Interim Commissioner of Competition John Pecman and Senior Deputy Commissioner of Mergers Kelley McKinnon recently attended a breakfast seminar at Stikeman Elliott, to speak to an overflow crowd of clients and to answer questions related to their visions for the future of the Competition Bureau.
Susan M. Hutton and Solène Murphy -
April 3, 2013 the Ontario Court of Appeal released its reasons for decision in R v. Dowdall, affirming the Superior Court’s earlier decision to commit 17 defendants to stand trial on charges of bid-rigging under s.47 of the Competition Act. The defendants had argued that tenders submitted to pre-qualify as approved suppliers, or to create a standing order, if and when such services were required, was not a “bid or tender” and thus fell outside the ambit of the prohibition against bid-rigging.
Both the Superior Court and Court of Appeal agreed that the preliminary inquiry judge reasonably concluded that there was some evidence that the process of obtaining a Standing Offer Agreement was contractual and could be considered a “request for bids or tenders” under the bid-rigging offence.
Continue Reading...On February 5, 2013 the federal government tabled amendments to the Corruption of Foreign Public Officials Act (CFPOA) which, if passed, would give Canada a much broader reach and pose a more serious threat to Canadians and Canadian businesses who attempt to gain a business advantage through bribery. These amendments are evidence of the Government’s tougher approach to enforcement of the CFPOA in recent years, as witnessed already by prosecutions of Niko Resources in 2011 and more recently of Griffiths Energy, both of which pled guilty to offences under the Act (see below for more details). In some ways, the CFPOA will now be tougher than its US counterpart.
Generally speaking, the CFPOA prohibits giving or offering to give a benefit of any kind to a foreign public official, or any other person for the benefit of the foreign public official, where the ultimate purpose is to obtain or retain a business advantage.
Continue Reading...On December 14, 2012, the Competition Bureau announced that it had withdrawn criminal charges related to the breach of a consent agreement in a waste-collection company merger due to the accidental leak of privileged information during the course of the Bureau’s investigation.
The Bureau said in its statement that on September 19, 2012, it “became aware of an unfortunate procedural error, where certain information subject to solicitor-client privilege had been inadvertently shared with investigators.” As previously covered on this blog, on September 11, 2012, the Bureau laid criminal charges against Progressive Waste Solutions Ltd. and its subsidiary BFI Canada Inc. (known together as Progressive). The Bureau alleged that Progressive had violated the terms of a consent agreement it had entered into with the Bureau in 2010. The Bureau concluded at the time that the merger would result in a substantial lessening or prevention of competition in the waste collection market in several Canadian cities.
Continue Reading...Robert Mysicka and Graeme Deuchars -
On December 7, 2012, the Competition Bureau announced that charges have been laid against five individuals for violations of the Criminal Code of Canada and of the Competition Act, in relation to tactics used in two Montréal-based telemarketing operations.
The charges arose out of a 2006 investigation by the Competition Bureau in partnership with the Centre of Operations Linked to Telemarketing Fraud (COLT), a joint forces operation between a number of Canadian and American law enforcement authorities. The investigation revealed two telemarketing operations in Montréal promoting the sale of office supplies and medical kits to Canadian and American businesses that allegedly utilized misleading or fraudulent tactics, including implying that the caller represented a business that had an existing relationship with the victim’s company, indicating that certain products or services were required under government rules, or implying that the call was being made on behalf of a government agency Five individuals were charged with defrauding the public in excess of $5,000 contrary to section 380(1) of the Criminal Code. In addition, four of these individuals were charged under the Competition Act with making false or misleading representations during telemarketing calls.
Section 52.1(3) of the Competition Act is a criminal provision that prohibits making materially false or misleading representations in promoting the supply or use of a product or business interest during interactive telephone communications (telemarketing). Contraventions of the Competition Act’s telemarketing provisions carry a maximum penalty on indictment of a fine in the discretion of the court, and/or up to 14 years imprisonment.
Mark Walli and Graeme Deuchars-
On November 20, 2012, amendments to the Criminal Code of Canada under the Safe Streets and Communities Act (the SCCA) came into force, restricting the availability of conditional sentences for individuals convicted of certain offences, including conspiracy to fix prices and bid-rigging under the Competition Act. Conditional sentences are non-custodial punishments, such as house arrest, that may only be assessed where the judge determines the offender is not a danger to the community. While these amendments were not specifically directed at Competition Act offences, the result of the legislative changes is to eliminate the discretion to allow for serving custodial sentences for serious Competition Act offences in the community.
The SCCA, introduced in 2011, included a slate of amendments to the Criminal Code and other legislation which the Department of Justice stated were intended to “combat crime and terrorism”. Among other things, the SCCA provides that conditional sentences are unavailable for all offences for which the law prescribes a maximum term of imprisonment of 14 years or more – this includes cartel agreements among competitors, bid-rigging and willful or deceitful misleading advertising under the Competition Act.
Continue Reading...On November 14, the Competition Bureau published a news release disputing a statement made by the Royal Bank of Scotland Group (RBS) related to the Bureau’s ongoing investigation of alleged collusive conduct in the setting of the LIBOR benchmark rate. In its third-quarter Interim Management Statement, RBS stated that it was “co-operating fully” with investigations by the Bureau and other regulators. The Bureau’s news release argued that this statement was false, in light of the fact that RBS had not applied to its leniency or immunity programs and that RBS had challenged a court order obliging it to produce documents in connection with the Bureau’s investigation.
