I offer a full range of competition law compliance services and have prepared compliance programs and policies for clients in numerous industries. My services include:
- Competition law compliance programs and policies
- Competition law seminars for companies and trade associations
- Competition law talks and “lunch and learns” for companies and law firms
- Guidelines for board meetings, conferences and other meetings
- Document retention programs
CANADIAN COMPETITION LAW COMPLIANCE
“Every business and individual has a duty to act lawfully. The Bureau operates on the assumption that all businesses and their senior management wish to comply with the law. Compliance is important for all businesses, regardless of their size, for both legal and practical reasons.
The legal, economic and reputational risks of non-compliance to companies and their directors and officers outweigh any advantages. For example, contravention of the Competition Act, whether civil or criminal, can expose a business to significant fines or administrative monetary penalties and recovery of damages by private parties under section 36 of the Competition Act. In addition, most provinces have procedures in place to certify class action proceedings; it is common to see such actions filed when an offence has been committed under the Competition Act.
Non-compliance can also result in negative publicity, loss of management time, significant legal costs and a prohibition from participating in government bidding processes. In addition to, or in lieu of, fines, individuals convicted of criminal offences may be sentenced to a period of imprisonment.
The importance of a compliance program in avoiding contraventions under the Acts, and in detecting and dealing with such behaviour, should not be underestimated. The procedures put in place as the result of a compliance program serve not only to identify unlawful or questionable conduct but also to promote awareness that will result in ethical standards of conduct.”
(Competition Bureau, Bulletin, Corporate Compliance Programs)
“Which brings me to the Bureau’s role in promoting compliance. Specifically, the Bureau promotes compliance through enforcement and it provides the education and the tools that assist the corporate community in developing corporate compliance programs. We all know businesses and individuals have a duty to act lawfully — and, the Bureau expects that businesses and their senior management, on the whole, want to comply with the law. It is our hope that by now, it is clear that the legal, economic and reputational risks of non-compliance far outweigh any perceived advantages. Non-compliance costs businesses dearly – not just in terms of financial and legal penalties, but through negative publicity, loss of business opportunities and lost management time. While I suspect that you recognize the value of a compliance program and that many of you have clearly established compliance policies that identify and address questionable behaviour — and aim to prevent it from occurring in the first place, let me take a few minutes to expand on the benefits of such a program.”
(Interim Commissioner of Competition, John Pecman
October 30, 2012 speech)
The Canadian Competition Act (Act) contains both criminal and civil provisions prohibiting or regulating a range of activities that can arise in commercial dealings – for example, in the context of distributor/customer relations, trade association activities and commercial agreements including intellectual property license agreements, joint venture and strategic alliance agreements and franchise agreements, among others.
The criminal parts of the Act include provisions relating to criminal conspiracies (i.e., price-fixing, market allocation and output restriction agreements between competitors), bid-rigging agreements, criminal misleading advertising, deceptive telemarketing and pyramid selling schemes. Civil (i.e., non-criminal) “reviewable matters” under the Act include abuse of dominance (or monopolization as it is referred to in the U.S.), civil misleading advertising, refusal to deal, resale price maintenance and certain types of vertical restraints by dominant firms (e.g., exclusive dealing and tied selling).
The potential penalties for violation of the Act can be severe and include fines of up to $25 million (and in some cases without limit – i.e., in the discretion of a court), imprisonment for up to 14 years, prohibition orders, civil fines of up to $10 million ($15 million for subsequent orders) and court orders to stop or modify conduct.
Directors and officers can also be liable under the Act. In this regard, it is common for employees and directors and officers of companies to be involved both in Competition Bureau investigations and to be named as parties in competition law related civil actions.
Competition compliance programs are not mandatory under the Act, though can in certain cases be ordered by a court – for example, as part of a negotiated consent agreement or prohibition order. Not having a competition compliance program, or at a minimum practical guidelines for key activities that where there is potential competition law risk (e.g., board meetings, dealings or initiatives involving competitors, information exchanges and surveys, certain types of competitive restraints in commercial agreemetns, etc.), can, however, expose companies, associations and other organizations to significant risk.
