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«Second Edition Contributing Editors: Nigel Parr & Euan Burrows Published by Global Legal Group This article appeared in the Second Edition of Global ...»

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Enforcement, Appeals & Damages Actions

Second Edition

Contributing Editors: Nigel Parr & Euan Burrows

Published by Global Legal Group

This article appeared in the Second Edition of Global Legal Insights – Cartels; published by Global Legal Group Ltd, London.


Nigel Parr & Euan Burrows, Ashurst


Marcelo den Toom, M. & M. Bomchil 1

Argentina Peter Armitage, Melissa Fraser & Ross Zaurrini, Ashurst 11 Australia Christian Mayer & Annika Wanderer, Fiebinger Polak Leon & Partners 21 Austria Randall J. Hofley, Mark A. Morrison & Joshua A. Krane, Canada Blake, Cassels & Graydon LLP 27 Hannah Ha, John Hickin & Philip Monaghan, Mayer Brown JSM 37 China Marios Eliades, Tassos Papadopoulos & Associates LLC 50 Cyprus Olaf Koktvedgaard, Erik Kjær-Hansen & Christian Holger Vang, Bruun & Hjejle 57 Denmark Maria Peterson & Greete-Kristiine Kuru, Attorneys at Law Borenius 63 Estonia Nigel Parr & Euan Burrows, Ashurst 69 European Union Arttu Mentula & Katrin Puolakainen, Merilampi Attorneys Ltd. 81 Finland Leyla Djavadi, Séverine Sanglé-Ferrière & Jean-Louis Fourgoux, France Fourgoux et Associés 89 Ulrich Schnelle & Volker Soyez, Haver & Mailänder 100 Germany Farhad Sorabjee & Amitabh Kumar, J. Sagar Associates 111 India John Meade, Arthur Cox 117 Ireland Catherine E. Palmer, Daiske Yoshida & Hiroki Kobayashi, Latham & Watkins 126 Japan Gabriel Bleser, Kleyr Grasso Associés 134 Luxembourg Kees Schillemans & Tjarda van der Vijver, Allen & Overy LLP 139 Netherlands Funke Adekoya & Chinyerugo Ugoji, ǼLEX 147 Nigeria Kristin Hjelmaas Valla & Henrik Svane, Kvale Advokatfirma DA 153 Norway Dorothy Hansberry-Bieguńska, Hansberry Competition 163 Poland Silviu Stoica & Mihaela Ion, Popovici Ni

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Overview of the law and enforcement regime relating to cartels Statutory regime Cartel conduct is a serious criminal offence in Canada, attracting both penal and financial sanctions (indeed, the imposition of the highest fines in cases of any “corporate crime” in Canada). Canada’s cartel prohibitions are set out in sections 45 to 47 of the Competition Act (the “Act”),1 which is a federal law of general application that applies to all conduct which either occurred in, or has effects in, Canada.2 Section 45 criminalises agreements between competitors or potential competitors to fix or control prices or output, or to allocate sales, territories, customers or markets for the supply of any good or service. Prior to amendments which entered into force in March 2010, it was an indictable criminal offence to conspire or otherwise agree with another person (not just a competitor) to prevent or lessen competition “unduly” with respect to a good or service in Canada. Today, section 45 is a per se offence, such that proof of an undue lessening of competition (or anti-competitive effects) is not required to establish culpability.

Given the amended provision’s reference to supply, the Canadian Competition Bureau (the “Bureau”) has in guidelines indicated that section 45 does not apply to joint purchasing agreements.3 This approach aligns generally with the approach taken by the authorities in the United States (“US”).4 Section 46 of the Act makes it a criminal offence for any corporation, wherever incorporated, which carries on business in Canada, to implement a “directive, instruction, intimation of policy or other communication” from a person outside of Canada, in order to give effect to a “conspiracy, combination, agreement or arrangement” that would have contravened section 45 had it occurred in Canada. The communication must come from a person who is “in a position to direct or influence the policies of the corporation”.

