Overview
With the sweeping amendments to the Competition Act (the “Act”) earlier this year, including significant changes to the criminal offences under the Act and increased fines and other penalties, it is worth revisiting both the scope of competition law in Canada and the Competition Bureau’s (the “Bureau”) criminal Immunity Program for offences committed under the Act.
The Act contains a wide range of provisions applicable to business activities in Canada. These include a number of criminal offences including criminal conspiracy (e.g., price fixing and market allocation agreements), bid-rigging, criminal misleading advertising, deceptive telemarketing and pyramid selling.
The potential penalties for contravention of the Act can be severe (e.g., breach of the criminal conspiracy provisions can lead to current fines of up to CDN $10 million and/or imprisonment for up to five years, with the penalties to be increased next year to up to CDN $25 million and/or imprisonment for up to fourteen years for breach of the criminal conspiracy provisions).
The Bureau, however, which is the administrative agency responsible for administering and enforcing the Act, has adopted and refined over the years a formal Immunity Program under the Act. Where a party successfully obtains immunity, criminal liability and prosecution can be avoided. In addition, where a party does not qualify for full immunity, it may nevertheless seek and obtain some degree of leniency for its cooperation with the Bureau in a criminal investigation.
The Bureau’s Immunity Program, and the requirements to successfully obtain immunity, are discussed below in more detail.
The Commissioner & Director of Public Prosecutions
In a typical criminal investigation under the Act, the Bureau will work together with the Public Prosecution Service of Canada (“PPSC”), which is headed by the Director of Public Prosecutions (the “DPP”).
While the Bureau’s mandate is to administer and enforce the Act, the PPSC’s mandate is the actual initiation and conduct of prosecutions under the Act. In other words, criminal prosecutions for criminal anti-competitive conduct are the responsibility of the DPP (though in reality in a criminal prosecution the Bureau will work closely with the Crown in a criminal investigation).
Where there is evidence of a criminal offence under the Act, the Commissioner may refer the matter to the DPP for potential prosecution, which in turn has the authority to grant immunity to parties facing potential criminal liability.
Immunity Requirements
With respect to the requirements for immunity, all things being equal, the Commissioner will recommend that the DPP grant immunity to a party where the Bureau is either: (i) not aware of an offence (and the party seeking immunity is the first to disclose it) or (ii) the Bureau is aware of the offence and the party seeking immunity is the first to come forward (before there is sufficient evidence to warrant a referral to the DPP by the Bureau).
To obtain immunity, however, a party must satisfy certain formal requirements. These include:
- Terminating its participation in the illegal conduct;
- The party must not have coerced others to be a party to the illegal conduct;
- The party cannot have been the only party involved in the offence;
- During the course of the Bureau’s investigation (and later prosecution(s)) the party must provide complete, timely and on-going cooperation with the Bureau;
- Unless made public by the DPP or the Commissioner (or required by law), the party cannot disclose its application for a marker;
- The party must make full disclosure of all information of conduct that may be an offence under the Act;
- The party must provide complete, full, frank and truthful disclosure of all evidence and records in its possession, available to it or under its control (with the exception of privileged information) relating to the conduct in relation to which immunity is sought;
- Companies must take measures to secure the cooperation of current directors, officers and employees for the duration of the investigation (and subsequent prosecutions); and
- Companies must facilitate the ability of current and former directors, officers, employees and agents to appear for interviews and give testimony in related judicial proceedings.
Director and Officer Liability
With respect to director and officer liability, if a company qualifies for immunity under the Bureau’s Immunity Program, current directors, officers and employees of the company that admit their involvement in the criminal conduct as part of the company admission (and also provide complete, timely and ongoing cooperation) will also quality for the same immunity recommendation by the Bureau.
Former directors, officers and employees that offer to cooperate with the Bureau’s investigation may quality for immunity (though the Bureau makes such determinations on a case-by-case basis). It is also worth noting that even in cases where a company does not qualify for an immunity recommendation, current or past directors, officers or employees may still be considered for immunity separately.
Immunity Process
The immunity process in Canada generally has four stages. These are: (i) obtaining a marker, (ii) providing a “proffer”, (iii) entering into an immunity agreement and (iv) full disclosure and cooperation.
(i) Marker
With respect to a marker, anyone may commence a request for immunity by contacting either the Senior Deputy Commissioner of Competition, Criminal Matters or the Deputy Commissioner of Competition, Fair Business Practices to discuss the potential of receiving immunity from criminal prosecution for an offence under the Act.
An immunity applicant can initiate the first contact on the basis of a hypothetical disclosure which reveals the nature of the criminal offence in relation to a particular product. The initial disclosure, however, must be made with enough detail to secure a so-called “marker” so that the immunity applicant will be “first in line” to receive immunity (assuming the other formal requirements for immunity are also met). In most cases, marker requests are made to the Bureau by an applicant’s legal counsel.
(ii) Proffer
The second step or stage in the immunity process is to provide a “proffer” to the Bureau. Where a party obtains a marker and wants to proceed with an immunity application, it must provide a detailed description (i.e., a proffer) of the activity and disclose enough information so that the Bureau can determine whether it will qualify for immunity.
Proffers are normally made in hypothetical terms by an immunity applicant’s legal counsel. The objective for the Bureau during this stage of the immunity process is to determine the nature of the records an applicant can provide, the types of evidence potential witnesses may give and how useful (i.e., probative) the evidence provided by an immunity applicant is likely to be. Where the Bureau is satisfied that an immunity applicant can provide full cooperation and otherwise satisfy the other requirements for immunity, it may make an immunity recommendation to the DPP (which will exercise its discretion as to whether or not to grant immunity).
(iii) Immunity Agreement
The third stage in the immunity process is the entering into of an immunity agreement. Based on a recommendation by the Bureau (assuming the DPP accepts the recommendation), the DPP will execute an immunity agreement for the immunity applicant which will contain the ongoing obligations for the applicant discussed above.
(iv) Full Disclosure and Cooperation
The final stage in the immunity application process is full disclosure and cooperation by the immunity applicant. After an immunity agreement has been entered into with the DPP, applicants are required to provide non-privileged information to the Bureau and evidence relating to the anti-competitive conduct. The Bureau may also require witnesses to attend at Bureau offices for interviews or to testify in court proceedings.
Violation of Immunity Agreement
It is also worth noting that where an applicant has failed to comply with the requirements of an immunity agreement, the DPP may revoke a party’s immunity (thereby exposing an immunity applicant to potential criminal liability).
Conclusion
With the recent significant amendments to the Act and increased fines and penalties for criminal anti-competitive conduct in Canada, it is prudent for companies and their counsel to not only have an understanding of competition law and compliance, but also to understand the terms of the Bureau’s Immunity Program.
As a practical matter, in the event of the detection of potentially criminal conduct under the Act, the benefit of the Bureau’s Immunity program together with the ability of a company and its officers to move quickly and nimbly to seek immunity, could result in a significant reduction of potential criminal liability.
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