This article outlines the major global criminal and related antitrust developments in 2012, with a focus on Canada. Three salient realities underpin this article (1) global and domestic businesses and their directors, officers and employees are subject to increasing scrutiny by Canada’s Competition Bureau and global antitrust regulators; (2) antitrust investigations, prosecutions, convictions and sanctions are growing; and (3) criminal and related antitrust investigations are increasingly global, with multiple regulators investigating and prosecuting the same conduct, either working together or in parallel.
As described below, 2012 saw large-scale global investigations, domestic price fixing and bid-rigging investigations, escalating fines and imprisonment in some cases. Our review begins with an examination of major developments in Canada, followed by major developments in other major jurisdictions.
This article seeks to be user-friendly. It summarizes a voluminous amount of information and provides hyperlinks to more detailed information. We hope you find this article helpful.
2012 was a definitive year in criminal and related antitrust enforcement in Canada. 2012 saw a significant increase in charges laid and convictions, both in domestic and international activity. 2012 was not only busy but signaled that rigorous enforcement and harsher penalties are here to stay.
Of all the major developments, three are particularly salient:
First, in August, the Superior Court of Québec overturned the Director of Public Prosecutions’ decision to renege on a plea agreement in R. v. Couche-Tard Inc.  J.Q. No. 9567. Alimentation Couche-Tard Inc. was charged with fixing retail gas prices in Québec. Pursuant to the plea agreement, the accused disclosed its defence strategy to the Competition Bureau, which the Court believed had irreparably prejudiced the fairness of the trial. Fourteen months earlier, the repudiation of a plea agreement was at issue in a non-antitrust case before the Supreme Court of Canada, R. v. Nixon 2011 SCC 34,  2 SCR 566. The Court in Nixon confirmed that the Crown’s decision to resile from a plea or immunity agreement cannot be overturned failing a successful abuse of process challenge. However, the Court in Couche-Tard did not apply the stringent Nixon test. It concluded that the Crown’s repudiation of the plea agreement was not an abuse of process but nevertheless overturned the Crown’s repudiation of the plea agreement due to procedural fairness concerns. Couche-Tard is currently under appeal. To our knowledge, Couche-Tard is the first case in Canada where the repudiation of an anti-trust plea agreement was at issue. Full text of the decision in French can be found here.
Second, in September 2012, Chief Justice Crampton of the Federal Court of Canada in Canada v. Maxzone Auto Parts (Canada) Corp., 2012 FC 1117, reluctantly accepted a plea agreement between the Competition Bureau and the accused, Maxzone Auto Parts (Canada) Corp. The fine was $1.5 million, 10% of the volume of affected commerce. The Competition Bureau recommended a fine representing 10% of the volume of affected commerce due to Maxzone’s participation in the Bureau’s leniency program. The Federal Court accepted the recommendation, but signaled that future plea deals may be rejected unless there is evidence that the various objectives of sentencing have been duly considered. Justice Crampton made a number of critical comments in obiter regarding the practice of resolving cartel cases though joint penalty submissions. Justice Crampton concluded that the parties had not filed a sufficient evidentiary record from which the Court could conclude that the objective and principles set out in sections 718 to 718.21 of Canada’s Criminal Code were satisfied. Justice Crampton was also concerned that there was no evidence upon which the Court could be satisfied that the fine would likely disgorge, in an approximate way, the gains arising from the illegal conduct. Justice Crampton also made comments regarding the deterrent effect of prison sentences for cartel offences, noting that Courts will expect sentencing submissions to explain why fines alone are sufficient to the exclusion of prison sentences having regard to the harm caused by cartel behaviour. Full text of the Court’s sentencing reasons can be found here.
Third, in November 2012, legislative amendments that were enacted under Bill C-10 (the Safe Streets and Communities Act) came into force. Among the changes were the elimination of conditional sentences (i.e., community service or house arrest) for conspiracy to fix prices, bid-rigging and misleading advertising. In addition, the wait period for a pardon following a criminal conviction was extended from 5 to 10 years. Full text of the Bill can be found here.
