Cartel leniency in Canada: overview
A Q&A guide to cartel leniency law in Canada.
The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.
To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.
This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-guide.
For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/mergercontrol-guide and www.practicallaw.com/restraintsoftrade-guide.
Applicable laws and guidance
The relevant legislation is Canada's Competition Act (R.S.C. 1985 c. C-34) (Act), which regulates competition in Canada. The Act includes provisions that regulate civil practices (such as mergers and abuse of dominance) and those that prohibit criminal conduct (such as conspiracies and bid-rigging). (All legal references in the article are to the Act, unless otherwise specified.)
Immunity and leniency are available for certain violations of the criminal provisions of the Act. Immunity applicants (those first-in to the Competition Bureau (Bureau) to provide information on criminal violations of the Act) may benefit from immunity from prosecution if they comply with the requirements of the Bureau's immunity programme. Leniency applicants (all applicants that follow) may benefit from more lenient treatment (but will be expected to plead to an offence) if they comply with the requirements of the Bureau's leniency programme.
The policy documents published by the Bureau include:
In relation to the immunity programme:
Competition Bureau, Immunity Program under the Competition Act Bulletin (7 June 2010) (www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03248.html);
Immunity Program: Frequently Asked Questions (www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03594.html);
In relation to the leniency programme:
Competition Bureau, Leniency Program Bulletin (29 September 2010) (www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03288.html); and
Leniency Program: Frequently Asked Questions (www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03593.html).
Notably, the Bureau's policy documents are not legally binding.
The Commissioner of Competition (Commissioner) heads the Bureau, an independent law enforcement agency, that investigates breaches of both the civil and criminal provisions of the Act.
While the Commissioner enforces breaches of the civil provisions of the Act, breaches of the criminal provisions are prosecuted by the Public Prosecution Service of Canada (PPSC); a part of the Federal Department of Justice. The Bureau investigates criminal violations and where there is evidence of a criminal offence, the matter may be referred to the PPSC for prosecution.
When the Bureau refers a matter to the PPSC, the Bureau will provide its analysis and assessment of the matter, as well as its recommendations on immunity, leniency or sentencing. The PPSC has the sole authority to grant immunity or leniency, but, in practice, it consults with the Bureau and considers the Bureau's recommendations. (The Federal Prosecution Service Deskbook (www.ppsc-sppc.gc.ca/eng/pub/fpsd-sfpg/index.html) sets out the PPSC's policy on the granting of immunity or leniency.)
Scope of application
The immunity and leniency programmes are available for the following criminal competition law violations (the main cartel violations):
Conspiracy (section 45).
Bid-rigging (section 47).
Implementing foreign conspiracy directives (section 46).
They are also available for aiding and abetting or counselling the above offences (which are offences under Canada's Criminal Code.) The programmes do not apply to the criminal offence of obstruction; nor do they apply to infringements of the civil provisions of the Act (see Question 4).
Section 45 of the Act prohibits naked (general) restraints on competition, specifically, any agreements or arrangements between competitors (or potential competitors) to fix prices, allocate customers or markets, or restrict output. Section 45 violations are punishable by a fine of up to CAN$25 million (per count), imprisonment for a term of no more than 14 years, or both. Violation of section 45 is a per se offence (that is, no effect on competition must be proven).
Section 47 of the Act prohibits bid-rigging (that is, an agreement between two or more parties, to submit a pre-arranged bid or not to submit a bid, in response to a call for bids or a request for tenders). Where the agreement has been made known to the person requesting the bid, at or before the bid is submitted, the agreement is not illegal. Like section 45, a violation of section 47 is a per se offence. Contraventions of this provision are punishable by a fine in the discretion of the court, imprisonment for a term of no more than 14 years, or both.
Section 46 of the Act prohibits the implementation, by a corporation, of a foreign directive or instruction that gives effect to an agreement that would have contravened Canadian law if it had been arranged in Canada. Contraventions of this provision are punishable by a fine in the discretion of the court.
The same levels of fines apply to both companies and individuals.
