Canadian COMPETITION LAW

On May 24^th, the European Commission announced that it had fined Suez Environment and Lyonnaise des Eaux €8 million for breaching a seal during a regulatory inspection.

In making the announcement, the Commission stated:

“Joaquín Almunia, Vice President of the Commission in charge of competition policy, said: ‘Inspections are a key tool in the fight against cartels as companies rarely voluntarily hand over evidence of anti-competitive practices. Even when a company does give evidence in return for immunity, the Commission must still prove the participation of others, the practices themselves and their duration. It is therefore important that companies do not break seals, which may be necessary when there is more than one office to inspect or a day is not enough.’

From 13 to 16 April 2010 the Commission conducted an inspection at the premises of water management companies in France, including LDE, over suspicions of anti-competitive behaviour (see MEMO/10/134). Coming back the morning of the second day, the Commission officials found that a seal had been broken at LDE’s headquarters. The Commission immediately started an investigation (see IP/10/691). LDE and Suez Environnement admitted that an LDE employee breached the seal, arguing an unintentional act

Breaches of seals are a serious infringement of competition law. The Commission however took into account the immediate and constructive cooperation of Suez Environnement and LDE, which provided more information than was its obligation, when setting the fine.

The investigation into suspected anticompetitive practices in the water and waste water markets is still on-going (see MEMO/10/134).”

Like the European Commission, the Competition Bureau has a wide range of enforcement powers available to it to investigate potential violations of competition law under the Competition Act.  These include the power to obtain search warrants, document production orders, orders compelling testimony under oath and wiretaps.  The Bureau is increasingly resorting to these powers, particularly in relation to its enforcement priorities that include the detection and investigation of criminal cartels and deceptive and fraudulent marketing.

The Competition Act also contains obstruction provisions, which make it a criminal offence to impede or prevent (or attempt to impede or prevent) inquiries or examinations under the Act[1] (see for example: Morgan Companies Fined $1 Million for Obstruction and Price-fixing).

As such, companies and organizations that may realistically face the prospect of a competition law investigation or search at some point – for example, companies in higher risk industries including construction, oil and gas, trade associations, etc – are well advised to adopt basic search and seizure guidelines to reduce the likelihood of breaching Canadian competition law in the event of a search.

These commonly include guidelines dealing with how to deal with Bureau officials during a search, advising company/organization personnel, the control of information and PR, inspecting the search warrant and reducing the risk of breaching the obstruction provisions of the Act which can lead to additional liability (such as by breaching sealed boxes or rooms or impeding Bureau officers during a search).

For the full news release see: Commission Fines Suez Environnement and Lyonnaise des Eaux €8 Million for the Breach of a Seal During an Inspection.

For more information about the Competition Bureau’s enforcement powers see: Competition Bureau Enforcement.

[1] Obstruction of an inquiry or examination is a criminal offence under the Act, with potential penalties, on summary conviction, of a fine up to $100,000, imprisonment for up to 2 years, or both and, on indictment, an unlimited fine (i.e., in the discretion of the court), imprisonment for up to 10 years, or both (Act, subsections 64(1), (2)).  Failure to comply with sections 11 (section 11 orders) or 15 (search warrants) are also criminal offences, with potential penalties, on summary conviction, of a fine up to 100,000, imprisonment for up to 2 years, or both and, on indictment, an unlimited fine (i.e., in the discretion of the court), imprisonment for up to 2 years, or both (Act, subsections 65(1), (2)).  In addition, destruction or alteration of records that are sought by the Bureau under section 11 (section 11 orders) or 15 (search warrants) is punishable, on summary conviction, by fines up to 100,000, imprisonment for up to 2 years, or both and, on indictment, by unlimited fines (i.e., in the discretion of the court), imprisonment up to 10 years, or both (Act, subsection 65(3)).  The Act also provides that corporate officers, directors or agents may be liable independently of whether a company is prosecuted for a failure to comply (Act, subsection 64(4)).

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