Further major development in the form of charges laid and convictions are described below, and are subdivided under price-fixing, bid-rigging and deceptive marketing.
- In January, Domfoam International Inc. and its affiliate Valle Foam Industries (1995) Inc. pleaded guilty to conspiracy under the Competition Act for participating in a price-fixing cartel in the polyurethane foam market over an 11-year period, and were fined a total of $12.5 million. This guilty plea was the first conviction under Canada’s amended conspiracy law. More details about this case can be found here.
- In July, Korean Air Lines Co., Ltd pleaded guilty to conspiracy for participating in a cartel that fixed air cargo fuel surcharges over a 4-year period and was fined $5.5 million. Korean Air Lines was the 7th international air carrier fined under this investigation, which in total has resulted in $22.6 million in fines. More details about this case can be found here.
- Throughout 2012, many charges were laid in connection with a Competition Bureau investigation of alleged fixing of retail gas prices in Québec. The investigation, which began in 2008, has resulted in 39 individuals and 15 companies being charged with criminal price-fixing, and over $3 million in fines from guilty pleas by 28 individuals and seven companies. In addition, six individuals have received prison sentences totalling 54 months. More details about this case can be found here.
- In February, Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc., and Entreprises de Construction OPC Inc. pleaded guilty to bid-rigging related to the 2003 expansion of the Chicoutimi Hospital in Québec. They were fined a total of $100,000 and are subject to a court order for 10 years. The Competition Bureau found that the companies entered into an agreement to pre-determine the winner of the bidding process. Because the bid-rigging occurred prior to the amendment of the bid-rigging provision of the Competition Act in March 2009, the companies were charged under the previous bid-rigging provisions. The amendment gives the Court discretion to impose higher fines for bid-rigging, and/or a prison sentence of up to 14 years. More details about this case can be found here.
- In June, a joint investigation in the construction industry by the Competition Bureau and the Unité Permanente Anticorruption of the Sûreté du Québec resulted in 77 charges being laid against nine corporations and 11 individuals, including two municipal officials. The group of accused allegedly colluded with one another to gain preferential treatment in obtaining municipal contracts for various infrastructure projects in Québec. Charges include, inter alia, bid-rigging, corruption in municipal affairs, breach of trust, extortion and fraud. More details about this case can be found here.
- In June, Colmatec Inc. and its operations director pleaded guilty to participating in a bid-rigging scheme to obtain municipal contracts for special sewer services in Québec. Colmatec Inc. was fined $50,000 and is subject to a court order, and the operations director was sentenced to 100 hours of community service and two years’ probation. This is one of the outcomes pursuant to an investigation conducted by the Competition Bureau between 2009 and 2011, which resulted in criminal charges being laid against six companies and five individuals. The total value of calls for tender under investigation is $3.3 million. More details about this case can be found here.
- In June, a sixth individual was charged with bid-rigging for a private ventilation contract for a Montreal high-rise. Five individuals and eight corporations were similarly charged in 2010. Les Entreprises Promécanic Ltée has since pleaded guilty and was fined $425,000 in 2011. The group of accused allegedly coordinated their bids in order to pre-determine the winner of the contract and block out good-faith competitors. The total value of contracts subject to bid-rigging was approximately $8 million. More details about this case can be found here.
- In July, Corporate Research Group Ltd. pleaded guilty to bid-rigging in relation to real estate advisory service contracts with the Canadian federal government. The company was fined $125,000. More details about this case can be found here.
- In Ontario (Commission of Competition) v. Yellow Page Marketing, 2012 ONSC 927, the Ontario Superior Court of Justice held that five corporations and three individuals had engaged in a deceptive marketing scheme that duped consumers into entering contracts for listings in an online business directory, contrary to the Competition Act. The convicted persons were ordered to pay administrative monetary penalties totalling $9,035,000 as well as full restitution to the victims. More details about this case can be found here; full text of the case can be found here.
