. We submit that the Court's focus on stigma has led us down the wrong path. The more appropriate inquiry is to consider the risks of a wrongful finding of liability.
Recent jurisprudence in the United States has challenged the logic employed in some Canadian legislation defining AMPs as promoting compliance and not punitive by definition. The United States Supreme Court has held that "a civil sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes, is punishment."18
Part II compares the risks of a wrongful conviction to the risks of a wrongful finding of a violation in the context of AMPs. Wrongful convictions are the subject of numerous Hollywood movies and documentaries,19 as well as fictional writing.20 A review of the "top ten" causes of miscarriages of justice reveals that seven of these causes could apply to some degree to administrative findings of liability as follows:21
- Non-disclosure of evidence (and role of procedural fairness)
- Reliance on unreliable evidence including hearsay
- Officer misconduct
- Misconduct of those performing a prosecutorial capacity
- Adjudicative failures
- Flawed expert evidence
- Tunnel Vision
The study of wrongful convictions reveals the potential for error, and parallels can be made to scientific methodology with respect to error rates.22 The potential for error increases to the extent that there is any vagueness or grey areas in the regulation. For example, abuse of dominance was decriminalized on the basis that it was hard to determine ex ante beyond a reasonable doubt and yet now is the subject of potential billion dollar administrative monetary penalties.23
Part III assesses the reputational damage that could flow from a wrongful finding of a legislative or regulatory violation. For corporations that are wrongfully found liable, it is a more complex calculation of potential reputational harm.
The front loaded nature of the calculation of many AMPs reflects a presumption of guilt. An example is the issuance by the Canadian Radio-television and Telecommunications Commission of a notice of violation to Compu-Finder on March 5, 2015 assessing the penalty to be $1.1 million.24 The assessment of a $1.1 penalty "front loads" the scheme by putting the penalty cart before the liability horse. The legislation provides a mechanism to contest the Notice of Violation, which shall "inform the person that they may make representations to the Commission within 30 days after the day on which the notice is served or any longer period set out in the notice, and set out the manner for making the representations".25
In a statement, Manon Bombardier, chief compliance and enforcement officer with the CRTC said Compu-Finder:
... flagrantly violated the basic principles of the law by continuing to send unsolicited commercial electronic messages after the law came into force to e-mail addresses it found by scouring web sites. Complaints submitted to the Spam Reporting Centre clearly indicate that consumers didn't find Compu.Finder's offerings relevant to them. By issuing this Notice of Violation, my goal is to encourage a change of behaviour on the part of CompuFinder such that it adapts its business practices to the modern reality of electronic commerce and the requirements of the anti-spam law.26
As it turns out, the regulator (the CRTC) reduced the magnitude of the AMP as set out in the original Notice of Violation ("NOV"). The CRTC concluded that the appropriate amount for an AMP in this case is $200,000 rather than the $1,100,000 set out in the NOV. This finding was upheld by the Federal Court of Appeal and leave to the Supreme Court of Canada was dismissed in 2021.27
Footnotes
1 In 2007, researchers theorised that when a coin is flipped, the flipper's thumb imparts a slight wobble to it, causing it to spend more time with one side facing upwards while in the air and making it more likely to land showing that side. They predicted that a coin should land showing the same side that was facing up when flipped approximately 51 per cent of the time. Now, Frantiaek Bartoa at the University of Amsterdam in the Netherlands and a team of 49 others have conducted the most robust test of this theory yet carried out. The findings backed up the original research: coins are likely to land on the same side they started on 50.8 per cent of the time. Although the findings show coin flips have a bias, they can still be used for everyday decisions – as long as both parties don't see the starting state of the coin before the flip. See https://www.newscientist.com/article/2397248-coin-flips-dont-truly-have-a-50-50-chance-of-being-heads-or-tails/
2 What does "proof on a balance of probabilities" mean? The party who has the burden of proof on an issue must convince the finder of fact that what she or he asserts is more probable than not, or to put it another way that the balance is tipped in his or her favour. . If the evidence is such that the tribunal can say: 'we think it more probable than not', the burden is discharged, but if the probabilities are equal it is not. See F.H. v. McDougall, 2008 SCC 53 (CanLII), [2008] 3 S.C.R. 41 at paragraph 49 and Miller v. Minister of Pension, [1947] 2 All E.R. 372. at 374 (K.B), cited in 401949 B.C. LTD v. 079858 B.C. LTD., 2022 BCPC 205 at paragraphs 54-55.
3 The standard of proof applied by the Tribunal is the civil standard of proof on a balance of probabilities: Gestion Lebski inc, at paras 53, 152, 191; Tervita Corp v Canada (Commissioner of Competition), 2015 SCC 3, [2015] 1 SCR 161, at para 66; Toronto Real Estate Board v Canada (Commissioner of Competition), 2017 FCA 236, [2018] 3 FCR 563, at paras 48, 87; FH v McDougall, 2008 SCC 53, [2008] 3 SCR 41, at paras 45-46, 49 as cited in Canada (Commissioner of Competition) v. Cineplex Inc., 2024 Comp. Trib. 5 (Competition Trib.) at paragraph 234.
