Canada

Introduction

A number of different forms of ‘settlement’ – that is, the resolution of investigations by the Competition Bureau regarding conduct that is alleged to be contrary to Canada’s Competition Act (the Act) other than through formal litigation – are available under the Act. However, the type of settlement available, and the process for reaching a settlement, varies significantly between those matters that involve conduct that is subject to the criminal provisions of the Act, including cartels, and those matters that involve conduct that is subject to civil provisions of the Act, including abuse of dominance.

This chapter describes: (1) the key players, and their roles and responsibilities, involved in the negotiation and oversight of settlements in Canada; (2) the settlement of conduct subject to the criminal provisions of the Act; and (3) the settlement of conduct subject to the civil provisions of the Act.

Key players in Canadian settlement processes

In Canada, there are a number of independent authorities that may be involved in different aspects of a settlement, including Canadian courts. This is in contrast to other jurisdictions, where a single competition law authority may itself have the power to investigate conduct, determine if a settlement is appropriate and then negotiate and enter into that settlement.

The independent authorities that may be involved in different aspects of a settlement are as follows.

• Canada’s Commissioner of Competition, who is tasked with the administration and enforcement of the Act. The Commissioner is assisted by the Competition Bureau, a law enforcement agency. The Act permits the Commissioner and the Bureau to conduct an ‘inquiry’; that is, to investigate conduct that the Commissioner has reason to believe may, or is about to, contravene different provisions of the Act. The Act grants the Commissioner numerous investigative powers to pursue his or her inquiries.
• The Public Prosecution Service of Canada (PPSC), an independent prosecuting authority responsible for prosecution of all federal criminal offences, including offences under the Act, before Canada’s courts. Where the Commissioner and the Bureau conclude that a person’s conduct has contravened the criminal provisions of the Act, the Commissioner makes a recommendation to the PPSC. When referred a case by the Bureau, the PPSC considers the evidence and the Bureau’s recommendation; the PPSC then makes an independent determination of whether to lay criminal charges under the Act against a person. In criminal cases that may be settled, the Commissioner will also make recommendations to the PPSC regarding settlement, and the PPSC will make an independent determination of whether to pursue settlement discussions.
• Canadian courts, which are independent and have exclusive jurisdiction for the entering of a criminal conviction against a person and the imposition of a criminal sanction. Where a person’s conduct is contrary to the criminal provisions of the Act, the PPSC will agree to a settlement whereby a person will agree to plead guilty to the offence, and the PPSC and the person will make a joint sentencing recommendation to a Canadian court. The court will enter a criminal conviction and consider the sentencing recommendations, but will make an independent determination of whether to accept the recommended sentence.
• The Competition Tribunal, which is an independent and specialised court that has jurisdiction to hear and dispose of all applications made under the civil provisions of the Act, among other things. The Tribunal is comprised of a roster of judges who sit on Canada’s Federal Court, as well as certain lay members who are appointed. Where the Commissioner and the Bureau conclude that a person’s conduct has contravened the civil provisions of the Act, the Commissioner may make an application for an order in respect of that conduct to the Tribunal. In addition, the Commissioner and the person may enter into an agreement on consent that is registered with the Tribunal (and which, upon registration, has the force and effect of an order).

Settlement of conduct contrary to the criminal provisions of the Act, including cartels

The Act contains numerous provisions that create criminal offences. Competition-related conduct that constitutes a criminal offence in Canada includes agreements among competitors to fix prices, allocate markets or restrict output, as well as agreements to rig bids in response to calls for tender. In addition, certain deceptive marketing practices and false or misleading representations can constitute a criminal offence. Sanctions for criminal offences vary depending upon the offence, but may include a term of imprisonment for individuals and significant fines for individuals and corporations (e.g., cartel conduct is punishable by a maximum fine of C$25 million per count and a term of imprisonment of up to 14 years, or both).

