BACKGROUND
1. What is the relevant legislation concerning the leniency policy and what is the enforcing body?
The Canadian Competition Bureau (the ‘Bureau’) had an informal policy encouraging cooperation prior to 2000. A formal immunity policy was announced in September 2000. The policy is outlined in an information bulletin entitled ‘Immunity Programme under the Competition Act’ (the ‘Bulletin’) as well as in legislation protecting the identities of and prohibiting workplace retaliation against whistleblowers (sections 66.1 and 66.2 of the Competition Act). The Bulletin, and its companion Frequently Asked Questions publications (‘FAQ Documents’) are not legally enforceable codes (see, by analogy R v Atomic Energy of Canada Ltd [2001] OJ No 1580 (Ont SC) where it was observed that Crown policy manuals are not intended to have legal implications). Rather, they outline practices and procedures jointly employed by the Bureau and the Attorney General of Canada (the ‘Attorney General’ or ‘AG’) on issues of immunity for criminal antitrust behaviour. In this respect, the procedure differs from that of the United States Department of Justice Antitrust Division (the ‘US DOJ’) because of its bifurcated nature. Prosecutorial immunity in Canada is granted only by the AG on a positive recommendation from the Bureau. The AG’s discretionary grant of immunity, whether provisional or final is given in exchange for evidence, information, cooperation or assistance provided by the applicant. The AG maintains a separate but similar immunity policy (Federal Prosecution Service Deskbook, Chapter 35 ‘Immunity Agreements’). Canada is currently revising its prosecution system to create The Public Prosecution Service of Canada and a Director of Public Prosecutions (‘DPP’) who will formally replace the AG in conducting Canadian federal prosecutions, including those pursuant to the Competition Act. Further detail on the manner of operations of the DPP will be revealed as the new system is implemented. For this revision of the Canada chapter, we will continue to use the AG designation in our discussion.
Although no Canadian court has yet set out a legal analysis of an immunity agreement in a competition case, the limited criminal law jurisprudence in the area suggests that the ‘bargain’ would be analysed in contractual terms, not unlike the approach taken in the US decision in Stolt-Nielsen (2005 352 F Supp 2d 553 (reversed upon constitutional grounds by the Third Circuit Appeals Court). (See the decisions in Re Abitibi Paper Co Ltd and the Queen [1979], 47 CCC (2d) 487 (Ont CA); R v Crneck, Bradley & Shelley [1980], 55 CCC (2d) 1 (Ont HC); R v MacDonald [1990] 54 CCC (3d) 97 (Ont CA).)
2. What are the basic tenets of a leniency/immunity programme?
An understanding of Canada’s criminal antitrust laws provides important background to the tenets of the immunity policy. Significant features are:
1 With thanks to Nicole Brown for her research assistance
Jurisdiction issues may arise for Competition Act enforcement which are not apparent in the US: (1) there is often no Canadian domestic participant, and (2) market definition issues may arise because global participants more often operate on the basis of an agglomerated North American market. To date, no case has analysed the jurisdictional ambit of Competition Act offences, and subject-matter jurisdiction has not yet been ruled upon by the courts (however, see by analogy R v Libman [1985] 2 SCR 178 where in a non-competition case, it was held that to establish Canadian subject-matter jurisdiction, a significant portion of the activities constituting the offence should occur in Canada). Obtaining personal jurisdiction over a non-Canadian corporation may also be in doubt after the decision of the Ontario Superior Court in R v RJ Reynolds Tobacco Co (Delaware) et al [2004], 182 CCC (3d) 126 (currently under appeal by the prosecution). In countries having extradition treaties covering criminal antitrust offences in Canada, extradition remains a potential risk for foreign executives (in the Thomas Liquidation case an individual waived his right to an extradition hearing, came to Canada and pleaded guilty to the offences: Francine Matte, QC, Acting Director of Investigation and Research, Business Across Borders – Competition Law Enforcement in a Global Environment 11th Commonwealth Law Conference, 27 August 1996). However, the majority of foreign executives who have resolved their antitrust liability in Canada have voluntarily come forward in the absence of the threat of extradition.
The basic tenets of Canada’s immunity policy are set out in the Bureau’s Bulletin and FAQ Documents, as follows:
the party must provide full, frank and truthful disclosure of all the evidence and information known or available to it or under its control, wherever located, relating to the offences under investigation. There must be no misrepresentation
Immunity is granted by product (which includes services) and relative to a particular offence or offences committed in Canada. Because immunities are granted by product and offence and not by time period, there is no subdivision of immunities (ie, two applicants receiving immunity for the same product and offence but over different time periods). Thus, if the applicant innocently understates the time period of the offence, it may be able to obtain the benefit of immunity for a larger time period on the same product and offence which may come to light independently from further investigation.
It should be noted that as a condition of granting immunity, the Bureau will demand disclosure of all Competition Act offences for the product covered by the request. However, applicants should be prepared to respond in the same way they would to the ‘omnibus question’ asked by the US DOJ under its leniency practice. This is typically necessary and desirable in any event when the conspiracy has a North American dimension. Should the matter proceed to charges against co-conspirators, personnel of an immunity applicant will likely be required as government witnesses. The prosecution will want disclosure of all prior corporate and individual criminal conduct prior to calling that person as a witness. The Bulletin also refers to full disclosure. These prospects raise the spectre of potential revocation of immunity, or even obstruction of justice charges, if applicants are untruthful in their disclosures and further or contradictory information comes to light.
