Archive for the 'Private Actions' Category
January 25, 2013
Steve Szentesi
Kevin Wright (Davis LLP)
(with contributions by Jonathan Gilhen – Davis LLP)
Extract from a chapter to be published in CLEBC’s
Annual Review of Law & Practice – 2013
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2012 was a busy year for Canadian competition and foreign investment law, with significant developments in all major areas including misleading advertising, mergers, abuse of dominance, criminal matters (including cartels, bid-rigging and deceptive marketing) and private actions. The following is an overview of some of the key criminal developments, with summaries of other significant developments in 2012 to come over the next few days.
Criminal Code
Sentencing Amendments
In March 2012, amendments to section 742.1 of the Criminal Code (the “Code”), which were part of the Federal Government’s omnibus crime bill (Bill C-10), received Royal Assent. The changes, which came into force in November 2012, restrict the availability of conditional sentences, including for some offences under the Competition Act (the “Act”). In particular, where a person is convicted of an offence and the court imposes a sentence of less than two years, the court may order a conditional sentence (i.e., served in the community), except in certain circumstances. Those now include where an offence is an indictable offence with a maximum term of imprisonment of 14 years or life, which includes sections 45 and 47 of the Act (conspiracy and bid-rigging). These changes to the Code will impact sentencing in competition law cases (i.e., eliminate the ability for courts to impose conditional sentences in some cases). They may also influence whether cases go to trial or settle and whether individuals who are not eligible under the Competition Bureau’s (the “Bureau”) Immunity Program will cooperate with the Bureau under its Leniency Program, which, unlike the Immunity Program, requires guilty pleas as one condition.
DomFoam
(First Amended Competition Act Conviction)
In January 2012, the Bureau announced the first conviction under the Act’s amended conspiracy provisions. Domfoam International Inc. and Valle Foam Industries Inc. pleaded guilty to conspiracy under section 45 of the Act and were fined a total of $12.5 million for participating in a price-fixing conspiracy for polyurethane foam. The Bureau relied on wiretaps and search warrants in its investigation, as well as companies that cooperated with the Bureau under its Immunity and Leniency Programs.
Maxzone
(Cartel Sentencing)
In an important Federal Court decision issued in September, 2012 in the ongoing global auto parts price-fixing investigation (R. v. Maxzone Auto Parts (Canada) Corp., 2012 FC 1117), Chief Justice Crampton set the stage for the Court’s future approach to joint sentencing submissions for cartel cases. The Court’s reasons relate to its earlier decision to accept joint sentencing submissions imposing a $1.5 million fine on Maxzone in this price-fixing case (Maxzone pleaded guilty to one count of contravening the foreign directed conspiracy provision of the Act).
Several key points come out of this decision. First, parties making sentencing submissions must do more than adopt the mathematical approach to fines set out in the Bureau’s Leniency Program Bulletin, which establishes 20% of the affected volume of commerce in Canada as a starting point for fine negotiations. Second, while the Bureau’s Leniency Bulletin can be an appropriate framework for sentencing submissions, it must be followed in “letter and spirit” relating to the Code’s sentencing principles (i.e., the fundamental purpose and objectives of sentencing, principle of proportionality and aggravating and mitigating factors). Third, the Court indicated that it will require significantly more detailed evidentiary records and submissions in the future to be satisfied that a recommended sentence will not be contrary to the public interest or bring the administration of justice into disrepute. These include either an estimate of the illegal profits gained (or evidence an accused has made restitution to victims). The Court will also require a good sense of any relevant aggravating and mitigating factors (and how they influenced the jointly recommended fine) and sufficient information to determine whether the recommended sentence appropriately reflects the sentencing principles set out in the Code.
The Court also discussed individual sentencing in cartel cases, recognizing that it may be in the public interest for the Crown to agree to refrain from seeking imprisonment in some cases (e.g., directors, officers or employees of the first company to seek leniency) while at the same time indicating that subsequent leniency applicants may be asked to justify why individual imprisonment is not appropriate. Overall, this recent decision signals an increasingly stern view of cartel sentencing by the Federal Court and a caution the Court will not rubber-stamp mathematically derived sentencing submissions.
