Archive for the 'Conspiracy' Category
On November 5th, in somber but not altogether unexpected remarks, Montreal Mayor Gerald Tremblay resigned following the termination or suspension of a number of City of Montreal employees in the midst of the ongoing Quebec construction corruption probe.
In his resignation speech, the Mayor said that his father told him politics was a “dirty business”, that he had heard of “brown envelopes” for the award of construction contracts in Quebec though denied that he had ever seen them, accepted full responsibility, said that some of his staff had “betrayed his trust” and concluded by saying to Montreal residents that he never betrayed them.
This case has involved testimony of allegations of violations of federal and provincial criminal and competition laws, including violations of the criminal bid-rigging provisions of the Competition Act.
In a speech earlier today, the new Interim Commissioner of Competition, John Pecman, in his first published remarks as Commissioner, discussed compliance, current Bureau enforcement policies and ongoing cases.
Some of the noteworthy aspects of the Interim Commissioner’s remarks include highlighting the Bureau’s continued enforcement in key areas (notably criminal cartel enforcement, including its Immunity and Leniency Programs, and abuse of dominance), highlighting the recent signals in the Maxzone case that the Federal Court will take a stricter approach to sentencing in cartel matters, and in particular compliance programs urging Canadian companies to adopt compliance programs (and discussing the risk of non-compliance and reputational benefits of adopting a credible program).
Compliance
Given that this speech was Mr. Pecman’s first official one as Interim Commissioner, and delivered at a national law firm seminar for firm clients, it is perhaps not surprising that his remarks focused on compliance:
“… 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.”
The Commissioner reiterated the five elements that are in the Bureau’s view necessary for an effective compliance program: senior management involvement and support; compliance policies and procedures; training and education; monitoring, auditing and reporting mechanisms; and consistent disciplinary procedures and incentives.
Some of the specific compliance themes the Commissioner discussed included compliance programs that are not followed, the importance of senior management promotion of compliance policies and monitoring and internal power to enforce policies. The Commissioner was particularly critical of compliance programs that were well prepared but not followed or effectively delivered. In this regard, the Interim Commissioner said that “the issue is not [a compliance program’s] content, or [its] quality – the issue is internal enforcement …”
Trade Association Compliance
Interestingly, the Interim Commissioner also made a number of specific remarks relating to trade associations. These included highlighting the particular potential risks of associations (saying that associations face “unique compliance issues” and are “naturally exposed to greater risks of anti-competitive behavior”) and emphasizing the importance for associations to have effective compliance programs.
The Interim Commissioner also said that the Bureau would be likely to show an interest in trade association conduct where they engaged in three categories of conduct: (i) restricting the types of professional service practice offerings (e.g., setting limits on things like office location or size); (ii) limiting the number or range of members’ ability to compete (e.g., through mandatory or suggested fee schedules or product standards); or (iii) conduct that reduces incentives to compete vigorously (e.g., information sharing agreements and the exchange of competitively sensitive information).
The Criminal Matters Committee of the Canadian Bar Association’s Competition Law Section will be offering a webinar on cartel enforcement in smaller jurisdictions with the ABA’s Section of International Law on November 6, 2012. From the CBA:
“Cartel enforcement in smaller economies can involve unique issues, including as a result of relatively thin markets that accommodate fewer players of appreciable scale and the existence of industrial policies and business cultures that may clash with competition law principles. In addition, leniency-driven cartel enforcement in relation to alleged international cartel conduct can raise challenging issues for competition agencies and investigated parties alike, especially outside the United States and European Union, where leniency applicants (and investigated parties) are incentivised to concentrate their efforts.
Register for this teleseminar to hear how enforcement officials in Canada, Ireland, New Zealand and Israel are tackling a variety of issues in cartel enforcement, including: drafting anti-cartel laws that clearly distinguish between unlawful cartels and beneficial, efficiency-enhancing, competitor collaborations; working with corporations and government to promote a culture of compliance; drafting and administering effective leniency programs that account for and mitigate parties’ natural pre-occupation with ‘primary’ competition jurisdictions; leveraging international networks and cooperation with other competition agencies; accessing evidence and witnesses in foreign countries; establishing jurisdiction over alleged cartel conduct originating abroad; avoiding resource fatigue from foreign leniency applications and maintaining a credible enforcement program targeting domestic cartels; building a strong enforcement culture and obtaining precedent-setting sanctions in the face of penalties and class action suits for the same conduct in other jurisdictions.”
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.
I have been doing quite a bit of compliance work lately, and have been seeing a wide range of compliance by companies and associations, ranging from no compliance or guidelines whatsoever to full competition law compliance programs that follow the Competition Bureau’s recommended elements in its Corporate Compliance Programs Bulletin.
Given that the Competition Bureau continues to aggressively enforce the Competition Act in key areas (conspiracy, abuse of dominance, bid-rigging and misleading advertising), I thought that I would post a “top 10” competition compliance list (or as it happened to work out a top 15).
While by no means exhaustive, this list covers much of what companies and associations need to think about to reduce the likelihood that Competition Act issues will arise.
Key Competition & Advertising Compliance Rules
for Companies & Associations
DO NOT agree to fix prices, divide markets (geographic markets, customers or product/service lines) or restrict output with competitors.