Immunity and leniency are also available for the criminal offences of misleading representations and deceptive marketing practices.
Availability of leniency
Immunity and leniency are only available in connection with certain criminal competition law violations (see Question 2). Administrative fines are not available for such violations.
Not applicable (see Question 4).
Not applicable (see Question 4).
Immunity and leniency are available to both companies and individuals in connection with violations of the criminal cartel provisions of the Act (see Question 2).
Immunity. For immunity to be granted by the Public Prosecution Service of Canada (PPSC), the applicant must satisfy a number of requirements. The applicant must:
Be the first to disclose the conduct to the Bureau. Where the Bureau is already aware of the conduct, the applicant must be the first to come forward before the Bureau has gathered adequate evidence to refer the matter to the PPSC.
Cease all participation in the illegal conduct.
Not have coerced or otherwise pressured unwilling parties to engage in the illegal conduct.
Provide, to both the Bureau and the PPSC, "complete, timely and ongoing co-operation". Such co-operation will continue after immunity has been granted and will include the following:
information regarding all of the illegal conduct the applicant engaged in;
"full, complete, frank and truthful disclosure of all non-privileged information, evidence and records in its possession, under its control or available to it, wherever located" that relate to the illegal conduct;
securing (through lawful measures) the co-operation of current and former company personnel;
maintaining its application for immunity and subsequent granting of immunity (and any related information) confidential unless consent has been received by the Bureau or the PPSC to allow for such disclosure. (For example, such disclosure may be required to comply with securities legislation.)
Once immunity has been granted, the applicant will be required to comply with the terms and conditions of the immunity agreement it enters into with the PPSC, if it is to maintain its immunity status. Those terms and conditions will include the co-operation obligations outlined above.
Leniency. For the PPSC to grant leniency, the applicant must satisfy the same requirements as set out above, except that:
A leniency applicant will not be the first to disclose the conduct to the Bureau, but it must come forward before the Bureau has gathered adequate evidence to refer the matter to the PPSC.
It must be willing to plead guilty to committing a criminal offence.
Once leniency has been granted, the applicant will be required to comply with the terms and conditions of the plea agreement it enters into with the PPSC, if it is to maintain its leniency status (see above, Circumstances: Immunity).
The Bureau's leniency programme provides that the recommended fine to be paid by a leniency applicant will be based on a 20% proxy of the leniency applicant's affected volume of commerce in Canada (as a starting point). This 20% proxy can be adjusted up or down, depending on whether there are any aggravating or mitigating factors. Additionally, depending on the applicant's place in the marker queue a leniency discount can be applied as follows:
First-in leniency applicants (that is, those behind the immunity applicant): discount of 50%.
Second-in leniency applicants: discount of 30%.
All subsequent leniency applicants may benefit from a leniency discount. (The amount of the discount will depend on a number of factors, but will not be greater than that applied to earlier applicants.)
There is no limit on the number of applicants who can apply for/receive leniency (as long as they come forward before the Bureau has sufficient evidence to refer the matter to the PPSC).
An additional discount may also be applied in connection with an immunity plus application (see Question 13).
With respect to incarceration recommendations, the Bureau's leniency programme provides that the Bureau will recommend that no separate charges be laid against a first-in leniency applicant's co-operating with current directors, officers or employees. A similar recommendation can also be made with respect to current and former agents and former directors, officers and employees (who co-operate); however, this will be determined on a case-by-case basis. For all subsequent leniency applicants, the Bureau will make its determination on a case-by-case basis.
Historically, custodial sentences have been rare in Canada and when they have been ordered, they have traditionally been served in the community. However, a number of recent developments have increased the possibility that individuals could now start serving time in prison for violations of the Act. These developments include the following:
An increased willingness on the part of the Commissioner to recommend jail time for individuals.
The decision of the Federal Court of Canada in R v Maxzone Auto Parts (Canada) Corp, 2012 FC 1117 (F.C.) (Maxzone), which encouraged the imposition of more custodial sentences.
