Competition Bureau submission to the OECD Competition Committee roundtable on Ex Officio Cartel Investigations and the Use of Screens to Detect Cartels
October 30, 2013
- Canada’s Competition Bureau (the "Bureau") is pleased to provide this submission to the OECD Competition Committee’s October 2013 roundtable on "Ex officio cartel investigations and the use of screens to detect cartels". The Bureau, headed by the Commissioner of Competition (the "Commissioner"), is an independent law enforcement agency responsible for the administration and enforcement of the Competition Act (the "Act")Footnote 1 and certain other statutes. In carrying out its mandate, the Bureau strives to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
- Cartels deprive Canadians of the benefits of competition, such as lower prices and increased product choice.Footnote 2 Therefore, cracking down on domestic and international cartels is one of the Bureau’s top enforcement priorities.
- The Bureau’s Immunity and Leniency Programs are its most valuable tools for detecting, investigating and prosecuting cartels. However, the Bureau also relies on a variety of other proactive and reactive methods to increase its detection of cartels, such as complaints from members of the public, partnerships with other agencies, and outreach to the procurement, business and legal communities. This submission briefly discusses these and certain other cartel detection methods used by the Bureau and provides a few examples of cartel cases in which these methods have been used successfully.
2. Immunity and Leniency Programs
- The Immunity ProgramFootnote 3 has proven to be the Bureau’s single most powerful means of detecting, investigating and prosecuting criminal activity under the Act. The goal of the Immunity Program is to uncover and stop criminal anti‑competitive activity prohibited by the Act and to deter others from engaging in similar behaviour.
- Under the Immunity Program, the first party to disclose to the Bureau an offence not yet detected or to provide evidence leading to a referral of the matter to the Public Prosecution Service of Canada (the "PPSC") Footnote 4 may receive immunity from the PPSC, provided that it fully cooperates with the Bureau’s investigation and any subsequent prosecutions. In Canada, immunity is available to both organizations and individuals.
- Since its inception, the Immunity Program has continued to grow in success. For example, while the Bureau received 15 applications for immunity in 2011, it received 19 such applications in 2012.Footnote 5 The Immunity Program’s continued appeal to those who would otherwise remain undercover is pivotal to the Bureau’s enforcement efforts.
- The Leniency ProgramFootnote 6 complements the Immunity Program by supporting the effective and efficient enforcement of the Act. Under the Leniency Program, the Bureau will recommend to the PPSC that applicants be granted recognition for timely and meaningful assistance to the Bureau’s investigation and any subsequent prosecutions, provided that they satisfy all of the conditions of the program. While leniency applicants are not eligible for a grant of immunity under the Bureau’s Immunity Program, their early admission and cooperation respecting their role in a cartel offence can earn them a substantial basis for lenient treatment in sentencing.
- The Bureau’s Leniency Program has been particularly successful in resolving cartel cases in a timely fashion. For example, between January 1, 2013 and September 1, 2013, the fines imposed in cartel cases in Canada totalled approximately CAD$46.5 million. Of this amount, approximately CAD$44 million (or 95 percent) was imposed on companies participating in the Leniency Program.
3. Other methods of cartel detection
- In addition to its Immunity and Leniency Programs, the Bureau uses several other methods to detect cartels. As discussed in more detail below, these methods include a dedicated Information Centre; the Criminal Cartel Whistleblowing Initiative; partnerships with police forces; outreach to the procurement, business and legal communities; proactive monitoring by Bureau employees; and increasing public awareness of the Bureau’s mandate and programs. Each of these methods has proven to be successful in facilitating the detection and deterrence of cartels in Canada.
3.1 Information Centre
- The Bureau’s Information Centre is the primary point of contact for both requests for information and complaints from members of the public. The public can contact the Bureau through the Information Centre by telephone, fax, mail or e‑mail. The Bureau also has an online form to facilitate this process. A number of the Bureau’s investigations are the result of information provided by complainants, who can be consumers, businesses, informants or whistleblowers.
- In 2011, the Bureau received 20,657 requests for information and complaints from members of the public through the Information Centre, of which 203 related to cartel activity. Similarly, in 2012, the Bureau received 17,798 requests for information and complaints from members of the public, of which 439 related to cartel activity.
3.2 Criminal cartel whistleblowing initiative
- Whistleblowers are an important source of information for the Bureau, particularly with respect to the detection of cartels. In order to encourage whistleblowers to come forward, the Act includes a specific provision protecting the identity of a whistleblower. In particular, the Act provides that "[a]ny person who has reasonable grounds to believe that a person has committed or intends to commit an offence under the Act … may notify the Commissioner of the particulars of the matter and may request that his or her identity be kept confidential with respect to the notification".Footnote 7 The Act prohibits employers from dismissing, suspending, demoting, disciplining, harassing or otherwise disadvantaging an employee, or denying an employee a benefit of employment, as a result of the employee providing information on reasonable belief and in good faith to the Bureau under the whistleblower provision.Footnote 8
- Whistleblowers in Canada are also protected by other legislations, including the Criminal Code, which makes it an offence for an employer to take disciplinary measures against, demote, terminate or otherwise adversely affect the employment of an employee, or to threaten to do so, because the employee has provided or will provide information to a person whose duties include the enforcement of federal law.