In its reply, RBS emphasized that it did want to cooperate with the Bureau, but that the production of documents requested by the Bureau would violate privacy laws in the United Kingdom. RBS stated that it had offered a number of alternative mechanisms, but that the Bureau had refused such offers.
This is not the first time the Bureau has intervened when it believed a public statement by a company was inaccurate. In September 2011, the Bureau required Beiersdorf Canada Inc. to correct an allegedly inaccurate public statement the company made in relation to a settlement it had reached with the Bureau. Businesses should take note that the Bureau is active in monitoring comments they make in the press and in public disclosure filings.
Jeffrey Brown and Edwin Mok -
A recent change in the integrity policy of the Department of Public Works and Government Services Canada (Public Works) has resulted in a prominent consulting firm being effectively banned from making future bids for services to the department.
On July 30, 2012, Corporate Research Group Ltd. (CRG) pleaded guilty to a criminal charge of bid-rigging for real estate advisory services contracts with the federal government. It was fined $125,000. According to the Competition Bureau news release at the time, CRG and Louis Facchini, who ran First Porter Consultancy, had submitted coordinated bids under an agreement not disclosed to Public Works.
Continue Reading...On September 11, the Competition Bureau announced that it had laid criminal charges against Progressive Waste Solutions Ltd. and its subsidiary, BFI Canada Inc., alleging that Progressive had violated the terms of a consent agreement it had entered into in 2010. The consent agreement was reached in respect of a merger between IESC-BFC Ltd. and Waste Services Inc. (now known together as Progressive), two commercial waste collection companies. The Bureau concluded at the time that the merger would result in a substantial lessening or prevention of competition in the waste collection market in several Canadian cities, and entered into a consent agreement with the merging parties which required them to divest certain assets in the affected markets. The consent agreement also provided that the parties could not attempt to reacquire the customers of the companies who purchased the divested assets for one year following the divestitures. In October and December of 2010, the Bureau approved divestiture buyers. Now, the Bureau alleges that Progressive violated the terms of the agreement by soliciting and reacquiring a customer whose contract had been divested, and then providing a false declaration of compliance and failing promptly to notify the Bureau of the breach.
Continue Reading...Susan M. Hutton and Robert Mysicka -
On July 30, 2012 Corporate Research Group Ltd. (CRG) pled guilty to a charge of bid-rigging under subsection 47(2) of the Competition Act. The bid-rigging was in relation to federal government contracts for real estate advisory services in Canada.
The guilty plea follows the Competition Bureau’s investigation into CRG’s activities after being contacted by the Department of Public Works and Government Services Canada (PWGSC). The specific complaint related to a Request for Standing Offers (RFSO) issued by PWGSC for real estate advisory services. In its guilty plea, CRG admitted that Louis Facchini, a company representative carrying on business as First Porter Consultancy, submitted bids, in response to the RFSO, that were arrived at through an agreement that was not disclosed to PWGSC.
Continue Reading...Susan Hutton and Shannon Kack -
On May 30, 2012, in R v Global Fuels, the Court of Québec interpreted for the first time the new section 22.2 of the Criminal Code (the Code) regarding the criminal liability of organizations. Section 22.2 makes corporations liable for the actions of a “senior officer”. Section 1 of the Code defines “senior officer” as a representative who plays an important role in the establishment of an organization’s policies or is responsible for managing an important aspect of the organization’s activities and in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer. The Court held that the term “senior officer “encompasses more than the individuals who form the directing minds of the corporation under the identification doctrine which had previously governed corporate liability (see Canadian Dredge and Dock Co v. The Queen.
The Supreme Court of Canada had previously characterized a “directing mind” as follows (The Rhone v The Peter AB Widener: at 526):
Continue Reading...The key factor which distinguishes directing minds from normal employees is the capacity to exercise decision-making authority on matters of corporate policy, rather than merely to give effect to such policy on an operational basis….
On June 22, 2012, Canada’s Competition Bureau announced that Colmatec Inc. and its operations director, Rénald Drouin, have pleaded guilty in a scheme to rig bids on contracts for specialized sewer services in the province of Québec. Charges are still pending against five other companies and their directors as part of the conspiracy, which involved bids on 37 municipal contracts worth over $3 million. A sixth company had previously pleaded guilty on November 22, 2011. Colmatec has been fined $50,000 and is subject to a court order, while Rénald Drouin will perform 100 hours of community service and is subject to a two year probation period. Bid-rigging is a criminal offence under section 47 of the Competition Act.
Susan M. Hutton and Robert Mysicka -
On May 4, 2012 the Competition Bureau announced that Maxzone Auto Parts (Canada) pleaded guilty to price-fixing for its participation in an international cartel involving aftermarket replacement automotive lights. Maxzone was fined C$1.5 million under subsection 45(2) of the Competition Act which provides for imprisonment and/or a maximum fine of C$25 million for the offence of conspiracy to fix prices between competitors.The products that were the subject matter of the conspiracy consisted primarily of headlights and tail lights purchased by auto parts supply companies in Canada for use as replacement parts in automobiles.