The Commissioner and the Bureau may commence an inquiry in respect of conduct that may constitute a criminal offence. If the Commissioner and the Bureau conclude that a criminal offence has occurred, the matter will be referred to the PPSC, together with a recommendation. The PPSC will make an independent determination of whether to lay criminal charges before a Canadian court. The PPSC then has the burden of proving to a Canadian court beyond a reasonable doubt a defendant’s commission of a criminal offence. A Canadian court will evaluate the evidence and determine whether to enter a criminal conviction against a person, and what criminal sanction to impose against that person.

Availability of settlements of criminal investigations

Where the Bureau and the PPSC have determined that a person (i.e., a defendant) has contravened the criminal provisions of the Act (and the person is not a successful immunity applicant), the defendant may seek to negotiate a plea agreement with the PPSC. A plea agreement is a final settlement of criminal charges whereby the defendant admits the conduct it is alleged to have engaged in and pleads guilty to a criminal charge. In exchange, typically, the PPSC agrees to permit the defendant to plead to a lesser criminal charge or fewer criminal charges than were originally laid (i.e., the PPSC will agree not to prosecute the more serious or more numerous criminal charges that were originally laid) or the PPSC agrees to certain matters related to the sentence or other sanction that will be imposed upon the defendant, or both.

Any criminal charge under the Act may be resolved by way of plea agreement. Among other things, one defendant may choose to settle the criminal charges it faces by way of plea agreement, while other defendants that were the subject of the same multiparty inquiry elect to face criminal litigation. In other cases, defendants facing charges arising from a multiparty inquiry may elect to attempt to plea bargain collectively.

The delay, costs and uncertain outcomes of criminal litigation create strong incentives for the PPSC and defendants to enter into discussions early to determine whether a plea agreement can be reached. These incentives may result in the negotiation of a plea agreement and a joint sentencing recommendation that is attractive for defendants (as compared to a criminal trial, where a defendant could be found guilty of a more serious offence and be subject to a recommendation of a more serious sentence). Such attractive plea agreements and sentencing recommendations are the extent of the incentive to plead guilty; there is no additional or separate discount or credit available for an agreement to plead guilty.

Separately, and as noted above, a person may also be an applicant for immunity under the Bureau’s and the PPSC’s jointly administered Immunity Program. At the conclusion of an applicant’s successful cooperation under that programme, the applicant will enter into an immunity agreement with the PPSC. The agreement is not a plea agreement, and is not presented to the court for review or other scrutiny before it becomes binding. An immunity agreement is another way for defendants to settle criminal investigations.

Different processes for negotiating plea agreements for criminal investigations

All plea agreements are negotiated by a defendant with the PPSC, not the Bureau. The PPSC will consult with the Bureau regarding the terms of the plea agreement and will brief the Bureau on the terms and supporting rationale of the plea agreement.^[2] However, the Bureau is a mere law enforcement agency, and will not ultimately be a party to any plea agreement or exercise any decisional role into whether a plea agreement will be accepted. The plea agreement does not become binding as a matter of law until it is presented to a Canadian court, and the court enters a guilty plea and imposes a sentence (or makes another order, as described in more detail below).

There are three main processes through which a plea agreement may be negotiated and entered into.

First, a defendant may enter into a simple plea agreement with the PPSC. When a plea agreement is reached, a defendant and the PPSC typically agree to make a joint sentencing recommendation to the court. That sentencing recommendation will specify precise details of the recommended sentence (e.g., the amount of a fine or the length and circumstances of any incarceration for individuals). In addition, the joint sentencing recommendation will be supported by a submission from the PPSC describing the factors underlying the joint submission, including any benefits obtained by the PPSC or concessions by the defendant. These sentencing recommendations and submissions are carefully negotiated between defendants and the PPSC, and the PPSC will ultimately only agree to the submission if it is satisfied that the joint submission will not bring the administration of justice into disrepute and is not otherwise contrary to the public interest. This high standard applies because courts will ‘only rarely reject a joint submission on sentencing’; in particular, a joint recommendation will only be rejected if it is so ‘markedly out of line with the expectations of reasonable persons aware of the circumstances of the case that they would view it as a breakdown in the proper functioning of the criminal justice system’.^[3] When a plea agreement is accepted by a court, a court enters a criminal conviction and imposes a sentence (unless the court completely rejects the plea agreement).

