Canadian COMPETITION LAW

October 3, 2010

On September 29, 2010, the Competition Bureau issued its final Leniency Program Bulletin and Leniency Program FAQs.  The Bureau’s final Leniency Bulletin sets out the factors the Bureau considers when making sentencing recommendations to the Public Prosecution Service of Canada (“PPSC”) and the process for seeking leniency recommendations in criminal cartel cases.  Under the Bureau’s Leniency Program, the Bureau may recommend to the PPSC that applicants that qualify with the terms of the program be granted leniency in exchange for cooperating with the Bureau in an investigation and any subsequent prosecution.

While the federal Competition Bureau is responsible for the enforcement of the Competition Act and investigating alleged violations of the Act, jurisdiction for prosecuting criminal offences under the Competition Act (and granting immunity or leniency) rests with the Director of Public Prosecutions.  In reality, however, the Bureau and DPP work closely together during a criminal investigation under the Act.

The Leniency Bulletin was subject to extensive public consultations in 2008 and 2009 and, together with, the Bureau’s Immunity Program Bulletin, are the two core enforcement policy documents for the Bureau’s formal Immunity and Leniency Programs.

Some of the key aspects of the Bureau’s new Leniency Bulletin include:

Immunity v. leniency.  The Bureau confirms that full immunity from prosecution is only available for the first individual (or business organization) that applies for a marker under the Bureau’s Immunity Program and complies with all other requirements of the Bureau’s Immunity Program.

Leniency eligibility and requirements.  While full immunity is not available, other parties to criminal cartel activities (e.g., price-fixing, market allocation or supply restriction agreements between actual or potential competitors) that disclose their involvement and cooperate with the Bureau may qualify for leniency in sentencing.  A leniency recommendation will be made when an individual (or business organization) has: (i) terminated its participation in the cartel, (ii) agrees to full and timely cooperation with the Bureau’s investigation (and any subsequent prosecution) and (iii) agrees to plead guilty (the latter requirement being an important distinction between the Bureau’s Leniency Program and its Immunity Program, where no guilty plea is required, and which emphasizes the importance of early detection given that both of the Bureau’s programs operate on a “first in” basis).

Timing.  Where the Bureau has already referred a matter to the PPSC for potential prosecution, leniency is no longer available.

Disclosure requirements.  Like the Bureau’s Immunity Program, applicants are required to provide full, frank and truthful cooperation with the Bureau’s investigation.  The Bureau also states that “full and prompt cooperation at an early phase in the Bureau’s investigation” will likely secure a recommendation for a more substantial mitigation of a sentence than cooperation at a later phase.  In essence, the Bureau is attempting to give parties more incentive to both initially report an offence and cooperate to a greater extent early in an investigation.

Calculation of fines.  The Bureau maintains its previous position of using 20% of a party’s volume of commerce as a proxy or starting point in fine recommendations.

Penalty reductions.  The first leniency applicant is eligible for a 50% reduction of the fine that would otherwise have been recommended and the second leniency applicant is eligible for a 30% reduction in fine, provided that the requirements of the Leniency Program are met.  According to the Bureau, subsequent leniency applicants “may benefit” from fine reductions, provided they meet all requirements of the Leniency Program (the Bureau also states, consistent with its Leniency and Immunity Programs as intended to create incentives for parties to report and cooperate, that “later leniency applicants will not be eligible for a greater leniency discount than earlier applicants”).

Aggravating and mitigating factors for sentencing.  The Bureau will consider aggravating and mitigating factors in making sentencing recommendations to the PPSC, as set out in the Criminal Code, with the Bureau’s 20% volume of commerce fine proxy increased or reduced accordingly (the sentencing guidelines under the Criminal Code apply to violations of the criminal offences under the Competition Act).

“Immunity plus”.  A leniency applicant may be eligible for “Immunity Plus”, where an applicant discloses evidence of other offences under the Act that the Bureau was unaware of (in which case, an applicant may be entitled to full immunity from prosecution for the additional offence, despite being ineligible for full immunity from the main offence under which leniency is sought).

Director and officer liability.  The Bureau will recommend that no separate charges will be laid against an applicant’s current directors, officers or employees, provided they cooperate with the Bureau’s investigation.  This is both a benefit to an immunity applicant’s directors and officers, but also emphasizes the importance of counselling directors and officers of the importance of complying with the Bureau’s program in order to maintain leniency rights.

Marker requests.  Like the Bureau’s Immunity Program, marker requests must be made to the Senior Deputy Commissioner of Competition, Criminal Matters Branch.  Initial marker requests are typically made on a no-names and hypothetical basis.  The Bureau allows four days for a marker applicant to determine whether to participate in the Bureau’s Leniency Program and a further 30 days to complete its proffer to the Bureau (i.e., provide initial information regarding participation in a cartel, on a without prejudice basis, subject to settlement privilege).

Leniency recommendation.  The Bureau will make a leniency recommendation to the DPP after an applicant has made a “complete and timely” proffer (i.e., provided all relevant information pertinent to leniency and sentencing).

Plea agreement.  Unlike the Bureau’s Immunity Program, the Leniency Program involves the negotiation of a plea agreement, which the Bureau states will be conditional on the full and timely cooperation of a leniency applicant.  Plea agreements, like the leniency and immunity processes generally, require applicants to continue to provide “full, frank, timely and truthful disclosure” of information relating to the offence, except information covered by solicitor-client privilege, that are followed by joint sentencing submissions based on an agreed statement of admissions.

Other jurisdictions.  The Bureau confirms its earlier position that it will not give applicants special consideration solely where they have been granted immunity in another jurisdiction.  The Bureau will also not disclose a leniency applicant’s identity to a foreign antitrust agency and will only disclose information with a waiver from the applicant “absent compelling reasons”.

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