Beyond Merriment and Diversion: The Treatment of Conspiracies under Canada's Competition Act

Harry Chandler
Deputy Commissioner of Competition, Criminal Matters
and Robert Jackson¹
Competition Bureau

Roundtable on Competition Act Amendments
Insight Conferences
Toronto, Ontario

May 25, 2000

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice.

Adam Smith, Wealth of Nations (1776)

---

Introduction

Despite Adam Smith's pessimism, countries around the world have enacted laws to prohibit conspiracies among competitors. Canada's conspiracy law dates from 1889. The cornerstone provision, section 45, prohibits agreements or arrangements to prevent or unduly lessen competition. Some commentators and practitioners have suggested that this provision is overly broad and chills potential collaborations among competitors that would benefit Canada.

The purpose of this paper is not to judge the effectiveness of the law, but rather to report on how section 45 and the related provisions have been enforced over the past two decades. In broad, the main findings are:

• Every one of the prosecutions under section 45 and its predecessor involved blatant hard-core anticompetitive behaviour. Almost all of these cases involved arrangements to fix prices or share markets. A few related to group boycotts or output restrictions. While the conspiracy provision is capable of a wider application - any agreement or arrangement that lessens competition unduly - the enforcers of the law have focussed public resources on the hard-core anticompetitive behaviour.
• Since 1980, convictions in 32 cases under section 45 and its predecessor resulted in total fines of about $158 million. A total of more than $14 million in penalties was levied under section 46 (Foreign Directives), and a further $8.8 million under section 47 (Bid-rigging).
• In 29 of these 32 conspiracy prosecutions, the convictions were the result of guilty pleas; three of the convictions followed contested proceedings.
• There have been 20 contested conspiracy cases since 1980, 17 of which resulted in acquittals or discharges. Of these acquittals or discharges, 6 were because of a failure to show agreement, and 11 for reasons related to undueness.
  

This paper is organized into two parts. The first describes the criminal law provisions outlawing agreements among competitors. The second summarizes the record of court proceedings under these provisions. There are two appendices which form important adjuncts to this paper. Appendix I contains tables providing numerical summaries of the disposition of prosecutions under sections 45, 46 and 47 since 1980. Brief summaries of all cases concluded since 1990 are found in Appendix II to this paper.

Conspiracy and the Related Provisions Outlawing Agreements Among Competitors

Conspiracy (Section 45)

Section 45, the conspiracy provision, is the cornerstone of the Competition Act . This provision, which dates back to 1889, prohibits agreements or arrangements to prevent or unduly lessen competition. Section 45 is sufficiently broad to capture many different types of agreements or arrangements which restrict competition; however, it is important to note that not all anti-competitive conduct is prohibited under this provision. What is unlawful are agreements or arrangements to lessen competition. Likewise, not all agreements or arrangements which lessen competition are prohibited. The "undueness" element of this provision establishes a threshold test which distinguishes permissible combinations from illegal ones.

It is not an element of section 45 that the agreement or arrangement actually be implemented. A conviction can result regardless of whether or not any action was taken to carry out the agreement or arrangement. Nevertheless, it is often the case that the best evidence of an agreement or arrangement is found in the overt acts which have resulted from its implementation. The court may consider circumstantial evidence, and there is no requirement that there be direct evidence of communication among the parties.

Lessening Competition "Unduly"

From the time this provision was enacted, considerable case law has been developed which provides guidance on what constitutes an undue lessening of competition. The courts have attached a sense of seriousness in relation to the competitive effects contemplated by this word. If an agreement or arrangement would impose "improper, inordinate, excessive or oppressive" restrictions on competition, then it can be considered to be undue and, therefore, illegal.

To date, the most definitive guidance on this question is found in the 1992 decision of the Supreme Court of Canada in a challenge under the Charter of Rights and Freedoms involving the Pharmacy Association of Nova Scotia ("PANS")². In that case, the Court noted the extensive jurisprudence in relation to this provision, and found that this provision was sufficiently precise to meet the constitutional standard that the law not be too vague³. The Court also considered the process whereby "undueness" is assessed, highlighting the "structure-behaviour framework analysis" that courts have used in their assessment. The Supreme Court emphasized that it is the combination of market power and behaviour likely to injure competition which makes a lessening of competition undue. It noted that the parties to an agreement need not have the capacity to influence the market, only the ability to behave independently of it, in a passive way. A particularly injurious behaviour may trigger liability even if market power is not considerable. The Court provided a non-exhaustive list of the determinants of market power, consisting of such factors as market-shares; the number of competitors and the concentration of competition; barriers to entry; geographical distribution of buyers and sellers; differences in the degree of integration among competitors; product differentiation; countervailing power; and cross-elasticity of demand.

In the PANS judgment, the Supreme Court also settled the question of what minimum element of fault (mens rea) must exist for a conviction under this provision. This issue had arisen on several occasions in previous cases, and it was now again before the Supreme Court in a Charter challenge. The Court clarified that the Crown must prove that the accused had the intention to enter into the agreement and had knowledge of its terms. Once that is established, it would ordinarily be reasonable to draw an inference that the accused intended to carry out the terms of the agreement unless there is evidence to the contrary. The Crown must establish that the likely effect of the agreement would be to prevent or unduly lessen competition and that the parties to the agreement intended it to have that effect. However, on this latter element of fault, the Court ruled that the Crown must establish only that a reasonable business person, who can be presumed to be familiar with the business in which he or she engages, would or should have known that the likely effect of the agreement would be to prevent or unduly lessen competition.

Some types of arrangements are so egregious that they are, without serious question, injurious to the public. At the top of the list are arrangements between competitors to fix prices, allocate markets, restrict output or to drive other competitors from a market by boycotting them or their suppliers or customers. In the so-called "grey area" are arrangements which are likely to lessen competition but which have some offsetting benefits to the public, such as enhanced efficiencies or innovation. In case law relating to the meaning of "undueness" under section 45, the courts have made it clear that public injury or public benefit from any standpoint other than the agreement's effect on competition are simply not relevant. Consequently, an agreement or arrangement which provides counterbalancing efficiency gains could nevertheless be unlawful. The only issue under section 45 is whether the agreement or arrangement impairs competition to the extent that it will attract liability. This is what is referred to as the "partial rule-of-reason approach", a concept which lies somewhere between the per se rule (where all agreements that lessen competition are presumed to be contrary to the public interest) and the full rule-of-reason approach (where all of the economic advantages and disadvantages of the agreement are considered).

