Archive for the 'Conspiracy' Category
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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The Malaysian Competition Commission (MCC) has set out its position on information exchanges in the association context, in relation to information exchanges involving the Malaysian Automotive Association (MAA).
According to the MCC, it had previously advised the MAA as to why and how the dissemination of disaggregated information to MAA members could infringe Malaysian competition law.
In her announcement, the MCC’s chief executive officer pointed to potential risks of the formation of horizontal or vertical agreements that may raise competition concerns, principally dampening competitive rivalry among them:
“The detailed information exchanged and shared by the MAA’s members may facilitate them to coordinate their prices and such information could facilitate members to plan their marketing strategy by allocating territories or adjusting their production. This indirectly has the consequence of discouraging members from competing fairly and more effectively against one another.”
The potential issues associated with information exchanges between competitors is not, of course, unique to Malaysia, nor are the types of commonsense precautions trade and professional associations can take to reduce competition/antitrust issues from arising.
In Canada, like many other jurisdictions, the potential risk of exchanging competitively sensitive information in un-aggregated form (e.g., price, cost, market, market share, customer or supplier information) is generally twofold: first, exchanging such information can lead to agreements that violate section 45 of the Competition Act (the criminal conspiracy provision, which prohibits price-fixing, market allocation/division and output/supply restriction agreements between competitors); and second, that information exchanges can be used as evidence by the Competition Bureau, a court or private plaintiff to infer the existence of an agreement.
Also, since the passing of Canada’s relatively new civil agreements provision (section 90.1), information exchanges can also now in theory be challenged on a stand-alone basis (i.e., apart from, for example, a price-fixing agreement) where they prevent or lessen competition substantially (or as well raise issues in relation to otherwise legitimate vertical agreements and arrangements).
For more information about information exchanges and competition law in Canada, and steps associations can take to minimize competition risk, see:
Associations and Competition Law
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In two interesting notes yesterday and today (see: here and here) Bloomberg has reported that the Competition Bureau is seeking to overturn an earlier interim stay obtained by RBS in relation to a court order to produce records related to the Bureau’s ongoing LIBOR price-fixing investigation involving Deutsche Bank AG, HSBC, Citigroup Inc., ICAP Plc and RP Martin Holdings Ltd.
According to Bloomberg, the Bureau sought and obtained court orders for the compulsory production of documents (section 11 orders) requiring the firms being investigated to produce documents including lists of individuals responsible for making Yen LIBOR submissions and internal communications. Also according to Bloomberg, the Bureau has taken the position that its [section 11 orders] “may be the only tool available to the Commissioner to obtain evidence of an international cartel formed by foreign-based persons impacting the Canadian economy but where records are held in a foreign jurisdiction …”
On June 21, 2012 the Competition Bureau announced that, together with the Unité permanente anticorruption (UPAC) in Quebec, it has laid 77 charges against 11 individuals and 9 companies in relation to a broad range of allegations that include corruption in municipal affairs, breach of trust, influencing municipal officers, fraud upon the government, production and use of counterfeit documents, accepting reward, advance or benefit, extortion and conspiracy.
With respect to allegations of competition law violations, the Bureau has announced that bid-rigging charges were also laid under section 47 of the Competition Act.
According to the Bureau, this newly announced case is the result of an investigation that ran for more than two years, which uncovered “evidence of a sophisticated collusion scheme giving preferential treatment to a group of contractors to obtain municipal contracts, mainly for infrastructure projects in Saint-Jean-sur-Richelieu and surrounding areas.”
Under section 45 of the Competition Act (the criminal conspiracy offences of the Act) three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product or service), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product). Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters agreement provision (section 90.1).
In addition to these conspiracy offences, the Competition Act (somewhat in contrast to, for example, the U.S. where bid-rigging is challenged under Section 1 of the Sherman Act together with other types of cartels, such as price-fixing or market division arrangements) also contains stand-alone bid-rigging offences (under section 47 of the Act).
In this regard, section 47 of the Act makes it a criminal offence to: (i) agree to not submit a bid or tender, (ii) agree to withdraw a bid or tender already submitted (recently added to the Act as a result of the 2009 amendments) or (iii) submit a bid or tender that is arrived at by agreement. Bid-rigging in Canada is also, like the amended section 45, ”per se” illegal, in that no anti-competitive effects on a relevant market (or markets) need to be established in order to make out an offence (though all of the elements need to be established on the standard criminal burden of proof – i.e., beyond a reasonable doubt).
