Archived — Revised Draft Information Bulletin on Sentencing and Leniency in Cartel Cases

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Bulletin

For Public Consultation — March 25, 2009


Preface

This Bulletin sets out the factors that the Competition Bureau (the "Bureau") considers in making a recommendation to the Director of Public Prosecutions ("DPP") for lenient treatment of individuals or business organizations accused of criminal cartel offences under the Competition Act. It is accompanied by the publication of a Bureau-DPP Memorandum of Understanding that addresses the respective responsibilities in administering the Program.1

"Lenient treatment" is not a novel concept. Under the Bureau's Immunity Program, where a party does not qualify for immunity, but the party cooperates with the investigation, the Bureau may recommend that the DPP consider some form of leniency. In making such recommendations in the past, the Bureau has taken into account a number of different considerations in light of sentencing principles under Canadian law. In the course of considering revisions to the Bureau's Immunity Program, which was introduced in October 2007, it became clear that a Leniency Program setting out these considerations would be particularly useful.

A transparent and predictable Leniency Program complements the Immunity Program and supports the Bureau's effective and efficient enforcement of the Act, consistent with the public interest. Parties are more likely to come forward and cooperate (rather than litigate) where they are aware of sentencing principles and leniency considerations, and are confident that the Bureau will follow them in its recommendations to the DPP. In developing this Program, we have considered the best practices of foreign jurisdictions that have adopted leniency policies as well as the considerable input received from the Canadian, American and International Bar Associations.

I should note that this Program does not bind the DPP, which is responsible for the prosecution of criminal offences.2 It is the courts that are ultimately responsible for sentencing upon conviction. While the Bureau cannot guarantee specific sentencing outcomes in cartel cases, this Bulletin sets out the policy that the Bureau will follow in developing sentencing and leniency recommendations to the DPP. I am confident that this initiative advances the transparency and predictability of the Bureau's enforcement policies and practices, and promotes the effective deterrence of cartel activity.

Melanie L. Aitken
Interim Commissioner of Competition

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I. Introduction

A. The Purpose of this Bulletin

  1. This Bulletin establishes the Leniency Program (the "Program") of the Competition Bureau (the "Bureau") for cartel cases.3 Under the Program, the Bureau may recommend to the Director of Public Prosecutions (the "DPP")4 that cooperating persons who have breached the cartel provisions under the Competition Act (the "Act"),5 but who are not eligible for a grant of immunity,6 nevertheless be considered for lenient treatment in sentencing. Applicants who meet the requirements of the Program may thus expect to benefit from a more advantageous resolution with the DPP than would otherwise be possible.
  2. The Bulletin first sets out, in Part I, the respective roles of the Commissioner of Competition (the "Commissioner"),7 the DPP and the courts in sentencing. In Part II, the Bulletin identifies the general sentencing principles on the basis of which the Bureau makes recommendations to the DPP. Part III establishes the eligibility conditions for participating in the Program, the considerations that the Commissioner takes into account in making recommendations for leniency to the DPP, and the steps required to be taken by parties cooperating with the Bureau to remain eligible for a leniency recommendation under the Program.
  3. In developing this Bulletin, the Bureau is informed by its experience in administering and enforcing the Act, including the Immunity Program; by comments from experts and stakeholders, and by the operation of similar programs in jurisdictions with which the Bureau cooperates regularly.
  4. This Bulletin does not provide legal advice. Readers should refer to the Act when questions of law arise and obtain legal advice if a particular situation causes concern. If a party wants to seek advice on the applicability of the Act to proposed business conduct it may request a written opinion from the Commissioner.8

B. The Bureau, the Competition Act and the Cartel Provisions

  1. The Bureau is an independent agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.
  2. The Act is a law of general application containing criminal provisions that prohibit anti‑competitive business activities such as cartels and deceptive marketing practices, and civil provisions relating to mergers, abuse of dominant position and misleading advertising. The Commissioner has the independent authority to administer and enforce the Act.
  3. The cartel provisions are a key component of this mandate; among these, section 45, the conspiracy provision, is considered a cornerstone of the Act. Generally, a cartel is a group of business organizations or individuals seeking to limit or eliminate competition by agreeing to fix prices, restrict output, allocate customers or markets, or rig bids or tenders. Eliminating the incentive to compete freely, cartels increase prices and reduce output in the market, increasing costs to consumers and businesses, hampering innovation and restricting the supply of inputs. Cartel violations are widely condemned as the most egregious anti‑competitive behaviour. As cartels harm economic efficiency without any compensating economic benefit, the effective enforcement of the cartel provisions of the Act is essential for an efficient and competitive Canadian economy. To deter and punish this illegal activity, there are serious criminal penalties for both business organizations and individuals9 convicted of cartel offences. Enforcing these provisions is a top priority for the Commissioner.

C. Roles of the Commissioner of Competition, the Director of Public Prosecutions and the Courts

  1. This section sets out the respective roles of the Commissioner, the DPP and the courts in the investigation, prosecution and sentencing phases of a cartel case. This information is important for understanding the scope of this Bulletin and the Program, given that the Commissioner may only make recommendations to the DPP concerning sentencing and leniency. The DPP has independent discretion to accept or to reject such recommendations, and the courts are ultimately responsible for sentencing following conviction.

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1. The Commissioner of Competition

  1. The Commissioner has the independent authority to administer and enforce the Act. The Bureau uses a wide variety of techniques to promote compliance with the Act. These range from public education to referral of matters to the DPP for prosecution.10
  2. It is the Bureau's responsibility to investigate a matter that may engage the Act. In addressing an alleged cartel violation, the Bureau begins by conducting a preliminary examination.The Bureau bases this examination and its analysis on information obtained from a number of sources, including:
    • complainants, including competitors and those who may be direct victims of the cartel behaviour;
    • market intelligence gathered by Bureau staff;
    • other enforcement agencies;
    • parties that have applied for a grant of immunity from prosecution from the DPP under the Bureau's Immunity Program;11 or
    • other cooperating parties.
  3. Where the Commissioner has reason to believe that an offence has been, or is about to be, committed and that further investigation is justified, the Bureau may commence an inquiry. In advancing the investigation at this stage, the Commissioner may use judicially authorized powers to obtain evidence, including the power to conduct searches of premises and seize both paper and electronic records, the power to seek court orders to compel the production of records, testimony and written returns of information, as well as the power to intercept private communications.12
  4. Early in a cartel investigation the Bureau will often seek the advice of counsel from the Public Prosecution Service of Canada (PPSC counsel) on any legal issue likely to impact the investigation or any subsequent prosecution. In the immunity and leniency processes, early consultation ensures that all relevant factors are considered when the Bureau makes a recommendation to the DPP, that PPSC counsel is well apprised of the facts of the case, and that the public interest is well served throughout.
  5. Whenever the Bureau has evidence that an offence has been committed and considers that prosecution of the offence would be in the public interest, the Commissioner may make a formal referral of the matter to the DPP "for such action as the Attorney General of Canada may wish to take".13 At that stage the Bureau is responsible for fully briefing PPSC counsel on the results of its investigation and identifying available evidence. The Bureau may provide a recommendation on whether a plea is appropriate in the public interest and may indicate what it believes to be an appropriate sentence.
  6. Following referral, the Bureau remains an active partner in supporting the prosecution (including at plea and sentencing discussions); however, PPSC counsel does have independent carriage of the matter and determines whether the evidence is sufficient to justify the initiation of proceedings and whether prosecution is in the public interest.14 Bureau involvement throughout the process allows the Bureau, among other things, to fully appreciate the dynamic of the discussions and to make a more informed recommendation as to the appropriateness of any plea or sentence disposal.

2. The DPP

  1. Criminal prosecutions under the Act are the responsibility of the DPP. In the cartel context, as in other areas of criminal law, many cases are ultimately resolved as a result of plea and sentencing discussions, which are essential components of the criminal justice system in Canada. It is in the public interest to avoid unnecessary litigation with its attendant costs and uncertainties while, at the same time, ensuring that parties are held responsible for their criminal activities.
  2. PPSC counsel has the sole authority to engage in plea and sentencing discussions with counsel for an accused although, as described above, the Bureau typically provides support and recommendations to the prosecution throughout such discussions.
  3. In cases where there is a leniency applicant, PPSC counsel will maintain a supervisory role throughout the process although PPSC counsel will not necessarily be present throughout every step of the process. For example, Bureau officers will typically lead the fact-gathering portions of the process such as the proffer and witness interviews. PPSC counsel may be present for the purpose of providing legal advice to Bureau officers or to better their understanding of the case at hand, but will not engage themselves in the investigation. Only PPSC counsel can engage in discussions regarding charges, penalties or any other elements that may form part of, or impact in any way, a plea agreement.
  4. PPSC counsel must ensure that plea and sentencing discussions meet the standards in the Federal Prosecution Service Deskbook.15 The Deskbook recognizes the importance of consultations with the investigating agency in the plea and sentencing process. In practice, there is a significant degree of cooperation between the Bureau and PPSC counsel, not only at the plea and sentencing stages, but also throughout the enforcement process. Bureau staff are responsible for briefing PPSC counsel on the results of their investigation, have in-depth knowledge of the facts, and are ideally placed to support and advise PPSC counsel in plea and sentencing discussions with counsel for the accused. For this reason, the Bureau's recommendations on sentencing are an important factor to be considered by the PPSC. Recommendations by the Bureau do not bind the DPP or the courts.