Foreign Directives (Section 46)

Section 46 makes it an offence for a company which carries on business in Canada to implement any foreign directive intended to give effect to an agreement or arrangement entered into outside of Canada that, if entered into in Canada, would have been in contravention of section 45.

This provision is targeted specifically at international cartel activity affecting Canada. It allows the application of the Competition Acteven in situations where the actual conspirators are not located or incorporated in Canada. It applies where a company doing business in Canada (wherever incorporated) implements any directive, instruction, intimation of policy or other communication from a foreign person who is in a position to influence the company, where the purpose of the communication is to give effect in Canada to a foreign conspiracy. There is no need to prove that any officer or director of the company in Canada had knowledge of the conspiracy.

Bid-rigging (Section 47)

Section 47, the bid-rigging provision, became an offence in its own right in 1975. Bid-rigging is an agreement between or among two or more persons where, in response to a call or request for bids or tenders, one or more of them agrees not to submit a bid, or to submit a bid that has been arrived at by agreement between or among themselves.

Unlike the conspiracy provision, section 47 is a per se offence where injury to the public is presumed. Section 47 is also different in that the activity is only illegal if it is covert. An agreement or arrangement would not constitute bid-rigging if it is disclosed to the tendering authority prior to submission of the first bid by any party to the agreement. The underlying rationale for this exception is that the number of available bidders can be increased if smaller firms are able to form strategic alliances combining their products, knowledge or resources in order to compete effectively against their larger rivals. Joint ventures are also common on mega-projects, which often require the pooling of capital and the sharing of risk.

In a prosecution under section 47, the Crown must prove the existence of an agreement or arrangement based on the criminal standard of "beyond a reasonable doubt". As with section 45, this can be difficult because of the covert nature of the activity.

Conspiracy Relating to Professional Sport (Section 48)

Section 48 makes it an offence to conspire to unreasonably limit the opportunities for players or competitors to participate in professional sport, or to unreasonably limit the opportunity for a person to negotiate with, and play for, the team or club of the person's choice. This provision allows the court to consider the international nature of a league, and the desirability of maintaining a reasonable balance among the teams or clubs participating in a league.

This provision is designed principally to address arrangements in professional sport which, on objective examination by a court, limit the choice of a player when he or she graduates from amateur to professional sport and which would unreasonably limit the choice of teams to play for upon acceptance into a professional sport. Of particular concern are contracts imposed upon players which are self-repeating and which bind the player indefinitely to any team to which the player may be, from time-to-time, assigned.

There have been no referrals to the Attorney General and no prosecutions under this provision.

Conspiracy among Federal Financial Institutions (Section 49)

This provision makes it per se illegal for banks or federally incorporated trust, loan or insurance companies, to enter into an agreement or arrangement with respect to interest rates or service charges on deposits or loans, or with respect to the kind of services to be provided or the persons or class of persons to be served. This provision contains a number of exceptions intended to ensure that these prohibitions do not inhibit the legitimate operation of the financial system.

Section 49 came to the Competition Actin 1986 as a result of the repeal of a similar provision in the Bank Act. The reason for this change was to bring the responsibility for enforcing competition policy in the financial sector under one roof, that is, the Competition Bureau. The previous distribution of competition policy enforcement between the Minister of Finance and the Bureau was viewed as inefficient. In 1991, section 49 was amended to include all federal financial institutions, rather than just banks, in order to create a more-level playing field among competing institutions.

There have been no referrals to the Attorney General and no prosecutions under this provision.

Price Maintenance (Section 61)

Under section 61, the price maintenance provision, it is an offence for a business person to attempt, by means of a threat, promise or agreement, to influence upward, or to discourage the reduction of, the prices charged or advertised by another business person. It is also an offence to refuse to supply a product to, or discriminate against, another business person because of that person's low pricing policy.

Originally known as "resale price maintenance", this provision was introduced into the Competition Actin 1951 to combat vertical pricing restraints imposed by "dealers" against "resellers" (e.g. a wholesaler requiring a retailer to resell the wholesaler's products at list price). In 1975, the provision was amended to include both vertical and horizontal pricing restraints.

The price maintenance provision has been included in this paper as a provision related to section 45 because it has been used to prosecute horizontal restraints, that is, restrictions of competition between or among competitors. Section 61 does not provide a per se prohibition against agreements among competitors. Therefore, this provision is not a substitute to section 45.

Prosecutions Under Section 45 and the Related Provisions

Appendix I to this paper lists all prosecuted cases involving the relevant provisions since 1980. Appendix II provides a synopsis of each case concluded since 1990. Time did not allow the preparation of similar brief summaries for the period 1980-90. 1980 was chosen as the starting period because it represents a significant period of time to identify broad trends, taking into consideration the effect of legislative change and key judgments.

A review of all the cases listed in Appendix I reveals that every single case involved blatant hard-core anticompetitive behaviour - primarily price-fixing, market-sharing or bid-rigging⁴. None involved what are sometimes called strategic alliances, for example, competing firms entering into partnerships to facilitate the transfer of knowledge, skills and technologies; to enter new markets at a lower cost and with less risk; to enhance innovation and growth; to bring products to the market more quickly; to overcome legal or trade barriers; to realize economies of scale and scope; or to be more competitive against larger rivals with wider product lines⁵.

The table below draws from the two appendices and summarizes what happened with the prosecuted cases over the last two decades.

Disposition of Prosecutions
January 1980 – May 2000

NUMBER OF CASES
Provision	Total Cases	Guilty Pleas	Discharged at Preliminary Hearing	Charges Stayed by Crown	CONTESTED (TRIAL)
					Convicted	Acquitted
s. 45	51	29	4	2	3	13
s. 46	4	4	-	-	-	-
s. 47	20	10	1	-	5	4
Total	75	43	5	2	8	17

Some observations are appropriate. The first point is definitional. The term "case" almost without exception means a single matter involving the same agreement or agreements among competitors⁶ . The numbers do not represent individual counts in a prosecution. For example, in the Pulp Baling Wire case, five companies pleaded guilty under section 45. This matter appears as one case, not five.