Some common types of coordinated bidding activities that can contravene the criminal bid-rigging provisions of the Act include: “cover”, “courtesy” or “complementary” bidding (some firms submit bids that are too high to be accepted, or with terms that are unacceptable to the party calling for bids, to protect an agreed upon low bidder); “bid suppression” (one or more bidders that would otherwise bid agree to refrain from bidding or withdraw a previously made bid); “bid rotation” (all parties submit bids but take turns being the low bidder according to a systematic or rotating basis); “market division” (suppliers agree not to compete in designated geographic areas or for specified customers); and “subcontracting” (parties that agree not to submit a bid, or submit a losing bid, are awarded subcontracts or supply agreements from the successful low bidder. Trade association activities involving information exchanges about upcoming or proposed tender opportunities, or that facilitate coordination of bids and tenders, can also raise competition law concerns.
Companies and other organizations, such as trade and professional associations, may exchange information for a wide range of legitimate and pro-competitive purposes. These may include industry research, benchmarking, joint ventures or other business or strategic alliances or in the context of merger negotiations.
Indeed, the exchange of information between companies or association members can have many pro-competitive purposes and effects – for example, facilitating research or production initiatives that would be impossible without cooperation, increasing market transparency and consumer knowledge, leading to enhanced products and services or supporting lobbying and industry advocacy efforts. In this regard, competition enforcement officials, both in Canada and other major jurisdictions, generally acknowledge that markets operate more efficiently when information is relatively free and openly available to industry members.
Having said that, information exchanges – that is the exchange of certain types of competitively sensitive information between competitors, such as price, cost, market, market share, customer, supplier or business or strategic plan information – can represent a significant risk for companies, trade or professional association members (as well as their management and boards) and merging or joint venture partners.
Generally speaking, the exchange of competitively sensitive information between competitors can dampen competitive rivalry by reducing competitors’ uncertainty about their rivals’ competitive and commercial responses. More specifically, the exchange of competitively sensitive information between competitors can raise significant competition law risk under the Competition Act (the “Act”).
In Canada, the principal risk of information exchanges between competitors is that they can lead to agreements that violate section 45 of the Act, which makes it a criminal offence for competitors (or potential competitors) to enter into agreements to fix prices, divide markets or restrict output. Potential penalites under section 45 include criminal fines of up to $25 million (per count), imprisonment or up to 14 years and damages arising from civil actions.
While section 45 does not criminalize information exchanges themselves, the risk of such exchanges between competitors, without appropriate safeguards, is two-fold: first, exchanging (or discussing) competitively sensitive information may result in an agreement that contravenes section 45 (e.g., a price-fixing agreement); and second, an information exchange may be used by a court, the Competition Bureau or a private plaintiff to infer the existence of an agreement that violates section 45 (i.e., be used as “circumstantial” evidence of the existence of an agreement).
Canadian courts have relied on evidence of information exchanges as one basis to conclude that an illegal conspiracy existed and such exchanges are commonly relied on in criminal and civil proceedings in Canada under section 45. Information exchanges have sometimes involved conduct as seemingly straightforward as the discussion of prices at association meetings and in one older, but noteworthy, case, an attempt by industry members to adopt an “open pricing” policy (by exchanging price information with no express agreement to follow the exchanged rates) without contravening section 45.
Steve Szentesi & Mark Katz
(First published in Competition Policy International, Antitrust Chronicle)
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles. We allege that executives at the highest levels of these companies—concerned that e-book sellers had reduced prices—worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.”
(Attorney General Eric Holder, April 11, 2012)
“This was competition on the merits, with Apple providing a superior reading platform on a beautiful 10 inch iPad screen, with color, multi-media, and fixed display, and access to millions of future iPad purchasers. This is classic procompetitive behavior that should be celebrated, not condemned through litigation.”
(Apple Answer, May 22, 2012)
“Absent any direct evidence of conspiracy, the Government’s Complaint is necessarily based entirely on the little circumstantial evidence it was able to locate during its extensive investigation, on which it piles innuendo on top of innuendo, stretches facts and implies actions that did not occur and which Macmillan denies unequivocally. For the record, Macmillan did not conspire with other publishers in New York City restaurants.”