Second, a defendant may enter into a plea agreement with the PPSC, under which the defendant agrees to plead guilty and be sentenced, and the defendant and the PPSC also agree to the entry of an order under Section 34 of the Act that provides for the taking of certain steps. The steps that may be agreed to by the defendant and the PPSC in the order under Section 34 of the Act are not circumscribed; this is in contrast to a simple plea agreement with a joint sentencing recommendation, where the sentence can only relate to those sanctions for the offence that are specified in the Act. As a result, an order under Section 34 of the Act can provide for many of the same sanctions that a joint sentencing recommendation might provide for (e.g., the payment of an amount of money, which is akin to a criminal fine), but may also provide for other steps not provided for by the Act, such as the establishment of a corporate compliance programme; a prohibition (of up to 10 years) on the defendant engaging in the same or other conduct; or any other steps that the defendant and the PPSC agree are necessary to prevent the repetition of the offence. In addition, the court has broad discretion to make an order under Section 34 where the defendant and PPSC agree on the terms of the order, and the court may be less likely to reject such an agreement as compared to a joint sentencing recommendation (even though the rejection of a joint sentencing recommendation is already quite rare). A plea agreement and an application for an order under Section 34 of the Act are presented to the court, which enters a criminal conviction, imposes a criminal sentence and issues an order under Section 34 of the Act (unless the court rejects the plea agreement or will not otherwise agree to make an order under Section 34 of the Act).

Third, a defendant may be an applicant to the Bureau’s and the PPSC’s jointly administered Leniency Program.^[4] An applicant to the Leniency Program must agree to plead guilty and to take certain other steps (including cooperating fully and in a timely manner, at its own expense, in the Bureau’s investigation and any subsequent prosecution by the PPSC of other participants in the illegal conduct). In exchange, the PPSC will make a joint sentencing recommendation with the defendant to the court. As consideration for the applicant’s participation in the Leniency Program, the PPSC will calculate a ‘leniency cooperation credit’ of up to 50 per cent of the amount of the calculated fine (which is based on the volume of commerce, the presence of any aggravating or mitigating circumstances, and other factors). As noted above, there is no additional discount or credit available for agreeing to plead guilty in addition to participation in the Leniency Program; the agreement to plead guilty (and the settlement of criminal charges) is simply an integral component of the Leniency Program. The plea agreement is then presented to the court, which enters a criminal conviction and imposes a sentence (unless the court rejects the plea agreement).

Information disclosure from plea agreements and other matters

Plea agreements are public and are presented in open court (i.e., where the public and the media may attend, where a transcript may be made and where records are publicly accessible). As part of a plea agreement, a defendant will admit that it engaged in the conduct it is alleged to have engaged in, and that such conduct constituted an offence. In addition, a defendant and the PPSC typically present an ‘agreed statement of facts’, which details the conduct that is the subject of the criminal charge, the reasons for the entering of a plea and the basis for the recommended sentence. As noted, a joint sentencing recommendation will also typically be presented to the court. Those documents must be sufficiently detailed to permit a court to satisfy itself that acceptance of the jointly recommended sentence would not be contrary to the public interest and would not bring the administration of justice into disrepute.

Under the Act, a person may bring a private action for damages against a second person whose conduct was contrary to the criminal provisions of the Act. The admissions and facts presented to the court as part of any plea agreement can be an important source of information for plaintiffs that are pursuing private litigation under the Act.

The entering into of a plea agreement does not require that a defendant waive any privilege or other form of confidentiality that it enjoys. However, such requirements may arise from the defendant’s participation in the Bureau’s and the PPSC’s immunity and leniency programmes, which require that applicants make full disclosure to the Bureau and the PPSC.