Conspiracy

Since 1980, there have been 51 cases prosecuted under section 45 or its predecessor⁷, resulting in fines of about $158 million. As you will know from consulting the Competition Bureau's web site⁸, over 80 percent of these fines were achieved in the last two years as a result of guilty pleas by large multinational corporations implicated in global conspiracies in a wide range of products.

As the table shows, more than one-half of the 51 prosecutions (i.e., 29), resulted in guilty pleas. Of the remaining 22 cases, only three resulted in convictions. These cases were Papermakers' Felt (1982)⁹, Sherbrooke Driving Schools (1996-1997) and the prosecution of the former president of one of the firms involved in the Compressed Gas case (1996)¹⁰.

While almost two-thirds (63 percent) of prosecutions have succeeded¹¹, the rate of conviction in contested section 45 cases is, by any measure, very low (three out of 22 cases taken).

This low conviction rate in contested cases is likely attributable to the combination of elements which must be proven. The Crown must prove the existence of an agreement to lessen competition; the participation in the agreement by each accused; the likely "undue" effect of the agreement, if implemented; and the required fault element that the parties intended that the agreement have that effect.

Based on our reading of the decisions, of the 17 cases where the accused were acquitted at trial or discharged at a preliminary hearing, just over one-third (6 cases or 35 percent) were lost by the Crown because of insufficient evidence of an agreement, and almost two-thirds (11 cases or 65 percent) because of insufficient evidence of an undue lessening of competition or of the parties' intent that the agreement have that effect.

Proving the existence of an agreement beyond a reasonable doubt is a formidable task in itself. However, the results suggest that the "undueness" element poses the greatest obstacle to achieving convictions under section 45.

In two major cases following the Supreme Court of Canada's decision in PANS, the accused were acquitted for reasons related to the question of "undueness"

.

In February 1993, the two pharmacy associations which had launched the PANS challenge were acquitted of price-fixing in respect of the supply of prescription drugs in the Province of Nova Scotia¹². The Court found that the accused had entered into an agreement which lessened competition unduly, but was not satisfied that the accused had intended that the agreement have that effect. Subsequently, similar charges against four of their member companies and against three individuals were stayed.

In 1995, five companies were acquitted of conspiring to fix prices for the provision of pool-car freight-forwarding services in the Toronto to Western Canada market over an 11-year period from 1976 to 1987.¹³The Court found that the five companies had agreed "to lessen competition amongst themselves and their confederates by seriously restricting rate competition". However, the Court was not persuaded that the effect of the agreement was to lessen competition "unduly".

In both of these cases, the courts had found that the parties had entered into agreements which "seriously" or "unduly" restricted competition, but nevertheless acquitted the accused.

Foreign Directives

There has not been a contested prosecution under section 46. However, guilty pleas have been entered in four of the international cases¹⁴, a testament to the utility of this section in helping to combat transnational cartel activity. Fines in respect of these section 46 offences have totalled just over $14 million, of which $11 million was levied in one case alone¹⁵.

Bid-rigging

Since 1980, there have been 20 cases prosecuted under section 47, resulting in about $9 million in fines. Of those cases, one-half (10 cases) resulted in guilty pleas, almost the same proportion as with section 45 (57 percent). Of the remaining cases, one-half (5 cases) resulted in convictions. In all of the cases which resulted in acquittals at trial, the Crown failed to meet its burden in proving the existence of an agreement. One case resulted in a discharge at the preliminary hearing because the court did not find that there was a call or request for bids or tenders.¹⁶

Overall, three-quarters (15 of 20) of the prosecutions under this provision resulted in convictions. This is higher than the 63 percent rate under section 45, and the 50 percent conviction rate in contested proceedings under this section far exceeds the 14 percent rate under section 45.

Horizontal Price Maintenance

In all of the cases where section 61 has been used horizontally, the conduct involved was an attempt by a company or individual to persuade a competitor to raise or maintain prices.

The Bureau and the Attorney General have attained convictions under this provision in several cases where a company or individual has employed a "threat" or a "promise" as the means to influence a competitor's prices. For example, in 1988, a business forms supplier pleaded guilty to a price-maintenance charge for having offered a competitor a share of the market if that competitor participated in a bid-rigging scheme involving the submission of high cover bids. In 1994, a national real estate company and its regional vice-president were convicted in a contested price-maintenance case for promising to co-operate with a discount realtor in Calgary if that company increased the commission rates which it charged to home sellers.¹⁷

No one has ever been convicted for attempting, by "agreement", to influence a competitor's prices, without a "threat" or "promise" also being present. The courts have not accepted the proposition that an attempt to establish a price-fixing agreement is an attempt, by agreement, to influence prices. Consequently, section 61 is not a per se price-fixing conspiracy provision. However, like section 45, the objective of this provision is to prevent artificial restraints on price competition.

In some instances, vertical price maintenance activity could be related to a larger agreement among competitors. For example, several companies which pleaded guilty under sections 45 and 46 for participating in an international cartel to fix the price of thermal fax paper also pleaded guilty to price maintenance for activities directed against a Vancouver distributor who was selling the products at a low price. Apparently, this price-cutting by the distributor had undermined the effectiveness of the cartel in the Canadian market.

Some Concluding Observations

Horizontal agreements among competitors harm consumers by denying them the choice of the best products at the best price. A competitive marketplace, unimpaired by artificial restraints, is well recognized as the best means of providing the mix of price, quality and availability of products which consumers value most.

The Competition Act contains several complementary provisions to deal with agreements among competitors. This paper has provided a brief overview of these provisions, and some insight into how they have been enforced during the past twenty years.

As stated at the outset, it is not the purpose of this paper to judge the effectiveness of the law against conspiracy, but rather to report the facts on how the law has been enforced in the courts. Many different interpretations can be given to this fact-set and to the resulting implications for amending the law. We look forward to this discussion.