(Macmillan Answer, May 29, 2012)
INTRODUCTION
Before the U.S. Department of Justice (“DOJ”) filed its claim in the eBooks case earlier this year, Canadian class action plaintiffs commenced their own proceedings in the provinces of British Columbia, Ontario, and Quebec.[1]
As in the United States, the Canadian actions are challenging the agency eBook distribution model adopted by Apple and five of the world’s largest book publishers.[2] Specifically, the Canadian plaintiffs allege that Apple and the defendant publishers violated Canada’s price-fixing offense under section 45 of the Competition Act (the “Act”). The publishers allegedly committed the offense by collectively agreeing to discontinue their former wholesale distribution models, under which publishers sold eBooks at wholesale prices to distributors who in turn set retail prices, for a new agency model under which publishers set prices with distributors receiving sales commissions.[3]
The Canadian plaintiffs also allege that the publisher defendants illegally agreed not to set eBook prices below Apple’s iBookstore prices (a “most-favored-nation” provision). Finally, the plaintiffs plead a variety of non-statutory grounds for recovery, including certain common law torts (e.g., unlawful interference with economic relations) and—in Québec—claims under the Civil Code of Québec.[4]
As in the United States, the key substantive issue in Canada will be whether the conduct of Apple and the defendant publishers constitutes an illegal conspiracy. In addition, the case raises some uniquely Canadian issues relating to jurisdiction and certification and the interpretation of Canada’s conspiracy offense.
Before addressing these various questions, we provide a brief summary of the competition class action regime in Canada for background purposes.
A few interesting regulatory law developments caught my eye today including:
Stanford University Press has published a new book entitled The Global Limits of Competition Law, edited by Daniel Sokol and Ioannis Lianos: Stanford University Press – The Global Limits of Competition Law.
The American Antitrust Institute has published a new global handbook on private competition law enforcement entitled The International Handbook on Private Enforcement of Competition Law: Edward Elgar Publishing – The International Handbook on Private Enforcement of Competition Law.
The Federal Government has introduced a new Safe Food for Canadians Act: Harper Government Introduces Safe Food for Canadians Act.
The Federal Privacy Commissioner yesterday issued a new policy position on online behavioural advertising: Policy Position on Online Behavioural Advertising.
The New York Times published an interesting Barnes & Noble Op Ed arguing that the settlement with e-book publishers would “punish consumers”: Barnes & Noble Argues Book Settlement “Punishes Consumers”.
The Australian competition regulator (the ACCC) has approved the Glencore/Viterra transaction: Australia Competition Watchdog Approves Glencore Takeover of Viterra.
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The Toronto Sun has reported that the federal Competition Bureau has commenced an investigation into alleged price-fixing activities among concrete companies in the Greater Toronto Area home-building industry.
According to the Bureau, it is investigating businesses in the residential concrete forming industry in the Greater Toronto Area (companies that create basement foundations for residential homes). In addition to contractors, the allegations appear to include a trade association, the Residential Low Rise Forming Contractors Association of Metropolitan Toronto and Vicinity (the LRFA). Also according to Bureau officials, criminal searches have been conducted in the Toronto area.
Under section 45 of the Competition Act, three types of agreements between competitors are “per se” illegal (i.e., with no adverse competitive impacts required to be proven): (i) price-fixing agreements (agreements to fix, maintain, increase or control the price for the supply of a product or service), (ii) market allocation/division agreements (agreements to allocate sales, territories, customers or markets for the production or supply of a product) and (iii) output/supply restriction agreements (agreements to fix, maintain, control, prevent, lessen or eliminate the production or supply of a product). Other types of agreements between competitors are potentially subject to review under a second and separate non-criminal reviewable matters agreement provision (section 90.1).
The construction industry has long been a target of competition/antitrust regulators. For example, some of the construction related cases in Canada, many of which have also involved trade associations and have gone back about a century, have included building contractors, corrugated metal pipe manufacturers, electrical contractors, gypsum dealers and manufacturers, plumbing contractors, road surfacing contractors, chain link fence contractors, among others.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