Recent Bid-rigging Cases
There have been a number of high-profile bid-rigging cases brought recently by the Bureau and Director of Public Prosecutions, many in relation to the construction industry in Quebec. A few of these cases are summarized below.
Sewer Services in Quebec
In November 2011, the Bureau announced it launched an investigation into bid-rigging (under section 47 of the Act) for municipal and provincial specialized sewer services contracts in the greater Montreal region. As of December 20, 2012, seven companies and seven individuals have been charged, of which three companies and one individual have plead guilty and received a total fine of $140,000, for the three companies, and the individual was sentenced to perform 100 hours of community service.
December 27, 2012
I’ve been thinking lately about writing a short note on Competition Act remedies and how the Act can be used as a strategic tool, partly from working on a few recent files with general commercial counsel who tend to ask: “what will we get and how do we get there using competition law”?
I’ve also grown to think of the Competition Act over the past few years as a collection of tools that can be used for strategic purposes (e.g., in settlement negotiations) or in an effort to achieve certain types of remedies for clients. In other words, thinking about remedies first and the best types of competition law tools to get there.
So, with that said, the following is a short overview of Competition Act penalties and remedies (and a few of the ways the Act can be used as a strategic tool, either on its own or with other proceedings or strategies):
1. As a general matter, the Competition Act contains both civil provisions and criminal offences, and so the potential penalties/remedies vary considerably depending on the particular provision and whether a criminal offence or civil reviewable matter.
2. Competition Bureau complaints are possible under all of the provisions of the Act, by consumers or competitors (and may be filed in a number of ways).
3. Under the criminal offences of the Act (e.g., criminal conspiracy agreements, bid-rigging, deceptive telemarketing, etc.), potential penalties include fines and/or imprisonment. The Bureau also sometimes seeks so-called “prohibition orders” for conduct to stop, which is one peculiar feature and remedy available to the Bureau.
December 5, 2012
In interesting and wide ranging comments given earlier today in Vancouver, as a prelude to published remarks, the Interim Commissioner of Competition John Pecman discussed current Bureau priorities, some key enforcement trends and gave some indication of future policy direction at the Bureau.
Perhaps appropriately, the Interim Commissioner began his remarks by noting that today, December 5th, has been designated by the Indian based NGO CUTS International as “world competition day” (with this year’s topic being designated by CUTS as the impact of cartels on the world’s poor).
Some highlights from the Interim Commissioner’s remarks included:
Enforcement. An overarching theme of today’s discussion in Vancouver was a continued focus on enforcement and an unwavering willingness by the Bureau to commence litigation (though underscored throughout the talk by a message that the Bureau continues to be interested in collaboration and dialogue). While the Interim Commissioner said that the Bureau’s default is generally to work collaboratively, the Bureau will continue not to hesitate to litigate. The Interim Commissioner also spoke about a desire to return to some of the “bread and butter” priorities of the Bureau in both the criminal and deceptive marketing areas. Interestingly, the Interim Commissioner indicated that despite recent Federal budgetary cuts, the Bureau was working toward enhancing its internal litigation capabilities.
Consultations & New Guidelines. The Interim Commissioner indicated that the Bureau would be commencing consultations with the competition bar in Canada in the new-year, as well as stakeholders, business groups and procurement groups to amplify and clarify several key areas, including the Bureau’s Immunity and Leniency Programs and electronic document production. The Interim Commissioner also indicated that the Bureau would be working towards issuing new price maintenance guidelines, FAQs for unilateral conduct and new general guidelines on Bureau enforcement. The Interim Commissioner also suggested a desire by the Bureau to move away from issuing advisory opinions in individual cases toward a focus on published materials (i.e., guidelines).