- In June, the Québec Court of Appeal upheld the Superior Court’s decision in Express Transaction Services Inc. v. Canada (Attorney General), 2012 QCCA 1093. The lower court dismissed an application challenging search warrants executed by the Competition Bureau and the RCMP in 2007. Their investigation into a $172 million fraudulent telemarketing scheme resulted in charges against five individuals and four corporations. Full text of the case can be found here.
United States of America
The U.S. Department of Justice (“DOJ”) Antitrust Division remained very active in the enforcement of criminal antitrust matters. For the 2012 fiscal year, the U.S. Antitrust Division’s statistics indicate that 67 criminal cases were filed with the imposition of US$1.1 billion total criminal antitrust fines. The average prison sentence between 2010~2012 was 25 months. Among the notable matters were the following:
- In September, a Taiwan-based liquid crystal display (“LCD”) producer AU Optronics Corporation was fined a total of US$500 million for its engagement in a conspiracy to fix the prices of thin-film transistor LCD panels sold worldwide. Two former executives were each sentenced to serve three years in prison and to pay a US$200,000 criminal fine. The US$500 million fine matches the largest fine imposed against a company for violating U.S. antitrust laws. LCD prices were fixed during monthly meetings with AU Optronics Corporation’s competitors secretly held in Taiwan. By the end of the conspiracy, the worldwide market for LCD panels was valued at US$70 billion annually. As a result of this ongoing investigation, eight companies have pleaded guilty or been convicted, totalling approximately US$1.39 billion in criminal fines. 13 out of the 22 charged executives have pleaded guilty or have been convicted. More details about this case can be found here.
- In January, Japanese supplier of automotive electrical components Yazaki Corporation, along with Denso Corporation, pleaded guilty for their involvement in several price-fixing and bid-rigging conspiracies in the sale of automotive parts to automobile manufacturers in the United States. The US$470 million criminal fine that Yazaki Corporation has agreed to pay is the second largest criminal fine obtained for a Sherman Act antitrust violation. Denson Corporation has agreed to pay a US$78 million criminal fine. Four executives of Yazaki will serve prison time ranging from 15 months to two years and each has agreed to pay a US$20,000 criminal fine. The group of co-conspirators agreed to allocate the supply of automotive parts on a model-by-model basis and to coordinate price adjustments requested by automobile manufacturers in the U.S. and elsewhere. In total more than US$748 million in fines have been obtained as a result of the DOJ Antitrust Division’s ongoing criminal investigation in the auto parts industry. More details about this case can be found here.
- In February, the former Chairman of Taiwanese aftermarket auto lights manufacturer Depo Auto Parts Industrial Co. Ltd. pleaded guilty for his participation in an international conspiracy to fix the prices of aftermarket auto lights. Towards the end of last year, one of the co-conspirators Maxzone Vehicle Lighting Corp. pleaded guilty for participating in the conspiracy and was sentenced to pay a US$43 million criminal fine. More details about this case can be found here.
- In April, an executive of Hitachi-LG Data Storage Inc. (HLDS), a joint venture between Hitachi Ltd. and LG Electronics Inc., pleaded guilty for his participation in a series of bid-rigging conspiracies for the sale of optical disk drives. Under the plea agreement he agreed to serve six months in prison and pay a US$25,000 criminal fine. HLDS pleaded guilty last year to 14 counts of violations under the federal antitrust laws and was sentenced to pay a US$21.1 million criminal fine. More details about this case can be found here.
- In April, Tokyo-based Fujikura Ltd. pleaded guilty and agreed to pay a $20 million criminal fine for its participation in a conspiracy to fix prices of automotive wire harnesses and related products installed in automobiles in the U.S. This was part of the investigation involving Yazaki Corporation that resulted in the second largest criminal fine against a corporation for violating U.S. antitrust laws. Seven of the executives involved have pleaded guilty and have been sentenced to serve a total of more than 122 months in prison. More details about this case can be found here.