Maxzone admitted to implementing an agreement with its competitors that fixed the price of aftermarket automotive lights in Canada from January 2004 to September 2008. The products that were the subject matter of the conspiracy consisted primarily of headlights and tail lights purchased by auto parts supply companies in Canada for use as replacement parts in automobiles.
Continue Reading...Michael Kilby and Kim Lawton -
The Court of Queen’s Bench in Alberta has recently ruled in 321665 Alberta Ltd. v. ExxonMobil Canada Ltd, on several issues relating to costs under section 36 of the Competition Act. The ruling follows an award of damages in a civil case involving a rare buyer-side conspiracy, brought under the pre-2009 section 45 of the Act.
By way of background, section 36 of the Competition Act provides a statutory cause of action to any person who has suffered loss or damage arising from the breach of any of the criminal provisions in Part VI of the Act. These criminal provisions include conspiracy, bid-rigging, misleading advertising, and deceptive telemarketing.
Continue Reading...Susan Hutton and Robert Mysicka -
On February 17, the Competition Bureau announced that three construction companies—Construction G.T.R.L. (1990) Inc., Acoustique JCG Inc., and Entreprises de Construction OPC Inc.—have pled guilty to charges of bid-rigging in a construction project involving the expansion of the Chicoutimi hospital. The case comes less than half a year after a similar bid-rigging scheme involving ventilation companies in Montreal was uncovered and prosecuted, resulting in the imposition of a substantial fine and a prohibition order.
Continue Reading...On November 22, 2011, the Competition Bureau announced that criminal charges had been laid against six companies and five individuals accused of rigging bids for municipal and provincial sewer services contracts in the greater Montreal area. Bid-rigging, in which two or more bidders agree among themselves on whether or how to submit bids, without informing the person calling for the bids, is a criminal offence under section 47 of the Competition Act.
The Crown alleges that the accused companies and individuals conspired to pre-determine the winners of 37 municipal and provincial calls for tender in 2008 and 2009 related to the cleaning and maintenance of sewers, with a total value of C$3.3 million. The bidders who were not pre-determined to win allegedly submitted inflated, token bids in order to mislead tendering authorities into believing that the processes were competitive. Because the alleged conduct took place prior to the 2009 amendments to the Competition Act which increased the maximum penalties available under section 47, the accused face maximum penalties of up to five years in prison and/or a fine in the discretion of the court.
The Bureau also noted that its investigation benefitted from cooperation under its immunity and leniency programs, which provide incentives for parties involved in criminal conduct to self-report the conduct to the Bureau.
David Elder and Lindsay Gwyer -
Life is about to get more difficult for foreign telemarketers that flout domestic Do Not Call rules, as twelve global regulators have joined forces to create an international enforcement network.
On October 28, 2011 the CRTC announced the creation of an International Do Not Call Network to facilitate international cooperation on telemarketing enforcement and hopefully reduce the amount of unauthorized telemarketing calls Canadians receive from abroad.
Continue Reading...On September 22, 2011, the Competition Bureau (the Bureau) announced that charges had been laid against five individuals and four Montreal-based companies involved in an allegedly fraudulent telemarketing operation. According to the Bureau’s Backgrounder, the companies hired telemarketers to contact businesses and falsely suggest (i) that the telemarketers were regular suppliers of the businesses looking to obtain renewals for services; (ii) that purchases of medical kits were required to comply with new legislation; (iii) that an order had already been pre-authorized by someone else in the business; or (iv) that the purpose of the telemarketer’s call was to verify an address when in fact it was to obtain an order confirmation. The companies allegedly sold products which were inflated up to ten times the market value, and threatened collection actions against businesses when they refused to pay.
Based in Montreal, the telemarketing operation had allegedly targeted businesses in Canada, the United States, Europe and Central America since at least 2001. The accused individuals and companies are charged with deceptive telemarketing and misleading representations (both criminal offences) under the Competition Act, and fraud under the Criminal Code. Last year, in remarks made to the International Consumer Protection and Enforcement Network, the Commissioner of Competition remarked that “[i]t is now clear that victims do not need to be Canadian in order for [the Bureau] to take action. This is an important step forward in the international fight against fraud.”
Susan M. Hutton and Paul Beaudry
On September 2, 2011, the Competition Bureau released the results of an ex-post assessment of its December 2007 study entitled “Self-Regulated Professions: Balancing Competition and Regulation.” The Bureau’s review assessed developments since the publication of its 2007 study, which contained 53 recommendations aimed at eliminating unwarranted regulatory restrictions on competition in five self-regulating professions: accountants, lawyers, optometrists, pharmacists and real estate agents.
In addition to specific recommendations, the 2007 study also included six guiding principles set forth by the Bureau to help regulators develop regulatory frameworks that maximize consumer welfare through competition:
Susan M. Hutton and Robert Mysicka -
Les Entreprises Promécanic Ltée (Promécanic), a ventilation company based in Laval, Québec, has pleaded guilty to three criminal charges of bid-rigging for tenders issued by its contractors in 2004 and 2005. On July 19, 2011, Promécanic was fined C$425,000 by the Superior Court of Québec for participating in agreements to fix the outcome of bids for the installation of residential ventilation systems in Montreal.