Maxzone. With respect to the recent decision by Chief Justice Crampton in the Maxzone case, the Interim Commissioner indicated that the decision both sends a strong message that serious white-collar crime conduct akin to fraud should be appropriately punished (including by increasing recommendations for prison sentences) while other aspects of the decision were less workable practically, for example Chief Justice Crampton’s suggestion that defendants should work to achieve restitution with plaintiffs prior to plea agreements (which can delay criminal investigations). In this regard, the Interim Commissioner commented on the existing partition between private actions and criminal enforcement, saying there already existed a mechanism for restitution (section 36 of the Competition Act – the provision under which private civil actions in Canada are commenced). Overall, however, Mr. Pecman described the ongoing shift of Canadian courts toward sterner sentencing and recent Criminal Code sentencing amendments eliminating conditional sentences for cartel and bid-rigging offences as a “sea change” to how competition law offences are treated in Canada.
November 16, 2012
I did a bit of a quick sweep earlier today for new Canadian competition, advertising and regulatory law texts and this one, recently published by Oxford University Press, caught my eye on class action regimes around the world including Canada. Given the accelerating rate of class action activity in Canada, including in the competition and advertising law areas, I thought this was a worthy hole to fill (and to keep filling).
Abstract:
“World Class Actions: A Guide to Group and Representative Actions around the Globe is a guide for attorneys and their clients on the procedures available for class, group, and representative actions throughout the world. It helps lawyers navigate and develop strategies for litigation and risk management in the course of doing business abroad, or even in doing business locally in a way that impacts interests abroad.
Part I of the book provides a jurisdiction-by-jurisdiction survey of the class action, group, collective, derivative, and other representative action procedures available across the globe. Each chapter is written from a local perspective, by an attorney familiar with the laws, best practices, legal climate, and culture of the jurisdiction.
Part II provides guidance from the perspective of international attorneys practicing in foreign jurisdictions and the art of counseling and representing clients in international litigation. It also covers a variety of topics related to transnational, multi-jurisdictional, and class or collective actions that involve international issues and interests.
Each chapter offers practice tips and cultural insights helpful to an attorney or litigant facing a dispute in a particular part of the world. Many of the chapters introduce key books, treatises, articles, or other reference materials to foster further research. Its focus on international class and group litigation law from a practitioner’s perspective makes World Class Actions an essential guide for the lawyer or client.”
Jurisdictions included in this new global class action text include Canada, as well as the U.S., Australia, a number of major European jurisdictions, China, India and the Asia-Pacific region.
For more information see: World Class Actions: A Guide to Group and Representative Actions Around the Globe.
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In an interesting Canadian Bar Association (Competition Law Section) teleseminar earlier today (November 6th), the Competition Bureau’s Acting Senior Deputy Commissioner of Competition, Criminal Matters Branch, discussed the enforcement of cartels in small jurisdictions from a Canadian perspective.
The teleseminar, which included enforcement agency panelists from Canada (Matthew Boswell, Competition Bureau), Ireland (Patrick Kenny, Irish Competition Authority), New Zealand (Mary-Ann Borrowdale, New Zealand Commerce Commission) and Israel (Gadi Perl, Israel Antitrust Authority), focused on three aspects of “Cartel Enforcement in Smaller Jurisdictions”: the preparation of effective cartel laws; practical cartel enforcement issues; and enforcement results. In sum, the spectrum from the preparation of cartel rules to carrying them out.
The Senior Deputy Commissioner’s remarks focused on the Bureau’s Immunity and Leniency Programs and recent enforcement results. Interestingly, the Deputy Commissioner also discussed Bureau efforts to detect domestic (i.e., Canadian) cartels, a renewed focus on associations and the Bureau’s participation in the ongoing Quebec corruption/competition probe, which resulted in the resignation of Montreal’s Mayor last night and involved searches of four Laval engineering-consulting firms this morning.
