Cartel and bid-rigging enforcement continue to be top enforcement priorities of the Bureau. The cartel (Section 45) and bid-rigging (Section 47) provisions of the Competition Act (Act) are indictable offences with serious monetary and jail penalties for convicted offenders. There is no limitation period for these offences.
The Bureau identified the remedying of cartels and bid-rigging, as well as working with public procurement authorities to detect and prevent cartels and bid-rigging in public contracts, as among its most important commitments in its most recent three-year plan.i Significant cases
In October 2017, the Bureau conducted dawn raids at the offices of seven bread wholesalers and grocery retailers in a criminal investigation tied to the alleged price-fixing of packaged bread products. In court filings, the Bureau alleged that bread wholesalers Canada Bread and Weston Bakeries communicated with one another to set bread prices before meeting with grocery retailers and getting the retailers to accept the fixed prices. The retailers that were subject to the dawn raids were Loblaw Companies Ltd (whose parent company, George Weston Ltd, owns Weston Bakeries), Walmart Canada Corp, Sobeys Inc, Metro Inc and Giant Tiger Stores Ltd.
In December, George Weston and Loblaw publicly admitted to their participation in what the companies say has been an industry-wide arrangement over the past 14 years to coordinate and fix the price of bread, and identified themselves collectively as the immunity applicant in this case. According to documents released by the Ontario Superior Court of Justice, the investigation alleged that prices were increased at least 15 times over this time period, in a pattern known as the 7/10 convention – seven cents more at wholesale and 10 cents more for consumers in stores.
Of the remaining companies implicated in the alleged price-fixing, Walmart has declined to comment, while the others have denied contravening any provisions of the Competition Act. With much of the documentary evidence in public court findings redacted, Sobeys and Metro have filed applications to make all the documents public. Sobeys has also threatened legal actions against Loblaw for implicating Sobeys in the scheme. The Bureau has not offered a timeline for when charges may be laid, and in early 2018, publicly clarified that there was no conclusion of wrongdoing at that time. At the time of writing, a class action lawsuit against the implicated companies is in the process of being certified; the statement of claim alleges that the implicated companies overcharged consumers by C$5 billion.
In 2017, the Bureau completed an investigation into a number of auto part suppliers with sales into Canada, as part of which Mitsubishi Electric Corporation, a Japanese manufacturer and supplier of auto parts, pleaded guilty and paid a C$13.4 million fine. Mitsubishi Electric Corporation is reported to have been party to an illegal agreement with a competing Japanese supplier of alternators and ignition coils sold to Honda, Ford and General Motors. The Bureau first learned of this cartel activity through its immunity programme. While Mitsubishi Electric Corporation was not the immunity applicant, it did participate in the Bureau's leniency programme, and implemented a compliance programme to prevent future contravention of Canadian law. To date, public proceedings related to cartels in the auto parts industry have resulted in 13 guilty pleas and fines totalling over C$86 million.
The Bureau has continued to investigate a gasoline price-fixing conspiracy (most recently, Irving Oil Limited pleaded guilty and was fined C$287,583) and, in 2018, charged four individuals in connection with conspiring to rig bids for certain infrastructure contracts in Quebec.ii Trends, developments and strategies
In September 2018, the Bureau published the final version of its revised immunity and leniency programmes, pursuant to which a party that reveals the existence of criminal conduct and cooperates may be granted immunity from prosecution. Under the revised programmes, immunity is withheld until such time as the applicant's cooperation and assistance is no longer required. In practice, this would result in applicants only benefiting from a provisional grant of immunity (as contrasted with a final grant of immunity) for the long periods of time typically associated with cartel investigations, and potentially up until the applicant has testified at the trial of alleged co-conspirators. This change is intended to address the risk that, following the initial application, the applicant may reduce or cease the extent of its cooperation, and is intended to address a challenge that prosecutors faced in a recent bid-rigging trial where a cooperating witness that benefited from the Bureau's cooperation programmes provided testimony that was different from what the Bureau expected.
In addition, the programmes no longer automatically protect directors, officers and employees of the immunity or leniency applicant. Instead, to benefit from the programmes, such individuals would need to demonstrate their personal knowledge of the alleged wrongdoing and their willingness to cooperate with the Bureau's investigation. As well, wider protections are afforded to current directors, officers and employees of immunity applicants, as compared to leniency applicants. Another significant change reserves for the Bureau the right to require that witness interviews be conducted under oath, and to video or audio-record those interviews (as well as corporate proffers). Finally, all applicants are now required to provide confidentiality waivers allowing the Bureau to communicate with agencies in other jurisdictions where the applicant is applying for immunity or leniency.
The immunity and leniency programmes provide valuable incentives for parties to unlawful conduct to self-report. However, the changes may render the Bureau's premier cartel detection tool less attractive, particularly for potential applicants that are attempting to balance varying cooperation requirements of agencies operating across different jurisdictions.iii Outlook
Given the Bureau's continued focus on the detection, investigation, prosecution and punishment of cartels and bid-rigging matters, companies should continue to give significant attention to ensuring compliance with applicable laws and treating all possible violations very seriously.
In cases of possible international conduct, coordination with counsel in other jurisdictions should be considered as early as possible. It also should be noted that Canada has a mutual legal assistance treaty with the United States, as well as an extradition treaty with the United States, which can be used in relation to cross-border criminal investigations.
Above all else, it is critical for companies considering possible international conduct to understand the operation of the Bureau's immunity and leniency programmes, and what the operation of these programmes might entail for the companies' interests under the programmes of non-Canadian agencies and in respect of possible civil suits. In addition, companies must understand well how sales across borders are accounted for, which reduces the risk that companies could face fines for the same sales in multiple jurisdictions.