In December, 2010, the Competition Bureau’s investigation of eight ventilation systems companies culminated in the laying of criminal charges for bid-rigging against Promécanic and seven others. Bid-rigging, which is defined in section 47 of the Competition Act, prohibits bidders from entering into an agreement not to submit bids or to submit pre-arranged bids when responding to a bid or tender call. The criminal sanction under section 47 applies if the person calling for the bids is not made aware of the agreement at or before the time when the bid or tender is submitted or withdrawn. In this case, the Bureau’s investigation found evidence of collusion among the eight ventilation companies in five separate competitive bidding processes valued at approximately C$8 million. The maximum penalties for bid-rigging include a fine that is at the discretion of the court and/or a prison term not exceeding 14 years.
Continue Reading...Bill C-51, An Act to amend the Criminal Code, the Competition Act and the Mutual Legal Assistance in Criminal Matters Act (short title: Investigative Powers for the 21st Century Act) was re-introduced in the House of Commons on November 1st, 2010. As the short title of Bill C-51 implies, the bill aims to extend the current investigative powers of national law enforcement and security agencies for computer-related crimes to take into account the use of new communications technologies. While many of the proposed changes relate to the Criminal Code, they have an impact on the Competition Act and the investigative powers of the Commissioner of Competition.
Two other bills, Bill C-50, An Act to amend the Criminal Code (interception of private communications and related warrants and orders) and Bill C-52, An Act regulating telecommunications facilities to support investigations, were also introduced in October and November of last year. These three complimentary bills had previously been introduced under the former Liberal government in 2005, and under the Conservative government in 2009, but were killed by elections or prorogation.
Continue Reading...In a judgment rendered June 8, 2010, the Ontario Superior Court dismissed a motion by FMC Corporation and FMC of Canada, Ltd. (collectively, FMC) for leave to appeal a September 28, 2009 decision certifying a class action. The motion was supported by Arkema Inc., Arkema Canada Inc. and Arkema S.A. (collectively, Arkema). Both FMC and Arkema were among the defendants in the class action proceeding.
Continue Reading...On March 19, 2010, the Quebec Court of Appeal upheld a decision rendered by the Quebec Superior Court, unconditionally absolving Mr. Daniel Drouin, the accused, of a price-fixing charge. The Court of Appeal dismissed the Crown’s application for leave to appeal on the basis that the lower court judge had not made a reviewable error which would merit judicial review.
In the original Superior Court decision, the court had ordered an absolute discharge. The accused had pleaded guilty to a charge brought against him for fixing the price of gas in the city of Victoriaville in 2005, when he was the supervisor of Les Pétroles Cadrin Inc. In his capacity as supervisor, the accused was responsible for setting the price of gas sold by the service station. The price-fixing charge was brought against the accused following an investigation by the Competition Bureau.
The Competition Bureau today announced new criminal charges against 25 individuals and three companies with respect to alleged price fixing in Québec and stated that other investigations with respect to alleged price fixing in retail gasoline outside of Québec were ongoing. Among other things, the bureau used wiretaps in its investigation.
The bureau stated in a backgrounder that: “[w]hile some of the accused operated under the name or "banner" of a major oil company, it was the local operators of the gas stations who were responsible for setting the final price at the pump. There is no evidence that the three major national oil companies' corporate offices were involved in these offences.”
The bureau acknowledged that: “[s]imilar gasoline prices, or similar changes in the price of gasoline, do not necessarily indicate price-fixing. High prices are a concern under the Competition Act only when they are the result of anti-competitive conduct, such as price-fixing.”
The accused are presumed to be innocent and are entitled to all of the rights and defences provided by law including a fair and public hearing before an independent and impartial tribunal.
On May 25, 2010, the Quebec Superior Court acquitted Electromega Limited (Electromega), a traffic lights manufacturer, of a bid-rigging charge relating to the supply of LED traffic lights in Quebec.
Prior to the trial, Electromega had brought an application for a stay of proceedings on the basis that the death of its president in September 2009 deprived it of an essential witness and therefore a right to a fair and public hearing pursuant to paragraph 11(d) of the Canadian Charter of Rights and Freedoms. The court concluded that Electromega had not proven that the missing evidence created a prejudice of such magnitude that it amounted to a deprivation of the opportunity to make full answer and defence. Consequently, Electromega’s application was dismissed. However, at trial, the case was dismissed on the basis that the Crown had failed to prove an agreement.
The facts in issue arose in July 2004, when the city of Quebec solicited bids for the supply of LED traffic signals sourced by Gelcore (distributed in Quebec by Electromega), or Dialight (distributed by Tassimco Technologies Inc. (Tassimco)).
Continue Reading...In the text of a May 4, 2010 speech that was released by the Competition Bureau on June 7, 2010, the Commissioner of Competition, Melanie Aitken, has affirmed the guidance in the Competitor Collaboration Guidelines regarding the care with which she will proceed under the cartel provision (section 45 of the Competition Act). The Commissioner said: “[l]et me be crystal clear: if an agreement among competitors does not constitute a naked agreement to fix prices, allocate markets, or restrict output, that agreement will be subject to – at most, and only – a separate, civil review requiring proof of economic harm.”
