Competition Bureau investigations into cartels1 that violate section 45 of Canada’s Competition Act (the Act) face a challenge inherent in the covert nature of illegal cartel activity. Because those inclined to participate in cartels are aware of the illegality of their conduct and take steps to conceal their activities, detection and securing evidence of the offence is extremely difficult. Conspirators often are well-educated, resourceful people who devise sophisticated, covert price-fixing, bid-rigging or other anti-competitive schemes, doing their utmost to avoid detection. Ferreting out cartel activity and securing the evidence of wrongdoing that the Crown requires to meet the high burden of proof applicable to a criminal prosecution is a resource-intensive challenge. Of the investigative tools available to enforcers, no other yields the return of an effective immunity programme.
Cartel participants cannot assume that their activity will remain undetected by enforcement agencies, however clandestine the cartel, nor that all fellow participants will hold fast to a ‘cone of silence’. The Bureau’s Immunity Program2 (the Program) is designed to increase the risk of detection and encourage the inherent instability in any cartel. It does this by engaging a wrongdoer’s risk assessment – a calculation fundamentally directed at self-preservation – and providing immunity only to the first applicant that break ranks and reports the illegal activity. Only the cartel participant who breaks ranks and is ‘first in’ to the Bureau to offer cooperation with the investigation and prosecution will qualify for the immunity prize. This race to report and the full and complete cooperation of the immunity applicant are central aspects of the Bureau’s immunity programme.
The Bureau first introduced the practice of recommending immunity in the early 1990s.3 It broadened the practice in 19944 and formalised it with the publication of the current Program in 2000.5 The Bureau published a series of Frequently Asked Questions (FAQs) about its Program in 20036 which were reviewed and expanded in 2005,7 to provide a ‘roadmap’ to applicants as to what to expect once the decision is made to engage the immunity process.
Under Canada’s Program, immunity is available if an applicant is the first to disclose an offence of which the Bureau is unaware or, where the Bureau knows of the offence, if the applicant is the first to come forward before the Bureau has evidence sufficient to warrant a referral to the Attorney General (AG) for prosecution. If an applicant’s first contact with the Bureau leads to an immunity application, and the applicant meets the Program requirements, the Bureau will recommend to the AG, represented by the Director of Public Prosecutions (DPP), that the applicant be granted immunity. In Canada, cartel activity is punishable by significant fines, imprisonment or both and conspirators face the prospect of a criminal record. By any measure, the grant of immunity from prosecution is an extraordinary grant.8
Stripped to its essentials, under the Program immunity applicants that have engaged in criminal activity undertake a process that begins with an admission of participation in an offence and a commitment to provide complete and timely cooperation to the Bureau and the DPP throughout the investigation and prosecution of all other participants in the offence. In return, the applicant who fulfils its obligations under the Program is granted immunity from criminal prosecution.
The current Program is broken down into four key steps: (i) initial contact; (ii) a grant of provisional guarantee of immunity (PGI); (iii) full disclosure; and (iv) the grant of final immunity.9 Applicants that step up and fully meet the requirements of the Program are granted immunity from prosecution by the DPP.
It is not enough solely to be ‘first in’. To secure immunity, the Program requires that an applicant take effective steps to terminate its participation in the alleged illegal activity; not be the instigator or the leader of the illegal activity, nor the sole beneficiary of the activity in Canada; provide complete and timely cooperation throughout the course of the Bureau’s investigation and subsequent prosecutions; and, where possible, make restitution.
The Program has been used primarily in support of Bureau enforcement of cartel offences under the Act, whether domestic or international in scope. The Program is also available for other criminal offences under the Act such as price maintenance, false or misleading representations and deceptive marketing practices. Applicants may be individuals or business enterprises. In the case of corporate applicants, immunity is available to directors, officers and employees of the corporation who admit their involvement in the illegal activity and provide full cooperation.
An applicant who is first past the immunity post does not receive a ‘free ride’. Applicants must deliver on their obligations to cooperate under the Program. For a business enterprise, cooperation will entail making available to Bureau investigators in a timely fashion all relevant evidence and providing access to, and cooperation from, the relevant directors, officers and employees whether currently or formerly employed.10 While there are exceptions, an applicant is required to proffer information outlining the nature of the offence within 30 days of receiving confirmation of its ‘first in’ status.11 The proffer is typically made by counsel for the applicant and must be sufficient for the Bureau to assess whether it merits a recommendation that the AG grant a PGI. Post-PGI, applicants are expected to respond within schedule to provide full disclosure and should complete this disclosure within the directed timeframe – typically a six-month period.12 Ultimately, immunity applicants may be required to testify in court against their fellow cartel participants.
In September 2004, the Commissioner announced her intention to re-examine the Program to ensure that it continues to respond effectively to changing situations. The goal of the review is to ensure the Program’s continued optimum contribution to the detection, investigation and prosecution of criminal offences under the Act. In February 2006 the Bureau issued a Consultation Paper13 that addressed nine specific topics: confidentiality; oral applications and the paperless process; an applicant’s role in the offence; the coverage of directors, officers and employees; penalty plus; restitution; proactive immunity; revocation of immunity; and creation of a formal leniency programme. The Bureau encouraged stakeholders to address these and any additional matters they considered relevant to the Program’s operation.
Competition law practitioners, enforcers and policy makers from across the antitrust community provided insightful observations and suggestions14. The Bureau’s review has benchmarked the Program with similar immunity and leniency programmes maintained by other jurisdictions to capitalise on the experience of the Bureau’s international enforcement partners and advance convergence where possible in international competition law enforcement and good practice.
