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Investigations

Initiating an investigation

Who can initiate an investigation of potential cartel conduct?

It is the commissioner of competition’s responsibility, through the Competition Bureau, to investigate potential cartel conduct.

If an investigation is initiated by complainants or third parties, what rights (if any) do they have?

Generally, complainants or third parties have no specific rights as bureau inquiries are conducted in private. However, where a formal complaint is initiated under Section 9 of the Competition Act (six-person Canadian resident complaint under oath), the complainants are entitled to be informed of the progress of the inquiry.

What obligations does a company have on learning that an investigation has commenced?

A company should preserve all relevant records, anticipating that it may be subject to a production order or search by the bureau as well documentary production obligations in the event of civil litigation. A company will also have an obligation to comply with court orders authorising the gathering of information (such as a production order under Section 11 or search and seizure under Section 15 of the Competition Act), unless the order is otherwise challenged.

What obligations does a company have if it believes that an investigation is likely?

See above.

What are the potential consequences of failing to act or delaying action?

There can be adverse consequences for failing to preserve relevant information, including being subject to various obstruction offences under the Competition Act (Sections 64 and 65). In civil litigation, the consequence could be an adverse inference finding, presuming that the destroyed evidence would have been unfavourable to the party who destroyed it.

Formal stages of investigation

What are the formal stages of and approximate timeframe for investigations?

The bureau may investigate cartel behaviour through informal examinations and formal inquiries commenced under the act. The main difference between the two paths is that the certain evidence gathering tools under the act are only available after a formal inquiry has been commenced. It is common for the bureau to carry out an informal inquiry as a precursor to formal inquiry under the act. For criminal matters, the commissioner may commence a formal inquiry whenever he or she has reason to believe that a person has contravened an order made under certain provisions of the act or a criminal offence under the act has been, or is about to be, committed. There is no general timeline for these inquiries, and there are no statutes of limitation in relation to the conspiracy provisions.

The bureau also has immunity and leniency programmes, which are tools for detecting and investigating cartel offences under the act. Under the immunity programme, the first party to disclose to the bureau an offence not yet detected or to provide evidence leading to the filing of charges may receive immunity from prosecution from the Public Prosecution Service of Canada (PPSC) as long as the party cooperates with the bureau. The bureau’s leniency programme complements its immunity programme. Under the leniency programme, the bureau may recommend to the PPSC that cooperating persons who have violated the cartel provisions under the act, but who are not eligible for a grant of immunity, may be considered for lenient treatment in sentencing.

Investigative powers

What investigative powers do the authorities have?

The bureau has access to considerable evidence gathering powers under the Competition Act and the Criminal Code. Notably, it can obtain court authorisation for:

  • production orders;
  • search warrants; and
  • wiretaps.

Section 11 orders are essentially subpoenas, which are obtained and used by the commissioner to obtain information in the possession of a person (including a corporation) that is likely to have information that is relevant to a matter under inquiry pursuant to Section 10.

Information can be obtained on the issuance of a Section 11 order in the following ways:

  • oral examinations, under oath, of individuals on any matter that is relevant to the inquiry;
  • the production of records, including electronic records; and
  • written returns requiring a person to create or prepare detailed information under oath and provide it to the commissioner.

Section 11(2) also explicitly contemplates an order compelling a Canadian corporation to produce records in the possession of a corporation’s Canadian or foreign affiliates, where the issuing judge is satisfied that such affiliate has records relevant to the inquiry. As such, under Section 11(2), the commissioner can seek a court order requiring a Canadian subsidiary to produce records of its foreign parent or sister companies.

Section 15 also authorises the commissioner to apply ex parte to a judge for a warrant allowing bureau officers to conduct searches and seizures, including searches of computer systems and the seizure of electronic documents. 

The commissioner can also intercept and use judicially authorised wiretaps under Part VI of the Criminal Code. A judge who gives an authorisation for a wiretap may, at the same time, issue a warrant or make a production order under the code.

What is the geographic reach of public enforcement actions?

The geographic reach of public enforcement actions is broad. The bureau’s cartel investigations relate to both domestic and international cartel activity. Section 11(2) explicitly contemplates an order compelling a corporation in Canada to produce records in the possession of the corporation’s Canadian or foreign affiliates, where the issuing judge is satisfied that such affiliate has records that are relevant to the inquiry. As such, under Section 11(2), the commissioner can seek a court order requiring a Canadian subsidiary to produce records of its foreign parent or sister companies.

