Maintaining Conformity with the Competition Act

Notes for an Address by André Lafond
Deputy Director of Investigation and Research
Civil Matters Branch
Competition Bureau

10^th Annual Meeting of the Canadian Corporate Counsel Association
St John's, Newfoundland

August 25, 1998

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Introduction

It is a pleasure to participate in this plenary session and to have this opportunity to describe to you how the Competition Bureau is approaching the challenge of maximizing conformity with the Competition Act and our views on why an effective in-house compliance program is important to this effort.

After discussing the area of corporate compliance programs in more detail, I would also like to outline how the Bureau is approaching its own activities to ensure that they are both relevant and effective.

Corporate Compliance

The bulletin on corporate compliance programs, which was issued last year, was developed to clearly identify for the business and legal communities the Bureau's view of the essential features of an effective compliance program. It aims to ensure that businesses conduct their activities within the confines of the law. This more proactive approach reflects our view that it is always better to try to prevent trouble before it starts, and be in a position to deal with it effectively if it does arise.

To be useful and worthwhile, to both the company and its employees, a corporate compliance program should be both current and effective. Current means that the program is constantly reviewed for relevancy; effective means that it addresses all aspects of the company's business activities. For this reason we put real emphasis on developing a bulletin that would describe clearly and concisely the essential elements of an effective compliance program.

For the reasons that are described in the bulletin, we believe any prudent company is well-advised to adopt a corporate compliance program. The essential benefits of adopting such a program include:

• the prevention and detection of illegal conduct;

• more clearly identifying the boundaries of permissible conduct and the zones of risk, thus ensuring that legitimate business initiatives are not inhibited by uncertainty or misconceptions regarding the law; and

• possible positive benefits should you have any dealings with the Bureau. For example, while the existence of a program does not immunize firms or individuals from enforcement action by the Director, it may better situate them to receive consideration for alternative case resolutions or for a more favourable treatment in sentencing. As well, the program may be beneficial to a claim of due diligence to prevent the offense, which is available for certain misleading advertising offences under the Act.

Nonetheless, only the senior executives have the knowledge, understanding and judgment to decide whether to adopt a corporate compliance program, and what elements the program requires to address the real world situations that the company faces.

Before embarking on a compliance program, and in order to design a program suited to its particular circumstances, we believe that a company must carefully examine its operations, through an audit or a baseline study, to determine its strengths, weaknesses, particular vulnerabilities and needs. This will result in a more effective program that will have the appropriate emphasis and direction and be adapted to the particular activities of the company.

While it is necessary for it to be flexible and adapted to your given situation, we are firmly of the view that to be effective an internal corporate compliance program must contain the following five elements:

1. Senior Management Support

The foundation for an effective compliance program is the clear and unequivocal support of senior management. This must be more than a paper exercise. It means visible, vocal and on-going senior management support.

2. Relevant Policies and Procedures

Effective compliance is a living thing. It is not a matter of putting something on paper and forgetting it, or once a year getting employees to sign a piece of paper indicating that they have read the policy and procedures.

The on-going dissemination of appropriate information to the relevant employees and management is critical to the success of any compliance program. In addition, policies and procedures need to be regularly updated to address new developments in the law, business or industry practices, and enforcement policies.

3. Education & Training

Training is the effective means to build knowledge and understanding of the limits of acceptable behaviour encountered in day-to-day activities. It should be targeted to employees at all levels of the organization who are in a position to engage in or be exposed to anticompetitive behaviour, or who may be hampered in their activities by the lack of a full understanding of the law and jurisprudence in their area of work.

Put another way, training both serves to:

• support the goal of before-the-fact prevention rather than after-the-fact detection; and
• gives staff confidence to act, in the knowledge that they understand the bounds of permissible conduct.

4. Monitoring, Auditing, & Reporting

Prevention and detection of illegal activity are dual goals of any compliance program. Mechanisms for monitoring and auditing can enable a corporation to determine if compliance is being achieved, if training is effective and appropriately targeted, and it will signal problem areas requiring correction.

Similarly, in our view, a company that is committed to compliance will provide employees with an unfettered ability to report their concerns about situations that may contravene the firm's policies.

5. Disciplinary Procedures

Finally, we view disciplinary procedures as lending credibility to a compliance program by demonstrating the seriousness with which the firm views anticompetitive conduct by its employees.

Bureau Activities

I would now like to turn briefly to some of the initiatives that the Bureau has undertaken to ensure that its own activities are both relevant and effective.

As some of you may be aware, shortly after he was appointed Director of Investigation and Research over a year ago, Konrad von Finckenstein stated the four principles that he wants to govern the daily activities of the Bureau. These are:

• transparency
• fairness
• timeliness
• predictability.

