Around the globe, the number of cartels detected, fines imposed and even the amount of jail time served has increased exponentially in recent years, with the Canadian Competition Bureau also aggressively pursuing antitrust criminal enforcement (see our Criminal Enforcement in Canada: 2014 Year in Review). As indicated in the 2014 Competition Bureau Submission to the OECD Competition Committee Roundtable on the Use of Markers in Leniency Programs, “cracking down on domestic and international cartels has been, and continues to be, one of the Bureau’s top enforcement priorities.” The Bureau’s Immunity Program “has proven to be [its] single most powerful means of detecting criminal cartel activity.” The Bureau’s Leniency Program complements its Immunity Program, and together these initiatives aim to create incentives for organizations and individuals to report to the Bureau potential criminal activity prohibited by the Competition Act and to cooperate in the prosecution of such conduct.
The Bureau has published detailed FAQs for these programs. Here are the fundamentals:
- Immunity and leniency are available to both organizations and individuals for criminal Competition Act offences, other than single party offences, and including “aiding or abetting” offences. Most importantly, they are available for conspiracy and bid-rigging offences.
- Time is of the essence as immunity from prosecution is only available to the first applicant satisfying the eligibility criteria. This often creates a “race” to the Bureau.
- The difference between “first-in” and “second-in” may be a criminal conviction, including potentially multiple millions of dollars in fines. The stakes are high.
- The decision of whether to apply must be made quickly and there is often a myriad of factors to consider.
- Immunity from prosecution is not available if the applicant coerced others to participate in the illegal activity or if the Bureau is already aware of the offence.
- Leniency in sentencing may be available to a party that does not qualify for immunity but has come forward to resolve its criminal liability and cooperate with the Bureau’s investigation and any subsequent prosecution.
- The Bureau’s marker management system is an important feature of both programs as it determines the applicant’s place in line and commences the process by which the applicant is to provide information to, and cooperate with, the Bureau.
- Immunity and leniency applicants must terminate their participation in the illegal activity; maintain confidentiality regarding their application, immunity and plea agreement; and keep the Bureau apprised of the status of any related civil proceedings, including notifying the Bureau of an intent to cooperate with civil litigants.
- Immunity and leniency applicants must provide complete, timely and ongoing cooperation.
- This commences with a statement known as a “proffer.” The proffer is generally provided orally on a “without prejudice” basis by the applicant’s counsel and describes, in detail, the illegal activity, the applicant’s role in such activity and the effect of such activity in Canada, together with an outline of supporting evidence and witnesses.
- Proffers are to be made within 30 calendar days from receipt of a marker, but this timing may be accelerated where it impacts other steps in the Bureau’s investigation such as the execution of a search warrant or cooperation with authorities in another jurisdiction.
- The Bureau considers a proffer to be complete when it has received sufficient information to make an immunity or leniency recommendation to the Public Prosecution Service of Canada.
- Applicants have a positive obligation to promptly update their proffered information as they become aware of either new or corrected information.
- While the Bureau investigates matters under the criminal provisions of the Competition Act, grants of immunity and leniency, and the decision of whether to commence criminal prosecutions, are the sole responsibility of the Public Prosecution Service of Canada. In the case of leniency, the Court has the sole authority to determine an appropriate sentence. In this regard, the Federal Court decision in R v. Maxzone Auto Parts (Canada) Corp. provides substantial support for the Bureau’s position that price-fixing and hard-core cartel agreements ought to be treated at least as severely as fraud or theft, if not more so.
- The identity of an immunity applicant will typically remain confidential until charges are laid against other participants to the offence, and disclosure of the Crown’s case to the accused is required.
- Leniency applicants must plead guilty under a formal plea agreement and file admissions as to facts.
- Fine recommendations for leniency applicants typically start at the higher of 20% of the applicant’s volume of commerce and the statutory maximum fine. The following general guidelines apply to fine recommendations:
- “First-in” leniency applicant eligible for discount of up to 50%, “second-in” eligible for discount of up to 30%, and eligibility for a subsequent applicant depends on when the applicant sought leniency and the timeliness of its cooperation.
- Where there is no commerce in Canada, the recommendation will be made on a case-by-case basis, but sales to Canada will not be a governing feature.
- For indirect sales in Canada, the Bureau may “work with” an applicant to develop a methodology to estimate the affected volume of commerce, limit the calculation to the value of the relevant input into the end product and consider whether a penalty imposed in another jurisdiction for the direct sales that led to the indirect sales in Canada is adequate to address the Canadian economic harm.
- For bid-rigging cases, the Bureau will consider the total volume of commerce covered by the relevant agreements and the need to deter bid-rigging. All participants are subject to a penalty.
- Current directors, officers and employees of the “first-in” leniency applicant will not be recommended for separate charges provided that they cooperate with the Bureau’s investigation in a full, frank, timely and truthful manner. Former directors, officers and employees of the first-in leniency applicant implicated in the offence will also usually qualify, provided that they cooperate with the investigation and any subsequent prosecutions. For any subsequent leniency applicant, the Bureau will consider on a case-by-case basis whether to recommend that a current or former director, officer or employee be charged.
- Current directors, officers and employees of an immunity applicant qualify for immunity provided that they offer complete, timely and ongoing cooperation. The Bureau’s determination of whether former directors, officers and employees qualify for immunity is made on a case-by-case basis.
- The negotiation of an immunity agreement or a leniency agreement can be complicated, particularly in situations where the applicant is dealing with antitrust enforcers in multiple jurisdictions, and should benefit from the advice of expert counsel familiar with the Public Prosecution Service of Canada’s policies and procedures.
- An immunity or leniency agreement may be revoked if the applicant fails to comply with the terms and conditions of the agreement. Following revocation, the Public Prosecution Service of Canada may take such action against the applicant as it considers appropriate (including prosecution) and, in doing so, may use any evidence provided by any person pursuant to the immunity or leniency agreement.
Bottom Line: The criminal provisions of the Competition Act contemplate significant penalties including multimillion-dollar fines and potential jail time. A company’s decision of whether to apply for immunity or leniency in Canada must be made quickly, knowing that managing an immunity or leniency application is complex, time-consuming and resource-intensive.
These programs should also motivate organizations to implement and maintain effective compliance programs and conduct thorough internal investigations to ferret out wrongful conduct.