Overall the review process has confirmed the valuable contribution of the Program to anti-cartel enforcement and that the Program is in good shape. There will be few substantive changes to the Program. Anticipated areas of adjustment or clarification include:
Those who cross the finish line in second, third and even fourth place will not be granted immunity from prosecution, but under current practice they may see reduced sentences. The Bureau and the DPP may support sentencing recommendations to the court in recognition of a guilty plea and cooperation with the investigation and prosecution of the cartel, that serve to substantially reduce penalties, commensurate with the timing of a party’s application to the Bureau and the value of their cooperation. Stakeholders recommended that the Bureau adopt a formal leniency programme that would more effectively encourage leniency applications and the interests of effective case resolution. The greater the transparency and predictability of available sentencing incentives, which may include recommendations as to reduced fines and adjustments to individual charges or reduced jail time, the more likely a party will be to come forward and cooperate with the Bureau. Implementing an escalating series of penalties, premiums associated with timeliness, and differentiated exposure to individual charges is viewed as enhancing incentives for early engagement with the Bureau. The Bureau is committed to developing a bulletin that will set out a transparent and predictable framework applicable to its leniency and sentencing recommendations to the DPP.
The rationale for leniency is straightforward; an immunity applicant cannot always provide sufficient information to enable an enforcement agency to break the back of a cartel, nor to prompt other participants to forego costly and protracted litigation in lieu of settlement. Cooperation provided to the Bureau by a second or even third-in applicant for leniency can provide investigations with sufficient evidence to bring all participants to the settlement table and avoid unnecessary contested proceedings.
While not prejudging the outcome of efforts to develop a new programme in this matter, factors to be considered in assessing the scope for leniency will include those relevant to current sentencing recommendations including; the level of cooperation including the speed with which that cooperation was offered; the size and market share of the company involved; its role in the cartel; the duration of the offence; the extent of participation of senior officers and directors; corporate compliance measures; previous convictions; and any other relevant aggravating or mitigating circumstances. It is important to remember that while a formal leniency programme will identify the parameters within which the Bureau will make leniency and sentencing recommendations to the AG, acceptance of this recommendation remains subject to the AG’s discretion and the Court’s final decision.16
Fighting cartels has taken on new dimensions in a world that one commentator has called ‘flat’ in referencing the convergence of technology and economic and political realities that have transformed the global marketplace. Today’s ‘24/7’ competition reflects the reality of our borderless, increasingly inter-connected world and a global marketplace for products, services and ideas. As the marketplace has become more globalised, so too have cartels, a phenomenon not lost to enforcers. The evidentiary and other challenges that international cartel activity poses for enforcement has encouraged competition agencies in Canada, the US, the European Union, Australia, Japan and elsewhere to collaborate in the fight against cartels. This inter-agency collaboration is taking place within a global enforcement framework of increasing convergence of competition laws. The proliferation and coherence of immunity programmes is but one example. It also has resulted in virtually simultaneous applications in multiple jurisdictions by cartel participants seeking immunity for activity that is multinational in scope. The Bureau’s Program and its operational implementation continues to be guided by the work of the Organisation for Economic Cooperation and Development (the OECD) and the International Competition Network (the ICN), both of which have contributed to advances in effective global enforcement, not least the development and proliferation of immunity programmes worldwide.
The Bureau’s work combating international cartel activity in no way lessens its ongoing commitment to enforcement against domestic cartels. Enforcement against domestic cartels, including bid-rigging, is a top Bureau priority. The guilty pleas secured in 2006 from three Canadian paper companies for conspiracy and the resulting $37.5 million in fines levied by the court is testament to the Bureau’s resolve to deter domestic cartel activity, as is the commitment of new resources to regional Bureau offices across Canada.
There can be little doubt that the extraordinary nature of the immunity bargain makes it hard for offenders to resist. In response to the immunity incentive, a cartel participant will break ranks and come forward, often well before misconduct might have been discovered by the enforcement agency. In such an environment, it may be thought that there is a reduced drive to use robust investigative and enforcement techniques. This is not the case. Experience demonstrates that decisions to engage in anti-competitive behaviour are anything but serendipitous – they typically are based on a hard-nosed, cost-benefit assessment. Conspirators weigh the expected gain of engaging in the unlawful activity against the likelihood of detection and the resulting consequences. Effective enforcement and prosecution, including stiff fines, incarceration and the prospect of civil actions for damages stack up on the dissuasive side of the ledger and by adding immunity to the mix, enforcers are capitalising on the conspirator’s self interest. Trust and solidarity among cartel participants is subject to the knowledge that at any time any one of the parties could ‘rat’ on the others.
The Program has proven to be the Bureau’s single most powerful means of detecting cartel activity. Its contribution to effective enforcement is unmatched. Its continued appeal to those who would otherwise remain undercover is pivotal to the Bureau’s enforcement efforts. Since the publication of the Program in 2000, approaches to the Bureau for markers have increased steadily, with the Bureau now receiving in excess of a dozen a year. Over the last 10 years, cartel prosecutions have resulted in a total of close to $200 million in fines and much of that outcome can be attributed to cartels uncovered by the Immunity Program.
There is simply no other enforcement tool that provides the same magnitude of returns to supporting the detection and prosecution of cartels than a clear, transparent and predictable immunity programme.