Amendments to the Criminal Code (R.S.C. 1985, c. C-46) that eliminated the courts' discretion to issue conditional sentences for serious crimes that carry prison terms of up to 14 years (such as conspiracy and bid-rigging).
Proceedings against employees
Immunity. Although an individual can apply in their own right for immunity, where a company qualifies for immunity, criminal proceedings will not be brought against the company's current directors, officers and employees who admit their involvement in the illegal conduct and co-operate with the Bureau. Former personnel that co-operate with the Bureau can be granted immunity on a case-by-case basis. For example, the Bureau will consider whether such individuals have been involved in similar conduct while at other organisations.
Leniency. Although an individual can apply in their own right for leniency, where a company qualifies for first-in leniency, company personnel may also benefit (see above, Circumstances: Leniency).
Where a corporate immunity or leniency applicant ultimately fails to qualify for immunity or leniency, the company's personnel may still qualify for immunity or leniency (as if they had approached the Bureau on their own), if they admit their involvement in the illegal conduct and co-operate with the Bureau.
Where a company is either an immunity applicant or a first-in leniency applicant, its interests are aligned with those of its directors, officers, employees and agents (assuming these individuals are willing to co-operate with the Bureau).
Where, however, the company is lower down in the marker queue, or where the individuals refuse to co-operate with the Bureau, the interests of the company and the interests of the individuals may no longer be aligned (for example, if there is a risk that the individuals may be personally prosecuted) and a decision will need to be made as to whether the individuals should retain separate legal representation.
In general, an application for immunity or leniency (whether by a company or an individual) should be made as soon as possible following a determination that the applicant has engaged in conduct that contravenes the criminal provisions of the Act because applicants who are first to disclose the conduct to the Bureau can benefit from full immunity from prosecution, and leniency applicants will receive greater benefits, the higher they are in the marker queue. Moreover, once the Bureau has referred a matter to the Public Prosecution Service of Canada, immunity or leniency will no longer be available.
Even where a party has not yet determined, with certainty, that there has been a breach of the criminal provisions of the Act, it may still be advantageous to approach the Bureau. Under the Bureau's immunity and leniency programmes, a marker may be granted on the basis of a limited hypothetical disclosure (see Question 9, Markers).
While the Public Prosecution Service of Canada (PPSC) has the ultimate authority to grant immunity or leniency, applications for immunity or leniency are made to the Bureau. Once the Bureau has completed its investigation and recommended to the PPSC that it grant immunity or leniency, the applicant will then work with both the PPSC and the Bureau going forward.
Interactions with the Bureau are typically made through legal counsel, rather than directly by an undertaking or individual.
While a prospective applicant can obtain confirmation on whether a marker is available for immunity or leniency with respect to particular conduct, it is generally not possible to obtain informal guidance on whether an applicant will qualify for immunity or leniency prior to making an application. However, because a marker application can be initially placed without disclosing the identity of the applicant, the prudent course will usually be to place the marker to secure the position in the queue. The applicant can withdraw the marker if necessary.
Form of application
No formal written application is filed with the Bureau. The applicant will proffer relevant information in connection with its application, which, in practice, is done orally (see Question 10).
Markers can be obtained to secure an immunity or leniency position until the applicant satisfies all of the requirements of the Bureau's immunity or leniency programme.
To secure a marker, the applicant must provide sufficient detail on the nature of the illegal conduct relating to a specific product (or service), and the time period during which the conduct took place, to allow the Bureau to determine whether any other party has requested a marker for the same conduct. A marker can be requested anonymously by legal counsel and can be obtained on the basis of a limited hypothetical disclosure. (Once a marker has been granted, the Bureau will expect the applicant to be identified.) The Bureau does not accept joint requests for markers made by two or more applicants. A marker is typically requested by legal counsel (by contacting the Acting Senior Deputy Commissioner of Competition, Criminal Matters, at the Bureau).