Section 47 of the Act makes it an offence for two or more parties, in response to a request for bids, to:

(i) agree to submit pre-arranged bids; or (ii) agree that one or more of the parties will not submit a bid or withdraw a bid. As with the conspiracy provision, bid-rigging is per se a criminal offence.

The Commissioner of Competition (the “Commissioner”) and his department, the Bureau, are responsible for investigating alleged violations of the Act, including with respect to the cartel provisions. If they determine that a violation has occurred, they will refer the matter to the Public Prosecution Service of Canada (the “PPSC”) for prosecution.

The conspiracy and bid-rigging provisions apply both to firms and individuals, though the foreign directives provision applies to corporations only. Since cartel cases are prosecuted criminally, Canadian constitutional protections afforded to firms and individuals being investigated for, or accused of, a crime will apply (e.g., the presumption of innocence, the protection against self-incrimination, the right to counsel, etc.).5 While cases may be prosecuted in either the provincial superior courts or the Federal Court Trial Division, contested cartel cases in Canada are uncommon and more typically, prosecutions are resolved by way of a plea agreement and submitted either to the Federal Court or to the provincial court where the conduct was alleged to have occurred.6 In the case of international cartels, a company

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typically will enter into a plea agreement in Canada once it has pled guilty to conspiracy in the US, or sometimes elsewhere. While there is no limitation period for the prosecution of cartel conduct in Canada, the Bureau can exercise its discretion to discontinue an investigation and not refer past conduct to the PPSC.7 The Bureau has published several guidelines in respect of its enforcement approach to the cartel provisions of the Act. In May 2009, the Bureau published its Competitor Collaboration Guidelines which describe the Bureau’s approach in applying the cartel and competitor collaboration provisions of the Act, and outline the competition issues that may arise from collaborations.8 The Bureau also has published bulletins regarding its Immunity and Leniency Program, which it updates frequently to reflect the Bureau’s current approach to the administration of these programmes. The most recent bulletins for the Immunity and Leniency Program were released in June 2010 and September 2010 respectively, with the addition of a new set of Frequently Asked Questions in September 2013.9 Penalties The penalties for a violation of the cartel provisions are severe. A violation of section 45 or section 47 carries a possible term of imprisonment of 14 years. Maximum fines for conspiracy are now Can$25m per count (and a person could be charged with multiple counts), and there is no maximum fine for bid-rigging or the implementation of a foreign directive. A plea agreement could contemplate sanctions other than those prescribed by the Act, including the disqualification of individuals from holding certain offices within a company. In addition to criminal penalties, plaintiffs in third-party civil actions can recover damages, as well as investigation costs and costs to bring the proceeding.

Companies and individuals can also be barred from bidding on government contracts. Moreover, provincial asset forfeiture statutes allow for the confiscation by the Crown of proceeds of crime as well as offence-related property.10 The fundamental principle of sentencing in Canada is that a sentence must be proportional to the gravity of the offence and the degree of responsibility of the offender. The general principles of sentencing law in Canada require that judges consider sentences imposed on similar offenders in similar circumstances; however, there are no formal sentencing guidelines or rules. It is standard practice in Canada for the PPSC to make formal submissions on sentencing to the court considering the plea agreement, if one exists.11 The magnitude of the economic harm caused by a cartel goes to the gravity of the offence. The usual notion of “economic harm” from a cartel is the “overcharge”. This is the amount paid by victims of the cartel over-and-above what they would have paid for the products in the absence of the conspiracy.

The Bureau will normally recommend that the fine be greater than the overcharge to ensure that the fine is not “simply a cost of doing business” and to ensure that an appropriate level of punishment and deterrence is achieved.

In most cases it is difficult to quantify the overcharge resulting from cartel behaviour. In such cases, the Bureau typically will use 20% of the volume of commerce affected in Canada (e.g., the value of the conspirator’s sales of the products in Canada over the relevant time period) by the cartel participant as a proxy for the economic harm and as the starting point for its sentencing assessment (provided it is not above the maximum allowable fine); this is said to be made up of 10% for the assumed overcharge and 10% for deterrence.

In a conspiracy matter involving multiple counts, the resulting fines may exceed the statutory maximum for one count. In dealing with multiple counts, the Bureau will consider the totality of the conduct and surrounding circumstances to arrive at the appropriate sentencing recommendation.

