Earlier this spring, the Canadian Competition Bureau (the "Bureau") released its Draft Information Bulletin on Sentencing and Leniency in Cartel Cases (the "Draft Bulletin," is available online at: http://www.competitionbureau.gc.ca/epic/site/cb-bc.nsf/en/02663e.html ). The Draft Bulletin is designed to establish the Bureau's Leniency Program for cartel cases, and to complement the Bureau's Immunity Program. Public comments on the document are being requested through July 25, 2008.

The Draft Bulletin sets out the factors that the Bureau considers prior to making sentencing recommendations to the Director of Public Prosecutions (the "DPP") for those accused of criminal cartel offences. It also establishes the conditions a party must meet to be, and remain, eligible for the leniency program.

Sentencing Principles

For an accused corporation, sentencing recommendations generally take the form of a range of fines and a prohibition order. For individuals, the punishment may be a fine or imprisonment to a maximum term of five years.

Sentencing for cartel cases begins with the same fundamental principles as those used for other criminal cases: the sentence must be proportionate to the offence and must reflect the degree of responsibility of the offender. Aggravating and mitigating factors can influence the sentence.

In cartel cases, sentencing recommendations begin with an assessment of the magnitude of economic harm caused by the cartel. This is accomplished by multiplying the volume of commerce in Canada affected by the cartel, by an assent of the "overcharge" – the extra amount allegedly paid by victims as result of the cartel's activities.

Volume of Commerce

The affected volume of commerce is calculated by aggregating the value of each cartel participant's sales of the product in question, over the time period in which the cartel was active. In situations where one or more parties did not participate in the market as a result of the cartel, the Bureau will estimate the resulting economic harm.

In most cases, only direct sales in Canada will be used to determine volume of commerce. However, the Draft Bulletin acknowledges that it may be appropriate to include indirect sales in some situations to properly reflect the effects in Canada.

Overcharge Factor

The Bureau has determined that 20% of the volume of commerce affected is an generally appropriate overcharge factor. This takes into account economic effects on prices, as well as other effects on the market such as the exclusion of consumers due to higher prices.

The Draft Bulletin also indicates that the Bureau considers a 20% overcharge factor an effective deterrent; fines should be greater than the illegally obtained "overcharge" benefit, so as to become more than simply a cost of doing business.

Aggravating and Mitigating Factors

The Criminal Code requires courts to increase or reduce a sentence by taking into account aggravating and mitigating circumstances. The Draft Bulletin identifies the aggravating circumstances normally considered by the Bureau when making a sentencing recommendation: recidivism; coercion or instigation; large corporate size and/or market share; degree of planning, covertness and complexity of cartel activity; obstruction (particularly when not separately prosecuted); lengthy duration of illegal activity; nature of the victims (vulnerable or government/public agency); and high level of senior officer involvement.

Mitigating factors include: cooperation with authorities/acceptance of responsibility; restitution for victims; and early termination of conduct.

Prohibition Orders

In addition to sentencing recommendations, the Commissioner often requests that the DPP seek a prohibition order, under s. 34 of the Competition Act, prohibiting a business or an individual from continuing or repeating the offence.

Leniency Program

The Draft Bulletin also establishes the process and eligibility requirement for the Bureau's Leniency Program.

Conditions for Eligibility

Designed to complement the Bureau's established Immunity Program (as discussed in Lang Michener's Competition & Antitrust Alert dated October 19, 2007), the Leniency Program is for any cartel participant who is not a "first-in" applicant and, therefore, is not eligible for immunity but who, nonetheless, may be eligible for lenient treatment. This includes a reduction in fines or sentences.

Leniency may be available where the party is no longer participating in the illegal cartel activity; cooperates fully with the Bureau's investigation and any DPP prosecution; and admits that it has engaged in the offending anti-competitive conduct. If the DPP charges the applicant, they must agree to plead guilty and be sentenced.

Leniency Factors Considered

Timeliness

Prior to recommending to the DPP that a party receive lenient treatment, the Commissioner will consider the timeliness of a party's cooperation and the value of their evidence. Generally, earlier leniency applicants will be able to provide evidence that goes beyond duplicating or supporting evidence the Bureau already possesses. The Bureau also takes into account how fully an applicant cooperates and whether the party helps advance the Commissioner's investigation.

Value

The Bureau will then assess whether an applicant's evidence provides assistance in establishing that the applicant and others participated in any illegal cartels in Canada. This includes conducting internal investigations, producing evidence and satisfying the Bureau that they have taken all appropriate steps to locate evidence.

Reduction of Sentences

The first leniency applicant that meets, and continues to meet, the conditions of the Leniency Program is eligible for a reduction of up to 50% of the fine that would have otherwise been recommended.

Where the first leniency applicant is a business organization, the Bureau will typically recommend that individuals (directors, officers or employees) of the organization not be charged separately, provided they agree to cooperate with the investigation.

Subsequent leniency applicants may benefit from reductions of up to 30% of the fine that would have otherwise been recommended.

Leniency Process

The Draft Bulletin sets out a five-step process to obtain leniency.

1. Contact the Bureau

A request for leniency is made by communicating with the Senior Deputy Commissioner of Competition, Criminal Matters.

2. The Proffer

Applicants under the Program must provide the Bureau with a proffer, describing in detail the activity for which it seeks immunity or lenient treatment. Proffers are typically provided by an applicant's legal counsel, on a hypothetical basis. It must include a detailed description of the illegal activity and provide enough information for the Bureau to determine whether an applicant is eligible for leniency.

3. Conditional Lenient Treatment Recommendation to the DPP

Where the Bureau determines that an applicant's contribution to the investigation warrants lenient treatment, it will make such a recommendation to the DPP. The Draft Bulletin cautions that this recommendation is conditional upon a party's continuing cooperation and that the DPP retains full discretion as to whether or not it will follow the lenient treatment recommendation.

4. Full and Frank Disclosure

The Leniency Program is a tool for the Bureau and as such, a leniency applicant must provide full, frank and truthful disclosure of all non-privileged information, records or other materials in its possession, under its control or available to it, wherever located, that in any manner relate to the anti-competitive conduct for which the application is brought. Facts may not be misrepresented. Witnesses will likely be interviewed and may be called upon to testify.

5. Final Sentencing Recommendation to the DPP

Where the applicant fulfills its obligations, the Bureau will make a final recommendation to the DPP for leniency in sentencing.

Confidentiality

Finally, the Draft Bulletin concludes with a reminder that the Bureau holds as confidential the identities of the parties seeking immunity or leniency under the Leniency Program. The only exceptions to this treatment would be where the identity or the information has already been made public or where disclosure is required under law. If faced with a request for documents resulting from a private action under Section 36 of the Act, the Bureau requires a court order prior to providing information. In the event of such an order, the Bureau will take all reasonable steps to protect the confidentiality of the information, including seeking protective court orders. 

This article appeared in Competition & Antitrust Brief Summer 2008.