---

Conspiracy (s. 45)

Case	Date Concluded*	Result	Penalty	Citation
Fertilizer	Jan 1980	Acquittal		46 C.P.R. (2d) 154
Auto parts - Port Alberni, BC	March 1980	Acquittal		37 C.P.R. (2d) 156 40 C.P.R. (2d) 106 49 C.P.R. (2d) 7
Golf equipment - Vancouver	June 1980	Guilty Plea	$50,000
Radio/Television Advertising	July 1980	Acquittal		52 C.P.R. (2d) 47
Atlantic Sugar	July 1980	Acquittal		26 C.P.R. (2d) 14 41 C.P.R. (2d) 5 2 S.C.R. 644
Waste Disposal - Winnipeg	Dec 1980	Acquittal		56 C.P.R. (2d) 257
Paradichlorbenzene	Jan 1981	Discharged
Insurance - Quebec	March 1982	Acquittal
Bottling - Prince George, BC	May 1982	Guilty Plea	$100,000
Interpreters - Quebec	June 1982	Discharged
Concrete - Quebec City	Feb 1983	Guilty Plea	$465,000
Papermakers' Felt	Feb 1983	Conviction	$545,000	70 C.P.R. (2d) 36 52 C.P.R. (2d) 189
Volkswagon Auto Parts	March 1983	Stay
Uranium	Dec 1983	Stay		77 C.P.R. (2d) 1
Household Moving	Dec 1983	Guilty Plea	$250,000
Newspapers	Feb 1984	Acquittal
Pharmacies - Toronto	Nov 1984	Acquittal		3 C.P.R. (3d) 233
Outdoor Advertising	Feb 1985	Guilty Plea	$700,000
Fruitgrowers - BC	June 1985	Acquittal		11 C.P.R. (3d) 183
Autobody Shops - Ft. Erie	April 1986	Acquittal		11 C.P.R. (3d) 63
Driving Schools - Sherbrooke	Oct 1986	Guilty Plea	$5,000
Hotels - Ottawa	April 1987	Guilty Plea	$420,000
Business Forms - Sask.	Nov 1987	Discharged
Fish - Gaspé	Jan 1988	Guilty Plea	$11,000
Hogs - Alberta	Feb 1988	Guilty Plea	$475,000
Hogs - Alberta (Cda Packers)	Feb 1988	Acquittal		19 C.P.R. (3d) 133
Bottling - Manitoba	Jan 1989	Guilty Plea	$240,000
Concrete - New Brunswick	Dec 1992	Guilty Plea	$100,000
Pharmacies - NS	March 1993	Acquittal		49 C.P.R. (3d) 289
Compressed Gas	Aug 1993	Guilty Plea	$6,425,000
Insecticides	Nov 1993	Guilty Plea	$750,000
Ambulances - Alberta	Jan 1995	Guilty Plea	$40,000
Pulp Baling Wire	Feb 1995	Guilty Plea	$1,700,000	47 C.P.R. (3d) 394
Pharmacies - Quebec	May 1995	Guilty Plea	$2,000,000
Ductile Iron Pipe	Sept 1995	Guilty Plea	$2,500,000	64 C.P.R. (3d) 182
Freight Forwarding	Nov 1995	Acquittal		64 C.P.R. (3d) 289
Concrete - Quebec City	Aug 1996	Guilty Plea	$5,800,000
Driving Schools - Sherbrooke	Sept 1996	Conviction	1 year jail
Driving Schools - Sherbrooke	Nov 1996	Guilty Plea	$50,000**
Compressed Gas (Tindale)	Oct 1996	Conviction	$35,000
Waste Disposal - Quebec	Jan 1997	Guilty Plea	$2,500,000
Fax Paper	Feb 1997	Guilty Plea	$2,800,000	56 C.P.R. (3d) 467
Land Surveyors - Alberta	Aug 1997	Discharged		78 C.P.R. (3d) 203
Lysine	July 1998	Guilty Plea	$17,570,000
Snow Removal - Quebec	Jan 1999	Guilty Plea	$2,983,613
Sodium Gluconate	July 1999	Guilty Plea	$1,860,000
Choline Chloride	Sept 1999	Guilty Plea	$3,250,000 9 months jail
Citric Acid	Oct 1999	Guilty Plea	$9,575,000
Sorbates	Oct 1999	Guilty Plea	$3,280,000
Bulk Vitamins	March 2000	Guilty Plea	$91,125,000
Notaries - Quebec	April 2000	Guilty Plea	$25,000
Total Fine - Section 45			$157,629,613

 

*    The date shown is the month/year in which the final court proceedings in relation to the case were concluded. Where a case is still active, the date shown would be the month/year of the most recent court proceedings.

**    Fine in Sherbrooke Driving Schools case was a combined fine for conspiracy, predatory pricing (50(1)b)) and regional price discrimination (50(1)c)).

 

Foreign Directives (s. 46)

Case	Date Concluded	Result	Penalty	Citation
Insecticide	Nov 1993	Guilty Plea	$2,500,000
Fax Paper	Feb 1997	Guilty Plea	$250,000
Graphite Electrodes	March 1999	Guilty Plea	$11,000,000
Bulk Vitamins	March 2000	Guilty Plea	$370,000
Total Fine - Section 46			$14,120,000

 

Bid-rigging (s. 47)

Case	Date Concluded	Result	Penalty	Citation
School Buses	May 1982	Conviction	$52,000	57 C.P.R. (2d) 230 123 D.L.R. (3d) 159 67 C.P.R. (2d) 188 138 D.L.R. (3d) 690
Heating Equipment	Sept 1983	Conviction	$21,000
Diesel Generators	Dec 1984	Guilty Plea	$32,500
Reinforced Steel	June 1985	Guilty Plea	$42,000
Fencing - Alberta	Jan 1986	Acquittal		12 C.P.R. (3d) 53 69 A.R. 132
Hotels - Ottawa	Feb 1986	Discharge		9 C.P.R. (3d) 440
Glass & Glazing	Oct 1986	Conviction	$85,000	8 C.P.R. (3d) 46 17 C.C.C. (3d) 313 11 C.P.R. (3d) 391 27 C.C.C. (3d) 289
Graphic Services	Nov 1986	Guilty Plea	$120,000
Driving Schools - Chicoutimi	Aug 1987	Conviction	$3,000
School Buses - Quebec	April 1988	Guilty Plea	$23,000
Business Forms - NS	June 1988	Guilty Plea	$400,000	22 C.P.R. (3d) 462
Business Forms - Sask.	June 1988	Guilty Plea	$1,560,000
Flour Milling	Dec 1990	Guilty Plea	$3,405,000
Bus Services - Alberta	July 1993	Guilty Plea	$3,000
Power Equipment	March 1994	Acquittal
Bus Services - Alberta	June 1995	Conviction	$5,000
Towing - Winnipeg	April 1997	Acquittal
Helicopters - Quebec	Sept 1997	Acquittal
Electrical Contractors - Tor.	March 2000	Guilty Plea	$3,047,500
Timber Permits - Alberta	April 2000	Guilty Plea	$33,000
Total Fine - Section 47			$8,832,000