The Commissioner also confirmed the written guidance that certain types of agreements will not be the subject of cartel prosecutions: “we have explicitly removed whole categories of agreements from the scope of criminal enforcement action, such as dual distribution agreements, franchise agreements and non–competes, unless, of course, the agreement is just a sham. We are doing our best to put a fence around the conduct we would consider investigating as criminal, and to paint that fence in bright, bold colours.”
These unequivocal statements of the Commissioner will be welcomed by businesses who are considering legitimate collaborative conduct which may raise issues under the new and potentially very broad cartel law. Still, it must be noted that the Commissioner’s guidance is not binding and will not remove the risk of private actions in which cartel conduct is alleged.
The Commissioner also discussed merger review issues and her case against the Canadian Real Estate Association in the May 4, 2010 speech.
On June 3, 2010, the Supreme Court of Canada declined to hear an appeal by DRAM manufacturers of a decision of the British Columbia Court of Appeal that certified a class in a civil action alleging price-fixing with respect to dynamic random access memory. As is customary when leave to appeal is declined, the Supreme Court did not give reasons for its decision.
On May 14, 2010, the Commissioner of Competition, Melanie Aitken, and the Director of Public Prosecutions, Brian Saunders, announced that they entered into a Memorandum of Understanding (MOU). The MOU establishes the guiding principles of the relationship between the Competition Bureau and the Public Prosecution Service of Canada (PPSC). Stakeholders now have a clearer understanding of the working relationship between the Bureau investigators and PPSC counsel, such as their respective roles and responsibilities at different stages of an investigation. The MOU was not intended to change the relationship between the two organizations, but to crystallize their existing relationship. This announcement continues the Bureau's policy of providing transparency where possible.
The Competition Bureau announced today that Solvay Chemicals Inc. has been fined $2.5 million by the Federal Court after the company pleaded guilty to criminal charges for fixing the price of hydrogen peroxide sold in Canada. Solvay Chemicals Inc. is the second party to plead guilty in this alleged price-fixing conspiracy. The Bureau's investigation of other companies alleged to be participants in the conspiracy is ongoing.
The one-year delay before Canada's new, tougher, cartel law comes into force expires this month. Starting March 12, 2010, prohibited agreements between competitors will be criminally illegal in Canada, regardless of their impact on competition. The amendments result in the creation of a new category of "per se" criminal offences (so-called because the outlawed categories of agreement are "per se" illegal without proof of economic effect). Penalties under the new offence will also increase: from the former maximum five years imprisonment and/or C$10 million fine, to a maximum of 14 years and/or C$25 million.
Continue Reading...Susan M. Hutton and Jeffrey Brown
The Canadian Competition Bureau published the promised Competitor Collaboration Guidelines on December 23, 2009, less than three months before the coming into force of the new, stricter, criminal cartel provisions and their companion civil provisions applicable to non-criminal, but anti-competitive, competitor agreements. The Guidelines, which were preceded by an earlier consultation draft, published in May 2009, answer several questions raised by the new sections 45 and 90.1 of the Competition Act, but (unavoidably) leave many more to be clarified by the courts. Anyone doing business in Canada will wish to take stock of their dealings with competitors prior to the implementation of the new law on March 12, 2010. Seemingly innocuous agreements that did not appear to have a significant adverse effect on competition may now attract criminal (and civil) liability.
Continue Reading...Canada's Competition Bureau announced on November 21, 2008 that Akzo Nobel Chemicals International BV had pled guilty to criminal charges for fixing the price of hydrogen peroxide sold in Canada between 1998 and 2001, and agreed to pay a C$3.15 million fine.
Sales of the product in Canada during that period were approximately C$470 million, and Akzo Nobel accounted for approximately 5% of Canadian sales. The Bureau's release revealed that the company had cooperated in the investigation, and that the Bureau's investigation of the international conspiracy is ongoing.
On July 21, 2008, the Competition Bureau (Bureau) published its new Predatory Pricing Enforcement Guidelines (New Guidelines), following the issuance of draft guidelines in October, 2007 and a period of public consultation.1 The New Guidelines supersede all previous statements of the Bureau and the Commissioner of Competition on the subject.
Continue Reading...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 Act2should 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.
Continue Reading...On June 26, the blue-ribbon Competition Policy Review Panel issued its report to the federal Industry Minister on how to raise Canada's standard of living through greater competition and productivity, calling for urgent action to improve Canada's competitive position.
The report, "Compete to Win," is wide-ranging and thought-provoking, canvassing issues ranging from education, immigration, taxation, and securities regulation to specific proposals to amend Canada's competition and foreign investment review laws. Implementation of all, or even many, of the Panel's sixty-five recommendations would result in fundamental changes to the way business operates in Canada.
Continue Reading...On October 24, 2008, the Competition Bureau (the Bureau) released its draft Information Bulletin on Trade Associations (the Bulletin) for public comment.
According to the Bureau, participation in trade associations - particularly those whose members compete - carries with it an inherent risk that the association may be used as a forum for anti-competitive conduct, particularly anti-competitive agreements or collective action that violates the criminal conspiracy (cartel) provision of the Competition Act. "Association activities that deal with subjects such as pricing, customers, territories, market shares, terms of sales and advertising restrictions" are of particular concern to the Bureau. The draft Bulletin aims to provide guidance to trade associations on how best to ensure compliance with the Competition Act; it calls upon trade associations to "ensure that appropriate safeguards are implemented" to guard against anti-competitive conduct.