Prosecutorial authority is divided at the federal and provincial/territorial level in Canada. Some of the conduct which comprises Competition Act offences would constitute offences under either the fraud or like prohibitions in Canada’s Criminal Code or provincial consumer protection statutes, all of which are prosecuted by provincial or territorial AGs. However, as antitrust matters are rarely of interest to provincial regulators in practice, ‘provincial’ immunity is seldom sought nor needed. It is likely in any event that federal AG counsel would provide a positive recommendation to provincial or territorial colleagues that would make it unlikely that provincial prosecutions based upon the same conduct would ensue after receipt of Competition Act immunity.
The AG’s Federal Prosecution Service Deskbook refers to the Bureau’s policy and notes that a positive recommendation may result in a provisional grant of immunity or ‘PGI’ which provides a framework for obtaining further and more detailed cooperation and assistance from the applicant. Current officers, executives, and employees who admit their complicity in the illegal activity will normally be sheltered under the same PGI but in rare circumstances particular individuals may be ‘carved out’ of immunity arrangements and this may become a point of negotiation with the government. The status of prior executives, individuals, and employees under the PGI is decided on a case-by-case basis and may become another point of negotiation. Current affiliates and subsidiaries of the principal player may also be sheltered under the PGI. On fulfillment of the terms set out in the PGI, an applicant may receive final immunity (normally containing terms as to continuing cooperation and assistance), with similar caveats and negotiation points. In practice, the Bureau and AG are moving toward a position where all terms of potential final immunity are set out at the time of the PGI.
The Bureau is currently giving consideration to revising its immunity procedure to align it more closely with the US DOJ’s leniency process by eliminating the interim step of the PGI and instead proceeding directly to an immunity agreement after a successful marker and proffer. The immunity grant would be subject to continuing obligations of complete cooperation with the Bureau. Witness interviews following the proffer would be conducted under the corporate grant of conditional immunity and a ‘Queen for a Day’ witness letter (as more fully detailed below). As at this revision, the Bureau is still considering this change and has not publicly committed itself to eliminating the PGI process.
It should be noted that given the increasing prevalence of class action antitrust litigation in Canada, the Bureau has tended to put less emphasis upon restitution to persons affected, and retains some flexibility not to impose this condition if there is outstanding or anticipated civil litigation. (The most significant restitution payment to date is Cdn$19 million: See the UCAR Inc case 18 March 1999.)
3. How many cartels have been unveiled and punished since the adoption of the leniency programme?
There is no comprehensive, publicly available information as to how many cartels have been unveiled and punished since the adoption of the Bulletin on 21 September 2000. An incomplete picture emerges from some press releases which indicate when the Bureau’s investigation commenced. Only one release (relating to the conviction of Crompton Corporation in the rubber chemicals cartel in May 2004) discloses that the Bureau’s investigation started after the Bulletin was released. However, the Bureau had a cooperating parties programme in place for many years before September 2000. Consequently, many of the cartels which have been unveiled and punished since the release of the Bulletin can be attributed to the prior policy. According to the Bureau’s cartel penalty chart, there have been approximately 22 international cartels (representing different products) prosecuted to date. In a speech in September 2006, the Commissioner indicated that over Cdn$200 million in fines have been imposed following guilty pleas in international cartel cases over the past ten years (See Sheridan Scott, Commissioner of Competition, Criminal Enforcement of Anti-Trust Laws – The U.S. Model – A Canadian Perspective, speech given at the Fordham Corporate Law Institute Annual Conference, New York, 14 September 2006). In addition, there have been approximately 11 domestic cartels prosecuted since the adoption of the programme, one of which included the imposition of record fines of $12.5 million per guilty party by the Bureau (see Bureau press release: Competition Bureau Investigation Leads to Record Fine in Domestic Conspiracy, 9 January 2006). Many of these cases would have resulted from the cooperation and leniency policies.
The Bureau does not publish statistics concerning the number of cartels currently under informal investigation, or under formal inquiry. However, in a September 2006 paper, Denyse MacKenzie, the Senior Deputy Commissioner, noted that since the publication of the Programme in 2000, the Bureau has received close to 50 first-in immunity applications on a broad spectrum of products (see Denyse MacKenzie, Senior Deputy Commissioner, The Bureau’s Immunity Programme – Fine Tuning or Overhaul, Paper Prepared for the Canadian Bar Association Annual Conference, 28–29 September 2006). The authors are aware of numerous investigations which are ongoing but which are not yet public.
4. What is needed to be a successful leniency applicant? Is documentary evidence required or is testimonial evidence sufficient?
Both testimonial and documentary evidence are necessary in order to be a successful leniency applicant.
TIMING
5. What are the benefits of being ‘first in’ to cooperate?
There are substantial benefits to successfully obtaining immunity in Canada. Securing immunity for antitrust offences means that no public admission of guilt or liability will be required, consequential reputational damage may be avoided, no information or identities of complicit staff will be shared with other regulators (in the absence of consent), and cooperating subsidiaries, affiliates, and current officers, employees and agents may be sheltered under the same grant of immunity. Co-instigators of the illegal activity may potentially receive immunity (for further elaboration, please see comments under question 13).
