Archive for the 'Conspiracy' Category
On January 6, 2012 the Competition Bureau announced its first cartel case under Canada’s amended Competition Act, partially brought under the new section 45 of the Competition Act.
In this case, two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of C $12.5 million (see: Cartels Update: Bureau Announces $12.5 Million Fine in First Price-fixing Case Under Amended Competition Act and Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, believed to be one of a number of new cartel cases currently being investigated, the Bureau highlighted its stepped-up enforcement of cartels:
“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’
In other recent public remarks, the Bureau has similarly indicated that it intends to enhance its investigation of cartels under Canada’s new conspiracy (cartel) rules:
“In our Criminal work, we continue to concentrate on the, admittedly, lengthy process of ‘changing the game’— reorienting our approach at the Bureau, our processes, and our mindset to a more appropriately aggressive stance to respond, as we must, to our new more powerful criminal provisions.
As we move forward with our new criminal regime, consistency, consistency, and consistency is our focus. There will be no arbitrary relaxing of standards under the Bureau’s watch — a practice that can only impair predictability and fairness in enforcement. Further, we will use our investigative tools such as searches, wiretaps and section 11 orders.
Cartels and bid–rigging continue to be our focus, given the seriousness of this conduct, and its unambiguously harmful nature. We are committed to advancing cases that matter to Canadians, doing so in a timely manner, and following them through to the end.”
(See: Commissioner of Competition, Keynote Speech at the Canadian Bar Association 2011 Fall Conference).
Based on these and other recent developments, we will be posting overviews of Canadian conspiracy and bid-rigging laws, each concluding with practical steps companies can take to reduce potential criminal liability (and overviews of the Bureau’s Immunity and Leniency Programs, which are increasingly proving to be key for both Bureau investigations and parties to reduce liability).
For Part 1 see: here.
We read this rather fine article by Ted Banks recently on corporate antitrust compliance in Competition Policy International and reprint it here with permission. CPI is currently featuring a series of articles on corporate compliance.
By Theodore L. Banks
Ted Banks is counsel to the law firm of Schoeman Updike Kaufman & Scharf: www.schoeman.com and President of Compliance & Competition Consultants, LLC: www.complianceconsultants.com). First published in Competition Policy International (CPI) Antitrust Chronicle (February 2012(1)).
Antitrust Compliance – It’s All About the Culture
INTRODUCTION
What does it take to develop an antitrust compliance program that works? There are a lot of pieces. The employees must be presented with materials that are directly relevant to each of their jobs. It must be done in a way that is easily understandable. It must be ubiquitous, so that little or no effort is needed to gain access to information. There should also be business controls so that violations are not easy to accomplish—or difficult to detect.
We’ve known these things for a long time. In antitrust, which in many ways is the grandfather (or perhaps the godfather) of corporate compliance programs, we’ve had detailed policies, handbooks, training courses, videos, slides. No shortage of information—yet the violations continue. The Justice Department seems to have given up on compliance when it comes to antitrust. Their main method to control cartel behavior is not to encourage prevention (i.e., compliance), but to encourage confession (i.e., the amnesty program). In fact, they are apparently so disgusted with the sorry state of compliance[1] that they got a carve-out from the Federal Sentencing Guidelines when it comes to antitrust. If convicted of a violation of any other federal criminal law, the company can get credit for good intentions if its compliance program met the definition of an “effective” program. But not true for antitrust.
It is not as if antitrust is the only area where compliance programs do not seem to be making continuous improvement. The recently released 2011 National Business Ethics Survey from the Ethics Resource Center is not very encouraging. It showed an increase in companies that employees thought had a “weak ethics culture” and where employees felt pressured to ignore the company’s own ethical policies or break the law. Employees perceive there is more retaliation against employees that report wrongdoing, and more employees thought their managers were unethical. And what do they think of senior management? More perception of self-interest without being guided by ethics.
Interestingly, the failures that were identified were not ones of lack of knowledge, but were failures of culture.
Marlene Koury of Constantine Cannon LLP has written an interesting comparative article on the extension by some international enforcement agencies of protections to whistleblowers, in addition to existing immunity or leniency program protections (see: Making It Easier to Whistle While You Work).
According to the author, while approximately 50 foreign jurisdictions now have leniency programs in place, and while the U.S. pioneered leniency as a cartel detection tool, the U.S. does not yet have whistleblower protections.
In this interesting article, the author describes the fact that, for example, while the Antitrust Division of the U.S. Department of Justice, like Canada’s Competition Bureau, relies on its Corporate Leniency Program to encourage self-reporting of cartel activity, it is limited in that it fails to offer people who are aware of, but not complicit in, cartel activity with any incentive to report:
“The question of whether U.S. antitrust enforcement should emulate foreign whistleblower rewards programs as part of a crackdown on cartels is analyzed in a recent article by a Constantine Cannon attorney: Making It Easier to Whistle While You Work.
Cartel detection and prosecution are top priorities for the Antitrust Division of the U.S. Department of Justice (“Antitrust Division”) – regardless of which political party occupies the White House. Given the often secretive nature of cartels, however, they can be hard to detect. The Antitrust Division relies on its Corporate Leniency Program to encourage self-reporting of cartel activity, by offering immunity and/or reduced sanctions.
As important as leniency programs are, however, they are limited. Given their narrow focus on those at the heart of the cartel, corporate leniency programs fail to offer people who are aware of, but not complicit in, cartel activity with any incentive to report illegal activity. This absence of an antitrust informant rewards program undoubtedly means that much cartel activity victimizing U.S. consumers goes unreported.
Over the past 10 years, four jurisdictions – South Korea, Pakistan, the United Kingdom and Hungary – have addressed the limitations of their corporate leniency programs by adding an antitrust informant, or whistleblower, rewards program. Each jurisdiction noted that the aim of adding a rewards program was to increase reporting from those who are either uninvolved in, or on the periphery, of a cartel.”