---

 

Prosecutions under Sections 45, 46, 47 and 61 (horizontal)
for the period January 1, 1990 - May 25, 2000¹⁹

 

Conspiracy (Sections 45 and 46)

Compressed Gas (1991-1993)

- s. 45 - Guilty Pleas

This case involved a conspiracy to fix prices for the supply of liquid oxygen, nitrogen, carbon dioxide and hydrogen in 1989 and 1990. Five companies, Canadian Oxygen Limited, Union Carbide Canada Limited, Canadian Liquid Air Ltd., Liquid Carbonic Inc. and Air Products Canada Ltd. pleaded guilty to one count of conspiracy for their participation in the scheme. Six individuals also pleaded guilty to this offence. Total fines imposed in this case amounted to $6.425 million, a record at that time. Favourable treatment in the form of reduced penalties or immunity was granted to one company and a number of individuals for their co-operation in the Bureau's investigation.

Compressed Gas (1996) - s. 45 - Contested - Conviction

John Tindale, former President of Canadian Oxygen Limited, was tried and convicted of one count of conspiracy for which several companies and individuals had already pleaded guilty. Mr. Tindale was fined $35 thousand. The Court observed that there was no defence of duress even though the accused may have concluded that there was no viable business alternative to entering into the conspiracy. The Court also commented that the immunity granted to a Crown witness did not diminish the weight accorded to his evidence.

Concrete - New Brunswick (1992) - s. 45 Guilty Pleas

Kenny Ready Mix Ltd. and Blanchard Ready Mix Ltée pleaded guilty to one count of conspiracy in relation to the supply of ready-mix concrete in the City of Bathurst, New Brunswick. The companies arranged with one another to purchase a competitor and then discontinue its operations, thereby eliminating the company as a competitor in that local market. Each firm was fined $50,000.

Pulp Baling Wire (1992-1995) - s. 45 Guilty Pleas

Davis Wire Industries Ltd., the Gerrard Ovalstrapping division of EII Limited, Tennant Wire Limited, Titan Steel & Wire Co. Ltd. and Tree Island Industries Ltd. were fined a total of $1.7 million after pleading guilty to a price-fixing conspiracy relating to the sale and distribution of pulp baling wire, a product used by the pulp and paper industry to bale bundles of wood pulp.

Pharmacies - Nova Scotia (1993) - s. 45 - Contested - Not Guilty

The Pharmacy Association of Nova Scotia and the Nova Scotia Pharmaceutical Society, which had earlier unsuccessfully challenged the constitutionality of the conspiracy provisions before the Supreme Court of Canada, were acquitted on the two price-fixing offences with which they had been charged. The trial court found that the accused had entered into an agreement which lessened competition unduly, but was not satisfied that the accused had intended that the agreement have that effect. Subsequently, similar charges against four of their member companies and against three individuals were stayed.

Insecticides (1993) - s. 45 & 46 - Guilty Pleas

Chemagro Limited and Sumitomo Canada Limited pleaded guilty under section 46 for implementing a foreign-directed conspiracy to share the chemical insecticide market in Canada from 1987 to 1988. The product was used by provincial forest agencies and private companies in Newfoundland and New Brunswick to control the spread of budworm and gypsy moth. The arrangement was between Sumitomo Chemical Co. Ltd. of Japan and Bayer AG of Germany, Chemagro's parent company. Chemagro also pleaded guilty under section 45 for a market-sharing conspiracy with Abbott Laboratories in effect in 1990, also involving insecticide. Abbott was granted immunity from prosecution for having brought these matters to the Bureau's attention, but consented to a prohibition order and to pay restitution totalling $2.122 million. Total fines in these two cases amounted to $3.25 million.

Fax Paper (1994-1997) - s. 45, 46, 61 - Guilty Pleas

Mitsubishi Corporation and Mitsubishi Paper Mills Ltd. of Japan, together with New Oji Paper Company of Japan and Kanzaki Specialty Papers Inc. of the US, pleaded guilty under section 45 for having conspired to fix prices for thermal fax paper in 1991. Mitsubishi's Canadian subsidiary, Mitsubishi Canada Limited, also pleaded guilty under section 46 for having implemented a foreign-directed conspiracy in Canada. Total fines in this case amounted to $3.45 million, which included fines against the three Mitsubishi companies under section 61 for price-maintenance activities directed against a Vancouver distributor who was selling the products at a low price. This conspiracy was first uncovered in Canada. Through co-operation with the US Department of Justice, this case ultimately resulted in fines totalling more than $6 million (US) for similar activity affecting the US market.

Ductile Iron Pipe (1995) - s. 45 - Guilty Plea

Canada Pipe Company Ltd. pleaded guilty under section 45 for conspiring with US Pipe and Foundry Company of Birmingham, Alabama, to lessen competition unduly in the sale of mid-size range ductile iron pipe in Canada in 1990. This product is used in municipal water systems to carry drinking water to residents. Under the terms of the arrangement, US Pipe and Foundry agreed to exit the Canadian market, which it had been supplying through a distributor, Louisbourg Construction Ltée. This market-sharing arrangement included an agreement to cut off Louisbourg. Although US Pipe and Foundry tried to terminate its contract with Louisbourg by raising its prices and invoking a cancellation clause, it did not successfully achieve that objective. Canada Pipe was fined $2.5 million for its role in the conspiracy.

Freight Forwarding (1995) - s. 45 - Contested - Not Guilty

Following a lengthy trial, five pool car freight forwarding companies were acquitted on one count under section 45. The five companies were Clarke Transport Canada Inc., Consolidated Fastfrate Transport Inc., Cottrell Transport Inc., TNT Canada Inc. and Northern Pool Express Ltd. Although the court found that the companies had agreed "to lessen competition amongst themselves and their confederates by seriously restricting rate competition", it concluded that the Crown had failed to prove that the effect of the agreement was to lessen competition "unduly".