The receipt of immunity in another jurisdiction will have no binding or comity effect in Canada. Bearing in mind the substantial economic integration of North American business enterprises, together with the fact of strong trans-border cooperation between the US DOJ and Bureau officials, an immunity applicant would be well advised to consider a coordinated strategy of multiple applications as between the US and Canada.
6. What are the consequences of being ‘second’? Is there an ‘immunity plus’ or ‘amnesty plus’ option?
Entities that either fail to be the first to disclose the offence or that fail to meet the Bureau’s criteria for immunity may qualify for ‘leniency’ as a ‘second-in’. Benefits, primarily in the form of a reduction in the typical maximum fine of 30 to 40 per cent of the accused’s relevant volume of commerce in Canada over the period of the offence will be considered by the Bureau and AG, in exchange for a plea of guilty and undertaking of cooperation and assistance.
However, because Canada, unlike the US, has no formalised sentencing guidelines for the courts, there are no hard and fast rules on the quantum or quality of the benefit afforded to ‘second-in’ entities. There can be a great variety of ‘second-in’ situations, including two-party conspiracies, cases where the initial applicant may have supplied inadequate information to enable a referral to the AG and the ‘second-in’ effectively delivers the case, and others where there are significant time delays before the ‘second-in’ decides to cooperate. For these reasons, it is difficult to predict where a ‘second-in’ applicant is likely to fall after an application for leniency. However, the Bureau has acknowledged that substantial discounts may be available to subsequent players that arrive soon after an immunity applicant (or who may be failed immunity applicants themselves) and provide substantial and valuable cooperation. Joint requests for immunity, however, are prohibited. As a component of its continuing review process, the Bureau may give consideration to developing a separate bulletin that would provide a framework for its leniency and sentencing approaches for later-arriving parties.
The ‘second-in’ party also obtains some advantage in being able to negotiate the manner in which the AG will charge a violation (ie, full conspiracy offence, implementation of foreign directives, aiding and abetting, etc) and the content of the public statement of admissions that will be filed with the presiding court on the plea of guilty. Unlike the US DOJ, the AG will require a detailed statement of admissions to be filed with the court to proceed with the plea. This may function as a template for follow-on civil litigation and demands careful scrutiny.
However, because the immunity applicant already will have given a version of events to the Bureau and AG, it is generally unlikely that subsequent parties will be able to vary substantially from that version in negotiating points of admission for the plea document.
Important and troubling issues may arise where resolution negotiations with a ‘second-in’ applicant fail, and cooperation including interviews and document production, has been extended. It is doubtful that the Bureau or the AG would properly be able to share this material with other antitrust authorities. In addition, the government would face substantial derivative evidence obstacles in subsequently prosecuting an individual (on the theory that the information and evidence obtained was produced through a compelled or involuntary process with the party hoping for favourable treatment; in this regard see Thomson Newspapers Inc v Canada (Director of Investigation and Research) [1990] 1 SCR 425). Even more serious issues would arise if material has been shared and formal action initiated by other regulators.
An ‘immunity plus’ arrangement is available in Canada similar to a US DOJ ‘amnesty plus’ arrangement. The Bureau permits applicants who are not the first to disclose criminal conduct on one product to receive immunity on a second or further products if they are the first to come forward and disclose conduct related to distinct offences of which the Bureau is unaware or is at an early investigative stage. This arrangement will require the applicant to fulfil the usual immunity criteria on the second or further products as well as undertaking to enter a plea of guilty on the non-immunised product. In exchange, the AG will normally reduce the ‘expected’ fine level.
Some intricacy may arise where the officers or executives involved in both the ‘immunised’ and the ‘prosecuted’ conduct are the same. One of the company’s officers or employees may be expected to enter a plea of guilty for his/her complicit conduct and be subject to punishment of a conditional sentence of imprisonment or fine, or both. The immunity disclosure and identities will be preserved for the immunised product and often may be subject to negotiation, as with the level of ultimate corporate fine, depending upon the nature and extent of cooperation to be provided. The Bureau will not negotiate exemptions to disclosures that may be required by law or by agreement (eg, information sharing accords with other antitrust authorities or pursuant to treaty requests under Canada’s Mutual Legal Assistance in Criminal Matters Act RS 1985, c 30 (the ‘MLACMA’)). While alignment of immunity and plea arrangements is desirable across jurisdictions, it may sometimes arise that a ‘second-in’ immunity-plus applicant may qualify in one jurisdiction but not another.
Note that there are important strategic concerns surrounding a decision to seek immunity on additional products, particularly in situations where there is sufficient criminal conduct for an offence in one jurisdiction (or where there is no limitation period, as in Canada) but not in another. Competitors of the applicant may be making their own applications in other jurisdictions where the applicant believes it does not have exposure and may seek to implicate the applicant in those proceedings. A waiver provided by those competitors may enable the Bureau to obtain the information provided by them from other jurisdictions.
7. Are subsequent firms given any beneficial treatment if they make a useful contribution? How are ‘useful contributions’ defined?
The Bureau has not yet defined a scale of benefits for subsequent cooperators. As noted above, the AG tends to take a case-specific approach to later arrivals, depending upon the scope and nature of the cartel, the timing and level of cooperation to be provided by the subsequent party, and the availability of prosecution as opposed to an acceptable negotiated settlement (ie, fine level). Later arrivals have little scope to protect inter-agency disclosure of disclosed materials and protection for officers and executives may also be at risk. Later arrivals are also likely to be required to conform to statements of fact entered in support of guilty pleas by earlier parties and have limited scope to adjust or modify the ‘standard facts’ of the cartel to minimise civil liability exposure. The Bureau may also demand that an executive who was essential to the operation of the cartel enter a personal guilty plea to an offence in Canada and be sentenced to appropriate penalties. Should those individuals be ‘carved out’ of a plea agreement, the AG may institute extradition proceedings from jurisdictions where a fugitive executive may be found and more stringent penalties, including jail sentences, may be expected on conviction in Canada.