3. The Courts

  1. In all criminal matters in Canada, the determination of the sentence to be imposed is at the sole discretion of the judiciary. 16 Judges are not bound by sentencing recommendations and have the authority to determine appropriate sentences with reference to the statutory sentencing objectives and principles as set out in Part XXIII of the Criminal Code.17 In recent years courts have approved all sentencing submissions of PPSC counsel following convictions in cartel matters under the Act. A judge will only depart from a sentencing recommendation where accepting the recommendation would either be contrary to the public interest or bring the administration of justice into disrepute.18 This is a high threshold and is intended to foster confidence in an accused, who has given up his or her right to a trial, that the PPSC counsel submission he or she obtained in return for a plea of guilty will be respected by the sentencing judge.19
  2. Once a sentencing proceeding has commenced a party cannot withdraw its guilty plea simply because the presiding judge does not accept the sentencing recommendation. The party can seek leave to appeal the sentence where the judge did not accept the submission. On appeal, PPSC counsel can be expected to make submissions in support of the agreed upon sentencing recommendation.
  3. A proceeding involving a guilty plea to a cartel offence will normally include the submission of a Statement of Admitted Facts (sometimes also called a Statement of Admissions) to the court. The Canadian court system is premised on the principle that court proceedings are open to the public and, accordingly, the Statement of Admitted Facts, together with the indictment, will form part of the court record that will be available to the public. The Bureau also publishes news releases on its Web site to let the public know when guilty pleas have been entered before the courts.

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II. Sentencing in Cartel Offences

  1. This section sets out general principles of sentencing that the Bureau considers in making sentencing recommendations to the DPP and that courts use in sentencing.

A. Available Sentences under the Competition Act: Fines and Prison Terms

  1. Cartel offences are indictable offences subject to criminal penalties.20 The conspiracy and bid-rigging provisions (sections 45 and 47) apply to both business organizations and individual accused.
  2. Section 45 of the Act currently provides that an accused, upon conviction, may be liable for a maximum fine of $10 million or a maximum term of imprisonment of five years, or both.21 An accused under section 47 is liable upon conviction to a fine in the discretion of the court or a term of imprisonment not exceeding fourteen years, or both; there are no maximum fine provisions in respect of section 47 offences.22 Cartel cases may involve agreements encompassing multiple products,23 geographic markets or, in the case of bid-rigging, multiple bids or tenders. Where appropriate based on the facts of the case, an accused may face multiple charges (or counts) under the Act. Consequently, in a conspiracy matter involving multiple counts, the resulting fines may cumulatively exceed the $10 million dollar maximum. In dealing with multiple counts, the Bureau will consider the totality of the conduct and surrounding circumstances in arriving at an appropriate sentencing recommendation.
  3. Unlike sections 45 and 47, the foreign directives provision of the Act (section 46) applies to corporations only and penalties are limited to fines in the discretion of the court; as with bid-rigging, there is no maximum fine for a section 46 violation.

B. Sentencing Principles

  1. The fundamental purpose of sentencing in Canada, as set out in the Criminal Code, is to contribute to respect for the law and the maintenance of a just, peaceful and safe society.24 Sanctions must have one or more of the following objectives: denouncing the unlawful act,25 specific and general deterrence, rehabilitation of the offender,26 providing reparations for the harm done to the victims and to the community, and promoting a sense of responsibility in offenders.
  2. The fundamental principle of sentencing in Canada is that a sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.27 Other sentencing principles provide that a sentence should be increased or reduced to account for any aggravating or mitigating circumstances, that it should be similar to relevant precedent sentences and that an offender should not be deprived of liberty if less restrictive sanctions may be appropriate in the circumstances.28
  3. Section 718.21 of the Criminal Code lists additional factors that a court shall consider in sentencing an organization. These are reproduced in Appendix II.
  4. These sentencing principles and prevailing jurisprudence (both under the Criminal Code and in section 45 cases), along with the object and purpose of the Act, inform the approach of the courts to sentencing in cartel offences.

1. Economic Harm

  1. The magnitude of economic harm caused by the cartel goes to the gravity of the offence and is thus of fundamental importance to sentencing in cartel matters. In denouncing and deterring cartels, the overall economic harm caused by the cartel should be taken into account. The Bureau's recommendation for fines in cartel cases begins with an assessment of the magnitude of this economic harm.
  2. The usual notion of "economic harm" from a cartel is the "overcharge". This is the amount paid by victims of the cartel over and above what would have been paid in the absence of the cartel. It serves as the starting point for the Bureau's sentencing recommendations, the rationale being that an offender should not be permitted to retain ill-gotten gains. The Bureau will normally recommend that the fine be greater than the overcharge to ensure that the fine is not simply a cost of doing business, something that has been regularly denounced in the jurisprudence, and to ensure that an appropriate level of punishment and deterrence is achieved.
  3. The economic harm caused by cartel activity is not limited to the specific quantitative effects of higher prices. Cartels also exclude certain purchasers from the market because of the higher prices resulting in a "deadweight loss",29 and have an additional negative effect on the economy as a whole by reducing competition and inhibiting innovation.30 This reduction in competitive rivalry may lead to inferior goods and services and may inhibit new entrants into the market.
  4. Use of a Proxy: In most cases it is difficult to quantify and establish the actual overcharge and related economic harm resulting from cartel behaviour. In such cases, the Bureau will typically use a proxy to estimate economic harm for sentencing purposes.
  5. Studies have estimated that the amount of the "overcharge" resulting from cartel activity is often in the order of at least 10 percent.31 Nonetheless, the Bureau will always consider relevant and compelling evidence presented by defendants that demonstrates an overcharge greater or less than the 10 percent proxy.
  6. The additional economic harm resulting from cartel activity and the need to achieve the goal of both specific and general deterrence support the use of 20 percent of the volume of commerce affected by the defendant's participation in the cartel as the basis for the assessment of fines in cartel cases.32 For these reasons the Bureau uses 20 percent of the volume of commerce affected in Canada by the cartel participant as a proxy for the economic harm and (provided it is not above the $10 million statutory maximum fine)33 as the starting point for its sentencing assessment. Since 1990, settlements reached in cartel cases under the Act have, for the most part, resulted in fines that averaged 20 percent of the affected volume of commerce in Canada.
  7. Volume of Commerce: The volume of commerce used in the determination of the economic harm, by proxy or otherwise, is calculated for each cartel participant by aggregating the value of that participant's sales34 of the product in Canada that was the object of the anti‑competitive agreement over the time period that the participant was involved in the offence.35 The Bureau will assume that all sales in Canada of the subject product were affected by the cartel during the time period unless evidence that rebuts that assumption is brought forward.

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2. Low Economic Harm and Gravity of the Offence

  1. Where an agreement between competitors is reached but never implemented, or is detected very early, the volume of commerce affected may be non-existent or very low. Under these circumstances, basing the recommended fine on the actual volume of commerce affected would understate the seriousness of the offence. The Bureau will consider the nature of the conduct itself and an assessment of the harm that would have arisen from the cartel, but for the decision not to implement the agreement or the early detection of the activity, in determining its fine recommendation.36

3. Non-Participation of Cartel Members in the Canadian Market

  1. In some cartel scenarios parties agree to worldwide pricing arrangements with one or more parties agreeing not to trade in the Canadian product market. In such cases, those parties that do not trade in Canada remain liable for the cartel activity because they have helped in artificially raising prices or negatively affecting competition in Canada. The Bureau will typically reach a fine recommendation for such parties by applying the 20 percent proxy for economic harm to the amount of the party's world-wide sales of the cartelized product in comparison to the overall sales of the cartelized product in Canada from all cartel members as a proportion of world-wide sales. For example, in a case of a cartel member that agrees to fix prices and to allocate its business away from Canada, where that cartel member enjoys world-wide commerce of $100 million, sales generated by all the participating cartel members in Canada is $20 million, and the overall world-wide sales are $400 million, the Bureau's fine recommendation would be 20 percent of (100 x (20/400)) = $1 million, subject to aggravating and mitigating factors.
  2. Other forms of cartel arrangements may involve no specific price agreements but only an allocation of geographic markets or customers so that some parties do not participate in the Canadian market for the product.37 In this case the Bureau will typically recommend a broader approach to assess the economic harm caused by these cartel members to the Canadian market.An assessment considering such factors as the size and influence of the party on the global market, past history of involvement in Canada and its reputation as a competitor absent the cartel will be made. A fine proportionate to that of the remaining parties who do participate in the Canadian market will be assessed. The fines of the cartel members that do participate in the Canadian market will be assessed in the normal course as set out earlier in this document.