4 Archibald and Jull, Profiting From Risk Management and Compliance (Thomson Reuters 2025) Chapter 6.
5 Canada (Commissioner of Competition) v. Cineplex Inc., 2024 Comp. Trib. 5 (Competition Trib.). Cineplex has announced that it is appealing this decision.
6 https://www.reuters.com/technology/record-45-bln-eu-fine-punished-its-innovation-google-tells-eu-court-2025-01-28/. Google's appeal to the Luxembourg-based Court of Justice of the European Union comes two years after a lower tribunal sided with the European Commission which said the company used its Android mobile operating system to quash rivals.
8 Case T-203/0], Manufacture Francaise des Pneumatiques Michelin v Commission of the European Communities, [2003] ECR II4071.
9 "The Informational Role of an Elevated Standard of Proof" by Shmuel Leshem March 9, 2025 at page 3.
10 R. v. Starr, [2000] 2 S.C.R. 144, at para. 242
11 Finkelstein Divisional Court 2016 ONSC 7508. See also Finkelstein v. Ontario Securities Commission 2018 CarswellOnt 972, 2018 ONCA 61
12 Reasons and Decision on Sanctions and Costs, In the Matter of Mitchell Finkelstein at paragraph 22.
13 Finkelstein Divisional Court 2016 ONSC 7508 at paragraph 49. See also Finkelstein v. Ontario Securities Commission, 2018 ONCA 61, 2018 CarswellOnt 972 cited in Hutchinson (Re), 2019 ONSEC 36, 2019 CarswellOnt 17398 paragraph 61 for the proposition that circumstantial evidence does not itself establish the alleged fact; rather, the panel may draw an inference from the circumstantial evidence. Those inferences must be reasonably and logically drawn from a fact or group of facts established by the evidence, See also dismissal of leave to appeal by the Supreme Court of Canada in Miller v. OSC 2018 CarswellOnt21507.
14 Yamri Taddese, "Lawyer's steep fine for insider tipping part of bigger trend", Canadian Lawyer, (August 26, 2015) online: https://www.canadianlawyermag.com/news/general/lawyers-steep-fine-for-insider-tipping-part-of-bigger-trend/273359.
15 Guindon v. Canada [2015] 3 S.C.R. 3 at paragraph 84: "The amount is fixed without regard to other general criminal sentencing principles and no stigma comparable to that attached to a criminal conviction flows from the imposition of the penalty".
16 Guindon v. R. (2015), 327 C.C.C. (3d) 308, 2015 SCC 41 (S.C.C.) at para. 76.
17 Guindon v. Canada [2015] 3 S.C.R. 3 at paragraph 84: "The amount is fixed without regard to other general criminal sentencing principles and no stigma comparable to that attached to a criminal conviction flows from the imposition of the penalty".
18 SEC v. Jarkesy 603 U.S. (2024) at page 9.
19 https://innocenceproject.org/news/wrongful-conviction-media/
20 Victims of Circumstantial Evidence: Murder, Proof, and Wrongful Convictions in Nineteenth-Century Crime Fiction, Simon Stern, Faculty of Law & Dept. of English, University of Toronto.
21 "Miscarriages of Justice in Immigration Detention" by Louis Century & Kent Roach UBC Law Review, Forthcoming (Draft)
22 "Why Trust Adversarial Justice?" Jason M. Chin School of Law, Australian National University
23 The Abuse of Dominance provisions entered Canadian law on June 19, 1986, as sections 50 and 51 of the Competition Act (now sections 78 and 79). These provisions replaced the prior criminal monopolization provision, which was essentially a dead letter due in large part to the difficulty of meeting the criminal "beyond a reasonable doubt" standard of proof. See "Canadians Behaving Dominantly: The Recent Transformation of Abuse of Dominance Under the Canadian Competition Act by James Musgrove, William Wu and Mishail Adeel https://mcmillan.ca/wpcontent/uploads/2025/03/Vol24_Issue4_Feb2025_01_Musgrove_COPYRIGHT.pdf
24 CRTC Notice of Violation, www.crtc.gc.ca/eng/archive/2015/vt150305.htm.
25 CASL, s. 22(2)(d).
26 Jennifer Brown, "Quebec company hit with $1.1-million penalty under CASL" (March 9, 2015), In House, Canadian Lawyer Magazine, at www.crtc.gc.ca/eng/dncl/dnclc_2015.htm.
27 Application for leave to appeal to the Supreme Court of Canada dismissed with costs March 4, 2021 (without reasons) [2020] S.C.C.A. No. 370 | [2020] C.S.C.R. no 370. Record updated: March 4, 2021.
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