SCOPE/FULL LENIENCY
8. Is it possible to receive full leniency? And, if so, what are the conditions required to receive full leniency?
On completion of satisfactory cooperation, a final grant of immunity from prosecution from the AG is available, on a positive recommendation from the Bureau. In practice, the Bureau will attempt to secure all available documentary and testamentary evidence from the applicant prior to execution of the agreement. ‘Full leniency’ is somewhat of a misnomer. Immunity is always dependent upon continuing cooperation with the Bureau and is always subject to revocation. As noted above, cooperation may entail not only providing witness statements and documents but actual testimony in contested criminal proceedings.
If the Bureau proceeds to eliminate the PGI step, parties will move immediately to an immunity agreement after completion of a successful proffer; however, even under the current PGI system, the terms of the PGI letter are normally identical to those of the ‘full leniency’ agreement.
Tension between the immunity applicant and the Bureau can arise where individuals fail to cooperate to the Bureau’s satisfaction. The PGI and/or the immunity agreement require the corporate applicant to take ‘all lawful means’ to promote the cooperation of individuals. In the Bureau’s Immunity Programme Review Consultation Paper released in February 2006 (the ‘Consultation Paper’), the Bureau indicated that it will not be prevented from recommending immunity if the corporation is unable to secure the cooperation of one or more individuals or if cooperation is not within the firm’s control, but also cautioned that the number and significance of the individuals who fail to cooperate and the steps taken by the corporation to secure the individual’s cooperation are relevant in determining if there has been “full, frank and truthful” cooperation by the corporation.
The typical PGI or final immunity agreement also provides that it is conditional upon the corporation discharging its obligations (and the individuals theirs) under these clauses. To our knowledge, the Attorney General has never withdrawn corporate immunity, but has twice withdrawn individual immunity after repeated unsuccessful attempts by the Bureau to gain the cooperation of the parties in question. The Bureau recognises that the Bulletin does not provide any guidance on this problem, but should do so. (See Sheridan Scott, Commissioner of Competition, Cartel Enforcement: International and Canadian Developments, Fordham Corporate Law Institute Conference on International Antitrust Law and Policy, 7 October 2004). Particular difficulties may arise where Canadian or foreign labour laws may conflict with potential punitive measures in the PGI or immunity agreement against defaulting employees. Further, there may be significant costs associated with cooperation by retired or discharged employees. In its Consultation Paper, the Bureau sought comment as to whether any limits to a company’s ability to secure the cooperation of its directors, officers and employees should be recognised by the Bureau. The Bureau’s revised policy may address this issue. (See question 16 for further discussion).
9. How many companies have received full immunity from fines to date?
In a September 2006 paper Bureau officials noted that since the publication of the Programme in 2000, the Bureau has received close to 50 first-in immunity applications on a broad spectrum of products (referred to under question 3). The Bureau’s news releases do not systematically track the number of parties actually receiving immunity. A review of news releases and available agreed statements of fact to date discloses only four parties having received immunity. However, since a grant of immunity is confidential (unless there is a contested prosecution), it is not surprising there are relatively few public attributions of immunity.
PROCEDURE/CONFIDENTIALITY
10. What are the practical steps required to apply for leniency?
The following outline is a suggested course of action which includes both substantive and procedural considerations:
Determine eligibility for immunity
This will require a quick and usually incomplete analysis of whether the prospective applicant:
While there may be evidence of an anti-competitive agreement which could constitute an offence under US antitrust law, there may inadequate evidence of an undue lessening of competition in Canada as required under section 45 of the Competition Act. If there has already been investigative activity in another jurisdiction, there is a good chance that the prospective applicant will not be first-in. The prospective applicant then needs to assess whether it will attempt to obtain immunity on a second product, or significantly advance the investigation on the first product, or whether an offer of cooperation and acknowledgment of guilt potentially could reduce penalties that will be imposed.
Apply for a marker
This is an informal process through which counsel for the applicant contacts a designated senior official in the Bureau by telephone to explore the possibility of obtaining immunity. The responsible official in the Bureau is the Senior Deputy Commissioner of Competition responsible for criminal matters. The applicant will need to identify the product or products in question in order for the Bureau to search its database to see if a previous application has already been made. Some basic information concerning the nature of the activities (ie price fixing, market or customer allocation, bid-rigging, etc) and the time period of the conduct is normally requested by the Bureau in order for a successful marker to be placed. Counsel may make the contact on a hypothetical, no-names basis. However, depending on the circumstances, there may be little downside to making the initial disclosure on a names basis. Moreover, this could establish a level of trust and cooperation between counsel and the Bureau which is critical for the successful completion of the process.
Determine eligibility for a marker
The Bureau will report, usually within the same day, on whether the applicant would be eligible for a marker. The Bureau will provide written confirmation of a successful marker, if requested by the applicant; normally no such correspondence is offered.