Continue Reading...On October 30, 2007, the Competition Bureau announced that the Bayer Group pled guilty to three counts under section 45 of the Competition Act in respect of its role in three international price fixing conspiracies in the rubber and chemicals industry. Bayer AG was fined C$2.9 million for its part in a rubber chemicals conspiracy and C$400,000 for its role in a nitrile rubber conspiracy. Bayer Corporation, a wholly owned US subsidiary of Bayer AG, was fined C$345,000 for participation in a conspiracy to fix the price of aliphatic polyester polyols made from adipic acid. In all, the fines totalled C$3.645 million. Significant fines have also been levied against several companies in respect of these cartels in the United States and Europe.
On October 10, 2007, the Competition Bureau released a revised Information Bulletin on the Immunity Program Under the Competition Act, along with revised Responses to Frequently Asked Questions. The two documents should be read together in order to understand the Bureau's approach to recommending immunity. The new Bulletin and FAQs replace previous versions published in 2000.
Continue Reading...Ian Disend and Susan M. Hutton
On October 9, 2007, the Competition Bureau (the Bureau) released new draft Predatory Pricing Enforcement Guidelines (the Guidelines)."1Public comment is requested before January 18, 2008.
The Bureau first released guidelines on predatory pricing - the practice of pricing goods or services below their cost, so as to eliminate or discipline a competitor - in 1992. An attempt in 2002 to revise the Guidelines met with controversy, and that draft was ultimately withdrawn. The latest draft Guidelines go further than previous Guidelines in confirming the treatment of predatory pricing by the Bureau, at the first instance, as a civil matter under the "abuse of dominance" provisions, and thus subject to a competitive impact test (the actual legal provision being criminal and being capable of enforcement if a competitor is likely to be eliminated, even if there is no substantial lessening of competition). The new draft Guidelines also fully adopt the "avoidable cost" standard for the determination of unreasonably low prices.
Continue Reading...Bill C-299 is an Act to amend the Criminal Code, the Canada Evidence Act and the Competition Act (personal information obtained by fraud) and was introduced in Parliament as a Private Member's Bill.
Bill C-299 was introduced in Parliament by The Honourable James Rajotte on May 17, 2006, and was referred to the Standing Committee on Justice and Human Rights after it had received Second Reading on November 1, 2006.
The bill proposes amendments to the three statutes in its title, designed to penalize the fraudulent collection of personal information. In both the Code and the Competition Act, a definition of "personal information" is created, consistent with that of federal privacy legislation (Personal Information Protection and Electronic Documents Act), while the "false pretences" section of the Code is expanded to criminalize its fraudulent collection and related actions. The amendment to the Canada Evidence Act would also render fraudulently obtained information inadmissible as evidence.
Under the Competition Act, obtaining personal information under false pretences would be added to the criminal provisions contained in s. 50 (price discrimination and predatory pricing) as an illegal trade practice, and the promotion of a fraudulently provided service would be deemed a false or misleading representation under both the criminal (s. 52) and the civil ( s.74.01) misleading advertising provisions. Recovery of damages by those suffering loss from any of these violations would also be made easier by allowing the victim to sue the Canadian affiliate of an international corporation that has committed the offense, regardless of whether the Canadian affiliate was involved.
In a ruling of the Newfoundland Provincial Court dated September 18, 2006, D. Orr Provincial Court Judge dismissed, after a preliminary hearing, charges laid under Section 45 of the Competition Act (Canada) against six companies and seven individuals in respect of an agreement among them to refuse to bid on certain contracts for exclusive supply rights at the St. John's Airport and other St. John's locations (R. v. Budgens Taxi, [2006] N.J. No. 250). The Judge found that the Crown's economic expert failed to provide any evidence as to the absolute size of the relevant market, therefore making it impossible to determine the impact of the agreement on competition. While stating that the regulated conduct defence could not be considered at the stage of the preliminary inquiry, he also stated that the accused "were acting within the confines of a regulated industry", and had brought the issue to the attention of the appropriate regulatory body, and could not be said to have "unduly" impacted the market.
On June 29, 2006, the Competition Bureau (the Bureau) released the final version of its Technical Bulletin on "Regulated Conduct" (the Bulletin). The Bulletin outlines the Bureau's approach to enforcement of the Competition Act (the Act) in respect of conduct that is authorized or required by a federal, provincial or other law (i.e., the so-called "regulated conduct doctrine", or "RCD"). Given that the RCD operates to immunize certain conduct from the Act, and therefore narrows the Bureau's jurisdiction, it is perhaps not surprising that the Bulletin reflects a strict approach to the RCD's application. That said, the Bulletin notes that even if the RCD is not available in a given case, other defences, such as a lack of mens rea or official inducement of error, may apply to exempt conduct from the Act's application. In short, in cases where the RCD does not apply, the Bureau will still consider, using other tools of statutory interpretation, whether Parliament intended that the impugned conduct be exempt from the relevant provisions of the Act.