4. Economic Harm Arising From Indirect Sales

  1. Indirect sales occur when a cartelized product is used as an input into an intermediate or final product that is subsequently sold to a purchaser. Among other effects, the purchaser may end up paying a higher price than he or she otherwise would if some or all of the overcharge on the cartelized product is passed through the distribution chain.38 In cases where economic harm arising from indirect sales of a cartelized product into Canada is likely and significant, the Bureau will include it in its overall assessment of economic harm in Canada caused by the cartel.
  2. In cases where there are indirect sales of a cartelized product into Canada,39 the relevant volume of commerce will be the volume of sales of the cartelized input contained in the intermediate or final products sold into Canada.40 If reliable evidence of the volume of indirect sales of the cartelized product into Canada is not available, the Bureau may derive the volume of commerce affected from available data. For example, the Bureau may aggregate the sales of a cartel member to its top customers, which then sold the intermediate or final product containing the cartelized input into Canada.41 Consistent with its approach to direct sales, the Bureau will use 20 percent of the volume of commerce affected in Canada by the cartel as a proxy for the economic harm caused in Canada by the indirect sales of the cartelized product. As in all cases, the Bureau will adjust the proxy of 20 percent of the volume of commerce affected if the accused brings forward evidence of actual harm to rebut this proxy.42
  3. Related to the issue of indirect sales is that of double counting. Where cartel members have already been penalized in another jurisdiction for the direct sales that led to the indirect sales in Canada, the Bureau will consider the penalties imposed by other jurisdictions on a case-by-case basis. Factors such as the magnitude of the economic harm in Canada associated with the indirect sales and the adequacy of any penalties imposed in the foreign jurisdiction will be considered relevant.

5. Aggravating and Mitigating Factors

  1. Subsection 718.2 of the Criminal Code requires the courts to increase or reduce a sentence by taking into account aggravating and mitigating circumstances relevant to the offence or the offender. This section applies equally to offences under the Act. Accordingly, the Bureau's sentencing recommendations reflect aggravating and mitigating circumstances for each potential accused, whether an individual or a business organization. The aggravating and mitigating factors, as established by the jurisprudence and normally considered by the Bureau, are set out in the table below.
Aggravating and mitigating factors
Aggravating Mitigating
Recidivism/Criminal Record Cooperation with Authorities
Coercion, Instigation or Management of the Cartel Acceptance of Responsibility
Corporate Size and Sophistication Early Termination of Conduct
Degree of Planning, Covertness and Complexity of the Cartel Activity Restitution for Victims
Obstruction (when not separately prosecuted)  
Lengthy Duration of Illegal Activity  
Nature of the Victims (Government/Public Agency or Vulnerable Groups)  
Widespread Senior Officer Involvement  
  1. The weight of each factor in a given case is determined by the facts of that case. As well, depending on the circumstances of the matter, there may be other relevant considerations that the Bureau will take into account as an aggravating or mitigating factor.
a) Aggravating Factors
  1. The Bureau considers the following factors to be aggravating factors in its sentencing assessments and recommendations.
  2. Recidivism/Criminal Record: The Bureau considers previous convictions for cartel activity as well as violations of related court orders (e.g., prohibition or probation orders) in its assessments. Recent convictions are given more weight than those in the more distant past, and will usually provide grounds for the Commissioner to recommend a more severe sentence. Parties that resume illegal cartel activities soon after a conviction can expect the Bureau to recommend increased penalties to promote effective deterrence. The Bureau will also consider previous convictions for other crimes, particularly those involving financial dishonesty, such as fraud, insider trading or the payment of secret commissions (kick-backs).
  3. Coercion, Instigation or Management: This may include, but is not limited to, making threats of reprisals or taking retaliatory measures against other business organizations or individuals, pressing them to participate in the illegal conduct. Instigating or managing the cartel agreement is also considered to be an aggravating factor.
  4. Corporate Size and Sophistication: Companies that have a sizable share of the market under investigation and that engage in cartel activities can more readily distort the market and cause greater economic harm. The company's level of knowledge regarding the legal implications of its conduct as well as its ability to obtain legal advice will also be considered.
  5. Degree of Planning, Covertness and Complexity of the Cartel Activity: The nature of the cartel and the types of activities the participants engage in to advance or to hide the cartel may well constitute an aggravating factor. Cartels are inherently covert enterprises, whereby improper communication among cartel participants almost always requires planning and forethought to evade the law. To frustrate an investigation, parties may agree on coded communications and evidence destruction protocols. At times, legitimate business activity is misappropriated or misused to advance the objectives of criminal cartel communications: for example, in some instances, trade association meetings have been subverted through complex planning to serve as cover for criminal conspiracies. Such forethought in the planning and commission of a crime reduces the likelihood of detection and increases the culpability of the participants.
  6. Obstruction: "Obstruction" refers to a range of activities aimed at frustrating the investigative process and is a criminal offence under both the Act and the Criminal Code.43 As obstruction can include, for example, the destruction of evidence, giving of false or misleading statements to investigators and tampering with witnesses, any such action must be vigorously deterred. To that end, the Bureau will address such action either as a separate offence under the Act or the Criminal Code or as a particularly aggravating factor in recommending the sentence for the cartel offence.
  7. Lengthy Duration of Illegal Activity: The duration of a party's participation in a cartel is a consideration in sentencing that goes beyond the calculation of volume of commerce and is relevant to the culpability of the accused. Denunciation of illegal activity becomes more pressing the longer a party participates in a cartel. Continuation of illegal activities after becoming aware of a Bureau investigation is also an aggravating factor that justifies a recommendation that the DPP seek a more severe sentence for the accused before the courts.
  8. Nature of the Victims: The nature of the victims is a factor in sentencing. Cartel activity that targets government or public agencies, and thereby the public funds of the taxpayer, is considered particularly egregious. Targeting vulnerable groups such as the elderly, youth or low income population is also considered to be an aggravating factor.
  9. Widespread Senior Officer Involvement: Senior officers44 of a business organization, particularly at the highest levels of the management hierarchy, have a duty to ensure that the business organization and its employees respect the law. It is considered to be an aggravating circumstance when senior officers at high levels of management organize, lead, direct or otherwise actively participate in a cartel, or where those senior officers know that one or more other representatives of the organization are, or are about to be, parties to the offence and do not take all reasonable measures to stop them.
b) Mitigating Factors
  1. The Bureau considers the following factors as mitigating factors.
  2. Cooperation with Authorities:45 This includes an agreement to cooperate with the Bureau in the enforcement process and to plead guilty. Where the potential accused cooperates prior to the disposition of sentence, this can be a basis for a reduction in the Commissioner's sentencing recommendation to the DPP.
  3. Acceptance of Responsibility: The Bureau assesses a number of elements under this factor starting with whether the party immediately ceased the illegal activity upon discovery. Acceptance of responsibility includes a guilty plea and, where the accused is a foreign business organization or an individual not residing in Canada, acknowledgement that a Canadian court has jurisdiction in the context of a guilty plea. It can also include the implementation of a competition law corporate compliance program to assist in the detection of other possible violations.46
  4. Early Termination of Conduct: Early voluntary termination of the conduct is the corollary of the aggravating factor arising from the lengthy duration of the offence.
  5. Restitution for Victims: Providing restitution to victims is a mitigating factor.47 Restitution prior to the imposition of a sentence may justify a sentence reduction recommendation. The Bureau does not consider possible future exposure to lawsuits for the recovery of damages under section 36 of the Act to be a mitigating factor.

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C. Prohibition Orders

  1. A number of the Special Remedies in Part IV of the Act also apply to cartel offences.48 These remedies may form part of the package of sentencing recommendations put forward by the Commissioner to the DPP.
  2. Where there is a guilty plea in a cartel case, the Commissioner will typically recommend that the DPP consider applying for, among other things, a prohibition order under section 34(1) of the Act. A prohibition order prohibits a person from continuing or repeating the offence or doing any act or thing directed toward the continuation, commission or repetition of the offence, and may include prescriptive terms requiring positive steps or acts to ensure compliance with the law. For example, the terms of a prohibition order may include implementing a corporate compliance program,49 notifying clients of the order and removing individuals involved in the offence from their positions of influence within the business in question. Both business organizations and individuals may be subject to a prohibition order.50
  3. Under subsection 34(2), a court may issue a prohibition order without a finding of guilt on a contested or consent basis where the court finds that a person has done, is about to do or is likely to do any act or thing constituting or directed toward the commission of an offence. Only in exceptional circumstances will the Bureau recommend that the DPP resolve a matter with only a prohibition order. The Bureau will consider the merits of such a resolution in cases where, for example, the actual and potential economic harm is negligible, there are no aggravating factors and there are significant mitigating factors.