Meet the Bureau
Canadian counsel for the applicant, accompanied if possible by lead foreign counsel, should meet with the Bureau as soon as possible after the initial contact is made. At this meeting, which is likely to be attended by senior officials from the Bureau and the AG, counsel should be prepared to disclose to the extent known at that time the nature of the offence and the kind of evidence that is available to support the application. The discussion necessarily will have a different tenor depending on whether the applicant is ‘first-in’. Depending on timing constraints and other circumstances, this meeting may be collapsed into a single meeting dealing with the counsel proffer, discussed next.
Make the proffer
Assuming that the applicant is first-in and a marker has been obtained, the applicant will have to ‘perfect’ its immunity claim by disclosing full details of the offence to the Bureau within a relatively short period of time. The decision on the proffer should be made after careful consideration, since detailed inculpatory evidence will have to be turned over without any written assurance at that time (other than oral statements made by the Bureau and AG) that it will not be used against the applicant.
The ‘proffer’ is made by way of a detailed verbal disclosure by counsel, normally reading from a prepared script which may have been the product of coordination with counsel in other jurisdictions, of the nature of the offence and referring to the available documents to support the storyline. The Bureau representatives will make notes which become part of their internal files. Pre-existing business documents should be made available to Bureau officials at the same time. However, precautions over the way that the documents are packaged for the Bureau will have to be taken in order to minimise the creation of a ‘road map’ for foreign civil plaintiffs should these materials have to be disclosed by the applicant in response to a discovery order by a US court in civil litigation relating to the cartel (see Dean Foods Co v Eastman Chemical Co, No C 00-4379 WHO, US Dist Ct (N Dist Cal, 13 August 2001) and In Re Vitamins Antitrust Litigation, Misc No 99-197 (TFH), MDL No 1285, US Dist Ct (DC, 18 December 2002)). Generally, no work product or other privileged matter should be turned over to Bureau investigators.
While the Bulletin refers to the possibility that the description of the illegal activity could be in hypothetical terms before the issuance of the provisional guarantee of immunity (‘PGI’), in our experience it likely will not be possible to do this, given the detailed disclosure required to perfect the marker and the nature of the documents themselves. The Bureau’s policy is that applicants will be required to complete their proffer within 30 days after obtaining a marker (see Immunity Programme Responses to Frequently Asked Questions, October 2005). This may pose difficulties for certain applicants, as it is often inconsistent with the time frame in which these complex multinational cases can proceed, and does not recognise the difficulties associated with obtaining a clear understanding of the facts and obtaining the necessary evidence. Typically, a period of 90 days or more may be necessary in order to make a detailed and fully accurate proffer. It is hoped that the Bureau will show some flexibility in the application of the 30-day policy, and it has indicated that reasonable accommodations will be made where an applicant indicates at the outset that it will have justifiable difficulties in complying with the rule. However, Bureau officials have indicated that they have not encountered any substantial difficulties in the application of its 30-day timeline to date.
Obtain provisional guarantee of immunity
In a well-presented case, a PGI may be issued within a couple of weeks after the proffer. While counsel for the AG is likely to have been involved at a very early stage, probably at the initial meeting after the marker contact, they will become much more actively involved during the proffer and in negotiating the terms of the PGI. The Federal Prosecution Service Deskbook contains sample PGI forms. Certain aspects of the PGI may be negotiated by the applicant’s counsel to enhance protection and to clarify the arrangement for both sides. For example, reference may be made to the duty of confidentiality of the Bureau and the AG as set out in the Bulletin; actions that will be taken in the event of a request by a third party for disclosure of the evidence; use of the evidence in a non-specific, source-protected, non-attributable manner; and derivative use provisions protecting against prosecution for other offences. The Bureau may be moving to standardise its immunity agreements along the lines of those in use by the US DOJ. However, as at this writing, the Bureau has not formally committed itself to this step.
Cooperation after obtaining PGI
The Bulletin and the PGI require the applicant to provide full, frank and truthful disclosure of all the evidence and information known to it or under its control, and to cooperate fully and expeditiously on a continuing basis. In addition to collecting documents and interviewing employees, which will have taken place from the very earliest days of the process, the applicant must continue this process and conduct further and deeper searches for documents and re-interviews to resolve ambiguities and to address the government’s requests.
The applicant should keep in mind that it should not disclose the PGI or the fact that the matter is under investigation unless it obtains the consent of the Bureau and the AG. This is to ensure that the Bureau’s options for collecting evidence from other cartel participants by way of search and seizure or document production orders are not compromised. In certain cases where illegal activity may be continuing, the Bureau and AG may enlist the cooperation of other law enforcement agencies to collect evidence against other participants by way of wiretap or other investigative means.
Care must be taken to ensure that the search for evidence is cast broadly enough to include the Canadian component. Typically, US or EU counsel will be acting in a coordinating role with direct initial access to the corporation’s e-mail, files and personnel. They need to be sensitive to the legal test under Canadian law and the need for Canadian-specific material. Consequently, documents which refer to Canadian market structure and actions taking place in Canada should be flagged and brought to the attention of Canadian counsel as soon as possible. To the extent they are relevant, documents which are provided to the US authorities should be provided as soon as possible to the Canadian authorities as well. Since there is no limitation period for antitrust offences in Canada, the time period covered by the document search will need to be longer for documents that relate to Canada.