The marker will automatically expire within 30 calendar days. Before the end of that time period, it can be withdrawn, without consequence, if it is ultimately determined that no illegal conduct took place. Hence, it may be strategically beneficial to secure a place in the marker queue and then use the additional time to determine whether an offence was actually committed.
Applicants are expected to provide the Bureau with evidence that makes out the offence for which immunity or leniency is sought. This includes both documentary and testimonial evidence.
The Bureau accepts oral statements. Information proffered in support of an application for immunity or leniency is, in practice, delivered orally.
The first step in the application process is for an immunity or leniency applicant to obtain a marker from the Bureau (see Question 9, Markers).
Once a marker has been secured, the applicant will have a limited period of time to proffer information to the Bureau and perfect its marker. (A marker will automatically expire within 30 calendar days if it is not perfected within this time frame, or if an extension is not granted.) The proffer will give a detailed statement of the illegal conduct, its effects in Canada and any supporting evidence. While the information does not need to be exhaustive, it must be sufficient for the Bureau to determine whether the applicant qualifies for immunity or leniency. Moreover, the information must be accurate.
Areas to be addressed in the proffer include:
Identification of the participants in the illegal conduct.
A description of the products/services concerned and the relevant industry.
Details of the conduct (for example, nature of agreement, impact in Canada).
Identification of relevant evidence.
Any international issues (including whether immunity or leniency has been (or will be) sought in other jurisdictions).
Where the conduct relates to activities that pre-date 12 March 2010, the applicant must also provide information that will assist the Bureau in establishing that the conduct resulted in an undue lessening or prevention of competition (the statutory requirement before the Act was amended to convert section 45 into a per se offence).
The time period for providing this information is typically 30 calendar days from the receipt of a marker. The time frame can be extended where the Bureau determines the delay to be reasonable (for example, in complex cases or if a witness is unavailable). However, the Bureau has become increasingly reluctant to grant extensions and has even revoked markers where there has not been a sufficient proffer of information within the specified time.
As with a marker, a proffer of information is generally made by the applicant's legal counsel.
The Bureau will consider the information provided by the applicant, determine whether additional information may be required and then render its decision on whether to recommend that the Public Prosecution Service of Canada (PPSC) grant immunity or leniency to the applicant. Such a determination may take several months. Notably, no special consideration is given to immunity or leniency granted in other jurisdictions.
Upon making its decision, the Bureau will present its recommendation to the PPSC, along with any relevant information. In the case of a leniency application, where the Bureau decides to recommend leniency, the information provided to the PPSC will include its position on the level of fine that should be levied on the applicant, as well as its recommendation on whether any prison sentences should be imposed on individuals involved in the illegal conduct.
The PPSC has the sole authority to determine whether to enter into an immunity agreement with an immunity applicant or a plea agreement with a leniency applicant. This decision may be made several weeks or months after the PPSC receives the Bureau's recommendation.
In the case of an immunity application where the PPSC accepts the Bureau's recommendation for immunity, an immunity agreement will typically be signed soon after the PPSC has determined that immunity should be granted.
In the case of a leniency application where the PPSC accepts the Bureau's recommendation on leniency, the PPSC will enter into a plea agreement with the applicant and a date will be set for the applicant to plead guilty (in court) to committing an offence under the Act. A judge will ultimately determine whether the plea agreement and fine/sentencing agreed to between the PPSC and the applicant are acceptable.
Withdrawal of leniency
An applicant may decide to withdraw from the Bureau's immunity or leniency programmes at any time. Information provided to the Bureau in the context of the application cannot be used against the applicant. An applicant's participation in the immunity or leniency programmes may also be revoked where the applicant has failed to meet its obligations. However, in practice, revocation is an exceptional step. The Bureau takes the position that it will not recommend revocation unless it considers the applicant to be in plain breach of its commitments and it has failed to cure the defects and heed warning notices.
Where a marker has been cancelled or immunity or leniency has been revoked, applicants behind in the marker queue could potentially move up. Whether this will occur will be in the discretion of the Bureau/ Public Prosecution Service of Canada and there is little experience to draw on in this regard.
