Introduction

Bill C-10, the Safe Streets and Communities Act, is relatively well known for the significant impact it will have on a number of criminal statutes, including the Youth Criminal Justice Act and the Criminal Code.  Lesser known, however, is the important effect it will have on Canadians (and non-Canadians) charged with violating the conspiracy and bid-rigging provisions of the Competition Act. This effect, combined with the Competition Bureau’s enhanced pursuit of individuals – as well as companies – when enforcing the Competition Act, creates a new, American-style dynamic that may see the infamous Wall Street “perp walks” become a Canadian business risk.

The Competition Act’s criminal prohibitions against conspiracies and bid-rigging

Fundamental changes to Canada’s price-fixing law took effect on March 12, 2010, making it a criminal offence for any person, including corporations and individuals, to:

  • fix, maintain, increase or control the price for the supply of a product;
  • allocate sales, territories, customers or markets for the production or supply of a product; or,
  • fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.1

A conviction under section 45 no longer requires proof of anti-competitive effects, but rather only proof there was a conspiracy, agreement, or arrangement between the parties with respect to one of these three conducts.  Further, a court may infer the existence of such an agreement without direct evidence of communication between the parties, although the agreement must still be proved on the criminal standard of proof beyond a reasonable doubt.2

Section 47 of the Competition Act makes it an offence for one or more bidders to reach an agreement or arrangement:

  • not to submit a bid,
  • on the contents of a bid, or
  • to withdraw a bid or tender

where the agreement or arrangement is not made known to the person requesting the bids or tenders.

Conspiracy and bid-rigging are indictable offences, and the penalties for a conviction under sections 45 and 47 are severe.  Penalties were increased in 2010 to provide for a maximum prison term of 14 years, with a maximum fine of $25 million for a section 45 offence and a fine at the discretion of the court for a section 47 offence.3

When the maximum sentences were increased to 14 years, the power of courts to grant conditional or absolute discharges for convictions was lost, since these options are not available for offences with a maximum penalty of 14 years’ imprisonment.  As noted below, Bill C-10 takes other sentencing options away.

Effect of Bill C-10 on the Competition Act

Bill C-10 was introduced by the Minister of Justice on September 20, 2011, as part of the law-and-order promises in the Conservative Party’s 2011 election platform. Although the effect on the Competition Act was likely not intended, Bill C-10 will have two key effects on convictions, including guilty pleas, under sections 45 and 47 of the Competition Act.

Removes sentencing flexibility

First, it removes the ability to sentence an individual to community service, also known as a conditional sentence.  As sections 45 and 47 are indictable offences for which the maximum term of imprisonment is 14 years, Bill C-10 removes the power of courts to order a sentence of less than two years to be served in the community.  This means any prison sentence as a result of a section 45 or 47 conviction would result in the sentence having to be served in prison.  To date in Canada, no individual convicted under either section 45 or 47 has had to serve “real” time in prison.

Delays ability to travel abroad

Second, individuals convicted under sections 45 or 47 of the Competition Act would have to wait 10 years, instead of the current five years, to apply for a pardon after their sentences have expired (to be called a “record suspension”) pursuant to the changes made by Bill C-10.  This will have a significant impact on individuals charged under sections 45 or 47, who will have to wait five years longer to receive a pardon. This will in turn affect these individuals’ ability to resume business activities after they have served their sentences.  Of particular note is that a record of conviction affects the ability to travel to certain countries, particularly the United States, which bars entry to persons convicted of a criminal offence who have not received a pardon.

In addition, many corporations and individuals traditionally plead guilty to conspiracy offences after reaching an agreement with the Competition Bureau and the Director of Public Prosecutions that involves payment of a significant fine and if there is a term of imprisonment, that it be served in the community.  Bill C-10 may limit the ability of the Bureau and the DPP to agree to such terms, resulting in accused individuals contesting more cases. 

Next steps in light of Bill C-10

Bill C-10 has passed second reading in the House of Commons and is currently being studied in committee.  It is believed the bill will be quickly passed by Parliament, likely before the end of 2011, as it was part of the Conservative Party’s election platform to pass the bill within 100 sitting days of Parliament, which began in June.4

Given the significant impact that Bill C-10 may have on both individuals and corporations, it would be prudent for business groups that believe the effect of Bill C-10 on sentences is overly harsh to attempt to have amendments made before the bill becomes law. 

If Bill C-10 does become law in its current form, Canadian businesses should prepare or enhance corporate compliance plans and training for executives and employees to limit corporate and personal exposure under the Competition Act, particularly for breaches of sections 45 and 47.  Companies that are first to report suspected violations and meet the criteria of the Bureau’s immunity and leniency programs can obtain some legal protection for individual employees. Greater vigilance is also warranted as a result of recent statements from the Commissioner of Competition that enforcement activity against individuals will be enhanced.5  This combination of an enhanced enforcement climate and a tough-on-crime federal government means images of executives in handcuffs could be coming to Canada very soon.