It is advisable to periodically and proactively update the Bureau on the status of evidence collection, and any important developments in other jurisdictions which may impact on the Canadian process. This may be particularly important where there are delays in collecting or presenting the evidence that arise from circumstances beyond counsel’s control. While the Canadian authorities do actively cooperate with their foreign counterparts, there are occasional (and sometimes critical) lapses in communication. It cannot be assumed that all developments are communicated between the authorities themselves on a timely basis. To the extent possible, it is useful to involve foreign counsel with an oversight role in any material communications with the Bureau so that key foreign developments can be communicated first-hand, and foreign counsel appreciates any Canadian concerns first-hand.
Arrange for government interviews
After the proffer, counsel should arrange government interviews of relevant employees. These interviews may be scheduled conveniently for the employees, and so that they can be conducted immediately before or immediately after interviews by other antitrust authorities. Bureau officials now indicate that such interviews will normally take place in Canada although coordination with other agencies, particularly the US DOJ, is often the case. Consequently, if witnesses are travelling from foreign countries to Washington for interviews by the US DOJ, the Canadian interviews will be coordinated to occur when these individuals are in Washington. Canadian employees will likely be interviewed in Ottawa. Formerly, it was common practice for interviews to be conducted by the US DOJ and Bureau/AG at the same time, as ‘joint’ interviews. Concerns about triggering multifaceted disclosure obligations, chiefly in the US, have led to this practice falling out of use except in difficult scheduling circumstances.
No transcript will be taken of the interview. Instead, Bureau officials take notes which they later transcribe into internal evidence memoranda. These documents are not shared with counsel for the applicant or any outside party at this stage (see discussion at question 13).
Witnesses located outside North America may not be willing to travel to North America without an assurance they will not be prosecuted. Counsel for the AG routinely issue use immunity letters (colloquially known as ‘Queen for a Day’ letters) allowing free entry and exit, and underlying the voluntary nature of the process from the perspective of the witness. These letters typically are much shorter and less complicated than their US equivalents. They will confirm that the immunity of the individual will not be affected by any failure of the corporation to maintain its immunity that is unrelated to the cooperation of the witness. The letter will stipulate terms requiring candid and truthful cooperation and will not shield individuals from potential perjury or obstruction charges arising from statements made or materials provided during their cooperation. As with the PGI, the form of this letter may be negotiated to a limited extent.
Obtain grant of immunity
Once the PGI has been issued, interviews conducted and documents reviewed, the Bureau should be in a position to recommend to the AG whether final immunity should be granted to the applicant, or not. The AG will conduct an independent review and determine whether to grant immunity. Unfortunately, the Bureau’s bulletin does not set out a specific time frame within which final immunity may be granted. It is not unusual for an applicant to wait in excess of a year or more before a decision is made on this issue.
If a decision is made not to grant immunity, the applicant will face difficult consequences which are discussed elsewhere in this chapter. If immunity is to be issued, the agreement may be tailored to the specific situation. As noted above, terms of potential ‘final’ immunity may be available at the time of negotiation of the PGI. The immunity grant includes obligations of continued cooperation and disclosure. In a contested case, cooperation will include disclosure of the immunity agreement to the accused, and giving of testimony at the trial of a coconspirator which may occur later in the process. However, since these cases almost invariably are resolved on the basis of guilty pleas, this level of cooperation may not be required.
All of the foregoing discussion is subject to possible modification if the Bureau decides to eliminate the interim PGI process, as previously discussed.
11. Is there an optimal time to approach the regulatory authority?
Bearing in mind that few global criminal cartels have a Canadian origin, Canada is unlikely to be the premier destination of choice for immunity applicants with criminal antitrust exposure. That said, it is strongly advisable to consider contemporaneous applications for immunity after considering available facts concerning Canada and the nuances of Canadian competition law. Immunity in one jurisdiction has no binding effect in Canada. Clients normally should seek Canadian immunity at the earliest opportunity. Parties with antitrust exposure in Canada who delay their immunity application while competitors seek immunity in the US may find that consequential overt US regulatory action (such as the serving of subpoenas) may prompt Canadian authorities to act before the applicant proceeds in Canada. Bearing in mind the consequences, this is a substantial risk to take.
The tensions involved in early applications for immunity include the Bureau’s desire to obtain as much detail as possible about the potential offence at the earliest opportunity, and the practical difficulty for counsel in conducting internal investigations and interviews to enable verification of the conduct and significant events underlying the offences, while at the same time determining that the risks of being wrong are outweighed by the risks of delay. The situation is made more complex by Canada’s requirement for demonstration of market effects as a component of the cartel conspiracy offence. As noted above, the Bureau has outlined its 30-day time limit for ‘perfection’ of a marker, which places additional stress on the analysis of these issues.
12. What guarantees of leniency exist if a party cooperates?
Provided that an applicant makes truthful, timely, and comprehensive disclosure in good faith pursuant to the Bureau’s request, the immunity process will proceed smoothly. Minor discrepancies arising from witness interviews and document production, as well as reasonable and justifiable delays in providing information, should not lead to the prospect of revocation. However, material discrepancies in the versions of events given by witnesses, changes in the ‘story line’ or document production which effectively negate the proffered theory of liability may give rise to allegations that the applicant has misled investigators.
There is no statutory or administrative law guarantee that immunity will be granted in Canada. This flows from the nature of the discretion available to the AG in the exercise of his functions, which has been found to be constitutionally valid in Canada: R v Lyons [1987] 2 SCR 309.
