Canadian COMPETITION LAW

June 7, 2010

In a recent speech by Canada’s new Commissioner of Competition to the Canadian Bar Association’s Spring Competition Law Conference, the Commissioner outlined some of the Competition Bureau’s current enforcement and policy priorities following the recent significant amendments to Canada’s competition law.

The Commissioner’s remarks included a number of comments regarding the Competition Bureau’s (the “Bureau”) enforcement policy in relation to the new criminal conspiracy rules, enforcement priorities, the Bureau’s new sentencing and leniency policies and, of particular note, indicating that the Bureau wants to take a tougher stance against criminal cartels (including seeking increased penalties against individuals involved in criminal cartel conduct).

Some of the highlights of the Commissioner’s recent remarks include:

Canada’s New Criminal Conspiracy Rules

The Commissioner indicated that Canada’s new per se criminal conspiracy rules, which no longer require any adverse market effects in order to establish an offence, would be reserved for so-called “naked” or “hard-core” restraints.  In this regard, the Commissioner stated:

“Changes to the conspiracy provision created a criminal prohibition that is reserved for naked agreements between competitors to fix prices, allocate markets, or restrict output – agreements that in substance have no purpose or consideration other than restraining competition.”

The Commissioner’s remarks in relation to the categories of conduct that the Bureau would seek to enforce under the new criminal conspiracy provisions are consistent with other recent statements by the Bureau, notably in its recently issued Competitor Collaboration Guidelines.  Having said that, while some forms of “naked” restraints may be obvious (e.g., bare price-fixing agreements between competitors), Canada’s new two-track conspiracy regime is also likely to raise a number of challenging issues for the Bureau and Canadian courts in coming years including what restraints will be considered “naked” (e.g., how restraints that may be less obviously anti-competitive in some instances, such as advertising restrictions, will be reviewed), how the Bureau and courts will approach market definition under the new conspiracy provisions (the Bureau has recently indicated elsewhere that it will in many cases not engage in a detailed market analysis to determine whether entities are competitors for the purposes of the application of the new provisions) and the application and scope of the new ancillary restraints defence (and in particular the extent to which this new defence can be successfully used by defendants to escape criminal liability).

Competition Bureau Enforcement Priorities

With respect to the Bureau’s enforcement priorities, the Commissioner reiterated that in its enforcement of Canadian competition law, “attacking cartels remains a top priority for the Bureau.”  The Commissioner also stated:

“We will not hesitate to refer cases to the PPSC when evidence establishes a violation of the law.  Potential violators need to be aware that the Bureau will enforce the Competition Act, and legitimate businesses should rest assured that those who seek to reduce or restrict competition in Canada will be held to account.”

While the Commissioner’s statements regarding cartels as an enforcement priority are largely consistent with recent past statements of Bureau officials, it is thought by some that the new Commissioner (Melanie Aitken) may in practice be more likely than the former Commissioner (Sheridan Scott) to take a tougher enforcement stance against violations of the Act in general and criminal conspiracies in particular.  In addition, during a recent event in Vancouver, the new Commissioner indicated that the Bureau was actively investigating a number of cartels that were not as yet public, and also indicated that detecting domestic cartels in “our own backyard” (i.e., Canadian cartels) also remained a priority.

New Sentencing and Leniency Policies and MOU with the PPSC

With respect to the Bureau’s sentencing and leniency policies, the Commissioner described the Bureau’s efforts to refine its Sentencing and Leniency Bulletin, indicating that a final version would be issued “in the near future”.  The Commissioner also emphasized that the Bureau regarded its immunity and leniency programs as important tools for the detection and enforcement of cartels:

“Our single most effective tool remains our immunity program.  It provides the necessary incentive to cartel participants to self-report and cooperate with the Bureau.  Many immunity applications ultimately result in a successful resolution of liability.  For those companies who are not first in, our leniency program provides incentives for other parties to come forward and cooperate with the Bureau.  In this regard, we are committed to making the most of our leniency program.  The recent guilty plea by Solvay in our Hydrogen Peroxide cartel investigation demonstrates our resolve, and our pursuit in that case continues against other participants.”

As a practical matter, given that the maximum penalties for contravention of Canada’s new criminal conspiracy provisions are now fines of up to Cdn. $25 million (per count) and/or imprisonment for up to fourteen years, the Bureau’s immunity and leniency programs will likely be increasingly important for companies that may have been participants in illegal cartel activities.

Tougher Enforcement Stance Against Criminal Cartels

Perhaps the most noteworthy comments by the Commissioner in her recent remarks is the suggestion that the Bureau wants to take a tougher stance against illegal cartels and, in particular, that it would increasingly be seeking penalties (including imprisonment) against individuals in cartel cases:

“… while corporate fines used to be the norm in terms of sanctions in cartel cases, the Bureau has increasingly been recommending to the Public Prosecution Service of Canada prison sentences for individual conspirators.  In turn, the PPSC has recommended imprisonment to the court.  In the Quebec gasoline cartel case, the Court sentenced six individuals to terms of imprisonment totalling 54 months.  We will continue to hold individuals accountable for their actions in order to achieve deterrence.  I am encouraged by what appears to be a growing recognition – in the pure cartel and mass-marketing fraud contexts – by prosecutors and judges that this activity is no less criminal and deserving of criminal censure because it is economic.  The harm is real, the criminality clear and Canada now has the right signals and processes in place to bring home that message effectively.”

In this regard, while Canada has been recognized as taking a lighter approach to penalties imposed for white-collar crimes, including for competition law violations under the Canadian Competition Act, these recent statements by the Commissioner indicate that this trend may be slowly changing.

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