The Competition Bureau also recently issued a Draft Information Bulletin on Sentencing and Leniency in Cartel Cases for public consultation.1 The Bulletin sets out the factors that the Commissioner of Competition and the Bureau will consider in making recommendations to the Director of Public Prosecutions (DPP) that those accused of criminal cartel and bid-rigging offences under the Competition Act2 should be treated leniently in sentencing.
The Bureau’s goal is to establish a transparent and predictable Leniency Program to complement the Bureau’s existing Immunity Program. Under the Immunity Program, full immunity from prosecution is available, subject to certain conditions, to the first business organization or individual that comes forward to assist the Bureau with an investigation into the activities of a cartel or bid-rigging scheme – in other words, full immunity is available to the “first in.”
In the past parties who co-operated with the Bureau’s investigations in a timely and valuable way have also qualified for lenient treatment in sentencing. The formal Leniency Program clarifies the terms on which leniency will be made available in the future, on the expectation that parties will then be more likely to come forward and cooperate with investigations.
The Bulletin is divided into three parts. The introduction provides an overview of how the Bureau, the Act and the cartel provisions operate, and the respective roles of the Commissioner of Competition, the DPP and the Courts in enforcing the Act. The second part of the Bulletin sets out the general principles of sentencing that the Courts will consider, and which the Bureau therefore considers in the course of making sentencing recommendations. The third part of the Bulletin describes the more specific terms on which the Bureau will recommend a reduced sentence for participants in the Leniency Program as a result of cooperation and assistance during the investigation. This article focuses on the second and third parts of the Bulletin.
Sentencing principles: economic harm, aggravating factors, mitigating factors
The economic harm associated with cartel and bid-rigging activities serves as a starting point for a recommended fine. It has a quantitative dimension (higher prices for consumers) as well as a qualitative dimension (the stifling of competition and innovation in the economy as a whole). Because economic harm is difficult to quantify, however, the Bureau uses a proxy: the “volume of commerce” related to the cartel activities multiplied by an “overcharge” factor. The “volume of commerce” is the aggregate value of sales of the product in question, in Canada, over the term of the offence. The overcharge is the amount of money paid by victims of the cartel above what they would have paid if the cartel was not in effect. To calculate the overcharge, the Bureau uses a proxy of 20 per cent of the volume of commerce. (While numerous studies estimate that the likely overcharge is closer to ten per cent of the volume of commerce, the Bulletin suggests that the lesser figure would not capture the qualitative effects of the harm caused, nor produce an adequate deterrent.)
Once the Bureau has established an estimate of the economic harm caused, it will adjust its recommended sentence to reflect the aggravating or mitigating circumstances of the case. Aggravating factors such as whether the party instigated or managed the cartel, or coerced others into furthering its activities will weigh in favour of a harsher sentence.
The Bulletin also highlights the Bureau’s view that a significant deterrent in cartel cases is the exposure to criminal prosecution for the individuals involved. Individuals accused are liable to fines or imprisonment (to a maximum of five years) or both. The factors that may be weighed in the Bureau’s sentencing recommendations with respect to individuals include the degree to which an individual has profited from the cartel’s activities, whether that person has been involved in similar activities in the past, and whether he or she is being punished in other ways (for example, through loss of employment).
The Leniency Program
The overarching principle of the Leniency Program is that leniency in sentencing should be directly proportionate to the contribution a party makes to the Bureau’s investigations. The following basic conditions apply:
- the DPP must not have filed charges against the party;
- the party must have terminated its participation in the illegal activity;
- the party must cooperate fully with the Bureau’s investigation and any subsequent prosecution by the DPP; and
- the party must admit that it has engaged in anti-competitive conduct which may constitute an offence under the Act, and agrees, if charged, to plead guilty and to be sentenced for its participation in the illegal activity.
The Bureau prioritizes both the timeliness and value of cooperation. This is evaluated according to the utility of the evidence that a party can provide, and the quality of that cooperation including how quickly a party fully cooperates. A party seeking leniency must satisfy the Bureau that it has taken all appropriate steps to locate and produce relevant evidence, including full disclosure if it is suspected that individuals have hidden or destroyed evidence.
A party may also qualify for “Leniency Plus.” That is, a party that is not “first in” with respect to a particular offence may still be granted immunity under the Bureau’s Immunity Program if it provides evidence of a new offence of which the Bureau was not aware. In these circumstances, the party may qualify for immunity with respect to the new offence, as well as enhanced leniency with respect to the original offence.
The first leniency applicant who meets (and continues to meet) the Bureau’s qualifications is eligible for a reduction of up to 50 per cent of the fine that would otherwise be recommended. Where the party is a business organization, the Bureau will also typically recommend that no separate charges be laid against the applicant’s directors, officers and employees (subject to exceptions in extreme cases of wrongdoing). Subsequent leniency applicants may qualify for reductions in fines of up to 30 per cent, and up to 50 per cent where their evidence has exceptional value (or in cases where the first leniency applicant fails to satisfy the requirements).
The Bulletin describes five steps for leniency applications, similar to those applicable to immunity:
- contacting the Bureau;
- proffering evidence;
- qualifying for a conditional lenient treatment recommendation;
- full and frank disclosure; and finally;
- qualification for a final sentencing recommendation to the DPP.
Contact with the Bureau is usually made by the party’s legal representative. The proffer should follow as soon as possible, typically within thirty days. The proffer is usually made on a “without prejudice” basis, and must include a detailed description of the illegal activity and sufficient information for the Bureau to determine whether the party qualifies for the leniency. The Bureau may request (again, on a without prejudice basis) the opportunity to review the documentary evidence and to interview witnesses. If the Bureau is satisfied with the proffer, it will recommend lenient treatment, conditional on the party’s ongoing cooperation with its investigation, which will include full and frank disclosure of the party’s evidence.
Finally, the Bureau will treat as confidential the identity of the party requesting leniency (and the information provided by the party in furtherance of that request) except where that information is already public, or where disclosure is required by law to a Canadian law enforcement agency for the purposes of the administration of enforcement of the Act, is necessary to prevent the commission of a serious criminal offence, or is authorized by the party.