As the Competition Bureau
seeks to streamline its investigative process and consider its immunity and
leniency programs, should changes be made or is it working just fine?
By the standards of
any news release, even one by a government agency, it was short and not very
detailed. In the fall of 2015, the federal Competition Bureau stated that
charges had been stayed against the final defendants in an alleged chocolate
price fixing conspiracy that had first come to its attention eight years
The Bureau noted that the decision to stay
charges was made independently by the Public Prosecution Service of Canada.
“Today’s decision marks the end of the chocolate price-fixing matter. The
Bureau continues to investigate allegations of price-fixing and bid rigging in
Canada as a top priority,” the news release stated.
More than two years earlier, price-fixing
charges under the Competition Act were laid against three companies and three
individuals. The charges were in part based on information provided by Cadbury
Canada Inc., which had been granted immunity by the regulator. Hershey Canada
Inc. was fined $4 million by an Ontario Superior Court judge, following a
recommendation by the Bureau for leniency as a result of the company’s
cooperation after search warrants were first executed.
No other company or individual was
ultimately sanctioned for what was alleged to be a broad conspiracy to fix the
price of chocolate confectionary products in Canada between 2002 and 2008.
The same year, 2015, a jury in Ottawa acquitted
six individuals and three companies on all charges stemming from a Competition
Bureau-led investigation into alleged bid rigging for federal government
technology contracts. The Crown later stayed charges against five other
defendants who had elected a trial by judge alone.
Both cases were high-profile
disappointments for the Competition Bureau and the Public Prosecution Service
of Canada. Since that time, the Bureau and its commissioner have made public
changes to its organizational structure to try to improve and streamline its
investigative process. Reviews were launched of its immunity and leniency
programs along with entering into formal partnership agreements with the RCMP
and the Ontario Provincial Police.
Last fall, the
proposed changes to the immunity program were made public along with a
three-month window for submissions — a time frame that ended in late January of
this year. This is just the first stage of a process that is likely to take
several months before any amendments become law.
One of the more controversial aspects of
the proposals, from the perspective of the corporate sector, is that more
internal information may be recorded or be required to be submitted in
documentary form at an early stage and could then later be disclosed to third
perspective of the regulator and the federal prosecution service, the goal is
obviously to encourage companies and individuals to come forward when there is
evidence of a conspiracy that has resulted in price fixing or bid rigging. As
well, once immunity is granted, the hope is that this information will provide
a greater likelihood of convictions against other parties following a
The reaction to
these proposals though, in terms of whether they are needed and will achieve
the desired goals, has been somewhat mixed from those who practise in the
competition law sector.
“Are two unsuccessful prosecutions
sufficient justification to change the whole program?” asks Donald Houston, a
partner in the competition law group at McCarthy Tétrault LLP. “On a global
level, this not a welcoming document,” he suggests.
Robert Kwinter, a senior competition law
partner at Blake Cassels & Graydon LLP in Toronto, says that the Bureau
should be careful not to make it too onerous to be granted immunity. “What is
the problem you are trying to solve,” is what Kwinter says should be the focus
of the rationale for changes to the process.
have been cases that have ended without the outcomes that the Bureau likely
hoped for, that does not mean the existing framework has been unsuccessful,
suggests Danielle Royal, a partner at Stikeman Elliott LLP, whose practice
focuses on commercial and competition-related litigation.
“The current immunity program has been an
overwhelming success and has enabled the Competition Bureau to secure guilty
pleas, collect significant fines and enforce the cartel provisions of the
Competition Act in a cost-effective manner,” says Royal. “It is puzzling why
the Bureau is proposing significant changes which may change significantly the
risk analysis of a company that discovers potential cartel behaviour and is
considering seeking immunity,” she adds.
Coincidentally, the immunity program was thrust into the spotlight a few days
after the proposed revisions were released last October when George Weston
Ltd., the parent company of Loblaw Companies Ltd., issued a public statement.
It confirmed that it was part of an industry-wide investigation related to
alleged price fixing of certain packaged breads between 2001 and 2015. The
statement also disclosed that it was co-operating fully with the Competition
announcements resulted in class action lawsuits being filed against
Weston/Loblaw and other grocery store companies. Loblaw has also offered a $25
gift card to customers as part of its response to the class action proceedings
and the fallout from the price fixing allegations. [Loblaw declined a request
for comment as a result of the ongoing Competition Bureau investigation and
class action proceedings].
about the scope of the investigation were made public on Jan. 31 after the
Ontario Superior Court unsealed the information to obtain in support of search
warrants in the case. Weston/Loblaw have been granted immunity and are
cooperating with the Bureau and the unsealed document alleges that a total of
seven companies — including retailers and suppliers, were part of a lengthy
price fixing scheme.