European Union and the United Kingdom
The European Commission
The European Commission statistics indicate that for the year ending December 5, 2012, it decided on five cartel cases and imposed fines totalling €1.876 billion. This was a significant increase from 2011, which saw €614 million in fines imposed. Among the notable matters were the following:
- In December, 2012, the European Commission fined seven international groups of companies a total of €1.47 billion for participating in either one or both of two cartels in the cathode ray tubes (“CRT”) industry over a period of 10 years. The European Commission found that between 1996 and 2006 these companies fixed prices, shared markets, allocated customers between themselves, restricted their output and exchanged commercially sensitive information. One of the co-conspirators received full immunity from fines under the European Commission’s 2006 Leniency Notice, as it was the first to reveal the cartels’ existence to the Commission. Other companies received proportionate reductions of their fines for their cooperation in the investigation under the leniency program. More details about this case, including a breakdown of the fines can be found here.
- In March, 14 international groups of companies were fined €169 million in total for participating in four distinct cartels between 2002 and 2007, aimed at fixing prices and other trading conditions for international air freight forwarding services. The companies colluded on surcharges and charging mechanisms of important trade lanes, especially the Europe-USA and the China/Hong Kong-Europe lanes. Deutsche Post and its subsidiaries received full immunity from fines under the European Commission’s 2006 Leniency Notice for first revealing the cartels to the European Commission. Four other groups of companies received reductions of fines ranging from 5 to 50%, which reflected the timing of their cooperation and the quality of evidence they provided to help the Commission to prove the respective cartels. More details about this case, including a breakdown of the fines can be found here.
- In March, nine European producers of windows mountings were fined a total of €86 million for operating a cartel between 1999 and 2007, whereby they agreed to inflate prices of windows mounting. Seven of the producers were German. One of the German producers received full immunity from fines under the Commission’s Leniency Notice for first revealing the cartel to the European Commission. Two other producers’ fines were reduced by 45% and 25% respectively for their cooperation in the investigation. More details about this case, including a breakdown of the fines can be found here.
- In June, two groups of producers of water management products used in heating, cooling and sanitation systems were fined a total of €13.6 million, for operating together with another company a cartel in the German market from June 2006 to May 2008. For a short period in 2006 the cartel also expanded their anti-competitive activities to 13 other EU member states. The 3rd company was granted full immunity under the European Commission’s Leniency Notice. More details about this case, including a breakdown of the fines can be found here.
United Kingdom Office of Fair Trading
- In April, the Office of Fair Trading (“OFT”) found British Airways (“BA”) and Virgin Atlantic Airways (“VAA”) to have engaged in anti-competitive practices in relation to the pricing of passenger fuel surcharges, contrary to the Competition Act 1998. BA was fined £58.5 million. VAA revealed the cartel to OFT and was not fined pursuant to OFT’s leniency policy. The fine on BA was reduced from the level of fine originally agreed upon between the parties in 2007. Previously, the OFT separately brought criminal proceedings under the Enterprise Act 2002 against four BA executives, but these proceedings were discontinued in 2010. More details about this case can be found here.
Japan Fair Trade Commission
- In January, the Japan Fair Trade Commission (“JFTC”) issued surcharge payment orders against Yazaki Corporation, Sumitomo Electric Industries, and Fujikura Ltd., all manufacturers of automotive wire harness and related products, for violation of Article 3 of the Antimonopoly Act (“AMA”). The companies engaged in bid-rigging of the procurement process by automobile manufacturers. Cease and desist orders were also issued to stop the cartel activities and to implement preventative measures. The total amount of surcharge payment was approximately 12.9 billion yen (US$138 million). More details about this case, including a breakdown of the fines can be found here.
- In February, the JFTC issued a cease and desist order and surcharge payment order against EDION Corporation (EDION) for abusing its dominant bargaining position over certain suppliers. EDION allegedly instructed its suppliers to carry out various non-technical and tedious tasks to meet its stringent industry standards. The total amount of the surcharge payment was about 4.05 billion yen (US$43 million). More details about this case can be found here.