The RCD has been the subject of litigation - and indeed considerable controversy - in recent years. This controversy arose in part from a series of cases that appeared to have expanded the doctrine beyond its traditional limits, in particular by applying the RCD to:
Continue Reading...Following a Competition Bureau investigation, three Canadian carbonless paper sheet manufacturers (Cascades Fine Papers Group Inc., Domtar Inc. and Unisource Canada Inc.) recently pleaded guilty to conspiring to lessen competition in the supply of carbonless paper sheets in Ontario and Quebec contrary to section 45 of the Competition Act.Carbonless paper sheets are used in multiple copy forms. The demand for carbonless paper sheets has been declining for several years as a result of the development of computerized receipts.
Each of the accused was sentenced to pay a fine in the amount of $12,500,000, comprised of a $10,000,000 fine for activity in Ontario and $2,500,000 for activity in Quebec. In addition to the fines, each accused must educate its directors, officers, employees and agents about complying with the Competition Act.
This is the first time the Court has imposed the maximum $10,000,000 fine available under the Competition Act against a domestic company.
In Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., the United States Supreme Court recently decided that a truck manufacturer (Volvo) that had offered its dealers different wholesale prices was not liable for price discrimination because there was no evidence that Volvo discriminated between dealers contemporaneously competing to resell to the same retail customer.
The Plaintiff, Reeder-Simco GMC, Inc. (Reeder), was an authorized dealer of Volvo trucks. Reeder generally sold Volvo trucks through a competitive bidding process in which the retail customers would determine their specific heavy-truck product requirements and invite bids from several selected dealers. Once Reeder received the customer's specifications, it would request a discount or concession off the wholesale price from Volvo. Volvo would decide on a case-by-case basis whether to offer a discount and what the discount rate would be, taking into account factors such as industry-wide demand, and whether that particular retail customer historically purchased a different brand of trucks. Reeder would then use the discount offered by Volvo in preparing its bid to the retail customer.
Continue Reading...In the latest conviction related to the international conspiracy to fix the price of graphite electrodes used in steel production, Nippon Carbon Company, Ltd. pleaded guilty on December 8, 2005 to aiding and abetting the conspiracy, contrary to section 46 of the Competition Act and section 21(1) of the Criminal Code. Nippon had agreed, during the 5-year term of the illegal market sharing agreement, not to sell into Canada. Nippon will pay a fine of C$100,000. It is the 7th party to be convicted in Canada in connection with the graphite electrode conspiracy, and fines in the case now top C$25 million.
The Competition Bureau (the Bureau) recently released for consultation a revised draft Technical Bulletin on "Regulated" Conduct (the Draft Bulletin) setting out the Commissioner of Competition's approach to enforcement of the Competition Act where the impugned conduct may be regulated by another federal, provincial or municipal law or legislative regime.1A review of the Draft Bulletin indicates that the Bureau has considerably narrowed the scope of the defence - subject to further clarification by the courts. Comments are requested by February 3, 2006.
The Draft Bulletin draws an important distinction between conduct regulated by federal laws as opposed to conduct regulated by provincial laws. With respect to federal laws, it states that in circumstances where a party is unable to reasonably comply with both the Competition Act and another federal law, the Bureau will not pursue a matter under the Competition Act if Parliament has articulated an intention to displace competition law enforcement either explicitly through legislation or implicitly by establishing a comprehensive regulatory regime that authorizes a regulator to act inconsistently with the Competition Act.2 Moreover, the Bureau appears to recognize that in the context of conflicting federal laws, the regulated conduct defence is applicable both to the criminal provisions and the reviewable practice provisions of the Competition Act. However, the Bureau's approach to impugned conduct authorized by provincial regulatory laws is more restrictive and uncertain.
Continue Reading...With the fall of Canada's Liberal minority government on November 28, 2005, Bill C-19, An Act to Amend the Competition Act and to Make Other Consequential Amendments, died on the order paper. While the outcome of the January 23, 2006 federal election is unclear, re-introduction of the Bill in 2006 seems likely. Meanwhile, on October 6, 2005, the Government had announced amendments that would have increased the criminal fines for anti-competitive conspiracies from a current maximum of CDN$10 million to a maximum of CDN$25 million per indictment. The new proposals would also have provided the Commissioner of Competition with the authority to conduct broad-ranging studies of competition in a market - even when she does not believe there are grounds for an order pursuant to the Competition Act.
Bill C-19 was originally introduced to Parliament in the Fall of 2004, and was under review by the House Standing Committee on Industry, Science and Technology since that time.
The newly introduced amendments were in addition to those initially proposed in Bill C-19, which included, among other things, proposals to:
repeal the existing criminal provisions in the Competition Act dealing with price discrimination, predatory pricing and discriminatory promotional allowances; and
enable the Competition Tribunal to order the payment of an administrative monetary penalty up to a maximum of CDN$10 million (first order) or CDN $15 million (subsequent orders) under the abuse of dominance provisions of the Competition Act.
The Competition Bureau announced on August 30, 2005 that the Federal Court of Canada imposed fines totaling $1.675 million for a conspiracy to fix prices of nucleotides, a food flavour enhancer, in Canada. Ajinomoto Co. Inc., Japan's largest producer of seasonings, pleaded guilty to violating section 45 of the Competition Act by virtue of its participation in the conspiracy and was fined $1.5 million. CJ Corp. also pleaded guilty and was fined $175,000. In 2001, these same two companies pleaded guilty and paid fines in the United States for participating in this cartel. Katherine Kay of Stikeman Elliott's Competition/Antitrust Group acted for one of the defendants in this matter.