Many of the
other companies alleged to be part of the price-fixing issued immediate and
strongly worded denials of wrongdoing after the release of the information to
The timing of
the packaged bread investigation, while coincidental, means that one of the
regulator’s more high profile price-fixing cases is going to be proceeding
under its existing immunity program at the same time as it seeks approval to
revise the framework.
Some of the key aspects of the proposed
changes are that automatic immunity would not be provided for all directors,
officers and employees. This would be decided on an individual basis.
Immunity, if granted, would originally be
on an interim basis until it is determined that assistance is not required any
The proffer process, where a lawyer for a
company applying for immunity would set out detailed information about the
illegal activity and disclosure that would be provided, might be recorded on
audio. Currently, the normal procedure is for a lawyer to read out the details
in the proffer, sometimes in the form of a hypothetical, while investigators
take notes. “The fact is, at the proffer stage, it has been a paperless
process,” says Houston.
“Under the existing immunity program, there is clearly an incentive to participate.
It creates a race to be first in. It puts a premium on companies to get to the
bureau before it has all the facts [in any investigation of its own],” Houston
Osborne, a partner at Cassels Brock & Blackwell LLP, formerly with Affleck
Greene McMurtry LLP in Toronto, says the benefits of the immunity program, for
companies engaged in wrongdoing such as price fixing, are not complicated. “You
are confessing to Competition Act offences. The goal is to rat out your
competitors before they rat you out,” says Osborne, who specializes in
The proposed changes to the first stage of
the immunity program, after a company has contacted the Bureau, provided some
information and been granted a marker, are the ones that are of the most
The main issue is whether the new process
could result in legal advice to a client or other internal privileged
information having to be turned over to the Bureau and ultimately to other
parties, either in a criminal prosecution or class action litigation.
Any amendments that turn the initial stage
of the program into a “papered process” including recordings of counsel or
witnesses could increase the civil exposure to applicants compared to parties
that don’t self report or seek leniency, notes Royal. “There is the very real
potential for these disclosures to turn around and bite them in other
jurisdictions and the risks may just be too high compared to the benefits,” she
adds. Kwinter suggests there need to be more details on exactly how this process
would work. “My view is that the Bureau should make the requirements clearer
than in the past. Immunity applicants are required to produce all the facts. I
think there is a distinction between facts and legal advice,” says Kwinter, who
acted for one of the successful defendants in the chocolate price-fixing
One of the stumbling blocks in that case
for the federal Crown was a February 2015 ruling by then-Superior Court Justice
Ian Nordheimer (he is now on the Ontario Court of Appeal) over disclosure to
the defendants. Some information that Hershey had turned over at the proffer stage
to be eligible for the leniency program included details from its internal
Norhdeimer ruled that there was no
privilege in this information once it was turned over and the defendants were
entitled to disclosure of it under the rules set out by the Supreme Court of
Canada in its ruling in R. v. Stinchombe. “Generally speaking, a party who reveals solicitor and client
information to a third party will be found to have waived the privilege that
would otherwise attach to the information,” wrote Nordheimer.
That ruling was
not appealed and the scope of its application continues to be debated among
lawyers in the competition law field. However, they agree it has highlighted a
need for caution in terms of what is being requested by the Bureau at the
proffer stage. “The more detail they expect, the less likely companies are
going to see the benefit,” says Kwinter.
The increased possibility that legal advice and
information from an internal investigation that goes beyond what is needed to
satisfy the immunity requirement is the red flag raised by these proposals,
says Houston. “It may make it less attractive to immunity applicants. Some of
these changes could impact privilege and access to counsel’s notes,” he says.
Osborne also wonders about the rationale
for recording a proffer by a lawyer for a company seeking immunity. “I am not
sure I am comfortable with any recording. It will be produceable as part of the
Crown brief,” he says. One other proposal, which would permit the Bureau to ask
for the information for a proffer to be produced in less than the normal 30
days after a marker is granted, could be a problem, he says. This time period,
which includes identifying the wrongdoing and conducting an internal
investigation, is already a challenge
for any company. “It is expensive and not an easy process,” says Osborne.
In situations where there are allegations
of multi-jurisdictional price fixing and Canada is not the most significant
location, even the existing 30-day window may be too short for companies to
decide to seek immunity in this country, Kwinter points out.
A more common trend in recent years that
does not have to do with the formal framework of the program is that there
appears to be an expectation by the Bureau for the company seeking immunity to
present a “fuller case” to the regulator, Osborne says. “I am not sure that is
a good thing. It is better to have the Bureau, rather than the applicant, put
the case together,” he says. That way, the investigation is likely to be more
independent and of greater value to the prosecution side, he suggests.
the immunity program are not seeking an easy path to avoid a Competition Act
prosecution, without the potential for fines, restrictions on bidding for
government contracts and any other sanctions that might entail from a criminal
conviction, Kwinter stresses.