Ambulance Operators (1995) - s. 45 - Guilty Pleas

The Alberta Ambulance Operators' Association was fined $25 thousand and three members of its executive committee were each fined $5 thousand after pleading guilty to a market-sharing conspiracy involving the supply of ambulance services across Alberta. The offence took place over the period 1984 to 1991 and involved rules and activities of the association which prevented or discouraged ambulance operators from entering into territories already serviced by other members of the association.

Pharmacies - Quebec (1995) - s. 45 - Guilty Pleas

L'Association québecoise des pharmaciens propriétaires and six of its member pharmacy chains pleaded guilty under section 45 in respect of a price-fixing conspiracy affecting the cash sales of birth control pills and prescription narcotics, including the dispensing fees, in the Province of Quebec during 1988. Total fines of $2 million were levied by the Superior Court of Quebec.

Land Surveyors - Alberta (1996) - s. 45 - Contested - Not Guilty

This case involved an allegation of a price-fixing arrangement among land surveyors operating in the Edmonton metropolitan area. Thirteen companies and ten individuals had been charged with one count of conspiracy. Seven of the companies and nine of the individuals were discharged following a preliminary hearing. The court found that, while there had been a discussion about cost and about the price that certain people were going to charge, there was no evidence upon which a reasonable jury, properly instructed, could conclude that there was an agreement or conspiracy. An application by the Crown for judicial review of this decision was denied. Charges against the remaining accused, who had waived their right to a preliminary hearing, were subsequently withdrawn by the Crown.

Waste Disposal - Quebec (1996 & 1997) s. 45 - Guilty Pleas

Gestion des Rebuts DMP Inc., a waste management firm, and three of its senior officials, Pierre Paré, Serge Brière and Robert Caron, pleaded guilty to one count of conspiracy for participating in a market-sharing arrangement in respect of the hauling and disposal of commercial waste in the Mauricie region of Quebec between 1989 and 1992. The company was fined $1.95 million, and Mr. Paré was fined $550 thousand and ordered to perform 100 hours of community service. Messrs. Brière and Caron were each sentenced to one year of imprisonment to be served in the community. The court also imposed prohibition orders on the company and the three individuals, as well as three other parties, Jules Milette Inc., Service Sanitaire de Shawinigan Inc. and Pratte & Laforme Inc. Two individuals were granted immunity for their co-operation.

Concrete - Quebec City (1996) - s. 45 - Guilty Pleas

Ciment Québec Inc., Ciment St-Laurent Inc., Lafarge Canada Inc. and Béton Orléans Inc. pleaded guilty to one count of conspiracy to share the sales of ready-mix concrete in the metropolitan area of Quebec City in 1995, and were fined a total of $5.8 million.

Driving Schools - Sherbrooke (1996) s. 45, 50, 61 - Contested - Conviction

Following the first jury trial ever held in respect of a Competition Actoffence, an operator of a driving school in Sherbrooke, Quebec, Mr. Jacques Perreault, was found guilty of conspiracy to fix-prices, as well as other competition offences. He was sentenced to one year in jail.

Driving Schools - Sherbrooke (1996 & 1997) s. 45 and 50 - Guilty Pleas

Another individual, Mr. Yves Aubé, and three of his companies subsequently pleaded guilty to conspiracy and other competition offences. Mr. Aubé was sentenced to 100 hours of community service and fined $10 thousand. His three companies paid fines totalling $40 thousand. Another company pleaded guilty to breaching an earlier prohibition order resulting from a 1986 conviction for price-fixing, and paid a fine of $5 thousand.

Lysine (1998) - s. 45 - Guilty Pleas

Two US corporations, Archer Daniels Midland Company and Sewon America Inc., as well as Ajinomoto Co. Inc. of Japan, pleaded guilty in the Federal Court of Canada for their participation in an international conspiracy to fix prices and allocate markets for the supply of lysine, an amino acid used as an additive to hog and poultry feed. This conspiracy was in force from 1992 to 1995. Fines in this case totalled $17.57 million. Another company, Kyowa Hakko Kogyo Company Ltd. of Japan, received full immunity for being the first of the companies to provide evidence to the Bureau. In addition, Sewon paid a lesser fine than the other companies as a result of its valuable co-operation in the Bureau's investigation.

Citric Acid (1998-1999) s. 45 - Guilty Pleas

Archer Daniels Midland Company and Haarmann & Reimer Corporation of the US, and two Swiss companies, Jungbunzlauer International AG and F. Hoffmann-La Roche Ltd, pleaded guilty in the Federal Court of Canada for conspiring to fix prices and allocate markets for the supply of citric acid from 1992 to 1995. An executive with F. Hoffman-La Roche also pleaded guilty to his role in this international conspiracy. Total fines in this case were $9.575 million. Citric acid is used as a flavour enhancer and preservative in a variety of consumer products.

Sodium Gluconate (1998-1999) - s. 45 - Guilty Pleas

Jungbunzlauer International AG of Switzerland, Roquettes Frères of France, Fujisawa Pharmaceutical Co. Ltd. of Japan, and two Dutch companies, Akzo Nobel Chemicals B.V. and Glucona B.V., were fined a total of $1.86 million after pleading guilty in the Federal Court of Canada to fixing prices and allocating market shares for the supply of sodium gluconate from 1987 to 1995. This product is used in the concrete industry and as a cleansing and metal-treatment agent.

Graphite Electrodes (1999-2000) s. 46 - Guilty Plea

This case involves an international conspiracy to fix the price of graphite electrodes, a product widely used in the steel industry. During the period of the conspiracy, from 1992 to 1997, the price of this product almost doubled. UCAR Inc., one of two principal suppliers of graphite electrodes in Canada, pleaded guilty in the Federal Court of Canada to one count under section 46 for implementing a directive from its parent, UCAR International Inc., giving effect to the conspiracy in Canada. For this conduct, UCAR Inc. was fined $11 million, and agreed to pay more than $19 million in restitution. The inquiry in this matter is still ongoing.

