The Competition Bureau has announced its plans to review its leniency and immunity programs this year. Lawyers say any proposed changes need to walk a fine balance, lest they discourage anyone from coming forward to offer information needed to build cases.
“The proposed changes that the bureau is looking at are a pretty big deal in the enforcement and administration of the criminal conspiracy provisions of the Competition Act,” says Subrata Bhattacharjee, partner with Borden Ladner Gervais LLP in Toronto.
Bhattacharjee says the formal co-operation programs have been responsible for a large portion of the fines that the bureau has been able to collect in both domestic and international cartel cases in recent years.
Because the programs are supposed to encourage applicants to co-operate, the benefits are significant if the applicant can meet them. Bhattacharjee says the bureau has to work hard to make them as attractive as possible so that people continue to use them to co-operate.
Currently, how the system works is that the first company to co-operate will get immunity from prosecution, while the second and third to co-operate will get varying degrees of leniency. The first leniency applicant qualifies for up to 50 per cent off its fines and not having its employees prosecuted directly, while the second leniency applicant can get up to 30 per cent off its fines.
Huy Do, partner with Fasken Martineau DuMoulin LLP in Toronto, says the recent losses by the bureau in both R. v. Nestlé Canada Inc., 2015 ONSC 810 and the criminal bid-rigging jury trial in R. v. Durward have caused the bureau to rethink whether the programs are working or not. In Durward, the Crown failed to prove to a jury that criminal bid-rigging had occurred with government IT projects.
In Nestlé Canada Inc., one leniency applicant agreed to plead guilty and provide information and paid an approximately $4-million fine only for the Public Prosecution Service to eventually stay the charges against other parties in the case.
Do says the Nestle case led to some “soul searching” at the bureau.
“It looked really bad because you had a situation where people who were part of the same conspiracy got away with no fine,” says Do. “The only party that were faced with criminal sanctions was a leniency applicant who voluntarily came in, confessed its sins and paid a fine.”
The proposed changes to the immunity program would be that it be granted only on a conditional basis, which assumes co-operation in a timely fashion. Changes could also include forcing lawyers to disclose who their clients are sooner when they call up the bureau to ask if there are currently places in line for immunity or leniency in a certain area.
As for leniency, proposed changes could mean that the discount becomes contingent upon the level of co-operation as opposed to who was first in line, given that currently, companies might drag out the process or not fully co-operate.
“They think these tweaks may make it more attractive for someone to come in,” says Do. “I’m not sure that necessarily will occur, because from my perspective, the leniency program really for it to work well you have to have both the carrot and the stick.”
According to Do, if the leniency and immunity programs are the carrots, the stick has to be successful prosecution if they don’t co-operate, something that is lacking with the current track record of unsuccessful prosecutions.
“If you look at the current system, there is a lot of costs associated with co-operating, because you have to produce documents, produce witnesses, you have to travel to Ottawa to meet with the bureau on your dime and you get a discount off the fine,” says Do. “All that costs a lot.”
Do says that if a client doesn’t believe that the bureau will be successful in going after third parties, it may serve to act against going in for leniency.
“Whatever changes are proposed to the immunity and leniency programs need to be very clear about what the expectations are that are going to be placed on parties, given what I would consider to [be] the greater risk that the parties are going to be exposed to in entering the program,” says Linda Plumpton, partner with Torys LLP in Toronto.
She says that because of the severity of the decision for a party to make an application for immunity or leniency at the Competition Bureau, they need to be able to do so on a fully informed basis.
“I worry that the obligations that they are proposing are going to act as a further deterrent to parties that are considering [applying] under the program and may ultimately lead to a result that is not desirable for the bureau,” says Plumpton.
Do notes that prior to the current system, there was a provisional grant of immunity that was conditioned upon co-operation, which was changed because it left uncertainty.
“If it’s a provisional grant and you’re going in, you’re really in a bit of limbo,” says Do. “You’re given this interim immunity, provided you co-operate; otherwise, you don’t get it. It may be a bit of semantics, but I think it has an impact on people.”