D. Sentencing Recommendations

  1. The Commissioner typically refers to the DPP evidence pertaining to both the business organization and the individuals responsible for the violation(s), accompanied by sentencing recommendations in respect of all potential accused.
  2. For a corporate accused, the Commissioner typically recommends a fine as well as a prohibition order under subsection 34(1) of the Act. The fine recommendation will be determined in accordance with the sentencing principles set out above.
  3. Individual accused are liable to fines or imprisonment, or both, under the conspiracy and bid-rigging provisions of the Act. For conspiracy offences under the Act, the maximum term of imprisonment is currently five years, and for bid rigging offences it is fourteen years.51 The Commissioner considers that a significant deterrent in cartel cases is exposure to criminal sanctions for individuals involved in such criminal conduct. Individual liability reduces the likelihood that officers of a company lead and advance cartel activity merely on the basis of an analysis of the economic costs and benefits. Criminal sanctions render individuals vulnerable to loss of reputation, careers and even imprisonment; the sanctions bring home the real costs of committing a crime.52
  4. When the Commissioner recommends the prosecution of an individual for a cartel offence, the Commissioner will also provide sentencing recommendations. There are a number of considerations the Commissioner applies in developing sentencing recommendations for individuals. These include the role and level of participation of the individual who participated in the offence, the degree to which the individual personally benefited from the offence (e.g., through advancement, salary increases, performance bonuses or increased personal assets such as shares in the company), whether the individual has been sanctioned for participating in other cartels or in the same cartel in another jurisdiction and whether the individual has a criminal record for other financial crimes involving dishonesty.
  5. The Commissioner will typically recommend imprisonment for violations where the balance of aggravating and mitigating factors suggest the need for a severe sentence. Where the individual is a recidivist or used threats of violence to persons or property as a means of furthering the cartel, the Commissioner will see a pressing need for denunciation and deterrence that may best be achieved through imprisonment.53 Where an individual was an instigator, leader or coordinator of the cartel, used coercion or otherwise monitored and encouraged compliance with the illegal arrangement by other participants, obstructed the investigation, or where an individual personally benefited from the unlawful conduct (as described, for example, in paragraph 65), the Commissioner will also likely take the view that a prison sentence is justified.
  6. Where mitigating factors have more persuasive value, the Commissioner is likely to recommend to the DPP a fine and prohibition order as an appropriate sentence for an individual.
  7. Where individuals charged with a cartel offence cannot be served by a summons or are evading service, a warrant for their arrest may be issued by a court of competent jurisdiction.54 Where necessary to ensure appearance before the court, the Canada Border Services Agency may conduct border watches for individuals entering or exiting Canada. Where individuals are in a foreign jurisdiction and do not attorn to the jurisdiction of Canadian courts for the purpose of prosecution and sentencing, the Commissioner will recommend that extradition be sought in appropriate cases. When individuals are charged they will typically be fingerprinted and their identities registered on the Canadian Police Information System (CPIC).

E. Ability to Pay

  1. Should an accused company seek to have the Commissioner consider its financial position when making a recommendation to the DPP, the accused party will be required to provide financial information about its assets, liabilities, revenues and equity.55 The Commissioner may request that a third party expert accountant review the request. The Commissioner recognizes that an extended time to pay, or a reduction in what would otherwise be an appropriate fine, may be called for where payment of a fine would significantly affect the party's ability to operate as a going concern.
  2. Similarly, should an accused individual seek to have the Commissioner consider his or her financial position when making a recommendation to the DPP, the individual will be required to provide financial information about his or her financial situation, including relevant bank and investment records, tax filings and employment income. The Commissioner may make a recommendation to the DPP for a fine reduction or an extended payment period where there is a demonstrated need.

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III. Leniency in Sentencing

  1. The Program is an important part of the Bureau's investigation and enforcement activity and forms a part of the DPP's resolution process.56 The Program creates greater incentives for parties to apply for leniency, resolve their case at the earliest stage in the process, and cooperate with the investigation and prosecution.
  2. All communications57 from the time of a marker request until the plea agreement is in place, are protected by privilege including, but not necessarily limited to, settlement privilege and, depending on the particular fact situation, public interest privilege. The plea agreement will typically include provisions governing privilege and disclosure subsequent to the signing of the agreement.
  3. As an overarching principle, the Bureau's recommendation for leniency is directly proportionate to the contribution a leniency applicant makes to the Bureau's cartel investigation and any subsequent prosecutions.

A. Conditions for Eligibility

  1. Under the Bureau's Immunity Program, the first business organization or individual that qualifies under the Program's conditions (the "first in") can receive a grant of immunity from prosecution. The Bureau will recommend immunity only for the first in. Where other parties in cartel investigations provide timely cooperation to the Bureau and the DPP, they may benefit from leniency in sentencing recommendations.
  2. The Commissioner will make a lenient treatment recommendation to the DPP where the party:
    1. has terminated its participation in the cartel, and
    2. cooperates in a timely manner, at its own expense, with the Bureau's investigation and any subsequent prosecution by the DPP of other cartel participants.58

B. Timely Cooperation

  1. The Commissioner will consider the timeliness of an applicant's cooperation as paramount in arriving at a recommendation to the DPP that a party receive lenient treatment. To this end, the Bureau will typically consider the point in time at which the applicant sought leniency. Timeliness, however, means more than an early request for leniency; it is also when and how quickly a party cooperates with the Bureau's investigation. Timely, full cooperation that helps the Commissioner advance the investigation is more likely to secure a recommendation by the Commissioner for substantial mitigation of sentence than is later cooperation, regardless of the position of a leniency applicant in the marker queue
  2. The timeliness of cooperation provided by an applicant will be assessed on the basis of the cooperation an applicant provides and on the good faith that it provides the further cooperation pledged in its proffer.59 The rate of reduction will depend on each party's cooperation in a given case.
  3. There may come a point in time when the Bureau has completed its investigation and the evidence that subsequent leniency applicants can bring is of minimal use to the enforcement process. While there is generally a discount available for saving the Crown the cost of a trial, the recommended discount in these types of circumstances could be minimal in comparison to circumstances in which applicants provide timely cooperation early in the process.

C. Reduction of Recommended Sentence

  1. Where a leniency applicant meets Program requirements, the Bureau may recommend that PPSC counsel make submissions to a court in support of the following reductions in sentence. All reductions in sentence will be taken from the sentence as determined under the sentencing principles set out in Part II, above. Where that amount exceeds the statutory maximum, the discount will be taken from the statutory maximum.

1. The First Leniency Applicant

  1. The first leniency applicant that meets, and continues to meet, the conditions of the Program is eligible for a reduction of up to 50 percent of the fine that would have otherwise been recommended. The full rate of reduction will be achieved only in the case of exemplary cooperation: a timely and complete proffer, timely production of all relevant evidence and meaningful facilitation of individual witnesses' cooperation.
  2. Where the first leniency applicant is a business organization, the Bureau will typically recommend that no separate charges be laid against the applicant's current directors, officers or employees, provided such directors, officers and employees agree to cooperate with the Bureau's investigation in a timely fashion.
  3. Where the first leniency applicant is an individual applying independently of his or her employer company (but implicating that employer), the individual can expect to be treated in a manner similar to an individual who is covered by an employer's application. If the individual provides full cooperation, the Bureau will recommend that the individual not be criminally charged, although he or she may be subject to a prohibition order. This approach ensures that reporting employees are not put in a worse position than if they applied with their employer.
  4. An exception to the treatment of individuals as set out in paragraphs 81 and 82 may occur where evidence shows that the individual is a recidivist, carried out acts designed to obstruct the investigation or engaged in coercion of other participants in the offence. Bureau recommendations made pursuant to those paragraphs will also always be subject to the continued cooperation of the individuals.

2. Subsequent Leniency Applicants

  1. Even where a party is not the first leniency applicant, recommendations for substantial reductions in sentences, both corporate and individual, can be obtained where the leniency applicant provides timely cooperation of the nature required.
  2. Subsequent leniency applicants may benefit from reductions of up to 30 percent of the fine that would have otherwise been recommended. As is the case for the first leniency applicant, the full rate of reduction will be achieved only in the case of exemplary cooperation: a timely and complete proffer, timely production of all relevant evidence and meaningful facilitation of individual witnesses' cooperation.
  3. Penalties for individuals who cooperate with the investigation and any subsequent prosecutions will be less than those recommended by the Bureau against non-cooperating parties who played a similar role in the offence. In making its recommendation, the Bureau will take into consideration all of the facts and circumstances relevant to the particular individual and the particular offence as well as sentences imposed against individuals in past cases.
  4. Later applicants will not receive more lenient treatment than previous applicants unless exceptional circumstances exist; for example, if the cooperation provided by a later applicant is of a significantly higher value in terms of either evidentiary value or timeliness. In any event, benefits for earlier leniency applicants will not diminish as a result of a later applicant providing significantly higher value.

D Interaction with Immunity Plus

  1. When assessing a leniency application, the Bureau considers whether the information provided discloses other cartel activities so as to warrant Immunity Plus status.60 If the cooperating party meets the requirements set out in the Immunity Program, the Bureau will recommend that the DPP grant immunity with respect to the new offence. As well, in respect of the original offence for which lenient treatment is sought, the Bureau will recommend an additional discount recognizing the value of the disclosure of the new cartel. This recommended discount arising from a successful Immunity Plus application can typically be expected to be in the range of 5 to 10 percent depending on the nature of the newly disclosed offence. In the case of exemplary cooperation this could, for example, bring the final discount for first-in leniency applicants above the 50 percent mark.