“The whole point of immunity is that the
Bureau is going to use it for a prosecution down the road. This is the single
most effective tool to investigate price fixing. Information is going to be
disclosed. The whole nature of the immunity process is assisting the Bureau,”
The driving force, though, behind any changes that
are ultimately put into place should be increased transparency on exactly what
is required, says Kwinter. “They should be encouraging companies to come
The issue of alleged corporate wrongdoing
and how to investigate and prosecute it effectively has been front and centre
for the federal government in recent months.
with the request for comment by the Competition Bureau about proposed revisions
to its immunity program, the federal government began its own consultation
process on a related subject — deferred prosecution agreements.
The purpose, the government stated, was to determine if
it had the “right tools” in place to address corporate crime and whether its
“tool kit” should include a deferred prosecution regime.
deadline for feedback was last December and while it is still early in the
process, there appears to be momentum to move forward with adding this as an
option to try to deter illegal corporate conduct.
short, these types of agreements would suspend a criminal prosecution for a
specific period of time. During that period, there would be terms that must be
followed such as identifying responsible individuals, enhancing compliance
measures and the imposition of financial penalties. At the end of the term of
the agreement, if there is full compliance, the criminal charges are withdrawn.
process in which a company does not have to enter a guilty plea for illegal
conduct has obvious long-term benefits, such as reducing the likelihood of
prohibitions on bidding for government contracts.
The challenge, though, is to convince the public that
this is not another way for corporations to pay financial penalties as the
so-called “cost of doing business” without any executives or other high-level
employees facing criminal prosecution and the possibility of ending up in
availability of another tool makes sense,” says Andrew Matheson, a litigation
partner at McCarthy Tétrault LLP in Toronto, who specializes in white collar
and securities defence. At the same time, he agrees there is public cynicism
about prosecutions of these types of offences. “Critics of DPAs suggest this
can diminish the likelihood of the prosecution of individuals and result in
shareholders paying most of the cost,” he notes. “Entering into a DPA, though, is no light undertaking. It will
involve a lot of time and effort and potentially significant admissions,”
Morrison, a partner at Blake Cassels & Graydon LLP in Calgary, says the
public interest can be addressed by ensuring there is a “properly structured”
framework in place. “It could lead to more prosecutions rather than less. DPAs
should be seen as ensuring genuine compliance reform and as a way to pursue the
actual wrongdoers,” says Morrison, who is co-chairman of the firm’s business
crimes, investigations and compliance group.
have been in place in the United States to deal with white collar crime since
the early 1990s. In fact, the original concept originated in that country in
the 1930s to deal with juvenile offenders. In the United Kingdom, legislation
creating this option to deal with corporate wrongdoing took effect in 2014.
application of these agreements differs significantly in the two countries. In
the U.S., they can also be entered into with individuals, which is not the case
in the U.K. Under the British model, they apply to specific listed offences
such as bribery and money laundering and there is a greater oversight role for
report issued by Transparency International (Canada) last summer analyzed the
process in place in different jurisdictions and suggested that the framework in
Canada should lean more toward the British model. Morrison, who is on the board
of the organization, says that “on balance” the U.K. process is more effective.
a DPA regime to be effective, there has to be transparency. In the U.S., there
is no real third-party oversight,” he says. At the same time, any new framework
that is established in Canada should focus on what would be most effective in
this country and not simply adopt the model from another country, says
how these frameworks have played out in other jurisdictions is something the
federal government should do carefully, agrees Matheson. The U.S. model, for
example, gives a lot of discretion to prosecutors. Any Canadian framework might
benefit from a certain amount of judicial oversight, says Matheson, as long as
the role of the court is set out clearly.
see the argument for enhanced oversight but not adjudication. The court is not
being asked to adjudicate as in a contested hearing, only to decide on
reasonableness,” he says. In a comparison to a plea agreement in a traditional
criminal proceeding, Matheson says the legal threshold “should be at least as
high or higher” for a judge to decline to approve the terms of a deferred
court oversight will assist in addressing concerns that these agreements are in
the broader public interest, Morrison says.
overarching goal of a deferred prosecution framework should be to “incentivize”
companies to develop stronger compliance, he states. That requires some benefit
in exchange for self-reporting. “Under the current regime, if a company fixes
the problem, why would it also die on the sword?” he says.
Immunity program proposed
• Automatic coverage under a corporate
immunity agreement for all directors, officers and employees will no longer be
provided. Instead, individuals that require immunity will need to demonstrate
their knowledge of the conduct in question and their willingness to co-operate
with the Bureau’s investigation.
• Documentary and testimonial evidence
will be provided under an Interim Grant of Immunity. Final immunity will be
provided when the applicant’s co-operation and assistance is no longer
• Witness interviews may be conducted under
oath and may be video or audio recorded. Proffers may also be audio recorded.
• The Bureau may require the applicant to
make its proffer early within the 30-calendar-day period and to provide
documentary evidence and access to witnesses, which may be taken under oath and
may be video and/or audio recorded before the proffer is completed.