Susan M. Hutton and Patricia Martino
As reported in the March, 2005 edition of this newsletter, the House of Commons Standing Committee on Industry, Natural Resources, Science and Technology resumed consideration of Bill C-19 on March 9, 2005, after a hiatus of several months due to political skirmishing between opposition parties and the minority government members of the Committee. Further witnesses appeared on March 23, 2005. Although more witnesses may appear, it is still possible that Bill C-19 may become law this spring. So far, the Bill appears to have general all-party support, despite the opposition of some witnesses to certain aspects of the Bill.
Continue Reading...On March 9, 2005 The House of Commons Standing Committee on Industry, Science and Technology resumed consideration of Bill C-19, which proposes to amend the Competition Act by creating, among other things, stiff fines for abuse of dominance and misleading advertising practices.
In a surprising turn of events, the House of Commons Standing Committee on Industry, Science and Technology voted on December 2, 2004 to suspend further discussion of Bill C-19, An Act to Amend the Competition Act and to Make Consequential Amendments to Other Acts, for an indefinite period. The Committee had only recently commenced hearings concerning Bill C-19, the Government bill proposing important changes to the abuse of dominance, pricing and misleading advertising provisions of the Act, among others (see the November, 2004 issue of The Competitor for details).
The Committee had already heard from several witnesses, including the Commissioner of Competition, Sheridan Scott, as well as representatives from various business and lawyers' groups including the Canadian Council of Chief Executives, the Competition Law Section of the Canadian Bar Association, and the Canadian Chamber of Commerce. Several other witnesses were scheduled to be heard, but their appearance has been postponed, along with further discussion of the bill.
Continue Reading...On November 2, 2004, by tabling Bill C-19, the Canadian government took the first step toward implementing some of the long-debated amendments to Canada's Competition Act (the Act). If Bill C-19 manages to weave its way successfully through Canada's minority Parliament, it will implement the most wide-ranging changes in decades to Canada's competition legislation. Likely the most significant of these is the introduction of the additional remedy of fines ("administrative monetary penalties") for abuse of dominance, which should cause leading Canadian businesses to re-evaluate the way in which they operate.
Continue Reading...Public Reaction to White Paper is Mixed
As reported in the July 2003 issue of The Competitor, the Government of Canada released a discussion paper on June 23, 2003 entitled Options for Amending the Competition Act: Fostering a Competitive Marketplace (the White Paper), which proposed significant amendments to Canada's Competition Act (the Act).
The White Paper generated significant public comment and debate, and the Public Policy Forum (PPF), an independent non-profit organization, was mandated by the Government to steer a consultation process, which included written submissions and roundtable discussions.
Continue Reading...Canadian Competition Tribunal's analysis of ''avoidable costs'' in the Air Canada case diverges from the U.S. approach and may have repercussions far beyond the airline industry.
Katherine L. Kay and Danielle K. Royal
The Canadian Competition Tribunal (the Tribunal) recently released its Reasons and Findings in the Air Canada case regarding the appropriate way to measure whether a domestic airline has engaged in anti-competitive below-cost pricing. The decision was released shortly after that of the U.S. Court of Appeals (10th Circuit) in the American Airlines case, where the U.S. government alleged that American Airlines (AMR) engaged in predatory pricing on certain routes out of Dallas-Fort Worth. The Tribunal's approach to the appropriate price-cost test in the context of a predatory pricing analysis is markedly different from that approved by the U.S. Court of Appeal in American Airlines.
This is the first time that the so-called "avoidable cost" test has been considered by the Tribunal. The economic concept of "avoidable cost" as a means of testing for predatory conduct had not been used in Canadian competition law prior to its addition to the Competition Act (the Act) as part of airline-specific amendments in 2000. It replaced, in the context of the airline industry, the "average variable cost" test that had previously been used in predatory pricing jurisprudence. Since then, the Commissioner of Competition (the Commissioner) has indicated in both draft and final enforcement guidelines that the "avoidable cost" test will be used by the Competition Bureau in its approach to abuse of dominance generally, as well as in considering below-cost pricing under the pricing provisions found in section 50(1)(b) and 50(1)(c) of the Act. Thus, the approach adopted by the Tribunal in Air Canada has important repercussions for analysis conducted in other industries and under different provisions of the Act.
Continue Reading...An Overview of Proposed Changes to Canada's Competition Act
Paul Collins
On June 23, 2003, the Government of Canada released its much-anticipated discussion paper, entitled Options for Amending the Competition Act: Fostering a Competitive Marketplace (the White Paper).[1] The White Paper sets out potential amendments to the Competition Act (the Act) and reflects the analytical work done by the Competition Bureau over the past year, following the House of Commons Standing Committee on Industry, Science and Technology's April 2002 report, A Plan to Modernize Canada's Competition Regime.
The White Paper raises the prospect of sweeping changes to the Act that, if implemented, will have far-reaching repercussions for the business community. Indeed, the proposed amendments would be the most significant changes to the Act since its enactment in 1986, and represent a veritable seismic shift in the Canadian competition law landscape.
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