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E. The Leniency Process

  1. The steps required to obtain leniency are:

Step 1: Initial Contact/Marker Request

  1. Where a marker61 has been granted under the Immunity Program to a party in relation to a particular offence under the Act, and the marker remains valid, the Bureau will not recommend immunity for any other cartel participant in relation to that offence.62 Requests for immunity or leniency must be made to the Senior Deputy Commissioner of Competition, Criminal Matters (the "SDC") and are typically made by an applicant's legal representative. Where immunity is unavailable, the SDC will advise the party of the Bureau's Program and of the party's place in line if it were to apply for lenient treatment. The SDC will inquire whether the party wishes to participate in the Program and give the party a fixed amount of time (usually three to four business days) to make that determination, during which the marker for the specific place in line will be held
  2. Once a party notifies the SDC that it wishes to participate in the Program, the SDC will confirm the continuation of the applicant's marker and indicate the marker duration, usually 30 days to provide a full proffer. While it is possible for a marker to be extended, applicants should alert the Bureau to anticipated delays as early in the process as possible and must demonstrate to the Bureau that they are engaging best efforts to provide the required proffer on a timely basis or the marker may be lost.

Step 2: The Proffer

  1. Following a leniency request, the applicant will be expected to provide a proffer, describing in detail the anti‑competitive activity for which leniency is sought and its effect in Canada.
  2. A proffer will be made on a without prejudice basis typically by the applicant's legal representative. To enable the Bureau and PPSC counsel to make an informed assessment it must include a detailed description of the alleged illegal activity, including the nature of the agreement and its effect in Canada, the volume of commerce in Canada affected by the agreement and any other facts relevant to sentencing. In particular, the Bureau and PPSC counsel will need to know with detail and certainty the cooperation that the applicant is prepared to offer including the nature of any relevant non-privileged evidence, information and records in the applicant's possession or under its control, the witnesses it believes can testify to the events in question and details of the evidence or testimony that each of those potential witnesses can be expected to give; and the measures the applicant is prepared to take to facilitate and ensure the cooperation of its directors, officers and employees.63
  3. The Bureau expects that in preparing the proffer leniency applicants will conduct thorough internal investigations to locate all relevant evidence, wherever it may be located in Canada and elsewhere. This evidence may be in the form of records, witnesses or any other information that will be of assistance to the Bureau's investigation. Leniency applicants must satisfy the Bureau that they have taken all appropriate steps to locate and preserve relevant evidence. The Bureau will assess the evidence of the leniency applicant against information that it has from any other cooperating parties in an effort to ensure the veracity of the proffer and to identify any additional information that could be brought forward.
  4. Where the Bureau requires more information to assess the matter than is produced in the proffer it may request, on a without prejudice basis, an interview with one or more witnesses, or an opportunity to review certain records. The Bureau will expect the witnesses or records to be produced within a short time frame and a leniency applicant should begin preparing for these investigative measures as soon as it decides to make a request for leniency. While the applicant is not required to produce the records or witnesses, failure to do so may mean that the Bureau has insufficient information to make a lenient treatment recommendation to the DPP, as described in step 3, below.
  5. Where the applicant does not disclose evidence that it was involved in the commission of an offence, the Bureau will consider the information in the scope of its investigation of others but will not make a recommendation for leniency as no charge recommendation will be contemplated. Should evidence subsequently arise suggesting that an offence did indeed take place, all prior cooperation will be considered in any Bureau recommendation to the DPP for leniency unless it becomes apparent that the leniency applicant intentionally withheld information, or failed to uncover the information through a lack of due diligence.

Step 3: Lenient Treatment Recommendation to the DPP

  1. The Bureau will, on an ongoing basis, fully brief PPSC counsel on the evidence that the leniency applicant has or is expected to provide and will recommend a rate of sentence reduction for that applicant.
  2. A recommendation by the Bureau is conditional upon the party's ongoing cooperation with the investigation and prosecution. The recommendation will indicate the level of discount that the Bureau believes an applicant should receive following their cooperation in providing the proffer and any relevant evidence, and on the good faith that they provide any further cooperation pledged in the proffer. Any discount for a company will be used to reduce the recommended fine as determined pursuant to the sentencing principles set out in Part II of this Bulletin. The Bureau's recommendation may include the amount of the recommended fine (rather than just the percent discount) if the Bureau has sufficient information to determine the appropriate volume of commerce at this point in time. If facts relating to aggravating and mitigating factors are proffered, the Bureau may be able to give an initial indication of how they will be addressed in the recommendation. The more complete the proffer, the more timely and reliable a recommendation the applicant can expect the Bureau to make. Any Bureau recommendation for a discount for an individual's penalty will be applied both against any recommended fine and prison sentence as determined pursuant to Part II of this Bulletin.
  3. PPSC counsel retains full discretion whether to follow the Bureau's recommendation and all plea discussions with the leniency applicant will be conducted by PPSC counsel.
  4. The Bureau recommendation may be accompanied by the Commissioner's referral of the case to the DPP.64 In any event, the referral will take place before a plea agreement is concluded.

Step 4: Plea Agreement

  1. A successful resolution of issues between the applicant and PPSC counsel will typically result in a plea agreement65 between the two parties. It is anticipated that plea discussions will be conducted in good faith. Where it becomes apparent that a resolution of the issues is unlikely to occur, for whatever reason, the Bureau may recommend that plea discussions be terminated and that the investigation proceed as appropriate without t he cooperation of the leniency applicant. All decisions regardin g the process of plea negotiations are made by PPSC Counsel.
  2. Applicants can expect their plea agreement with the DPP to be conditional on the leniency applicant, and anyone else covered by the agreement, cooperating in a timely fashion with the ongoing investigation of the offence and any related prosecutions. Similar to immunity agreements, the plea agreement can also be expected to include a requirement that the leniency applicant provide full, frank and truthful disclosure of all non-privileged information, records or other things in its possession, under its control or available to it, wherever located, that in any manner relate to the anti‑competitive conduct for which leniency is sought. Typically a schedule for disclosure will be established at the time of the plea agreement and production of information completed as soon as possible thereafter, typically within a six-month time frame. Individuals covered by the agreement will typically be required to attend interviews and to testify in prosecutions of others if required. Corporate defendants will be expected to facilitate the cooperation of directors, officers and employees covered by the plea agreement.
  3. It can be expected that the plea agreement will include a provision that if the applicant/defendant fails to comply with the cooperation requirements of the plea agreement the DPP may review or revoke the agreement. The plea agreement can also be expected to provide that the applicant/defendant will be given 14 days prior written notice in order that the applicant/defendant has a reasonable opportunity to remedy his or her failure to comply.
  4. In addition to the cooperation requirements described above, the plea agreement will also typically set out the terms respecting the confidentiality of information provided and applicable privileges as well as the possible disclosure of information in subsequent proceedings against other cartel participants.66
  5. A Statement of Admitted Facts will be agreed upon between the DPP and the applicant/ defendant at the same time as the plea agreement and will form part of the plea agreement.

Step 5: Full Disclosure

  1. The Bureau encourages early disclosure of evidence relevant to its investigation. That being said, such disclosure is not required under the Program until a plea agreement has been concluded between the leniency applicant and the DPP. Applicants who disclose records early in the process and prior to a plea agreement, and who facilitate the cooperation of individual witnesses, can expect to see credit for that cooperation reflected in any leniency recommendation that the Bureau makes to the DPP.
  2. It is anticipated that the leniency applicant will have completed its internal investigation by the full disclosure stage if it takes place after the plea agreement, and that little delay in producing records and witnesses is warranted. Timing is critical to the Bureau's enforcement initiatives and the Bureau will often expect to see a complete record production very shortly after the signing of the plea agreement and to interview key witnesses very quickly. The Bureau may emphasize a particular area of the investigation or provide other guidance or direction to the applicant's search for and production of evidence. Depending on the circumstances and timing of the particular case, full disclosure may take place after the signing of the plea agreement and before or after the plea is entered before the court.
  3. There must be no misrepresentation of any material facts. Witnesses will be expected to be interviewed, usually at Bureau offices, and subsequently may be called upon to testify in court proceedings.
  4. Witnesses who refuse to comply in a timely fashion, and without good reason, with the cooperation requirements in the plea agreement will typically be carved out of, or cease to be covered by, that agreement.
  5. Where a leniency applicant agrees to make full disclosure to the Bureau, on a voluntary basis, of all information and evidence relevant to the offence in question, the Bureau will not normally use formal powers against the applicant or its cooperating individuals as long as plea discussions between the applicant and PPSC counsel are in progress.

Step 6: The Plea

  1. Following the execution of the plea agreement and the Statement of Admitted Facts, the DPP will file an indictment and the Statement of Admitted Facts in a court of competent jurisdiction as the basis for the plea and sentence to be imposed. PPSC counsel will set a mutually convenient date for the plea before the court and counsel for both the PPSC and the applicant/defendant will make sentencing submissions to the court that are consistent with the plea agreement and the Statement of Admitted Facts.
  2. The indictment and the Statement of Admitted Facts will form part of the public court record. The Bureau typically also publishes a News Release on its Web site advising the public of the guilty plea.