In reasons delivered in R v Maxzone Auto Parts (Canada) Corp,12 Crampton C.J. emphasized in obiter the need for a full evidentiary record and detailed submissions for the court to become satisfied that a sentence arrived at by plea agreement is in the public interest and would not bring the administration of justice into dispute.13 In this regard, the submission should set out the aggravating, mitigating and other sentencing considerations, some of which are not always submitted as a matter of course, including the amount of illegal profits attributable to the conduct, the “deadweight loss” attributable to the conduct, and whether the corporate defendant has paid restitution. Additional requirements may need to be met with respect to individual defendants. The Commissioner has stated publicly

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that despite the greater detail required in sentencing submissions, companies have continued to come forward seeking leniency, and the Bureau and cooperating parties have managed to work with the framework set out by Crampton C.J. More time is needed to assess whether the decision will have a material effect on the Leniency Program.

Administrative settlement Convictions in the context of cartels have to date been obtained almost exclusively through the plea bargaining process. In addition to, or in lieu of, a plea agreement (or conviction) for criminal conduct, section 34(2) of the Act provides a mechanism whereby a person can consent to a prohibition order.

The order may appear very similar to a plea agreement (e.g., include conditions for the payment of a monetary penalty, a prohibition on individuals holding certain offices, etc.), but will not result in a criminal conviction or criminal record. The Bureau typically will not seek prohibition orders in lieu of plea agreements.

Alternative track Parliament amended the Act in 2010 to include a new civil or administrative provision at section 90.1, which permits the Commissioner to commence proceedings before a specialised competition court, the Competition Tribunal (the “Tribunal”) in respect of an agreement or arrangement between persons (two or more of whom are competitors or potential competitors). Responsibility for enforcing section

90.1 lies exclusively with the Commissioner, and a decision to commence proceedings under section

90.1 bars the PPSC from prosecuting the conduct criminally.14 The Tribunal may prohibit the parties from implementing or continuing to implement an agreement between them that prevents or lessens, or is likely to prevent or lessen, competition substantially in a market. The Tribunal may not, however, impose other penalties (e.g., fines or imprisonment) and no private right of action for damages exists (strictly speaking) with respect to conduct governed by section 90.1.15 Cartel investigations Fact-gathering tools Cartel conduct typically will come to the Bureau’s attention in one of two ways. Most commonly, a person or firm will approach the Bureau under the Immunity Program (described below) and seek immunity in respect of cartel conduct. Sometimes companies that are affected by a cartel will complain to the Bureau about cartel conduct involving their suppliers or customers. If the Bureau finds the complaint to be credible, it can investigate the complaint using its many information-gathering powers.

Where cartel investigations in other foreign jurisdictions become public, the Bureau is increasingly pursuing investigations of its own accord.

The Commissioner also has extensive powers to obtain information through search warrants, orders for the production of data and records and wiretaps. Search warrants may be obtained by means of an ex parte application pursuant to section 15 of the Act. Under this section, the court must be satisfied that there are reasonable grounds to believe a criminal offence has been committed and that relevant evidence is located on the premises to be searched. It is a criminal offence to prevent access to premises (in Canada) or otherwise obstruct the execution of a search warrant. The Act also provides special procedures for sealing privileged documents and for determining the validity of privilege claims within a certain time frame.

Warrants are not subject to appeal, but can be reviewed where there has been material non-disclosure or misrepresentation in the affidavit supporting the Commissioner’s ex parte application. Targets may also request a retention or privilege hearing.

The Bureau also has the power to investigate cartel behaviour through wiretaps, although it requires prior judicial authorisation in order to do so. Recently, the Bureau obtained wiretap evidence in its investigation into a retail gasoline price-fixing conspiracy in Quebec, as well as in its investigation of the polyurethane foam conspiracy.16 In addition to the Bureau’s search and seizure powers, the Bureau may require the production of documents and other records and compel a corporation to prepare written returns of information under oath within a certain time period using section 11 of the Act. Section 11(2) of the Act also provides that

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