An effective compliance program has many actual and potential benefits. These include: reducing the risk of violating the criminal or civil provisions of the Act; identifying the boundaries of acceptable conduct; reducing costs in relation to investigations and proceedings; identifying circumstances when legal advice should be sought; detecting illegal conduct; potentially mitigating penalties in the event of an investigation; strengthening corporate goodwill and reputation; avoiding negative publicity; and reducing potential director and officer liability.
It is also more important now for companies to have effective compliance programs for several reasons including: (i) the recent enactment of new criminal conspiracy offences with a lower enforcement burden, (ii) increased penalties for criminal conspiracies (maximum fines of up to $25 million), (iii) heightened misleading advertising penalties (maximum “AMPs” of $10 million) and (iii) the fact that the Bureau is more focused on enforcement and litigation over the past several years.
While a competition law compliance policy will not automatically insulate a company or its directors and officers from potential criminal or civil competition law liability, the Bureau may give weight to a credible and effective compliance program in determining how to proceed for a particular matter (e.g., whether to proceed with a more informal resolution or on a civil or criminal enforcement track).
The Competition Bureau recently issued a new Information Bulletin on Corporate Compliance Programs (Bulletin), which replaces its earlier Corporate Compliance Programs Bulletin. In it, the Bureau sets out five essential elements for an effective compliance program:
1. Senior management involvement and support. As senior management are required to exercise care, skill and diligence and act in the best interests of a company, they should identify the principal risks faced by a business and implement appropriate systems to manage such risk (including compliance programs).
2. Corporate compliance policies and procedures. The development of a corporate compliance program tailored to a business and relevant industry is important to a program’s success (and programs should be periodically updated).
3. Training and education. A credible and effective compliance program should include ongoing training and education focused on personnel in a position to engage in conduct that may violate the Act.
4. Monitoring, auditing and reporting mechanisms. Monitoring, auditing and reporting mechanisms are also key in the Bureau’s view to an effective compliance program to help prevent and detect violations of the Act.
5. Consistent disciplinary procedures and incentives. Finally, consistent disciplinary procedures and initiatives demonstrate the seriousness of a company’s compliance with the Act and are important for deterrence purposes and as a reflection of a company’s policy against unlawful conduct.
TO COMPETITION COMPLIANCE
In practice, companies and associations may adopt comprehensive compliance programs (with a policy, guidelines, employee certification, training, audits, etc.) or merely practical guidelines for key activities or particular projects and initiatives that may raise competition law issues. Competition law “do’s and don’ts” or best practice guidelines / documents are often an excellent and practical starting point for competition compliance.
The Bureau has emphasized the particular importance for trade, professional and other associations of adopting effective compliance programs:
“A [compliance] program also plays a crucial role for trade associations because trade associations face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti-competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is therefore critical that trade associations implement credible and effective programs with strict codes of ethics and conduct. Such programs may allow trade associations and its members to avoid improper actions and to protect themselves from being used as a conduit for illegal activities. They may also allow trade association members to fully benefit from the association’s activities while reducing the potential for inadvertent contraventions of the Acts” (Competition Bureau, Corporate Compliance Programs Information Bulletin).
Given that associations in many, if not most, cases involve the interaction of direct competitors, it is important for associations to adopt credible compliance programs or at a minimum, basic practical guidelines for key activities (e.g., board and task force meetings, surveys and information exchanges, dealings with competitors, etc.) and to seek competition advice for specific initiatives that may raise competition law related issues.
LINKS AND RESOURCES
Competition Bureau: Competition Bureau – Bulletins: Corporate Compliance Programs, Competition Bureau Fee and Service Standards Handbook for Written Opinions, Conformity Continuum.
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