A warrant issued under Section 15 may be enforced anywhere in Canada, irrespective of the court issuing the warrant.

When is court approval required to invoke these powers?

The commissioner is required to obtain court approval in order to use these evidence-gathering powers. 

Orders made pursuant to Section 11 can be sought ex parte by the commissioner from a court in the course of a formal inquiry commenced under Section 10.

The act authorises the commissioner to apply ex parte to a judge for a warrant allowing officers of the bureau to conduct searches and seizures. Before issuing a warrant a judge must be satisfied that there are reasonable and probable grounds to believe that one of the act’s provisions has been, or is about to be, breached, and that there will be relevant evidence on the searched premises. Warrantless seizures are permitted in “exigent circumstances”, where the delay necessary to obtain a warrant under Section 15(1) would result in the loss or destruction of evidence.

In order to obtain wiretap authorisation, the commissioner must submit a sworn affidavit in accordance with the requirements of the Criminal Code. The affidavit must set out certain information, including:

  • the facts relied on to justify the belief that the authorisation should be given, together with details of the alleged offence;
  • the type of private communication to be intercepted; and
  • how and where the officers propose to accomplish the interception.

Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?

Yes, searches of business and personal premises may be authorised by Section 15. The searches are normally carried out by bureau officers. The bureau is not required to wait for legal advisers to arrive before commencing a search, but will typically give legal advisers a short but reasonable amount of time to arrive.

What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?

The subjects of a Section 11 order or a Section 15 search warrant must comply fully with the authorities. Those in control of premises to which a Section 15 search warrant has been issued, on presentation of the warrant, are required by law to permit entry to the person(s) named in the warrant to enter the premises, search the premises and copy or seize anything they are so authorised to copy or seize by the warrant.

Failure to comply with a Section 11 order or a Section 15 search warrant can constitute obstruction of justice contrary to the Criminal Code (Section 139(2)) and the Competition Act (Sections 64 and 65). Obstruction under the Criminal Code is an indictable offence which could result in imprisonment for up to 10 years. Any person found to have engaged in obstruction under Sections 64 or 65 is guilty of an offence and liable to a conviction on either an indictment or a summary conviction. A person convicted under an indictment is liable to a fine in the discretion of the court and/or imprisonment for a term not exceeding 10 years. A person convicted under a summary conviction is liable to a fine not exceeding C$100,000 and/or imprisonment for a term not exceeding two years.

Officers, directors or agents of a corporation can be liable for that corporation’s obstruction under certain circumstances. The penalties for corporation officers, directors or agents are the same as those provided for in respect of the offence committed by the corporation.

Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?

Yes.

Section 19 sets out the procedure for dealing with records required to be produced pursuant to Sections 11 and 15 but that may be subject to claims of solicitor-client privilege. Such documents cannot be seized immediately by officers under a search warrant. They must be sealed pending an assessment of the validity of the privilege claim within a limited time. 

Regarding wiretaps, in order to protect against any potential violation of solicitor-client privilege, the affidavit accompanying the application must fully disclose all circumstances to enable the receiving judge to stipulate terms and conditions which will enable the protection of privileged communications.

There are unique features of in-house counsel’s position and functions that complicate the application of solicitor-client privilege to the documents they prepare and distribute. Solicitor-client privilege protects legal advice but does not protect advice on purely business matters, even when prepared by a lawyer. This distinction can be complicated when in-house counsel has multiple corporate responsibilities, such as being a corporate secretary or a member of the board of directors. Courts may refuse to protect a communication from in-house counsel with solicitor-client privilege if the communication was circulated in the in-house counsel’s capacity as a business executive rather than a lawyer.

Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?

Canada’s Charter of Rights and Freedoms (eg, the right against unreasonable search and seizure, the right against self-incrimination) imposes limitations on investigatory powers. As such, the exercise of such powers must comply with the charter.

What is the process for objecting to an authority’s exercise of its claimed powers?

A party may seek to vary or set aside a court order authorising an evidence-gathering mechanism, such as a Section 11 order, a search and seizure under Section 15 or a wiretap.

Publicity and confidentiality

What information about investigations will be made publicly available and at which stage(s) of the process?

The bureau has a statutory duty, contained in Section 10(3), to conduct its inquiries privately and to maintain the confidentiality of the information it receives. However, in order to investigate and obtain relevant information from third parties, the bureau may have to inform third parties about the investigation, in general terms, in order to explain why information is needed from them. The bureau may rely on the exception to confidentiality in Section 29 which permits it to communicate information for the purpose of administering or enforcing the act. However, in practice, the bureau is reluctant to disclose any confidential information to third parties when conducting investigations.