Snow Removal - Quebec City (1999) - s. 45 - Guilty Pleas

Eight companies were fined close to $3 million after pleading guilty in Quebec Superior Court to their participation in a market-sharing scheme involving the clearing and removal of snow in the metropolitan Quebec City area.

Choline Chloride (1999) - s. 45 - Guilty Pleas

BASF Aktiengessellschaft of Germany and Chinook Group Limited of Canada, as well as a former Chinook executive, Russell Cosburn, pleaded guilty under section 45 for conspiring to fix prices and share markets in the supply of Choline Chloride over the period 1992 to 1995. BASF was fined $1 million and Chinook $2.25 million. Mr. Cosburn was sentenced to nine months' imprisonment, to be served in the community, and ordered to perform 50 hours of community service. Choline Chloride is an important additive used in the animal-feed industry.

Bulk Vitamins (1999-2000) - s. 45 & 46 - Guilty Pleas

This case involves an international cartel to fix prices and allocate markets for the supply of bulk vitamins, including vitamins A, B2, B5, B6, B12, C, E, as well as biotin, betacarotene and vitamin premixes. This conspiracy was in effect from 1990 to 1999. Seven companies and two individuals have pleaded guilty under section 45 for their participation in the scheme, and one other company has pleaded guilty under section 46 for implementing a foreign directive giving effect to the conspiracy in Canada. Total fines levied in this case thus far amount to almost $91.5 million. These are the largest fines ever imposed under the Competition Actand the largest criminal fines in Canadian legal history. This inquiry is still ongoing.

Sorbates (1999-2000) - s. 45 - Guilty Pleas

Hoechst AG of Germany and Eastman Chemical Company of the US pleaded guilty under section 45 for having participated in an international price-fixing and market-sharing conspiracy involving the supply of sorbic acid and potassium sorbate, which are chemical preservatives used in the food industry. This conspiracy spanned 17 years, from 1979 to 1996, though Eastman's participation did not begin until 1995. Total fines levied thus far have amounted to $3.28 million. This inquiry is still ongoing.

Notaries - Quebec (2000) - s. 45 - Guilty Pleas

The L'Association des notaires de Rivière-du-Loup pleaded guilty to one count under section 45 in relation to a conspiracy to fix the prices of notarized real estate transactions in the regions of Rivière-du-Loup and Trois-Pistoles, Quebec. In Quebec, consumers buying or selling real estate must use the services of a notary. The association was fined $25 thousand, and it and 19 of its members were made subject to a prohibition order.

---

Bid-Rigging (Section 47)

Flour Milling (1990-1991) - Guilty Pleas

Eight flour milling companies, including Maple Leaf Mills Limited, Ogilvie Mills Ltd. and Robin Hood Multifoods Inc., pleaded guilty to bid-rigging in connection with the sale of flour to the Government of Canada. The arrangement involved contracts over a period of 12 years from 1975 to 1987 for the supply of flour destined to undernourished areas of the world. At the time, the total fines of $3.405 million were the largest ever levied for any single case under the Competition Act.

Bus Services - Alberta (1993) - Guilty Plea

This case relates to the rigging of bids for the provision of charter bus services to transport military personnel in Wainwright, Alberta. Sun Valley Tours Ltd. pleaded guilty to two counts of bid-rigging and was fined $3 thousand.

Bus Services - Alberta (1995) - Contested - Conviction

Bison Bus (1985) Ltd. pleaded not guilty but was convicted on the two counts, and fined $5 thousand.

Power Equipment (1994) - Contested - Not Guilty

Two suppliers of power equipment, JO-AD Industries Ltd. and Western Air Conditioning Ltd. were accused of bid-rigging on a Government of Canada contract involving the purchase and installation of an uninterrupted power supply unit in 1991. The court acquitted the accused on the basis that the Crown had failed to prove, beyond a reasonable doubt, that the bids were submitted pursuant to an agreement between the bidders.

Towing Services - Winnipeg (1995-1997) Contested - Not Guilty

Three towing companies and three individuals were charged with rigging bids for the provision of towing services in the City of Winnipeg. The facts established that the accused held several meetings before and after the tenders were submitted and that their submitted tenders were substantially similar. The Crown claimed that the accused agreed among themselves to a minimum rate for certain of the services which had been put out to tender. The court found that there was evidence of meetings among the accused to exchange information and to discuss mutual concerns regarding the tenders. Although the court found that the circumstances raised a suspicion of an agreement to rig bids, it concluded that the Crown had not proven, beyond a reasonable doubt, that the bids were arrived at by agreement. Consequently, all of the accused were acquitted. A subsequent application for leave to appeal was denied.

Helicopters - Quebec (1997) - Contested - Not Guilty

Eleven small operators of helicopter transportation services, together with their trade association, L'Association Québecoise des Transporteurs Aériens Inc., and one individual, were charged with rigging bids on a 1993 call for tenders by Hydro Québec. Twelve bids were submitted, which contained hourly rates that were very similar to one another and to the rates suggested by the association. The prices were also 10-12% higher than those for the previous year. However, the court was not convinced that there was sufficient evidence of an agreement on the hourly rates, and acquitted the accused.

Electrical Contractors - Toronto (1997-2000) - Guilty Pleas

This case involved the rigging of bids for electrical contract work in the construction or renovation of commercial buildings in the metropolitan Toronto area, including Pearson Airport's Terminal III, the SkyDome Hotel and BCE Place - Phase 2. Eight electrical contracting firms and one general contractor pleaded guilty to various counts of bid-rigging, and paid fines totalling more than $3 million. In all, 24 bidding competitions were rigged by the various participants during a five-year period from 1988 to 1993.

Crown Timber - Alberta (1998-2000) - Guilty Pleas

Five manufacturers of wood products pleaded guilty to rigging bids at a 1996 timber-permit auction held by the Alberta Land and Forest Service in Blairmore, Alberta. Total fines in this case amounted to $33 thousand. In addition, two individuals were sentenced to perform community service.

