Many Canadians were outraged after Loblaw Companies Ltd. and its parent company George Weston Ltd. secured immunity from prosecution last year by coming forward and cooperating in an alleged bread price-fixing scheme. The fact that immunity was granted reinforced a widely held opinion that the federal government is soft on white-collar crime and corruption.
In fact, the feds have in fact been taking a closer look at white-collar crime in general, both domestically and internationally. The government introduced Bill C-74 in March, which would create deferred prosecution agreements in Canada, following a trend similar to legislation in other global jurisdictions.
Although formal immunity or leniency programs exist within the competition law area to promote the detection, self-reporting and prosecution of non-cooperating offenders, “in areas such as anti-corruption, the government is grappling with issues in terms of detection and enforcement,” says Huy Do of Fasken Martineau DuMoulin LLP in Toronto.
In instances of illegal conduct involving both competition law offences (such as bid-rigging) and anti-corruption offences (including bribery) “there’s a lot of coordination in terms of the criminal investigation by the relevant law enforcement agencies,” says Do. But because there’s no immunity or leniency program when it comes to anti-corruption offences, “there is uncertainty as to how the prosecution could unfold when the conduct in question involves both competition and anti-corruption offences.”
A government consultation in the past year on corporate wrongdoing looked at a deferred prosecution agreement or DPA regime, as well as issues relating to debarment, both of which would have an impact on the incentives for white-collar crime offenders to self-report and resolve matters quickly with the Crown, says Do.
“When it comes to competition cartel enforcement, we are one of a myriad of jurisdictions around the world that have immunity/leniency programs, which are sometimes referred to as amnesty programs,” he says. As global jurisdictions adopt these programs, it becomes more cumbersome for multinational companies “because if they go in for immunity/leniency in one jurisdiction, it’s likely that they may have, or want to, go in to agencies in other jurisdictions. And that just increases costs.” Do thinks that’s one more factor that is starting to cause companies to think twice about coming in and seeking leniency.
Since Canada has a relatively small economy, “companies worry much more about what happens in the U.S. and E.U. first given the potential exposures in those jurisdictions.” That includes large fines and serious jail time for executives and treble damages in follow-on class actions in the U.S.; and very large administrative fines in the E.U., says Do.
Immunity and Leniency Programs at the Competition Bureau have operated since 2000 and have been highly effective in detecting and investigating conspiracies. Companies that have committed Competition Act criminal offences may be entitled to immunity if they are the first to cooperate, or leniency if they are the second or third to cooperate. The first leniency applicant can receive up to 50 per cent off its fines and its employees are not directly prosecuted.
The goal of the Immunity Program is to uncover and stop criminal anti-competitive activity prohibited by the Competition Act and to deter others from engaging in similar behaviour, which “has proven to be the Bureau’s single most powerful means of detecting criminal activity,” according to the Bureau’s website.
But the Bureau and the Director of Public Prosecutions have not always succeeded in their prosecutions. It’s widely believed that a handful of unsuccessful prosecutions over the past few years led to some dissatisfaction and therefore a desire to toughen up the program. After one leniency applicant pleaded guilty and paid a massive fine in R. v Nestlé Canada Inc., charges ended up being stayed against the other parties. In the R. v Durward jury trial, the Crown failed to prove that bid-rigging had taken place.
The Competition Bureau’s proposed changes to the Immunity and Leniency Programs are now in a second round of consultations and several interested parties have raised concerns.
In July, the Competition Law Section of the Canadian Bar Association released a submission voicing its concerns. While it was encouraged that some controversial proposed changes to the Immunity Program, including the recording of attorney proffers, were removed, the CBA’s submission says a number of its prior comments were not addressed and “we remain concerned that the latest proposed revisions to the Immunity and Leniency Programs introduce significant uncertainty on the operation of these programs.”
The Section says the latest proposed revisions introduce new burdens on prospective applicants, heavily emphasize the spectre of revocation of immunity and suggest “ that draconian measures may be imposed against parties whose immunity has been revoked (including the immunity applicant’s evidence being used against them).” Requests for additional clarity on whether an immunity applicant’s investigative work product may be subject to production in Canada have not been addressed by the Bureau.
“By failing to address these uncertainties, and creating significant new burdens and risks, the proposed changes will place the immunity or leniency applicant at a distinct disadvantage relative to non-cooperating parties, particularly in responding to anticipated civil litigation,” the Section says. “As a result, the proposed changes create disincentives for seeking immunity or leniency in Canada, and likely undermine the effectiveness of the programs going forward. We encourage the Bureau to reconsider its approach to these issues.”
“I do think the government listened to the comments in the first instance and made improvements to the proposals,” says James Musgrove of McMillan LLP in Toronto. “The concerns expressed have been essentially ‘don’t kill the golden goose.’ Because to the extent you make immunity and leniency harder to get and/or less attractive, you may discourage participation in the program.”
The overall thrust of comments made by the CBA’s Competition Law Section and other interested parties is that these programs already work. “It is overwhelmingly the most useful mechanism to achieve successful detection and prosecution of cartel activity and if it’s less attractive to participate in, it will bring fewer people to the table,” says Musgrove, “so be careful of the tradeoff.”
Ann Macaulay is a regular contributor based in Toronto.