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IV. Treatment of Information

A. Privilege

  1. The overriding premise of this Program is that it forms part of the DPP resolution process. In Canada, communications in the course of resolution or settlement discussions are protected from disclosure by "settlement privilege". Such communications may include proffers, witness interviews and any records created for the purpose of the discussions. Settlement privilege is jointly held and neither the applicant nor the DPP can disclose any of the communications without the consent of both parties.
  2. Any evidence, record, statement or information provided subsequent to the plea agreement will not be protected by settlement privilege as it is provided pursuant to the cooperation requirements of the plea agreement rather than for the purpose of achieving resolution.
  3. Public interest privilege as well as other privileges may apply to information provided either before or after the conclusion of the plea agreement, depending on the particular fact situation.
  4. Applicants can anticipate that plea agreements will include a provision regarding the waiver of settlement privilege over evidence provided. These waivers ensure that evidence provided by the applicant can be used by the Bureau in its investigation and by the DPP in any subsequent prosecutions. The evidence will not be used against the applicant or its cooperating individuals provided there is no breach of the plea agreement.

B. Confidentiality

  1. The Bureau will treat all information provided to it from a leniency applicant, whether subject to settlement privilege or otherwise, as confidential. This confidentiality assurance is over and above that provided in section 29 of the Act.67
  2. The Bureau requires certain limited exceptions to this assurance of confidentiality in order to ensure the efficiency of the Program. These exceptions are identical to those included in the Bureau's Immunity Program.
  3. The Bureau treats the identity of a party requesting leniency as confidential. The only exceptions to this policy are where:
    1. disclosure is required by law;
    2. disclosure is necessary to obtain or maintain the validity of a judicial authorization for the exercise of investigative powers;
    3. disclosure is for the purpose of securing the assistance of a Canadian law enforcement agency in the exercise of investigative powers;
    4. the party has agreed to disclosure;
    5. there has been public disclosure by the party; or
    6. disclosure is necessary to prevent the commission of a serious criminal offence.
  4. The Bureau treats as confidential information obtained from a party requesting leniency, subject only to the exceptions listed in paragraph 119 above, or where disclosure of such information is otherwise for the purpose of the administration or enforcement of the Act.
  5. The Bureau will not disclose the identity of a party or the information obtained from that party to any foreign law enforcement agency without the consent of the party or unless required by law, including in response to an order of a Canadian court of competent jurisdiction.
  6. The Bureau's policy with respect to private actions under section 36 of the Act is to provide confidential information only in response to a court order. In the event of such an order, the Bureau will take all reasonable steps to protect the confidentiality of the information, including by seeking protective court orders.
  7. Applicants are also required to keep their contact with the Bureau confidential. An applicant should not disclose its leniency application to any person, other than his or her counsel, without the consent of the Bureau or the DPP, which consent will not be unreasonably withheld or unless disclosure is required by law. Where disclosure is required by law (e.g., in the case of required securities filings) the party must give notice to and consult with the Bureau and PPSC counsel on how to protect the interests of the investigation in light of the disclosure requirement. The party shall give this notice as soon as it becomes aware of the disclosure requirement.

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V. Withdrawal From the Program

  1. Applicants may withdraw from the Program at any time before the signing of the plea agreement with the assurance that none of the communications they have had with the Bureau or PPSC counsel will be directly used against them. However, the Bureau is free to use information provided by an applicant to pursue its investigation and may use any evidence directly or indirectly derived therefrom in any subsequent prosecution.
  2. Directors, officers and employees of a company that withdraws a leniency application may continue to cooperate under the Program and will receive the same level of lenient treatment that they would have received had their company continued with its application. Individuals in this position will be expected, pursuant to their plea agreement with the DPP or such other arrangement as is made to resolve their liability under the Act,68 to cooperate fully with the ongoing investigation and any subsequent prosecution. This cooperation will include the requirement for the individual to disclose all evidence in his or her possession against both his or her own company and other cartel participants.

VI. Further Information

  1. The Bureau encourages the public to take advantage of its policies and programs which facilitate conformity with the provisions of the Act.
  2. Anyone wishing to apply for leniency in cartel cases may contact:
    Senior Deputy Commissioner of Competition
    Criminal Matters Branch
    819-997-1208
  3. For further information, visit the Bureau Web site or contact the Bureau toll free at 1-800-348-5358.

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Appendix I - The Cartel Provisions of the Competition Act

Conspiracy69

45. (1) Every one who conspires, combines, agrees or arranges with another person

  1. to limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product,
  2. to prevent, limit or lessen, unduly, the manufacture or production of a product or to enhance unreasonably the price thereof,
  3. to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or
  4. to otherwise restrain or injure competition unduly,

is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million dollars or to both.

Idem

(2) For greater certainty, in establishing that a conspiracy, combination, agreement or arrangement is in contravention of subsection (1), it shall not be necessary to prove that the conspiracy, combination, agreement or arrangement, if carried into effect, would or would be likely to eliminate, completely or virtually, competition in the market to which it relates or that it was the object of any or all of the parties thereto to eliminate, completely or virtually, competition in that market.

Evidence of conspiracy

(2.1) In a prosecution under subsection (1), the court may infer the existence of a conspiracy, combination, agreement or arrangement from circumstantial evidence, with or without direct evidence of communication between or among the alleged parties thereto, but, for greater certainty, the conspiracy, combination, agreement or arrangement must be proved beyond a reasonable doubt.

Proof of intent

(2.2) For greater certainty, in establishing that a conspiracy, combination, agreement or arrangement is in contravention of subsection (1), it is necessary to prove that the parties thereto intended to and did enter into the conspiracy, combination, agreement or arrangement, but it is not necessary to prove that the parties intended that the conspiracy, combination, agreement or arrangement have an effect set out in subsection (1).

Defence

(3) Subject to subsection (4), in a prosecution under subsection (1), the court shall not convict the accused if the conspiracy, combination, agreement or arrangement relates only to one or more of the following:

  1. the exchange of statistics;
  2. the defining of product standards;
  3. the exchange of credit information;
  4. the definition of terminology used in a trade, industry or profession;
  5. cooperation in research and development;
  6. the restriction of advertising or promotion, other than a discriminatory restriction directed against a member of the mass media;
  7. the sizes or shapes of the containers in which an article is packaged;
  8. the adoption of the metric system of weights and measures; or
  9. measures to protect the environment.

Exception

(4) Subsection (3) does not apply if the conspiracy, combination, agreement or arrangement has lessened or is likely to lessen competition unduly in respect of one of the following:

  1. prices;
  2. quantity or quality of production;
  3. markets or customers; or
  4. channels or methods of distribution.

or if the conspiracy, combination, agreement or arrangement has restricted or is likely to restrict any person from entering into or expanding a business in a trade, industry or profession.

Defence

(5) Subject to subsection (6), in a prosecution under subsection (1) the court shall not convict the accused if the conspiracy, combi nation , agreement or arrangement relates only to the export of products from Canada.

Exception

(6) Subsection (5) does not apply if the conspiracy, combination, agreement or arrangement

  1. has resulted in or is likely to result in a reduction or limitation of the real value of exports of a product;
  2. has restricted or is likely to restrict any person from entering into or expanding the business of exporting products from Canada; or
  3. has prevented or lessened or is likely to prevent or lessen competition unduly in the supply of services facilitating the export of products from Canada.
  4. [Repealed, R.S., 1985, c. 19 (2nd Supp.), s. 30]

Defences

(7) In a prosecution under subsection (1), the court shall not convict the accused if it finds that the conspiracy, combination, agreement or arrangement relates only to a service and to standards of competence and integrity that are reasonably necessary for the protection of the public.

  1. in the practice of a trade or profession relating to the service; or
  2. in the collection and dissemination of information relating to the service.

Exception

(7.1) Subsection 1 does not apply in respect of an agreement or arrangement between federal financial institutions that is described in subsection 49(1).

Exception

(8) Subsection (1) does not apply in respect of a conspiracy, combination, agreement or arrangement that is entered into only by companies each of which is, in respect of every one of the others, an affiliate.
R.S., 1985, c. C-34, s. 45; R.S., 1985, c. 19 (2nd Supp.), s. 30; 1991, c.45, s.547, c.46, s.590, c. 47, s.714.

Where application made under section 79 or 92

45.1 No proceedings may be commenced under subsection 45(1) against a person against whom an order is sought under section 79 or 92 on the basis of the same or substantially the same facts as would be alleged in proceedings under that subsection.
R.S., 1985, C. 19 (2nd Supp.), s. 31.

Foreign directives

46. (1) Any corporation, wherever incorporated, that carries on business in Canada and that implements, in whole or in part in Canada, a directive, instruction, intimation of policy or other communication to the corporation or any person from a person in a country other than Canada who is in a position to direct or influence the policies of the corporation, which communication is for the purpose of giving effect to a conspiracy, combination, agreement or arrangement entered into outside Canada that, if entered into in Canada, would have been in contravention of section 45, is, whether or not any director or officer of the corporation in Canada has knowledge of the conspiracy, combination, agreement or arrangement, guilty of an indictable offence and liable on conviction to a fine in the discretion of the court.

Limitation

(2) No proceedings may be commenced under this section against a particular company where an application has been made by the Commissioner under section 83 for an order against that company or any other person based on the same or substantially the same facts as would be alleged in proceedings under this section.

R.S., 1985, c. C-34, s. 46; R.S., 1985, c. 19 (2nd Supp.), s. 32; 1999, c. 2, s. 37.

Definition of "bid-rigging"70

47. (1) In this section, "bid-rigging" means

  1. an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders, or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request, or
  2. the submission, in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers,

where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is submitted or withdrawn, as the case may be, by any person who is a party to the agreement or arrangement.