A revocation will only affect those parties that have failed to comply with the requirements of the (immunity/plea) agreement and/or programme. Thus, co-operating employees of a corporate applicant will still be covered by immunity or leniency, even though the corporate applicant's immunity or leniency was revoked. (Similarly, if an individual loses his immunity, the corporate employer will still continue to be covered.)
Scope of protection
The scope of immunity and leniency protection applies to all illegal conduct that an immunity or leniency applicant confirms has taken place. This includes conduct that the applicant itself brought to the Bureau's attention, as well as any conduct the Bureau learned of on its own, which it brought to the applicant's attention and that relates to the same marker, and that the applicant does not deny to have occurred.
A successful leniency applicant in one market may be able to obtain a reduction in the fine if it is the first to disclose illegal conduct in another market, which is unknown to the Bureau (referred to as immunity plus).
The Bureau will typically recommend to the Public Prosecution Service of Canada that an additional 5% to 10% be added to an applicant's leniency discount in connection with an immunity plus application.
The granting of immunity or leniency does not prevent a third party from launching a civil action for damages. To the contrary, it can actually assist a third party in proving its case.
Section 36 of the Act provides that any person who has suffered loss or damage arising out of conduct that contravenes the criminal provisions of the Act, has the right to commence a private right of action to recover the damages suffered (limited to the actual loss), plus legal costs.
Under section 36, a claimant must establish:
The elements of the offence, on a balance of probabilities (the civil standard of proof).
The actual loss or damage suffered (as a result of the illegal conduct).
Where a party has been convicted of a criminal offence (either at trial or as a result of a guilty plea in the context of a leniency settlement), the record of the court proceedings can be used as evidence in proving the illegal conduct, in the absence of evidence to the contrary. As a result, where a conviction has been obtained, civil actions are more likely to be launched.
A civil action can be launched by a claimant acting either in an individual capacity or as a representative of a class of claimants in a class action. Most section 36 actions brought with respect to cartel violations are in fact launched as class actions, and often soon after a conviction is entered.
Confidentiality and disclosure
The identity of an immunity or leniency applicant is treated as confidential by the Bureau, subject to a few exceptions (for example, where required by law or where the applicant has consented). An applicant's identity will commonly remain confidential until charges are laid against one of the participants to the illegal conduct or a leniency applicant pleads guilty before the court. At times, an applicant's identity may be disclosed prior to the laying of charges (or a conviction) where the Bureau relies on information provided by the applicant to obtain search warrants or production orders against other participants to the offence.
As in the case of an applicant's identity, information obtained from an applicant remains confidential, subject to certain exceptions (see above), and where the disclosure of information is required for the purpose of the administration or enforcement of the Act. For example, information provided by an applicant may be passed on to other participants in the Bureau's immunity or leniency programmes to corroborate or substantiate the evidence provided. Information may also be passed on to other parties under investigation by the Bureau who are not participating in either the immunity or leniency programmes, but where charges are laid (as part of the Public Prosecution Service of Canada's disclosure obligations to the accused). Additionally, in the context of a leniency application, certain information will become public when the applicant enters a guilty plea.
Immunity or leniency applicants will typically request that information provided as part of their application be covered by the confidentiality protections under the Act and those stipulated by the Bureau in its immunity and/or leniency programmes (see above).
Domestic submissions and domestic discovery
Information submitted to the Bureau or Public Prosecution Service of Canada (PPSC) in connection with an immunity or leniency application may become discoverable under a court order in the context of a private action. The Bureau takes the position that all information disclosed in the context of an application is confidential and not subject to disclosure, unless ordered by a court. It may even seek a protective court order to prevent such disclosure. However, confidentiality is not guaranteed. There is a risk that private litigants may seek disclosure of information provided to the Bureau. Issues relating to access to such information have not been finally resolved by Canadian courts and there have been cases (for example, see Forest Protection Ltd v Bayer A.G. (1996), 68 C.P.R (3d) 59 (N.B.Q.B), leave to appeal to N.B.C.A. refused , N.B.J. No. 408 (N.B.C.A.) and Imperial Oil v. Jacques, 2014 SCC 66) where private litigants sought access to documents in the possession of the Bureau, although these were not provided in the context of an immunity or leniency application.
