On November 19th, 2008 the Antitrust Division of the United States Department of Justice (USDOJ) released responses to “Frequently Asked Questions” (FAQs) and related materials to clarify U.S. antitrust policies for granting immunity from prosecution under antitrust laws (known as the U.S. “leniency policy”). These materials reveal important differences between U.S. practice and procedure and the Canadian Competition Bureau’s (the CCB’s) practice under its revised Immunity Program under the Competition Act. For firms discovering criminal antitrust conduct, these differences make the rapid and crucial decision-making process of determining whether to seek the benefits of prosecution immunity in both Canada and the United States more complex.

Background  

As indicated in our October 15, 2007 Osler Update, “Competition Bureau’s Revised Immunity Program Increases Clarity for Applicants,” a corporation may discover antitrust violations in the course of an acquisition or through a “whistle-blower” or routine audit or investigation. In the antitrust world, the clock then begins to run as only the “first in the door” participants in cartels or other multi-party antitrust crimes can receive prosecution immunity from the government, thereby avoiding multi-million dollar fines and potential imprisonment of executives. In October 2007, the CCB announced important revisions to its immunity policy that were intended to provide greater clarity and transparency to entities considering reporting antitrust violations. To some extent, these revisions aligned Canada’s program with the U.S. leniency process while allowing for differences in Canadian conspiracy law and related practice. However, with the USDOJ’s release of clarifications on November 19, 2008 the differences between Canadian and U.S. practice have become more significant. The USDOJ materials, including the FAQs and template model leniency letters, are found at http://www.usdoj.gov/atr/public/criminal/leniency.htm.

Differences in immunity/leniency policies

A major difference between the Canadian and U.S. programs is the USDOJ’s requirement that corporations promptly cease participation in the criminal antitrust activity “on discovery.” Canada’s program requires only that participation cease at the time immunity is sought. The U.S. program also disqualifies instigators/leaders from obtaining immunity, whereas the CCB removed this requirement in 2007 and replaced it with a coercion test. In addition, the USDOJ requires restitution under most circumstances while the CCB has removed this stipulation from its criteria. The USDOJ’s responses to FAQs also provide clarity on issues of leniency where a leniency applicant may be the subject or target of (or defendant in) a separate investigation, an area not addressed under the CCB’s immunity policy.

USDOJ requires written admission of offence

In practice, none of these differences would materially affect the risk assessment process for companies considering reporting antitrust violations in both Canada and the U.S. However, the USDOJ’s current revisions require a leniency applicant to make a formal written admission that the applicant has committed a criminal antitrust offence. This admission is contained in the conditional leniency letter provided to the immunity recipient. The admission requirement is a significant change from the USDOJ’s former practice of requiring only a concession that reportable conduct may constitute a Sherman Act violation. In contrast, CCB officials have said publicly that an applicant is required only to admit conduct that may constitute an offence which is very similar to the USDOJ’s former conditional leniency process.

Implications with potential changes to Canada’s conspiracy law

Under Canada’s current conspiracy law, the prosecution must not only prove the existence of an agreement with competitors, but also that such an agreement “unduly” lessens or prevents competition. “Undueness” requires proof of market power based on the criminal standard of proof beyond a reasonable doubt. This standard has proven to be a significant barrier to successful prosecutions. Given the state of Canadian antitrust law, excusing immunity applicants from making a formal admission of criminal conspiratorial conduct makes sense; an applicant may not possess sufficient market facts to make an admission that the impact of any anti-competitive agreement it entered into would be “undue.”

However, proposed amendments to Section 45 of the Competition Act (Canada’s main cartel-fighting conspiracy tool) would create a conspiracy offence very similar to the U.S. per se offence that is targeted under Section 1 of the Sherman Act. “Hard-core” anti-competitive agreements to fix prices, allocate customers or markets, or limit production, would be prosecutable without any assessment of potential effects on competition. If the proposals become law, there is a risk that the CCB would consider aligning its practice with that of the USDOJ and require applicants to make formal admissions about the commission of section 45 offences. There is also a risk, under current law, that the CCB would align itself with this practice and require an admission of criminal conduct for an offence (such as bid rigging under section 47 of the Competition Act) where there is no requirement to show competitive injury to the affected market to establish the offence. Since antitrust regulators tend to act cooperatively, there may be pressure on the CCB to follow the lead of the USDOJ in this area.

Implications for civil antitrust claims

U.S. leniency letters are potentially discoverable under U.S. law and, as a result of a recent decision in the U.S. District Court, redacted forms of these letters are potentially disclosable under U.S. freedom of information laws. While an admission contained in a U.S. leniency letter would not constitute evidence of an offence in Canada, it could nonetheless assist Canadian civil plaintiffs in establishing the “agreement” (but not the undueness) element of the Canadian conspiracy offence. If Canadian law were amended to create a per se offence, a U.S. admission conceivably could constitute sufficient proof of the offence in cross-border cases where the conspiracy encompasses both jurisdictions.

In practice, there are strong incentives under the U.S. system for immunity applicants to cooperate with civil plaintiffs. The Antitrust Criminal Penalty Enhancement and Reform Act of 2004 allows an immunity applicant to take advantage of single (as opposed to treble) damages and to avoid joint and several liability by providing cooperation. Such cooperation already tends to occur on a cross-border basis where the conspiracy has effects in both Canada and the United States. Accordingly, requiring a formal admission of criminal conduct in the U.S. conditional leniency letter may not have any real practical impact for U.S. applicants who already have strong incentives to cooperate with civil plaintiffs. However, it could raise interesting questions in situations where, for example, a U.S. leniency recipient is not “first in” in Canada on a trans-border case and, therefore, is ineligible for immunity in Canada. One such question would be whether the U.S. leniency letter would make it easier for Canadian authorities to prosecute or to facilitate civil claims. The additional exposure associated with admitting criminal conduct in the U.S. might now weigh more heavily in a Canadian firm’s assessment of whether to approach U.S. regulators in particular trans-border cases.

Canadian affiliates of U.S. entities or Canadian companies encountering antitrust violations must consider the trans-border implications of explicit admissions of criminal conduct in the USDOJ leniency process in their risk assessment of the consequences of potential violations of Canadian law, including the likelihood of civil proceedings. These recent changes in the USDOJ policy will heighten concerns where criminal antitrust conduct impacts both Canada and the United States.