There are very few decisions in Canada where an accused has alleged improper revocation of an immunity agreement by the AG. No clear principles have emerged. Moreover, none of these cases was an antitrust matter. Courts are likely to adopt a contractual analysis of the ‘bargain’ reached between the party and the AG. Doctrines of material breach, misrepresentation, and other contract law analytical tools would likely be relevant. Apart from the legal analysis, there is an overriding equitable public policy principle which courts will apply to actions by the AG who may be enjoined from proceeding with a case where ‘compelling an accused to stand trial would violate those fundamental principles of justice which underlie the community’s sense of fair play and decency’ or where the proceedings are ‘oppressive or vexatious’ (see R v Jewitt [1985] 2 SCR 128).
Thus, one would expect that the AG would be scrupulous in any determination to proceed with revocation of immunity where non-compliance is alleged. In this regard, the typical immunity agreement requires the AG to give notice to the applicant if a breach or noncompliance is alleged and proceedings are contemplated. During the notice period, an applicant would be able to make representations to the AG on the issue of whether proceedings should be taken.
Senior Bureau officials have indicated that revocation of an immunity grant, while a necessary enforcement tool, will be an extremely rare event.
Canadian immunity agreements currently do not incorporate a dispute resolution mechanism by means of an arbitration or reference process in order to resolve disagreements on, for example, the extent of cooperation provided by the applicant. There is no statutory enforcement mechanism and only untested administrative law means through which parties to the immunity arrangement can seek interpretation or enforcement of its terms. To date, the most common method of challenge of an immunity arrangement (in analogous non-antitrust cases) has been through a post-indictment pre-trial ‘abuse of process’ application brought by the accused to the trial court (see R v Power [1994] 1 SCR 601 where the immunity recipient complained that the immunity arrangement foreclosed prosecution for the acts or omissions set out in the indictment (see R v Crneck, Bradley & Shelley (1980), 55 CCC (2d) 1 (Ont HC)). There is no counterpart decision in which the AG has sought to have a court ratify its interpretation of an agreement. Obtaining a pre-indictment injunction against the Canadian government as in the initial District Court decision in the US Stolt-Neilsen case (subsequently reversed on appeal) has virtually no chance of success in Canada. In Canada, injunctive relief is not available against the Crown. Courts are generally reluctant to permit free-standing applications when there is a trial court ‘in view’ (see eg, R v Zevallos [1987], 37 CCC (3d) 79 (Ont CA)), and further because of an overriding judicial deference given to the discretion of the AG (see R v T (V) [1992] 1 SCR 749). Generally, the AG’s decision to prosecute, absent dishonesty, bad faith, or exceptional circumstances, is not subject to judicial review (unlike in the UK where failure to follow policies may be the subject of administrative law remedies: see R v DPP ex p Manning [2003] 3 WLR 463 (QB) and Ex p Kebilene [1999] 4 All ER 827 (HL)). To date, there is no documented case of revocation (or even interpretation) of an immunity agreement in Canada.
13. Is confidentiality afforded to the leniency applicant and other cooperating parties? If so, to what extent?
Section 29 of the Competition Act enjoins any disclosure by Bureau personnel of identities and information. This section has been determined not to create a statutory privilege, but a strict prohibition on disclosure: Middlekamp v Fraser Valley Real Estate Board [1990], 29 CPR (3d) 385 (BC Master), affirmed (1990), 32 CPR (3d) 206 (BCSC). The Bureau will guarantee confidentiality to applicants unless there is a waiver or agreement, where disclosure is for the administration or enforcement of the Competition Act, where the party has made public disclosure, or where disclosure is required by law or necessary to prevent the commission of a serious criminal offence. The Bureau will also normally undertake to oppose any requests by third parties to seek access to relevant material by way of a request under Canada’s Access to Information Act RS 1985, c. -l.
Section 66.1(2) of the Competition Act also provides confidentiality protection for whistleblowers.
The typical immunity agreement contains mutual provisions requiring notice of intended disclosures. In the applicant’s case, this may arise because of securities filing requirements associated with material events.
Immunity applicant witnesses normally function as the government’s chief witnesses in any contested case. Applicants should therefore be aware that their confidential status may end with the bringing of charges against co-conspirators or other parties because of disclosure obligations under Canadian law (R v Stinchcombe [1991] 3 SCR 326) that mandate production of any immunity agreement, witness statements, and associated investigative interview notes to a defendant (see R v Hamilton (1994), 94 (3d) 12 (Sask CA)). Disclosure may also be mandated in certain types of pre-trial motions such as those dealing with the admissibility of wiretap evidence in which immunity witnesses acted to provide confidential information. Delayed disclosure may be permitted in some circumstances. If true security concerns or other judicial qualifiers are sufficiently demonstrated, continued protection of informer identities may be available (R v Liepert [1997], 1 SCR 281). However, in most cases the confidentiality of the applicant’s identity will only be temporary, because associated personnel are normally compellable witnesses who attended or otherwise participated in cartel activities.
The scope of privilege afforded to settlement or ‘without prejudice’ documents exchanged between an applicant and the government’s counsel may be more limited in jurisdictions outside Canada. See Re Vitamins Antitrust Litigation Misc No 99-197 (TFH) , MDL No 1285, US Dist Ct (DC, 18 December 2002) where Canadian settlement privilege was largely overridden in favour of broad production and discovery requirements in the US. Further, the facts discovered as a result of internal investigations conducted by domestic counsel will also likely be subject to production and discovery.