Bid-rigging

(2) Every person who is a party to bid-rigging is guilty of an indictable offence and liable on conviction to a fine in the discretion of the court or to imprisonment for a term not exceeding 14 years, or to both.

Exception

(3) This section does not apply in respect of an agreement or arrangement that is entered into or a submission that is arrived at only by companies each of which is, in respect of every one of the others, an affiliate.

R.S., 1985, c. C-34, s. 47; R.S., 1985, c. 19 (2nd Supp), s. 33., as amended.

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Appendix II - Relevant Provisions of the Criminal Code

Purpose and Principales of Sentencing

Purpose

718. The fundamental purpose of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:

  1. to denounce unlawful conduct;
  2. to deter the offender and other persons from committing offences;
  3. to separate offenders from society, where necessary;
  4. to assist in rehabilitating offenders;
  5. to provide reparations for harm done to victims or to the community; and
  6. to promote a sense of responsibility in offenders, and acknowledgment of the harm done to victims and to the community.

R.S., 1985, c. C-46, s.718; R.S.,1985, c. 27 (1st Supp.), s. 155; 1995, c.22, s.6

Fundamental principle

718.1 A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.

R.S., 1985, c. 27 (1st Supp.), s. 156; 1995, c. 22, s. 6.

Other sentencing principles

718.2 A court that imposes a sentence shall also take into consideration the following principles:

  1. a sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender, and, without limiting the generality of the foregoing
    1. evidence that the offence was motivated by bias, prejudice or hate based on rase, national or ethnic origin, language, colour, religion, sex, age, mental or physical disability, sexual orientation, or any other similar factor,
    2. evidence that the offender, in committing the offence, abused the offender's spouse or common-law partner,
    3. evidence that the offender, in committing the offence, abused a person under the age of eighteen years,
    4. evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim,
    5. evidence that the offence was committed for the benefit of, at the direction of or in association with a criminal organization, or
    6. evidence that the offence was a terrorism offence shall be deemed to be aggravating circumstances;
  2. a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances;
  3. where consecutive sentences are imposed, the combined sentence should not be unduly long or harsh;
  4. an offender should not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances; and
  5. all available sanctions other than imprisonment that are reasonable in the circumstances should be considered for all offenders, with particular attention to the circumstances of aboriginal offenders.

1995, c. 22, s. 6; 1997, c. 23, s. 17; 2000, c. 12, s. 95; 2001, c. 32, s. 44(F), c. 41, s. 20; 2005, c. 32, s. 25

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Organizations

Additional factors

718.21 A court that imposes a sentence on an organization shall also take into consideration the following factors:

  1. any advantage realized by the organization as a result of the offence;
  2. the degree of planning involved in carrying out the offence and the duration and complexity of the offence;
  3. whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay a fine or make restitution;
  4. the impact that the sentence would have on the economic viability of the organization and the continued employment of its employees;
  5. the cost to public authorities of the investigation and prosecution of the offence;
  6. any regulatory penalty imposed on the organization or one of its representatives in respect of the conduct that formed the basis of the offence;
  7. whether the organization was - or any of its representatives who were involved in the commission of the offence were - convicted of a similar offence or sanctioned by a regulatory body for similar conduct;
  8. any penalty imposed by the organization on a representative for their role in the commission of the offence;
  9. any restitution that the organization is ordered to make or any amount that the organization has paid to a victim of the offence; and
  10. any measures that the organization has taken to reduce the likelihood of it committing a subsequent offence.

2003, c. 21, s. 14.

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Footnotes

1 To be developed following public consultation on this document.

2 Before publishing a final version of this Bulletin, the Bureau will seek a specific endorsement of the Program from the DPP. It is also anticipated that relevant sections of the Federal Prosecution Service Deskbook will be amended as necessary.

3 For the purpose of this Bulletin, cartel offences include conspiracy (notably section 45 but also sections 48 and 49), foreign directives (section 46) and bid-rigging (section 47). These provisions are set out in Appendix I to this document. While this document addresses lenient treatment only in cartel cases, it does not preclude the possibility of lenient treatment in other criminal, non-cartel, offences under the Act.

4 The Director of Public Prosecutions is the head of the Public Prosecution Service of Canada (PPSC), the federal government organization responsible for prosecutions on behalf of the Attorney General of Canada. The PPSC was created by the Director of Public Prosecutions Act on December 12, 2006, when Part 3 of the Federal Accountability Act came into force. It replaces the former Federal Prosecution Service of the Department of Justice. The PPSC is independent of the Department of Justice and reports to Parliament through the Attorney General of Canada. Counsel from the PPSC represent the DPP in proceedings before the courts of criminal jurisdiction in Canada.

5 Competition Act R.S.C. 1985, C. 19 (2nd Supp.)., as amended.

6 See the Bureau's "Immunity Program Under the Competition Act", available online at: www.competitionbureau.gc.ca.

7 For the purposes of this Bulletin, the terms "Commissioner" and "Bureau" are used interchangeably, as appropriate to the topic discussed.

8 Section 124.1 of the Act, supra note 5. A written opinion provided under this section is binding on the Commissioner if all the material facts have been submitted by or on behalf of an applicant for an opinion and they are accurate.

9 Section 46 of the Act applies only to corporations, although an individual could be convicted of aiding and abetting the commission of such an offence.

10 Competition Bureau, Conformity Continuum Information Bulletin (Ottawa, Industry Canada, 2000) available online at: www.competitionbureau.gc.ca.

11 Supra, note 6.

12 The Bureau has independent powers under sections 11, 15, and 16 of the Act and, as a law enforcement agency, may have recourse to powers set out in sections 183-196 and 487 of the Criminal Code R.S., c. C-34. For further reference see Information Bulletin on Section 11 of the Competition Act (2005), Information Bulletin on Sections 15 and 16 of the Competition Act (2008) and Interception of Private Communications and the Competition Act (1999), available online at :
www.competitionbureau.gc.ca.

13 Section 23 of the Act, supra, note 5.

14 See Federal Prosecution Service Deskbook (created by the former Federal Prosecution Service of the Department of Justice Canada and currently applied to the PPSC), Chapter 15, available online at: www.justice.gc.ca.

15 Supra note 14.

16 Criminal Code, R.S., c.C-46, subsection 718.3 (2) provides: "Where an enactment prescribes a punishment in respect of an offence, the punishment to be imposed is, subject to the limitations prescribed in the enactment, in the discretion of the court that convicts a person who commits the offence, but no punishment is a minimum punishment unless it is declared to be a minimum punishment".

17 Supra, note 16.

18 R. v. Haufe, [2007] O.J. No. 2644. (C.A.); R. v. Cerasuolo (2001), 151 C.C.C. (3d) 445 (C.A.)

19 Ibid.

20 Information on sanctions in recent cartel cases is available online at: www.competitionbureau.gc.ca.

21 Bill C-10, which received Royal Assent on March 12th, 2009, amended the Competition Act by increasing the maximum fine for section 45 convictions from $10 million to $25 million, and the maximum term of imprisonment from 5 years to 14 years. These amendments to section 45, however, will not come into force until one year after Royal Assent.

22 Bill C-10 increased the maximum term of imprisonment available for section 47 convictions from 5 years to 14 years. These amendments came into force immediately following Royal Assent.

23 Note that under section 2 of the Act, supra, note 5, a product includes an article and a service.

24 Section 718 of the Criminal Code (see Appendix II).

25 Denouncing illegal conduct expresses society's condemnation of the offender's conduct and should be a consideration in sentencing.

26 In the competition context, sentencing should protect the public interest in free competition by deterring others (general deterrence) and the offender in question (specific deterrence) from committing the offence in the future. For example, fines should neither be considered ‘a licensing fee' nor capable of being regarded as a probable cost of or necessary risk in doing business.

27 Section 718.1 of the Criminal Code (see Appendix II).

28 Section 718.2 of the Criminal Code (see Appendix II).

29 Deadweight loss is a permanent loss to society arising because the higher prices of a cartel cause customers (both direct and indirect) to buy less a desirable product or to not buy the product at all.

30 Moreover, with further levels of trade of the cartelized product through the distribution chain (e.g., either levels of further manufacturing or sales), there may be other quantitative and qualitative effects, such as additional deadweight loss, which arise at each additional level.

31 John M. Connor, "How High Do Cartels Raise Prices? Implications for Optimal Cartel Fines", Tulane Law Review 80 (December 2005): 513-570 [with Robert H. Lande]; John M. Connor, "Cartel Overcharges: Survey and Meta-Analysis", International Journal of Industrial Organization 24 (Nov. 2006): 1109-1137 (Special Issue The Economics of Cartels, Cartel Policy, and Collusion) [with Yuliya Bolotova]; Gregory J. Werden, "Assessing the Effects of Antitrust Enforcement in the United States", De Economist 156, No.4, 2008; OECD Competition Committee, as referred to in OECD, Directorate for Financial, Fiscal and Enterprise Affairs, Competition Committee, "Report on the Nature and Impact of Hard Core Cartels and Sanctions Against Cartels Under National Competition Laws" DAFFE/COMP(2002) 7, at page 2, para. 1, also referred to in OECD, Policy Brief "Hard Core Cartels - Harm and Effective Sanctions" , May 2002.