---

Horizontal Price-Maintenance (Section 61)

Real Estate Brokerage (1994) - Contested - Conviction

Following two lengthy trials, two real estate companies, and two senior officials of one of those companies, were convicted for price maintenance activities directed at two discount realty firms in Calgary. Royal LePage Real Estate Services Ltd. and its regional vice-president, Ted Zaharko, were convicted on two counts for discriminating against the two discount realtors because of their low pricing policies. A branch manager, John Roche, was also convicted on one of those counts. Royal LePage and Mr. Zaharko were also convicted of attempting, by promise, to influence upward the prices charged by one of the discount firms. Royal LePage was fined $200 thousand, Mr. Zaharko $25 thousand, and Mr. Roche $5 thousand. A local Calgary firm, Roberts Real Estate Co. Ltd., was also convicted on one count of discriminating against one of the discount realtors, and was fined $25 thousand.

Fax Paper (1994-1997) - Guilty Pleas

Mitsubishi Corporation of Japan and two of its subsidiaries, Mitsubishi Canada Limited and Mitsubishi Paper Mills, Ltd., along with Rittenhouse Ribbons & Rolls Ltd. of Canada, pleaded guilty and were fined a total of $398 thousand for price-maintenance activities directed against a Vancouver distributor who was selling thermal fax paper products at a low price. This case is related to a separate conspiracy among suppliers to fix the price of fax-paper products in the US and Canada.

Land Surveyors - Quebec (1997) - Guilty Plea

La Fédération des arpenteurs-géomètres du Québec pleaded guilty in Quebec Superior Court to one count of price maintenance for attempting, by threat or agreement, to discourage the reduction in land survey fees in the regions of Quebec City, Trois-Rivières and the south shore of Montreal. The association was fined $50 thousand.

Retail Gas - Ottawa (1999) - Contested - Not Guilty (on Appeal)

This case involved nine charges alleging that an independent gas retailer in Ottawa, Mr. Gas Limited, engaged in price maintenance activities against other independent gas retailers in the Ottawa region. In an agreed statement of facts, the accused admitted that the independent gas retailers in the market regularly communicated with one another concerning their current retail prices across the region. This practice even included advising competitors of attempted price restoration in the hope that they would follow. The Crown argued that this constituted an attempt, by agreement, to influence competitors' prices. The Crown also attempted to prove that Mr. Gas threatened competitors by engaging in selective retaliatory price reductions when the competitors reduced their prices. The trial judge acquitted the accused on eight of the counts, including the one alleging an agreement, and entered a conviction on one count involving an alleged threat. Subsequently, this conviction was overturned on appeal.

---

(1) Harry Chandler is Deputy Commissioner, Criminal Matters and Robert Jackson is Competition Law Officer, Criminal Matters Branch, Competition Bureau, Industry Canada.

(2)R. v. Nova Scotia Pharmaceutical Society et al (1992) 2 S.C.R. 606

(3) Referring to its earlier judgment in the "Prostitution Reference", (1990) 1 S.C.R. 1123, the Supreme Court of Canada cited two rationales for invalidating a vague law: (1) the need for citizens to be able to foresee the consequences of their conduct in order to be given fair notice of what to avoid and in order that they may benefit from a full answer and defence should they be tried, and (2) the need to limit enforcement discretion with clear and explicit legislative standards.

(4) There have been a few cases which have involved group boycotts or output restrictions.

(5) As part of the Bureau's Conformity Continuum, business people are encouraged to seek advisory opinions concerning the application of the Act to their individual decisions, plans or strategies. Upon receiving a request for an advisory opinion, the Bureau would review the proposal and provide an opinion as to whether the proposal, if implemented, would give rise to an inquiry under the Act. Advisory opinions can be of considerable comfort to parties who are concerned that a strategic alliance which they are about to enter might violate section 45 of the Act.

(6) For more detail, see Appendix II.

(7) Prior to the 1985 Revised Statutes of Canada, the conspiracy provision was found in section 32 of the then Combines Investigation Act. There has been no change in the essential elements of the conspiracy provision.

(8) For more information on fines, please click on 'Business Services .

(9) In December 1982, the Papermaker's Felt case was concluded when the Quebec Court of Appeal confirmed the convictions of six companies for conspiring to fix prices. R. v. Albany Felt Co. of Canada Ltd. et al (1982) 70 C.P.R. (2d) 36 (Q.C.A.), appeal from a decision of the Quebec Superior Court (1980) 52 C.P.R. (2d) 189 Leave to appeal to the Supreme Court of Canada was denied in February 1983.

(10) These latter two cases are summarized in Appendix II to this paper.

(11) 32 of the 51 prosecutions resulted in convictions, which includes the 29 cases which were concluded with guilty pleas, and the 3 cases where the parties were convicted after a trial.

(12)R. v. Nova Scotia Pharmaceutical Society et al (1993), 49 C.P.R. (3d) 289 (N.S.S.C.). This case is summarized in Appendix II to this paper.

(13)R. v. Clarke Transport Canada Inc. et al (1995), 64 C.P.R. (3d) 289 (Ont. Crt. - Gen. Div.). This case is also summarized in Appendix II to this paper.

(14) Convictions following guilty pleas under section 46 were obtained in the Insecticides, Fax Paper, Graphite Electrodes and Bulk Vitamins cases, all of which are summarized in Appendix II to this paper.

(15) This particular case is ongoing and involves the supply of graphite electrodes, a product which is widely used in the steel industry.

(16) The accused, hotel operators in Ottawa, were discharged in respect of the section 47 count, but committed to trial on a conspiracy charge under section 45. They ultimately pleaded guilty to that latter charge.

(17) The Calgary Real Estate case is summarized in Appendix II to this paper.

(18) Summaries of the Fax Paper case can be found in Appendix II to this paper.

(19) Prosecutions of the same matter are grouped as a single case and reported once. "Case" means a single matter involving the same agreement or agreements among competitors. While this is the general rule, there are certain exceptions which may affect the numbers to some extent. For example, in the Compressed Gas matter, 5 companies and 6 individuals pleaded guilty and one individual was convicted after a trial. This is treated as two cases. Another potential distortion arises where a matter involved charges under different provisions. Matters involving both section 45 and 46 are reported in this appendix together as one case. Where a matter also involved a horizontal section 61, as in the Fax Paper case, it was treated as two cases. However, in the summary table in the body of the paper, and in the table in Appendix I, a matter involving multiple provisions would be treated as multiple cases. For example, the Fax Paper case appears as a guilty plea under each of sections 45, 46 and 61: two cases in this appendix, but 3 entries into the statistics.