Canadian COMPETITION LAW

May 8, 2013

The C.D. Howe Institute has published a new report on cartel detection entitled Coming in From the Cold: Improving Cartel Detection and Reporting.  The report argues in general that the Competition Bureau and federal government should ensure that sufficient resources and policy emphasis are placed on the investigation, detection and prosecution of domestic cartels (i.e., Canadian price-fixing and other conspiracies).

Currently, the Bureau’s tools for detecting price-fixing, bid-rigging and other criminal competition/antitrust cartels include the ability to obtain wiretaps, its Immunity and Leniency Programs and Competition Act whistleblower protections.  Under the Bureau’s current Immunity Program, which the Bureau has described as its “single most powerful means of detecting criminal activity”, a party or company implicated in criminal conduct under the Competition Act may offer to cooperate with the Bureau in an investigation and, if all of the requirements of the program are met, receive full immunity from prosecution.  Under the Bureau’s Leniency program, applicants that are not entitled to full immunity – for example, because they are not first in – may still be eligible for 50% or 30% reductions in fines.

The C.D. Howe report suggests that, given the disparity between the Bureau’s participation in many international cartel investigations, such as the auto parts and Libor cases, and relative rarity of domestic prosecutions, that the Bureau’s current policies may be insufficient to motivate cartel members to self-report.

In this regard, the report recommends that: the Bureau’s cartel detection policies should aim to increase the likelihood of a successful and thorough prosecution even where there may only be one cartel defector; the awareness of the potential criminality of cartel behavior and existence of Immunity and Leniency Programs should be increased; and ensure that there are clear differences in how Immunity Program participants are treated (compared to subsequent Leniency Program members) to create a stronger incentive to report.

Some of the points made by the new C.D. Howe report that I found interesting include raising the questions of whether foreign and domestic immunity applicants may face different incentives to report, whether more domestic cartel enforcement would lead to more case law (there is presently a significant dearth in Canadian s. 45 conspiracy cases that the C.D. Howe group says is, based in part, on the fact that most foreign defendants do not contest Canadian fines) and a skepticism that more economic data or statistical approaches would yield much in terms of increased cartel detection.

I also found it interesting, if perhaps obvious, that the group recognized that regardless of any changes to the Bureau’s existing Immunity and Leniency Programs, the risk of class actions (and greater damages in some cases than any fine reductions available) may in reality be blunting the Bureau’s immunity and leniency self-reporting programs, rendering them ineffective to some extent.

For a copy of the new C.D. Howe report see: Coming in From the Cold: Improving Cartel Detection and Reporting.

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