Competition law litigation can be very complex, time consuming for management and employees, and expensive, and can result in emotional stress for individuals charged with competition offences. It is simply good business for all firms to have a credible and effective Competition Law Compliance Program, to enhance their understanding of what constitutes acceptable behaviour so that legitimate competitive practices are vigorously pursued, without contravening the law.
Competition Law Enforcement
Competition law is found primarily in the Competition Act, a federal statute applicable to most businesses. The Act addresses, among other subjects, conspiracy (including price fixing), bid-rigging, price discrimination, predatory pricing, price maintenance, misleading advertising, refusal to deal, exclusive dealing, mergers and abuse of dominant position. The Act creates criminal offences dealt with through the courts, civil matters reviewable by the Competition Tribunal, and the right to bring civil lawsuits, including class actions, in the superior courts of the provinces or the Federal Court.
The Commissioner of Competition, assisted by the Competition Bureau, investigates complaints of violations of the Act. Complaints may have many sources, including customers, competitors, disgruntled former employees and the public. The Commissioner has broad investigative powers.
The Director of Public Prosecutions conducts prosecutions of alleged offences. Convictions for contraventions of the Act can have serious consequences for corporations and individuals, including significant fines, imprisonment, recovery of sizeable damages and administrative penalties, and wide ranging remedial orders.
Dealing effectively with competition issues requires an understanding, not only of the law, but of the investigative processes and the options available to resolve contentious issues, and careful preparation for any proceedings before the courts or the Tribunal. In recent decades, economic analysis has played a significant role in the assessment and resolution of competition law violations. The Competition Bureau includes many economists. Interaction with the Bureau can be aided by economic input in areas such as market definition analysis, and in dealing with concepts such as abuse of dominance, market power and anti-competitive conduct. The careful selection of expert economists is imperative.
There are usually three phases in the enforcement process: a preliminary examination phase, a formal inquiry and a prosecution or application to the Tribunal. The preliminary examination involves fact-finding to verify the circumstances alleged in the complaint, gathering and considering further evidence, and conducting the required economic and other analyses.
Court Orders and Search Warrants
A formal inquiry can trigger court orders to compel oral testimony, and require the production of records, including electronic records, and written returns of information under oath. This is in addition to issuing search warrants. Compliance requires careful consideration, as the gathered information will often determine the future course of the litigation.
The Commissioner has authority, with judicial authorization, to use wire taps in investigations of bid-rigging, conspiracy and deceptive telemarketing. The Commissioner uses wiretaps infrequently, and only when other means of evidence gathering are not available. Wiretaps were used recently in a high profile case in Quebec resulting in criminal charges of price-fixing of gasoline at the retail level.
The whistle-blowing provisions of the Act encourage people to inform on competition law offenders. Protection is provided to persons who have knowledge that a criminal offence has been, or is about to be, committed, if they have not been a participant. Such persons may inform the Commissioner and gain statutory protection from reprisals from their employers.
Immunity from Prosecution and Leniency
The Bureau’s Immunity Program allows applicants who have participated in a criminal offence to seek immunity or lenience in return for their cooperation. In certain circumstances, they can approach the Bureau and request immunity from prosecution in return for cooperating with its investigation and any resulting prosecutions.
Under the Immunity Program, the Commissioner will recommend to the Director of Public Prosecutions that immunity be granted to the first person who comes forward and satisfies the identified criteria. Generally speaking, being “first-in” is essential to obtaining immunity. However, parties subsequently coming forward may request other forms of lenience, such as reduced fines, in return for cooperation. The Immunity Program has become one of the most effective enforcement tools of the Bureau.
Key areas of enforcement under the Act are conspiracy, bid-rigging, price maintenance, mergers and abuse of dominant position. Conspiracy is an agreement which “unduly” (significantly or substantially) lessens competition, facilities or the manufacture or production of products. Bid-rigging is an agreement not to submit a bid or tender in response to a request, or the submission of bids or tenders by two or more bidders where their agreement is not made known. Price maintenance involves attempts to influence the prices of the products of other persons, or the refusal to supply a product because of a person’s low pricing policy.
The Bureau must be notified in advance of certain large mergers. The Bureau analyzes such mergers to determine whether they are likely to prevent or lessen competition substantially. This test, along with whether there is substantial control of a class of business and a practice of “anti-competitive acts”, is also applied in the Bureau’s consideration of abuse of dominant position.
Although enforcement agencies are responsible to enforce the entire Act, they give certain forms of conduct greater attention, due to their recognized adverse effects. In recent years, cartel activity (which often involves price-fixing and allocation of markets or customers) has been a focus of attention, along with misleading advertising and deceptive telemarketing activities.
A most important development in private competition litigation has been the appearance of a plaintiffs’ bar, consisting of a substantial number of lawyers pursuing class actions dealing with alleged anti-competitive conduct. The result has been some very large settlements and a considerable increase in competition litigation.
Avoidance - Not Evasion - Competition Act Compliance
To have an efficient and credible Competition Law Compliance Program, a firm must demonstrate its commitment to conducting business in conformity with the law. Senior management must identify the principal competition risks faced by the business and implement effective systems to manage them. The program must be tailored to the business’ operation. The program must be updated to reflect significant changes in the business, the law, the industry and enforcement officials’ policies. Those who are in a position to potentially engage in, or be exposed to; conduct in breach of competition laws must be trained in this area. Monitoring, auditing and reporting mechanisms are crucial to the success of a Compliance Program. As with most policies, a consistent disciplinary procedure for breach of the program is imperative, not only for deterrence, but to reflect the business’ corporate policy against such conduct.
A Compliance Program does not immunize businesses or individuals from competition enforcement action. However, apart from its deterrent effect, it can be important when competition officials consider remedial action. The Bureau’s decision on whether to pursue suspected violations may factor in consideration of a credible and effective Compliance Program. In some cases, a Compliance Program may also assist in providing a due diligence defence.
A Compliance Program makes good sense, is good business and can avoid painful litigation.