Continued Reliance on Immunity and Leniency Programs
With respect to the Bureau’s Immunity and Leniency Programs, the Senior Deputy Commissioner summarized some of their key elements, confirmed that they continue to be the Bureau’s most important cartel detection tools (calling them “extremely important to the successful detection” of cartels in Canada), reminding applicants that the threshold to obtain markers was extremely low (to encourage participants to come forward at their “earliest opportunity”), while emphasizing that the Bureau continues to expect strict compliance with the timelines in both programs.
With respect to the latter point, the Senior Deputy Commissioner made it clear that while the Bureau is willing to grant extensions to perfect markers beyond its 30-day guideline, extensions are not granted lightly and the Bureau looks for applicants to justify delays – for example, with reference to internal company investigations, a concrete work-plan to provide information and status updates on the progress of cooperation with other jurisdictions.
The Senior Deputy Commissioner also confirmed the Bureau’s continued expectation for Immunity and Leniency applicants to provide waivers for the Bureau to communicate and cooperate with foreign agencies (although backstopped his waiver comments by noting that the Bureau rarely exchanged documents and understood immunity/leniency applicants’ interest in maintaining a paperless process generally, including through the proffer process).
He also discussed the importance of predictability and transparency for the Bureau’s Immunity and Leniency Programs to operate effectively, noting the fact that the requirements for both Programs are set out in detail on the Bureau’s website (and in its Immunity and Leniency Bulletins), including key requirements, director and officer rights and guidelines for fine calculations.
Interestingly, however, the Senior Deputy Commissioner did not raise the recent Federal Court decision in the Maxzone case, which has created uncertainty of whether the Federal Court will accept mathematically derived joint sentencing submissions (see e.g.: here) particularly around the Bureau’s 20% of affected Canadian volume of commerce figure historically used as a starting point for fine negotiations.
Enforcement Priorities & Recent Developments
With respect to enforcement, which was in some ways the more interesting aspect of the Deputy Commissioner’s remarks earlier today, he discussed the Bureau’s practical need to divide its enforcement resources between international and domestic cartel cases, saying at one point that the Bureau could, if it wished, “completely fill its [cartel enforcement] dance card with international cases”. He did, however, emphasize the Bureau’s continued interest in detecting and commencing enforcement in relation to domestic (i.e., Canadian) cartels.
In this regard, the Deputy Commissioner indicated that while the Bureau’s Immunity and Leniency Programs had been very successful in attracting cross-border cartel immunity/leniency applicants, they had been less so for domestic cartels (saying that they had had “moderate success” in Canada to date).
As such, in order to find new ways to detect Canadian cartels, he discussed a four-pronged enforcement approach currently being utilized by the Bureau involving: (i) developing relationships with Canadian public procurement authorities, (ii) partnerships with Canadian law enforcement agencies, (iii) outreach efforts to Canadian companies and other organizations (e.g., trade and professional associations), and (iv) media and public awareness efforts (e.g., Bureau news releases, education, speeches, etc.).
Reading some of the recent coverage of the global LIBOR price-fixing investigation made me think about how this case illustrates the sometimes subtle distinction between legitimate and anti-competitive industry “regulation” by associations.
For example, in this particular case, the U.K. Treasury announced today that it had accepted all of the recommendations of an independent review of the LIBOR benchmark, which will include the removal of the British Bankers’ Association (the “BBA”) as the “operational LIBOR administrator” (see also: Libor to be regulated ‘without delay’). LIBOR regulation is, therefore, set to be shifted away from the BBA (a trade association comprised of UK banking and financial services firms) to a new legislatively authorized Financial Conduct Authority.
Specific changes are to include: bringing LIBOR activities within the scope of statutory regulation (Including the submission and administration of LIBOR); creating a new criminal offence for misleading statements in relation to benchmarks, including LIBOR (and amending the language for existing offences); and giving the new Financial Conduct Authority specific power to make rules requiring banks to submit to LIBOR (including a code of conduct).
While the conduct in this specific case, LIBOR and the resulting competitive effects (or potential effects) are all clearly complex, and any wrongdoing not established, the case seemed to me as I said to raise the issue of when an association may assume an industry “regulatory” role and when industry association coordination, rules or barriers may raise competition/antitrust concerns.