Information used to obtain a Section 15 warrant (and for search warrants under the Criminal Code) are presumed to be publicly accessible unless a court orders otherwise. When applying for a search warrant the commissioner may seek a sealing order denying access to, and the disclosure of, information related to the Section 15 search warrant pursuant to the sealing order provisions for warrants and productions under Section 487.3(2)(a) of the code. 

Is any information automatically confidential and is confidentiality available on request?

Section 29 is the primary provision dealing with the treatment of confidential information in the possession of the bureau. Section 10(3) stipulates that all bureau inquiries are to “be conducted in private”. Section 29 requires the following, among other things, to be kept confidential:

  • the identity of any person from whom information was obtained pursuant to the act;
  • any information obtained pursuant to Sections 11, 15 or 16; and
  • any information provided voluntarily pursuant to the act.

This information may be disclosed where:

  • authorisation has been given by the person who provided the information;
  • the information has already been made public;
  • disclosure is made to a law enforcement agency; or
  • disclosure is made in order to administer the act.

The bureau takes the position that Section 29 allows the agency to share confidential information with foreign competition law enforcement agencies on the grounds that such exchanges are made for the purpose of enforcement or administration of the act.

International cooperation

Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?

Yes. Enforcement of Canadian competition law, particularly in relation to cartel enforcement, benefits from a high degree of international cooperation. Such cooperation appears to have strengthened over the past several years, particularly through the auspices of the International Competition Network. There is an especially close working relationship between the bureau and antitrust authorities in the United States and the European Union.

Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?

The bureau takes the position that Section 29 of the act allows it to share confidential information with foreign competition law enforcers on the grounds that such exchanges are made for the purpose of the act’s administration or enforcement and, consequently, the bureau does not require waivers to do so. However, the jurisdictions with which the bureau shares information may themselves require waivers.

Regarding leniency applications under the bureau’s immunity and leniency programme, the bureau expects a waiver to be given to agencies in those jurisdictions to which the applicant has made similar applications for immunity or leniency authorising such agencies to communicate and share information with the bureau.

Decisions

How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?

Other than through the bureau’s leniency and immunity programme, the commissioner has two general options to resolve a cartel investigation:

  • discontinue the investigation (ie, formal inquiry); or
  • refer the matter to the PPSC with a recommendation that criminal charges be laid. 

The PPSC will then independently decide whether to lay charges, and therefore whether a prosecution is in the public interest. 

If charges are laid, the ensuing criminal proceeding may be resolved by a negotiated plea agreement and sentence – these require court approval.

What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?

At any stage of a criminal proceeding the parties may resolve the matter by a court-approved negotiated plea agreement and sentence. Frequently, the crown and defence will jointly present to the court a plea agreement and joint submission on penalty. A court should only deviate from the recommendations of a joint submission where accepting the recommendation would either be contrary to the public interest or would bring the administration of justice into disrepute.

If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?

The criminal proceeding will be adjudicated by way of a criminal trial.

Which party must prove its case? What is the relevant standard of proof?

The crown has the burden of proving each of the elements of the cartel offence beyond reasonable doubt.

Is there a hearing? If so, what is the process for submitting evidence and testimony?

Yes. The hearing takes the form of a criminal trial.

What are the accused’s procedural rights?

The accused has the procedural right traditionally afforded to an accused in a criminal trial, such as the right to remain silent (ie, not to testify) and the requirement that the crown prove all of the elements of the cartel offence beyond a reasonable doubt.

Appeal process

What is the appeal process?

There is generally an appeal as of right arising from a judgment in a criminal proceeding. The jurisdiction of courts of appeal to hear appeals is entirely statutory. Appeals arising from convictions for indictable offences under the Competition Act are brought to the Court of Appeal for the province in which the criminal proceeding was prosecuted.  

To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?

There are distinctions between appeals by the accused and the crown. An accused may appeal the conviction on any ground that involves a question of law alone as of right and on any ground that involves a question of fact, or mixed law and fact, with leave of the court of appeal. The Crown may appeal against a judgment or verdict of acquittal on any ground of appeal that involves a question of law. The crown may not appeal against a judgement or verdict of acquittal on any ground that involves a question of fact or mixed law and fact.

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