We have been seeing an increase lately in penalties imposed in competition cases against individuals in Canada. A number of commentators have also recently noted this shift in enforcement by the Competition Bureau and some Canadian courts.
As a result of this trend, I thought I’d post a short note highlighting some of the recent statements by the Bureau, legislative developments and penalties imposed in one particularly noteworthy case – the ongoing Quebec gasoline price-fixing cartel case (the largest criminal investigation in the Bureau’s history).
For example, the Commissioner of Competition recently indicated that the Bureau had a stronger appetite to pursue penalties against individuals:
“In both cartel and bid–rigging cases, we will be appropriately aggressive when dealing with individuals. To date, 38 individuals have been charged in the Quebec Octane case, and last December, five individuals were accused of rigging bids for private sector contracts in residential highrise buildings in the Montreal area” (see: Keynote Speech at the Canadian Bar Association 2011 Fall Conference).
On February 17, 2012, the Competition Bureau announced that Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc. and Enterprises de Construction OPC Inc. pleaded guilty to bid-rigging in Quebec Superior Court in a case relating to the expansion of the Chicoutimi Hospital in 2003 (see: Quebec Construction Companies Plead Guilty to Rigging Bids for the Chicoutimi Hospital).
In making the announcement, the Bureau said:
“The court ordered Construction G.T.R.L. to pay a fine of $50,000, and Acoustique JCG and Entreprises de Construction OPC to pay a fine of $25,000 each. The companies are subject to a court order for a period of 10 years.
‘Bid-rigging harms everyone but the criminals who cheat the system for their own financial gain,’ said Melanie Aitken, Commissioner of Competition. ‘In this case, the bid-rigging scheme ultimately harmed the Chicoutimi Hospital and Saguenay residents, by preventing the hospital from obtaining a competitive price for its renovation.’”
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 many others.
The National Competition Law Section of the Canadian Bar Association will be holding a teleconference on February 29, 2012 entitled: “Criminal Conspiracy or Legitimate Competitor Collaboration? Tips for In-House Counsel”
From the Canadian Bar Association:
“Authorities have recently noted their first conviction under Canada’s amended conspiracy law, commenting: “[This investigation] highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.”
In-house counsel practising competition law are often asked to evaluate the competition law risks associated with activities such as joint selling initiatives, joint ventures, buying groups, participation in trade associations, and merger transactions. As such, in-house counsel are an organization’s first line of defence to identify potential illegal arrangements to fix prices, allocate markets or restrict output, that create risks of criminal investigation and prosecution; and that can result in significant fines, imprisonment, damage to an organization’s reputation, and civil damage claims.
The line between criminal conspiracies and pro-competitive strategic alliances among competitors, however, can at times be difficult to detect. It is critical that in-house counsel have the tools necessary to distinguish benign or pro-competitive activity from potentially criminal conduct.”
On January 6, 2012 the Competition Bureau announced its first cartel case under Canada’s amended Competition Act (partially brought under the new section 45 of the Competition Act).
In this case, two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of C $12.5 million (see: Cartels Update: Bureau Announces $12.5 Million Fine in First Price-fixing Case Under Amended Competition Act and Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, believed to be one of a number of new cartel cases currently being investigated, the Bureau said:
“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’
The charges are the first to arise from the Bureau’s investigation into price-fixing cartel in the polyurethane foam industry. Anyone with information relating to this investigation is encouraged to contact the Competition Bureau.
The Bureau’s investigation benefitted from cooperation under the Bureau’s Immunity and Leniency Programs, which create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.
Under the Competition Act, an agreement between competitors to fix prices, allocate markets or restrict output in Canada is a criminal offence. In March 2010, amendments to the conspiracy provision of the Act came into force.”
The Bureau also recently confirmed that it is investigating potential effects in Canada from the alleged global LIBOR-TIBOR bank cartel (see: Cartel Update: Competition Bureau Investigates Alleged Interbank Lending Rate Coordination), that it continues to receive guilty pleas in the Quebec gasoline price-fixing case, which was the largest such investigation in the Bureau’s history (see: Cartels Update: Seven More Individuals Plead Guilty in Criminal Quebec Gasoline Price-fixing Cartel) and that it remains focused on both maintaining and increasing its cooperation with global enforcement agencies in the detection and enforcement of cartels.
Last week, the Competition Bureau announced that Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc. and Enterprises de Construction OPC Inc. pleaded guilty to bid-rigging in Quebec Superior Court in relation to the expansion of the Chicoutimi Hospital in 2003 (see: Quebec Construction Companies Plead Guilty to Rigging Bids for the Chicoutimi Hospital).
In making this announcement, the Bureau said:
“The court ordered Construction G.T.R.L. to pay a fine of $50,000, and Acoustique JCG and Entreprises de Construction OPC to pay a fine of $25,000 each. The companies are subject to a court order for a period of 10 years.
‘Bid-rigging harms everyone but the criminals who cheat the system for their own financial gain,’ said Melanie Aitken, Commissioner of Competition. ‘In this case, the bid-rigging scheme ultimately harmed the Chicoutimi Hospital and Saguenay residents, by preventing the hospital from obtaining a competitive price for its renovation.’”
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, among many others.
There have also been a number of recent bid-rigging cases in Canada, many of which have involved construction and construction supply related companies.
For example, see: Guilty Plea and $425,000 Fine for Bid-rigging in Montreal, Charges Laid in Residential Construction Bid-rigging Scheme in Montreal, Competition Bureau Exposes Sewer Services Cartel in Quebec, Competition Bureau Obtains Court Order Against the Saskatchewan Roofing Contractors Association.
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