Edward Elgar has published a new handbook on U.S. private antitrust enforcement entitled Private Enforcement of Antitrust Law in the United States. Overview:
“Private Enforcement of Antitrust Law in the United States is a comprehensive Handbook, providing a detailed, step-by-step examination of the private enforcement process, as illuminated by many of the country’s leading practitioners, experts, and scholars.
Contributors: W.K. Arends, A.C. Briggs, W.J. Bruckner, P.B. Clayton, C.C. Corbitt, E.L. Cramer, M.B. Eisenkraft, A.A. Foer, A.J. Gaughan, P. Gilbert, J. Goldberg, D.E. Gustafson, M.D. Hausfeld, K. Kinsella, R.H. Lande, J. Langenfeld, S. Martin, K.J.L. O’Connor, H.L. Renfro, J.D. Richards, V. Romanenko, J.L. Rubin, M.R. Salzwedel, A.E. Shafroth, D.C. Simons, S.P. Slaughter, R.M. Stutz, B.E. Sweeney, J. Tabacco, M.J. Waters, S. Wheatman, K.C. Wildfang, G.G. Wrobel, J.A. Zahid
Private Enforcement of Antitrust Law in the United States is a comprehensive Handbook, providing a detailed, step-by-step examination of the private enforcement process, as illuminated by many of the country’s leading practitioners, experts, and scholars. Written primarily from the viewpoint of the complainant, the Handbook goes well beyond a detailed cataloguing of the substantive and procedural considerations associated with individual and class action antitrust lawsuits by private individuals and businesses. It is a collection of thoughtful essays that delves deeply into practical and strategic considerations attending the decision-making of private practitioners. This eminently readable and authoritative Handbook will prove to be an invaluable resource for anyone associated with the antitrust enterprise, including both inexperienced and seasoned practitioners, law professors and students, testifying and consulting economists, and government officials involved in overlapping public/private actions and remedies.”
For more information and ordering details see:
Private Enforcement of Antitrust Law in the United States
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On July 19, 2012 the Competition Bureau announced that Korean Air Lines Co., Ltd. pleaded guilty in the ongoing air cargo cartel case and was fined $5.5 million for its involvement from 2002 to 2006.
The Bureau’s investigation has led to seven convictions to date and fines of approximately $22 million (other airlines that have pleaded guilty in this case to fixing air cargo surcharges for shipments on some routes from Canada include Air France, Martinair, KLM, British Airways and Qantas).
For the Bureau’s earlier announcements in this case see: Air Carriers Plead Guilty to Price-Fixing Conspiracy (the initial round of fines was as follows: Air France – $4 million; KLM – $5 million; and Martinair – $1 million), Fourth Guilty Plea in Air Cargo Price-Fixing Conspiracy (Qantas was fined $155,000) and Cargolux Pleads Guilty in Air Cargo Price-fixing Conspiracy (Cargolux was fined $2.5 million).
The Bureau generally bases fine negotiations on the affected volume of commerce in Canada (see e.g.: Leniency Program – FAQs). In this respect, the Bureau will often begin with a “proxy” for a cartel party’s volume of commerce in Canada of 20% (i.e., based on the party’s volume of Canadian sales during the cartel period).
Under the Bureau’s Immunity and Leniency Programs a party that fulfills all requirements of the Bureau’s Immunity Program is entitled to full immunity from prosecution, while subsequent applicants may be entitled to 50% (for the “second in”), 35% (for the “third in”) and subsequent lesser reductions in penalties under its Leniency Program (although a critical distinction between the two programs is the latter requires applicants to plead guilty). Speed is, therefore, of the essence in evaluating whether to apply for immunity or leniency, as both of the Bureau’s programs involve a “race”.
For more about Canada’s conspiracy rules see:
For more about the Bureau’s Immunity and Leniency Programs see:
Immunity and Leniency Programs
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Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