Settlement of conduct contrary to the civil provisions of the Act, including abuse of dominance

The Act contains numerous provisions that permit the making of a civil order in respect of different forms of specified conduct, where that conduct has a negative effect on competition. These provisions permit the making of an order in respect of, among other things, conduct that constitutes an abuse of dominance, conduct that constitutes an agreement among competitors (but which is not otherwise contrary to the criminal provisions of the Act), conduct that constitutes price maintenance, and conduct that constitutes a territorial restriction on distribution. In all instances, an order may be made to prohibit the conduct; in some instances, additional orders may be made (such as a requirement to accept a customer that has been subject to a refusal to deal, or a requirement to pay an administrative monetary penalty of up to C$10 million for abuse of dominance).

The Commissioner and the Bureau may commence an inquiry in respect of conduct that the Commissioner has reason to believe contravenes the civil provisions of the Act. If the Commissioner and the Bureau conclude that a civil provision has been contravened, the Commissioner may make an application to the Competition Tribunal. At the Tribunal, the Commissioner bears the burden of establishing on a balance of probabilities that a respondent’s conduct has contravened the civil provisions of the Act; the PPSC is not a litigant before the Tribunal. The Tribunal is responsible for making the ultimate determination of whether a respondent’s conduct is contrary to the civil provisions of the Act, and for making an order in respect of such conduct. However, there are also numerous ways in which investigations of conduct that may contravene the civil provisions of the Act can be settled prior to a final determination by the Tribunal.

Availability of settlements of civil investigations

Settlement of civil investigations is theoretically available in all cases. To guide the resolution of such civil investigations, the Bureau has issued a ‘Framework’ addressing how it will seek to resolve matters subject to civil investigation.^[5] The Framework provides that in exercising its enforcement mandate, generally speaking, the ‘Bureau encourages and facilitates voluntary compliance and, when possible, will attempt to achieve a negotiated settlement in response to actual or potential non-compliance’.

The Bureau relies on two categories of measures to respond to actual or potential non-compliance.

Measures to facilitate voluntary compliance in settlement of civil investigations

First, the Bureau has identified a number of measures and actions that seek to encourage businesses and individuals to undertake voluntary measures to comply with the Act. These actions may be used before, during and following an investigation. These measures include alternative case resolutions; information letters sent to businesses or individuals to advise them that the Bureau is concerned about possible contraventions, and to emphasise their obligations to comply with the Act; warning letters (i.e., formal written notices to a business or individual that identify a specific alleged contravention); and information meetings.

The Bureau also facilitates voluntary compliance by promoting the development of credible and effective compliance programmes by businesses, setting out measures that businesses can take to prevent or minimise the risk of non-compliance with legislation, and to detect and deal with such behaviour. The Bureau may also seek the establishment of effective compliance programmes as part of its measures to enforce the Act in instances of non-compliance, discussed further below.

These measures, whether or not expressly agreed to by respondents that are subject to civil investigation, have the effect of resolving an investigation without the need for litigation.

Resolving non-compliance through consent agreements

Where voluntary compliance is either unavailable or insufficient due to the nature of non-compliance, the Bureau may seek to take more formal enforcement action. This enforcement action is taken through the filing of an application with the Tribunal.

However, prior to the filing of such an application, the Bureau may seek to address non-compliance through the negotiation and entering into of a consent agreement with the respondent. In most cases, the Bureau will conduct its inquiry to determine the facts of a case; only when the Bureau has concluded its assessment and identified potential options to address the conduct or its impact on competition will the Bureau invite a respondent to discuss potential settlement. Participation in such discussions is voluntary, and on a ‘without prejudice’ basis (that is, admissions or other statements made in the negotiation of a consent agreement will not be used against either side in future litigation). Only if settlement discussions are unsuccessful will the Commissioner make an application to the Tribunal. That said, even after an application has been filed with the Tribunal, it is possible for the Commissioner and a respondent to negotiate and enter into a consent agreement.

A consent agreement is a formal settlement agreement that, once entered into, is registered with the Competition Tribunal and placed on the public record. When registered, consent agreements have the force of a court order. As such, violations of a consent agreement may result in criminal penalties, including fines and imprisonment.