32 20 percent of the volume of commerce affected by the cartel is also used as a proxy for economic harm in the United States Sentencing Guidelines, available online at: www.USSC.gov .

33 As noted previously, Bill C-10, which received Royal Assent on March 12th, 2009, amended the Competition Act by increasing the maximum fine for section 45 convictions from $10 million to $25 million. The amendments to section 45, however, will not come into force until one year after Royal Assent.

34 For the purpose of this aggregation, it will not matter where the sales technically took place (e.g., where the sales are invoiced or where contract negotiations took place), but rather the Bureau will consider whether Canadian purchasers were harmed by the sales.

35 Canadian courts, within the context of competition law offences, have routinely accepted the use of affected volume of commerce to discern the magnitude of economic harm. Further, linking fines to the affected volume of commerce is a common method for estimating the magnitude of economic harm for cartel offences in other jurisdictions. See International Competition Network, Building Blocks for Effective Anti-Cartel Regimes Vol. 1 Part III Effective Penalties, 4th Annual Conference Bonn, Germany, June 6-8, 2005 available online at: www.internationalcompetitionnetwork.org.

36 For jurisprudence on this approach see, for example: R. v. McNamara (No.2) (1981), 56 C.C.C. (2d) 516 (Ont. C.A.), para. 42.

37 See, for example, the Choline Chloride case in which four companies pleaded guilty to conspiracy charges on the basis that they had agreed to largely stay out of the Canadian market. Press Releases relating to the four pleas taken in September 1999 and August 2003 are available online at: www.competitionbureau.gc.ca.

38 Economic harm arising from indirect sales typically manifests itself in two ways. First, some or all of the overcharge from the cartelized product may be passed through the respective distribution chain, resulting in a higher price of the intermediate or final good. Second, with further levels of trade of the cartelized product through the distribution chain (e.g., either levels of further manufacturing or sales), there may be other quantitative and qualitative effects, such as additional deadweight loss, which arise at each additional level.

39 It should be noted that harm from indirect sales may also arise in cases where there are indirect sales within Canada that arise from direct sales in or into Canada. For example, such a situation could arise where there are direct sales of a cartelized product into Canada and the cartelized product is then used as an input into another product, which is subsequently sold in Canada. While there may be other quantitative and qualitative effects (e.g., additional deadweight loss), which may arise at each additional level of trade within the distribution chain, unless there is evidence to the contrary, these effects are deemed to be included in the proxy of 20 percent of the volume of commerce affected of the direct sales.

40 As with direct sales, the volume of commerce in Canada associated with indirect sales is calculated for each cartel participant by aggregating the volume of the cartelized product that ended up in the intermediate or final goods sold into Canada over the time period that they participated in the offence. It will not matter where the sales of the intermediate or final product technically took place (e.g., where the sales are invoiced or where contract negotiations took place) but rather whether Canadian purchasers were harmed by the sales.

41 Within the context of this example, in cases where there are further levels of trade before the cartelized input is sold into Canada, the Bureau may similarly derive the volume of commerce by aggregating the sales of the cartel members' top customers to their top customers until the cartelized input is sold into Canada.

42 For example, there may be cases where the respective purchasers in Canada are able to pass through the cartelized price increases to indirect purchasers located outside of Canada, thereby reducing the total amount of harm in Canada caused by the cartel. In such cases, if the accused brings forward compelling evidence of the pass through and if the amount of the pass through is significant, it may be appropriate to discount the overcharge factor applied to the affected volume of commerce.

43 Sections 64 and 65 of the Act, supra note 5, and section 139 of the Criminal Code, supra, note 16.

44 Section 2 of the Criminal Code, supra, note 16, defines senior officer as a " representative who plays an important role in the establishment of the organization's policies or is responsible for managing an important aspect of the organization's activities and, in the case of a body corporate, includes a director, its chief executive officer and its chief financial officer".

45 See Part III, infra, for detail regarding leniency considerations in sentencing recommendations.

46 See the Competition Bureau Information Bulletin: Corporate Compliance Programs (2008), available online at: www.competitionbureau.gc.ca.

47 This is also listed as a factor to be considered in section 718.21 of the Criminal Code, supra, note 16.

48 Section 31 of the Act, supra, note 5, provides for the reduction or removal of customs duties in certain circumstances. Section 32 provides the Federal Court, on an information exhibited by the Attorney General of Canada, with the power to make a remedial order in respect of the use of exclusive rights and privileges conferred by intellectual property which prevent, lessen or limit competition unduly. In certain situations, a basis for enforcement action can arise out of an agreement between two or more parties. For more information on the application of section 32, see section 4.2.2 of the Intellectual Property Enforcement Guidelines (Ottawa, Industry Canada, 2000) available online at www.competitionbureau.gc.ca; Section 33 provides for the possibility of interim injunctions.

49 Supra, note 46.

50 Note that it is not possible for a person to be convicted of a cartel offence and receive no punishment other than a 34(1) prohibition order. A penalty of some sort must also be imposed by the court.

51 As noted previously, Bill C-10, which received Royal Assent on March 12th, 2009, amended the Competition Act by increasing the maximum term of imprisonment for section 45 convictions from 5 years to 14 years. These amendments to section 45, however, will not come into force until one year after Royal Assent. Bill C-10 also increased the maximum term of imprisonment available for section 47 convictions from 5 years to 14 years. These amendments to section 47came into force immediately following Royal Assent.

52 The importance of holding individuals responsible for their role in cartel violations under the Act and the validity of imprisonment as the ultimate punishment in order to achieve the goal of deterrence has been expressed by the Supreme Court of Canada in Thomson Newspapers v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425 at 514.

53 In these circumstances, the Commissioner would also consider the age and health of the individual, whether the person should be separated from the community for public safety reasons and the risk of re-offending.

54 Criminal Code, supra, note 16, section 512.

55 In this regard the Commissioner will expect to see the company's most recent audited year-end and interim quarterly/monthly financial statements, detailed financial projections for the next three years (including balance sheet and income statements), details of future strategic planning and any anticipated restructuring, details of any new or unreported assets or liabilities (such as available lines of credit), details of any ongoing or anticipated ownership changes and details of any ongoing or anticipated credit agreement amendments, restructuring, loan covenant breaches or changes in loan covenants.

56 For additional information on the resolution process, see Federal Prosecution Services Deskbook Chapter 20, supra, note 14.

57 Communications may include, but are not limited to, counsel proffers, witness interviews and any records created for the purpose of the discussions..

58 The terms of the cooperation required correspond to those of the Bureau's Immunity Program. This includes disclosing all information relating to the offence(s) for which leniency is being sought.

59 If not provided before the plea agreement is signed, this pledged cooperation will become a condition of the plea agreement.

60 A party that is not first to disclose conduct to the Bureau may nonetheless qualify for immunity if it is first to disclose information relating to another offence. This concept is known as "Immunity Plus". Immunity Plus encourages targets of ongoing investigations to consider whether they may qualify for immunity for other criminal anti‑competitive conduct. Although a company does not qualify for immunity for the initial matter under investigation for which it seeks leniency, the value of its assistance in a second matter can lead to immunity for the second offence and a reduction (the "plus") in the recommended sentence for its participation in the first offence. Immunity Plus is aimed at encouraging companies already under investigation to report the full extent of their illegal activities and put all competition law matters behind them. For additional information see the Bureau's "Responses to Frequently Asked Questions" in respect of the Immunity Program available online at: www.competitionbureau.gc.ca.

61 A "marker" is the confirmation given to an immunity applicant that it is the first party to approach the Bureau requesting a recommendation of immunity with respect to criminal activity involving a particular product. The marker guarantees the applicant's place at the front of the line provided the applicant meets all other criteria of the Immunity Program. A similar marker system establishing the place in line for leniency applicants will be established pursuant to this Bulletin.

62 This assumes that the marker will lead to a grant by the DPP of conditional immunity pursuant to the Bureau's Immunity Program.

63 The Immunity Bulletin, supra note 6, at Paragraph 17 and Responses to Frequently Asked Questions, supra note 60, at paragraphs 26-30 set out the type of information that will be expected of an immunity applicant. The same requirements will apply to a leniency applicant.

64 Pursuant to section 23 of the Act, supra, note 5.

65 The publication of a sample template plea agreement by the DPP is contemplated following public consultation on this Bulletin.

66 Ibid.

67 Supra, note 5.

68 In some instances, for example where the individual's company was the first leniency applicant, the DPP may determine that, in light of all the circumstances, individual charges are not required and will provide the individual with appropriate assurances that their information will not be used to commence proceedings against them.

69 Note that while Bill C-10, which received Royal Assent on March 12th, 2009, substantially amended section 45 of the Competition Act, these amendments will not come into force for a period of one year. This Appendix contains the current provisions of section 45 and not those that come into force in one year's time.

70 Note that Bill C-10, which received Royal Assent on March 12th, 2009, substantially amended section 47 of the Competition Act. These amendments came into force immediately following Royal Assent. This Appendix contains the provisions of section 47, as amended.

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