DO NOT discuss competitively sensitive topics with competitors (e.g., prices, margins, costs, markets, market shares, marketing or strategic plans, etc.). Exceptions can include discussions in the context of mergers, joint ventures and some other legitimate pro-competitive competitor-competitor activities, but advice should be sought prior to doing so.
DO NOT make decisions with competitors to refuse to deal with or supply to competitors, customers, suppliers or other marketplace participants without obtaining legal advice. Some concerted refusals to deal (i.e., “boycotts”) can raise significant competition law issues, while others may be justified depending on the circumstances – for example, some membership decisions in the association context.
DO NOT agree with competing bidders or tenderers to fix the terms of a bid/tender, not bid/tender or withdraw a bid/tender that has already been made. Also avoid discussing the terms of bids/tenders, or whether your company intends to bid, with competing bidders/tenderers (e.g., at association events or in other forums). Some types of joint bids can be made (e.g., in the context of legitimate bid consortia that meet the requirements of the Competition Act), but legal advice should be sought prior to the preparation and submission of joint bids.
DO NOT incorrectly suggest, in internal documents or correspondence, that anti-competitive activities are occurring (e.g., language that suggests coordination with competitors in relation to pricing, customers or output – e.g., it would “be easier to cooperate than compete”; that decisions are being made for anti-competitive purposes – e.g., to “drive out” a competitor; or “loaded” language – e.g., “dominate”, “squash”, “eliminate”, “stabilize” competition, “us and them”, they’re “not following the rules”, etc.).
DO NOT attempt to interfere with competitors’ suppliers without consulting management or obtaining legal advice.
DO consult management or obtain legal advice before attempting to influence a customer’s or reseller’s prices (or refusing to supply or discriminating against a person where the refusal/discrimination may be related to the person’s low pricing policy).
The University of British Columbia today announced the launch of “one of the world’s largest prizes dedicated to the international fight against corruption and protecting human rights”: The Allard Prize for International Integrity:
On September 28, 2012, the Competition Bureau announced that Irving Oil and its Quebec manager have been charged (three charges against each of the corporation and manager) for allegedly fixing gasoline prices in certain local Quebec markets in the Bureau’s ongoing Quebec gas price-fixing investigation. In making the announcement, the Bureau said:
“’These charges highlight our continued and steadfast commitment to combating domestic price-fixing cartels,’ said John Pecman, Interim Commissioner of Competition. ‘Canadians are ultimately on the losing end of secret agreements that cheat them out of their money.’
By using a number of investigative tools, including wiretaps and searches, the Bureau found evidence that in certain local Quebec markets gas retailers, or their representatives, communicated with one another to agree on the price they would charge customers for gasoline.
Thirty-nine individuals and 15 companies have now been charged with criminal price-fixing in this case. To date, 27 individuals and seven companies have pleaded guilty with fines totalling over $3 million. Of the 27 individuals who have pleaded guilty, six have been sentenced to terms of imprisonment totaling 54 months.”
Under Canadian competition law, the federal Competition Act makes the following three categories of agreements between competitors (or potential competitors) per se illegal:
1. Price-fixing agreements. Agreements to fix, maintain, increase or control the price for the supply of a product.
2. Market allocation/division agreements. Agreements to allocate sales, territories, customers or markets for the production or supply of a product.
3. Output/supply restriction agreements. Agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product (which is broad enough to potentially include group boycotts).
According to Reuters reporting earlier today, Irving said it was not aware of the alleged price-fixing activities involving its personnel and took steps to stop the conduct:
“Our company was not aware of these activities and, when our company became aware of them, we took immediate steps to address the situation, including disciplinary action,” spokeswoman Carolyn Van der Veen said in an email. “Our company believes that we should not be held responsible for the actions of employees who knowingly violated company policy.”
The potential risk for individuals involved in criminal price-fixing and other activities under the Competition Act has also increased, given several key recent developments that include the elimination of conditional sentences (i.e., sentences served in the community) for price-fixing offences under the Act, an increased appetite by the Bureau to seek penalties against individuals and a recent decision by the Federal Court indicating that that Court will not necessarily automatically accept sentencing submissions carving out individuals in the context of pleas.
For a copy of the Bureau’s news release and backgrounder see: Irving Oil Charged in Gas Price-Fixing Cartel and Bureau Activities.
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The Canadian Society of Association Executives (CSAE) will be holding its annual National Conference in Ottawa on November 1-3, 2012.
I am pleased to be co-presenting a seminar on Practical Competition Law and Compliance Case Studies for Trade and Professional Associations with the co-author (Mark Katz) of our new associations book (The Competition Law Guide for Trade Associations in Canada):
“Although most association activities are benign from a competition law perspective, they can raise serious issues in a variety of circumstances that occur on a regular basis. This presentation will review the key provisions of Canada’s Competition Act relevant to trade and professional associations and offer practical guidance on how to reduce risk based on a series of practical and interactive case studies derived from actual Canadian and international examples.
The focus of the case studies will be on real-life association activities that can attract liability if not conducted in an appropriate fashion. Issues to be covered include: (i) when will a purely voluntary or suggested fee tariff/schedule become problematic; (ii) ways associations can engage in joint negotiations or advocacy initiatives on behalf of members without raising competition issues; (iii) how associations can reduce the risk of engaging in information exchanges (e.g., research or benchmarking exercises); (iv) how to structure association membership restrictions and discipline procedures; and (v) what to do to distinguish pro-competitive standard-setting from conduct that can raise competition concerns.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
