Lawyers are mixed in their reception to anticipated changes by the Competition Bureau following its draft corporate compliance bulletin that was released last spring for public comment.
While the federal election put all new Competition Bureau publications
on hold until after the vote, Tony Baldanza at Fasken Martineau
DuMoulin LLP and chairman of its antitrust/competition group, says he
understands from the Competition Bureau that the final bulletin will be
Primarily the bulletin is intended to provide businesses with guidance to prevent or minimize their risk of contravening the Competition Act and it includes tools to encourage businesses to develop their own in-house programs.
“It is remarkable how many corporations and trade associations do not have competition compliance programs,” says Baldanza, who was part of a Canadian Bar Association task force that consulted with the Bureau during its drafting of the bulletin.
“I imagine that part of the problem is that business considers a program to involve a substantial investment of time, energy and money and that the return on investment isn’t visible until there’s a problem.
“However, there are a wide range of programs and most businesses can manage with a scaled-down program that covers the basics and does not involve a lot of management time or lawyer expense,” he says.
Baldanza says the return on investment “can be very substantial. Not only do you avoid dumb violations of the law, but the program can also help a company recognize anti-competitive conduct by its competitors, customers or suppliers, and can help a company compete to the limits of the law.”
He suggests that, when it is issued, the new bulletin, which updates the bureau’s bulletin from 1997, should help simplify the process of establishing an in-house program for some companies.
“I expect that in some ways the new bulletin will make it easier for a corporation to establish a compliance program because there is a framework document with precedents attached. On the other hand, the consultation draft was arguably too long and technical, hopefully the final bulletin will simplify things somewhat, and focus on core principles,” he says.
Baldanza says however that the new bulletin has emphasized that instituting a compliance program may result in lighter sentences and softer civil remedies should there be an inadvertent transgression.
“If you’re a public company and in a high risk industry dealing in commodity products where there are high entry barriers and few competitors, you would be quite foolish not to have a compliance program,” he says.
He adds however that one area in the draft bulletin which probably won’t be addressed by business, is the suggestion that companies include regular audits within their compliance programs.
“In all the years I’ve been doing this, I’ve conducted and overseen only a handful of audits outside actual Bureau investigations or litigation, and most of those have been only selective reviews of a single division or department,” he says.
James Musgrove, chair of the competition and marketing law group at Lang Michener LLP, commends the Bureau for its transparent program of guidance insight into its enforcement approach, and for soliciting comments on that guidance.
While he supports the goals of the bulletin, he offers some suggestions on areas of improvement. Musgrove agrees that the auditing requirement is “unrealistic.” “It’s hugely disruptive, expensive and it’s politically very difficult in organizations,” says Musgrove.
“Imagine I’m sitting at my desk and someone walks in and says ‘Excuse me I’m looking at your files.’ If you’ve got something that’s come to light that you need to look into, then it becomes realistic,” he says, adding jokingly, “I’d love to get a retainer to do an audit out of the blue, but I’m not holding my breath.”
Musgrove says that generally the provisions of the bulletin are more tailored to large market players rather than smaller and medium sized organizations that probably should consider implementing a program. “It just looks intimidating.
The bulletin does not say one size fits all, but if they went further and said, in some detail, that for smaller businesses there may be less formal ways to achieve this, it would be more practical,” he says.
As well, he says a company that purports to have a compliance program in place that is deemed to be inadequate or a sham, there could be penalties attached in the event of a breach.
“The policy says if you’ve got a policy you’re hiding behind that’s a sham, that might be an aggravating factor in a penalty you may receive if you do something wrong - and that scares people,” he says. “I understand in theory why they want to say that, but it’s a highly unlikely scenario and in fact the result - which I have seen - is that people then say ‘We’re better off not doing it,’ and that’s counterproductive.
So including that language in the policy for such an unlikely and rare situation and makes people shy away from doing anything.”
Another issue is that the bulletin recommends discipline or even dismissal for employees found to be culpable of a breach, which may undermine policies that provide immunity for those employees who come forward early in an investigation.
“The bureau and other antitrust agencies around the world have programs where people can come and report their bad behavior and get immunity or a lesser consequence if they’re early in,” says Musgrove. “So you really don’t want to dismiss culpable employees because they’re the people who know the story.
You need their co-operation to understand what happened and have them, if necessary, go to trial and testify. So I think the policy should be just tweaked to note the importance of that aspect.”
He notes also that the bureau is proceeding with similar guidelines for trade associations, which are expected to be released in draft form sometime later this year.
In a separate initiative, a competition policy review panel consisting of five legal and business representatives in Canada released a report, Compete to Win, that proposes what it describes as a “sweeping national competitiveness agenda based on the proposition that Canada’s standard of living and economic performance will be raised through more competition in Canada and from abroad.”
Primarily the report looks at ways to encourage international investments by Canadians and position Canada to be a world leader for talent, capital, and innovation.
In a paper authored by John Bodrug, Mark Katz, and Christopher Margison at Davies Ward Phillips & Vineberg LLP, the lawyers conclude “the panel’s recommendations with respect to the Investment Canada Act would significantly reduce the scope of mergers and acquisitions subject to review under the ICA and greatly facilitate the review process where a review is required.”
They note that Canada has more restrictions on foreign investment than most member countries of the Organization for Economic Co-operation and Development while recent foreign takeovers of Canadian business icons such as Hudson’s Bay Company has fuelled renewed debate on the topic.
The eight-page analysis by the three lawyers examines related legislation and even specific industry sectors that stand to be affected, and is available on the firm’s web site.