Thus, immunity applicants and their counsel must pay close attention to both the process of determining antitrust exposure and the manner of presentation of the immunity application to Canadian authorities.
Formal mechanisms for transmitting relevant investigative products include competition agreements and mutual legal assistance treaties (pursuant to the MLACMA). The Bureau has also interpreted section 29 of the Competition Act (together with subsection 3(2) of the MLACMA) to permit informal exchanges of information between authorities in appropriate circumstances where such action is made for the purpose of the administration or enforcement of the Competition Act (see Michael Sullivan and Josée Filion, The Basics of International Cartel Enforcement in Canada, Osgoode Hall Continuing Legal Education Programme, 14 January 2004).
CONSEQUENCES
14. What effects does leniency granted to a corporate defendant have on the defendant’s employees?
As noted above, it is possible to shelter current directors, officers, or employees of the immunity applicant under the PGI or final immunity, provided they admit their knowledge of and participation in the illegal activities and provide full cooperation to the Bureau. Cooperation will typically include full disclosure by the employee of all non-privileged information and documents in his or her possession or control, submitting to an interview and potential video-taping of a statement, and court testimony. Immunity obviously will not extend to any perjured testimony or obstruction of justice (see Morgan Crucible case, Bureau press release, 16 July 2004). In certain cases where no public investigative steps have been taken and unsolicited collusive activity is continuing vis-á-vis the applicant, the Bureau may waive its requirement that the immunity applicant take effective steps to terminate its unlawful activity and require the applicant’s personnel to act as ‘state agents’ in the collection of evidence and ‘play the role’ of a continuing conspirator in this regard. Such measures may involve the collection of wiretap evidence or of other evidence from other participants.
Coverage for non-cooperating or former directors, officers, or employees is not guaranteed. The AG may wish to ‘carve out’ certain non-cooperating or former personnel in order to take appropriate prosecution action in circumstances where the individuals orchestrated the organisation or operation of the cartel. Sometimes these actions are coordinated with, or reflect decisions taken by other authorities but, once again, immunity in another jurisdiction is no guarantee of immunity in Canada. Although the corporation will be relieved of obligations to require cooperation for ‘carved-out’ individuals, there may be employment and pension benefit cost issues for the immunised corporation.
15. Does leniency bar further criminal or private enforcement?
An immunity grant is not a complete bar to further criminal enforcement. If the grantee does not fulfil the terms of the immunity agreement, that immunity could be revoked and a prosecution could be commenced. In addition, the grant of immunity is typically subject to the general provisions of Canada’s Criminal Code regarding perjury, the giving of contradictory evidence, obstruction of justice and similar offences. Assuming that the conditions of the agreement are fulfilled, the immunity grant will preclude the AG from prosecuting the applicant for offences covered only by the immunity agreement itself.
The same cannot be said for an applicant who receives favourable treatment but not immunity. By definition, favourable treatment will result only in a reduction of the penalties (fines and potentially imprisonment) that normally would have applied had it not come forward.
Neither an immunity applicant nor a recipient of favourable treatment is entitled under the Competition Act to assert the fact of immunity or favourable treatment as a bar to a private damage action, or as a factor which will reduce the amount of damages. Section 36 of the Competition Act establishes a right of private action and entitlement to single damages in respect of the criminal offences in Part VI of the Act. Specifically, section 36(1) enables ‘any person who has suffered loss or damage as a result of conduct that is contrary to any provision of Part VI’ to ‘sue for and recover from the person who engaged in the conduct ... an amount equal to the loss or damage proved to have been suffered by him ...’.
Under section 36(2), the record of proceedings in which a person has been convicted of an offence under Part VI is, ‘in the absence of any evidence to the contrary, proof that the person against whom the action is brought engaged in conduct that was contrary to a provision of Part VI ...’. Consequently, if the record of proceedings does not disclose the identity of the immunity applicant or otherwise does not implicate it in the offence, because the matter was uncontested, there is an obligation on the part of the private claimant to establish that the immunity applicant participated in the offence.
Counsel to parties implicated in an offence will normally carefully negotiate the factual elements used in the statement of admissions in guilty plea cases in order to reduce the scope of public admissions and, ultimately, potential damages.
The Bureau will maintain the confidentiality of the immunity applicant in an uncontested proceeding. There is no obligation on the part of the Bureau to assist a private complainant with evidence that has been submitted to the Bureau in support of an immunity application.
While the Bulletin requires that an immunity applicant make restitution ‘where possible’ this has not been insisted upon in all cases. The assumption seems to be that the availability of civil damages may be sufficient to deal with this issue.
REFORM/LATEST DEVELOPMENTS
16. Is there a reform underway to revisit the leniency policy? What are the latest developments?
The Bureau has now conducted a public consultation process on its immunity policy and has received several formal submissions from organisations such as the Canadian Bar Association, the American Bar Association and the Canadian Chamber of Commerce. Among the topics which were indicated for consultation were confidentiality, the ‘paperless process’, the role of the applicant in the offence, coverage of officers, directors and employees, ‘penalty plus’, restitution, revocation of immunity, creation of a formal leniency programme, and pro-active immunity.
As at this writing the Bureau has not yet issued a revised policy, but one is expected to be published during the summer 2007.