- In November, the JFTC issued cease and desist orders and surcharge payment orders against seven automotive parts manufacturers for engaging in bid-rigging. The companies conspired in procurements of generators, starters, windshield wiper systems, radiators and electrical fans by automobile companies. The total amount of surcharge payment was about 3.4 billion yen (US$36 million). More details about this case, including a breakdown of the fine be found here.
Korea Fair Trade Commission
- In March, the Korea Fair Trade Commission (“KFTC”) issued a remedial order to several South Korean instant noodle manufacturers (Nongshim, Samyang Foods Co. Ltd, Ottogi Co. Ltd, and Korea Yakult Corporation) and fined them a total of KRW 135.4 billion (US$125 million) for participating in a cartel to raise market prices of instant noodles between 2001 and 2010. Most of the fines (KRW 108 billion, or approximately US$100 million) were attributed to Nongshim, who was the leader of the cartel. More details about this case can be accessed through the press release page of the KFTC website.
- In December, the KFTC raised the upper limit of compensation to reward those who report anti-competitive practices to US$2.7 million. The rewarding mechanism is based on the amount of fines ultimately imposed on the violators and the quality of evidence provided by the whistle-blower. More details about this amendment can be accessed through the press release page of the KFTC website.
The State Administration of Industry and Commerce (China)
- Since the Anti-Monopoly Law (“AML”) came into force on August 1, 2008, the State Administration of Industry and Commerce (“SAIC”) has authorized ten provincial/municipal authorities to investigate 18 competition matters, and eight of them have resulted in sanctions. 17 out of the 18 cases involve anti-competitive agreements between companies. One-third of the cases involve the construction industry.
- In 2012, the province of Liaoning imposed 16.4 million RMB (US$2.6M) in fines for cartel activities in the cement industry; the province of Hunan dealt with the first competition case involving insurance companies; and the province of Guangdong enforced the AML to prevent a municipal government from engaging in anti-competitive behaviours.
Competition Commission of India
- In June, the Competition Commission of India imposed approximately US$1.1 billion in penalties on the country’s 11 major cement manufactures for illegal cartel activities and abuse of dominance, contrary to the Competition Act, 2002. The fine was fixed at 50% of their net profit between 2009 and 2011. The case was brought by the Builders Association of India, but was ultimately investigated and enforced by the Director General of the Competition Commission. Full text of the decision can be found here.
Australia and New Zealand
The Australian Competition & Consumer Commission
- The Australian Competition & Consumer Commission(“ACCC”) continued its prosecution of participants in the Air Cargo cartel cases. The ACCC fined five airlines in 2012: Malaysia Airlines for AUD$6 million; Thai Airways for AUD$7.5 million; Emirates for AUD$10 million; Cathay Pacific for AUD$11.25 million; and Singapore Airlines for AUD$11.75 million.
- In line with other international competition agencies, in December the ACCC initiated legal proceeding against Yazaki Corporation and its local subsidiary Australian Arrow Pty Ltd. Although this is a civil proceeding, ACCC’s allegations against Yazaki Corporation and its Australian subsidiary are the same allegations made by criminal prosecutors in other jurisdictions, namely cartel conduct, market sharing and price fixing. The illegal activities were in relation to the supply of wire harnesses to automobile manufacturers in Australia. More details about this proceeding can be found here.
The New Zealand Commerce Commission
- In July, Korean Airlines and Emirates settled for NZ$3.5 million and NZ$1.5 million respectively for engaging in price fixing in the air cargo market that affected the price of cargo flown into New Zealand. In December, Singapore Airlines Cargo PTE settled for NZ$4.1 million. Details about these two cases can be found here and here.
- In August, the Court of Appeal of New Zealand ruled to widen the Commerce Commission’s claims against Australian packaging company Visy Board Pty Ltd, for its part in an alleged cardboard packaging price-fixing cartel. The Court held that the Commerce Act enables the Commission to enforce against a person that engages in conduct offshore, if that person is a resident of New Zealand or is carrying on business in New Zealand, and their conduct is targeted towards New Zealand. More details about this case can be found here.