The terms of consent agreements must be ‘based on terms that could be the subject of an order of the Tribunal’. This has a number of practical implications for the contents of any consent agreement.

First, the consent agreement must identify the provision of the Act that has been contravened, and each of the substantive elements of that provision. In other words, the consent agreement must include an explicit agreement between the Commissioner and the respondent that the respondent has engaged in each element of the provision, or otherwise contain an express statement that the Commissioner has concluded that each element has been met and the respondent does not contest the conclusion. This agreement (or this conclusion and non-contestation) regarding the conduct and its relationship to the elements of the provision is typically included in the recitals to the consent agreement.

Second, the consent agreement must provide for the taking of certain remedial steps, each of which must be open to the Tribunal to order under the provision of the Act in question. The order that the Tribunal can make in respect of anticompetitive conduct differs between the different civil provisions of the Act. For example, the Tribunal may order the payment of an administrative monetary penalty for conduct that constitutes an abuse of dominance, but not for other types of conduct that can be subject to a civil order.

Other examples of remedies that are available under different civil provisions in the Act include:

• the prohibition of the impugned conduct;
• changes to contractual terms;
• the establishment of a corporate compliance programme;
• product recalls;
• publication of corrective notices;
• divestitures; and
• payments of restitution.

Significantly, consent agreements often contain relatively detailed and potentially invasive provisions for the Bureau’s monitoring of the respondent’s conduct on an ongoing basis, potentially for a number of years following registration.

Third, the consent agreement cannot have terms that are unenforceable or that would lead to no enforceable obligation. A term might be unenforceable if, for example, it were vague.

In addition, as provided for under the Act, the terms of a consent agreement can be varied or rescinded where it can be established that the circumstances that formed the basis of the consent agreement have changed or the Commissioner and the person who consented to the agreement have consented to an alternative agreement.

Resolving non-compliance through undertakings

Civil investigations can also be settled through the provision of an undertaking to the Commissioner.

Undertakings were a common form of settlement in the past. In practice today, however, the use of undertakings to resolve conduct the Commissioner concludes is contrary to the civil provisions is infrequent, and the Commissioner will instead seek a consent agreement in most instances. However, the Bureau’s policy is that it may still consider accepting undertakings in matters involving infrequent and inadvertent non-compliance by parties that are willing to cooperate with the Bureau and restore competition.

These undertakings are given by a respondent directly to the Commissioner, and are not directly enforceable (i.e., there is no jurisdiction for a court to enforce undertakings that are privately given). Instead, the most likely consequence of the violation of an undertaking may be the re-opening of the Commissioner’s inquiry (and subsequent action, such as the making of an application to the Tribunal or the registration of a consent agreement).

Information disclosure from consent agreements and other matters

As noted above, a consent agreement is registered with the Tribunal and is a public document. That consent agreement will contain certain information about a respondent’s alleged conduct, as well as its relationship to the elements of the civil provision that is alleged to have been contravened; such matters are typically contained in the consent agreement’s recitals. These recitals can have reputational effects for respondents. However, in practice, these recitals are far less detailed than the agreed statement of facts and joint sentencing recommendations that are filed with the court in criminal matters. Moreover, because private damages actions are not available in Canada for conduct that is contrary to the civil provisions of the Act, the recitals do not create direct legal risk for a respondent.

In addition to a consent agreement, the Bureau will often publish a press release or another document (often referred to as a ‘position statement’ or a ‘technical backgrounder’) that summarises the results of the Bureau’s investigation and the reason the Bureau believes the consent agreement is likely to be effective. These publications can be detailed. The Bureau prepares drafts of these documents by itself. The Bureau typically permits a respondent to review the draft prior to publication, and will consider comments from the respondent regarding the factual accuracy of the draft. However, the Bureau will rarely accept comments from a respondent relating to the portions of the draft that summarise the Bureau’s analysis or conclusions.

The entering into of a consent agreement does not require that a respondent waive any privilege or other form of confidentiality it enjoys.

Notes