In any event, private litigants will be able to obtain any non-privileged information provided to the Bureau by the defendants, as part of the civil discovery process.
Domestic submissions and foreign discovery
There is also a risk that information provided to the Bureau or PPSC may be subject to discovery orders in foreign courts. While the Bureau takes the position that all such information is confidential and not subject to disclosure (unless ordered by a court), and has even sought protective orders to prevent such disclosure in a foreign jurisdiction (see Re: Vitamins Antitrust Litigation, Misc. No. 99-197 (TFH) MDL No. 1285) (D. Columbia, July 23, 2002, April 4, 2002 and December 18, 2002)), there is no guarantee that its opposition will be successful; disclosure of information provided to the Bureau has been ordered by foreign courts (see Re: Methionine Antitrust Litigation, Case No. C-99-3491 CRB (JCS) MDL No 1311) (Northern District of California, July 29, 2002)).
Foreign submissions and domestic discovery
Submissions in the possession of an applicant that have been provided to a foreign authority may be subject to discovery in Canadian civil proceedings, if they are relevant to the action.
The Bureau frequently co-operates with regulatory authorities from other jurisdictions. Such co-operation is typically based on waivers provided by immunity or leniency applicants. Under its immunity and leniency programmes, the Bureau generally requires applicants, as a condition of their participation in its programmes, to provide waivers that will allow the Bureau to share information with other jurisdictions where the applicant has sought similar relief.
Proposals for reform
To the authors' knowledge, there are no current proposals for reforming the existing competition law regime. However, future court decisions could always result in adjustments. For example, the decision in R v Maxzone Auto Parts (Canada) Corp, 2012 FC 1117 (F.C.) (Maxzone) may encourage the imposition of more custodial sentences.
Description. Website of the Competition Bureau, which includes the Bureau's immunity and leniency programmes, guidelines and other background information.
Description. An online source of the consolidated Acts and regulations of Canada maintained by the federal Department of Justice. Information on the website is generally updated on a weekly basis.
Canadian Legal Information Institute
Description. A free public database providing access to Canadian legislation and decisions of Canadian courts and tribunals.
The regulatory authorities
Canadian Competition Bureau
Head. John Pecman, Commissioner of Competition
Contact details. 50 Victoria Street
T +1 800 348 5358/ +1 819 997 4282
F +1 819 997 0324
Outline structure. The Bureau is headed by the Commissioner. In addition to the Commissioner, there are nine deputy commissioners. The two branches that are relevant to immunity and leniency applications are the Criminal Matters Branch (which handles cartel violations) and the Fair Business Practices Branch (which handles misleading representations and deceptive marketing practices).
Responsibilities. The Bureau is responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.
Procedure for obtaining documents. Bureau materials, including guidelines, bulletins, press releases and so on are publicly available on the Bureau's website.
Public Prosecution Service of Canada (PPSC)
Head. Brian Saunders, Director of Public Prosecutions
Outline structure. The PPSC is a federal government organisation responsible for prosecuting criminal offences under federal jurisdiction on behalf of the Attorney General of Canada (AG).
Responsibilities. In connection with offences under the Canadian Competition Act, the Competition Law Section of the PPSC is responsible for initiating and conducting prosecutions on behalf of the AG and for advising the Bureau on criminal investigations.
Procedure for obtaining documents. Information on the PPSC is available on its website.
Robert E Kwinter
Blake, Cassels & Graydon LLP
Professional qualifications. Ontario Bar, Barrister and Solicitor
Areas of practice. Competition and anti-trust; competition litigation; class actions; foreign investment.
Evangelia L Kriaris
Blake, Cassels & Graydon LLP
Professional qualifications. Ontario Bar, Barrister and Solicitor
Areas of practice. Competition and anti-trust; competition litigation; class actions; foreign investment.