The Competition Bureau released two enforcement bulletins in September to clarify its approach to compliance programs and the regulated conduct defence.
Canada's Competition Act underwent significant changes in 2009 and 2010 that included introducing a per se criminal cartel provision, substantially increasing fines for criminal conduct, instituting a new administrative monetary penalty for abuse of dominance, and decriminalizing a number of pricing provisions (price maintenance, price discrimination and discriminatory promotional allowances). The Bureau has already updated a number of its bulletins to reflect the new law, and September's releases are part of this process.
Bulletin on Corporate Compliance Programs
Notwithstanding an increased focus on enforcement, voluntary compliance with the requirements of the Competition Act (the "Act") remains a Bureau priority. The Bureau has thus made minor revisions to its 2008 bulletin on corporate compliance programs to reflect the recent amendments to the Act. These include: updating references to the criminal conspiracy provisions which now apply to agreements between competitors to fix prices, allocate markets or restrict output with no need to demonstrate an undue lessening of competition; increasing penalties for conspiracy, bid-rigging and misleading advertising; decriminalizing certain pricing practices; and adding significant administrative monetary penalties for abuse of dominance.
This revised bulletin reiterates the benefits of implementing a corporate compliance program as well as the Bureau's views on what makes a program credible and effective. Among the benefits of a compliance program are increased awareness of the Act's requirements and the Bureau's powers, thereby aiding in compliance with the law and reducing the risks of non-compliance. Compliance helps maintain a good corporate reputation, can reduce costs related to litigation and fines resulting from a Bureau investigation or court proceeding, and can help reduce exposure of employees, senior management and the corporation to criminal, civil or penal liability.
The Bureau considers a compliance program to be "credible and effective" if it is designed to prevent contravention of the Act, to detect inadvertent or unauthorized actions at an early stage, and to identify contraventions committed by others that affect the business. This is in contrast to what the bulletin refers to as "sham" policies, which are used to conceal or deflect liability. Where the Bureau finds evidence of a sham policy, it will be considered an aggravating factor for sentencing purposes or other form of resolution, including administrative monetary penalties.
The bulletin identifies five elements that the Bureau considers essential to a credible and effective compliance program:
- senior management involvement and support;
- corporate compliance policies and procedures;
- training and education;
- monitoring, auditing, and reporting mechanisms; and
- consistent disciplinary procedures and incentives.
The release of the updated Corporate Compliance Programs bulletin reinforces the need for firms to revisit their own compliance programs or to consider implementing a program if they do not currently have one. With the recent amendments to the Act substantially increasing the penalties for criminal violations and adding the prospect of hefty monetary penalties for certain civil matters, compliance is more important than ever. And, more than ever, it is clear that such compliance programs can never be regarded as static documents. They must be regularly reviewed and audited, and corporate conduct and actions must be continually reviewed and assessed against these programs.
Bulletin on Regulated Conduct
The Competition Bureau has also updated its bulletin on "regulated conduct." This bulletin outlines how the Bureau deals with conduct regulated by another federal, provincial or municipal law or legislative regime, but that may conflict with the Competition Act. These conflicts have given rise to what is known as the regulated conduct doctrine or regulated conduct defence ("RCD"), which effectively immunizes certain conduct from Bureau review on the basis that it was authorized or required by another validly enacted law.
In its initial guidance document, the Bureau took a cautious approach to the RCD, noting that the case law in the area is underdeveloped. The Bureau maintains this position in the updated bulletin. In determining whether to apply the Competition Act to conduct regulated by another scheme, the Bureau will consider the purpose of the Act and of the other applicable law, the interests meant to be protected by both laws, the conduct in question, the potentially applicable provisions of the Act, the identity of the parties involved, and the applicable principles of statutory interpretation. The Bureau will distinguish between laws passed by a provincial or territorial government and those passed by Parliament. Likewise, the Bureau will distinguish between conduct that is potentially subject to the criminal provisions of the Act and conduct that is subject to the civil provisions.
The recent amendments to the Competition Act specifically added a reference to the RCD in the revised criminal cartel provision. Section 45(7) of the Act now expressly provides that the RCD as it applied to section 45 prior to the 2009 amendments will continue to apply to the amended section 45. This is consistent with the approach taken in the Bureau's Competitor Collaboration Guidelines, issued in December 2009.
The Bureau will always consider whether the RCD applies to conduct that may be regulated by provincial law. It will examine whether a validly enacted provincial law authorizes or requires the conduct in question. Where this happens, the Bureau will not pursue a case under the criminal conspiracy provisions of the Act. When evaluating potential violations of other criminal provisions in the Act, the Bureau will begin by determining whether Parliament intended the particular Competition Act provision to apply to the conduct. If the answer is yes, the Bureau may nonetheless refrain from pursuing the case, relying on the RCD, other defences or doctrines, or the Bureau's discretion not to pursue an inquiry.
Regarding federal legislation that may conflict with the Act, the Bureau will strive to determine whether Parliament intended the statutes to operate harmoniously or whether it is impossible to comply with both statutes. The bulletin states that the Bureau will not pursue a matter under any provision of the Act where Parliament has expressed the intent to displace competition law enforcement by establishing a comprehensive regulatory regime and providing a regulator the authority to act (directly or indirectly) inconsistently with the Competition Act. This only applies where the regulator has exercised its regulatory authority in respect of the conduct in question.
Companies that operate in regulated industries should pay particular attention to these guidelines. As noted above, the Bureau views RCD case law as underdeveloped. Although this regulated conduct bulletin sets out a cautious approach to the RCD, the Bureau has also indicated that it will take into account both the regulatory context in which the conduct occurs and whether it is in the public interest to pursue the conduct under the Competition Act in the circumstances. The difficulty with this approach, of course, is it leads to a near complete lack of certainty as to how the RCD will be approached for practical, commercial conduct purposes. While a "test case" seems to be called for, it is unlikely that even a test case would provide universal guidance.