Essentially, we are going to be:

• as open in our dealings as the law permits,
• fair in our decisions by striking the right balance in our responses to non-conformance,
• deal with issues in as timely a manner as possible, and
• provide appropriate background material and Bureau positions on as many issues as possible so that business can arrange its affairs in such a way as to not be in conflict with the law.

Underlying our approach is the basic assumption that business people want to comply with the law and will do so when the manner in which the law will be applied is clear.

Obviously, there is a small minority that will not adopt such an attitude to compliance with the law. The approach we are taking in the Bureau does not mean leniency for those who engage in serious anti-competitive behaviour. In civil matters where reasonable solutions cannot be worked out by consent orders or other means, we will not hesitate to take the matter to the Competition Tribunal. In cases involving serious violations of the criminal provisions, we will not hesitate to refer them to the Attorney General with a recommendation for prosecution to the fullest extent possible.

In the coming years the Bureau will face enormous challenges to ensure that its work and the legislation it administers are both effective and relevant. To be effective, the Bureau must achieve the maximum "bang" for its limited "buck". To achieve this we must ensure that all the activities in which we are engaged are being focussed on that one clear goal of maximizing conformity with the law.

If we are organized right we will have a full range of responses to any anticipated activity.

We have a much greater array of tools to respond with now than in years past. Our continuum of activities starts with education and goes up to scale from education to publishing guidelines, advisory opinions, information contacts, voluntary codes, settlements, consent orders, charges, guilty pleas, fines and ultimately imprisonment at the other end of the scale.

In the Bureau, we realize that we need to continually examine and update our tools and activities, both on an individual basis and collectively, to ensure that we have the right mix, and to develop new innovative approaches when appropriate.

One such initiative is that we are actively encouraging the greater use of some more co-operative tools, such as partnerships and voluntary codes. An excellent example of how the Bureau has used partnerships is the Video "Scam Alert" which we produced jointly with Health Canada, the Royal Canadian Mounted Police, the Canadian Direct Marketing Association and the Ministry of Housing, Recreation and Consumer Affairs of British Columbia.

In the case of voluntary codes, they have been successfully utilised in the areas of misleading advertising and under the packaging and labelling statutes.

In this regard, you may wish to consult the recently released Voluntary Codes: A Guide for Their Development and Use, which was a joint initiative of the Office of Consumer Affairs, Industry Canada, and the Regulatory Affairs Division, Treasury Board Secretariat. The guide suggests involving the Competition Bureau at an early stage whenever an association or group of businesses are considering the creation of a voluntary code so as to ensure they are in conformance with the Act. Voluntary Codes represent an innovative approach to addressing the concerns and needs of consumers while at the same time helping Canadian companies to be more competitive.

On another front, we are going to make greater use of the Internet to get our message out. We have recently spent considerable effort in revising our web page in an effort to respond to the many comments and suggestions we have received. You may have already noticed a very different and more informative Internet presence for the Bureau.

We are also proceeding with our commitment to adopt a clear approach to advisory opinions and to publish these opinions, in full or in generic form, with the consent of the parties. This is an effort to provide pertinent information to as broad an audience as possible on how the Bureau approaches certain issues.

Industry Canada is also taking a leading role in government to ensure the effective application of computer technology in the workplace. Among its initiatives is the application of electronic commerce to departmental activities over the next few years, so that our clients can take advantage of doing business with us on the Internet. For its part, the Bureau is committed to developing electronic commerce applications in such activities as pre-merger notification.

Finally, the Department is also playing a leading role in ensuring the preparedness of computer systems for the Year 2000. I know that I can count on your support to ensure that your systems are Year 2000 compliant, so that we will be able to reap these benefits in the 21st century. I have heard some concerns expressed that members of the business community are worried that communication with the their competitors on Year 2000 related issues may be viewed with suspicion by the Bureau. If there are particular issues of concern to you or any of your clients, I encourage that you bring them to our attention for full discussion.

Conclusion

In summary, let me reiterate that for a corporate compliance program to be useful to both management and employees, it needs to be both effective and current. The Bureau's role in assisting you in this mutual objective is to continually review our tools and activities to ensure that we have the right mix and to develop new ones when appropriate, and continue with our stakeholder contacts in order that we can work together at achieving this objective of maximizing conformance with the four acts administered by the Bureau.

We encourage companies, associations and individuals to make use of our available resources in their compliance programs and daily activities. If there are particular areas where you feel that additional information would assist you in your activities, please let us know. Our aim is to ensure that you have the necessary information available so that your activities are in conformity with our statutes.

How to reach us? We have a 1-800 number; we can also be reached through the Internet or you can write to us. Appendix 2 of the Bulletin on Corporate Compliance Programs contains all the necessary information for communicating with the Bureau.

Thank you again for giving me the opportunity to share with you some thoughts on compliance from the perspective of the Competition Bureau.