- The Bureau recently launched its Criminal Cartel Whistleblowing Initiative.Footnote 9 This initiative increases awareness of the whistleblowing provisions in the Act and provides an additional method for members of the public to report alleged cartel activity to the Bureau. The primary objectives of this initiative are to increase the quality and quantity of whistleblower reports and to increase the number of cases originating outside of the Immunity Program.
3.3 Partnerships with police forces
- The Bureau has partnerships with several Canadian police forces that complement and support the work of the Bureau. Specifically, the Bureau continues to strengthen its ties with the white‑collar crime investigation units of various police forces. The Bureau believes that the police officers working in these units may come across evidence of cartel activity in the course of their investigations that can be provided to the Bureau to pursue cartel investigations.
- By way of example, in 2011, the Quebec provincial police force, the Sureté du Québec (the "SQ"), created a Permanent Anti‑Corruption Unit ("UPAC"). UPAC’s mandate involves, among other things, coordinating investigations of corruption and collusion in the Quebec public system. In June 2012, following a joint investigation by UPAC and the Bureau, a total of 77 charges were laid against nine companies and 11 individuals in the construction industry in connection with a collusion scheme in the Saint‑Jean‑sur‑Richelieu region in Montreal. These charges included 20 counts of bid‑rigging against nine companies and 24 counts of bid‑rigging against six individuals.Footnote 10
- The Bureau’s close relationships with the SQ and the Royal Canadian Mounted Police, Canada’s national police force, have also led to the detection of several other cartels.
3.4 Outreach in the procurement, business and legal communities
- The Bureau regularly provides outreach presentations to the procurement, business and legal communities in Canada. The purpose of these presentations is to provide the members of these communities with the knowledge necessary to both detect and prevent cartel activity. In addition, the Bureau publishes tools, such as pamphlets and multi‑media documents, on its website. These tools are distributed to and used by both consumers and businesses in Canada.
3.4.1 Procurement authorities
- Providing outreach presentations to public procurement organizations at all levels of government has been and continues to be a priority for the Bureau. For example, in 2011, the Bureau provided 10 anti bid‑rigging outreach training sessions to more than 1,000 employees of Public Works and Government Services Canada ("PWGSC"), the principal procurement agency of the Canadian Federal government. These presentations provided PWGSC’s procurement officials with the knowledge necessary to detect, deter and report bid‑rigging to the Bureau. In particular, they included information on, among other things, the bid‑rigging provisions in the Act, the common forms of bid‑rigging, the characteristics that make an industry more susceptible to bid‑rigging, the warning signs for possible bid‑rigging, and the techniques that can be used to prevent bid‑rigging.
- Over the years, the Bureau and PWGSC have worked together to address the challenges posed by cartel activity, particularly bid‑rigging. Pursuant to this existing relationship, PWGSC refers bid‑rigging complaints and cases to the Bureau for investigation, and the Bureau provides annual training to PWGSC staff on bid‑rigging prevention.
- For example, in 2005, following an outreach session provided by the Bureau, PWGSC contacted the Bureau to raise concerns about certain bidding processes, and the Bureau began an investigation. As a result of this investigation, bid‑rigging charges were laid against 14 individuals and seven companies in February 2009. The parties were accused of rigging 10 bids to obtain Government of Canada contracts for information technology services worth approximately $67 million. Two individuals have each pleaded guilty to one count of bid‑rigging. The case against the other individuals and companies is currently before the courts and the PPSC is preparing for multiple trials.
- As a result of the publicity generated by this case, the public procurement community became more aware of the importance of combating bid‑rigging. The Bureau leveraged this increased awareness to expand its educational initiatives and, in particular, emphasize collaboration with PWGSC and other government departments.
- As part of this collaboration, the Bureau recently entered into a Memorandum of Understanding ("MOU") with PWGSC. The MOU is intended to strengthen the prevention, detection, reporting and investigation of possible cartel activity, including bid‑rigging, for procurement processes and real property transactions that fall under the responsibility of PWGSC. This agreement, the first of its kind for the Bureau, highlights the commitment of the Canadian Government, through the Bureau and PWGSC, to take steps towards eliminating illegal cartel activity, maintaining competition in the marketplace and saving taxpayers’ money.
- As part of the MOU, the Bureau and PWGSC agree to share information relating to procurement processes and real property transactions by way of collaboration in the areas of enforcement, education and awareness. By working together to share resources and exchange knowledge, both organizations will benefit from each other’s expertise and will enhance their ability to achieve their goals of preserving and promoting fair, efficient and competitive processes. The two organizations will also collaborate in training and awareness programs to educate relevant stakeholders and PWGSC staff on how to detect and prevent cartel activity.
3.4.2 Business and legal communities
- The Bureau also provides outreach sessions to the business and legal communities, including to industry and trade associations and to corporate and in‑house counsel. For example, in 2011, the Bureau conducted 15 outreach sessions with over 300 member of the business community. Following these presentations, the Bureau uses a post‑outreach presentation survey to evaluate the effectiveness of the presentations and participants’ increased awareness.
- As another example of outreach by the Bureau, in 2009, leading up to the 2010 Winter Olympics in Vancouver, the Bureau reached out to the construction industry by conducting a survey on possible bid‑rigging on infrastructure projects. This survey increased awareness of the Bureau’s mandate and programs, and assisted in the prevention and detection of bid‑rigging in that industry.
3.4.3 Proactive monitoring and competitive intelligence
- Bureau officers regularly monitor the media, websites, antitrust publications and other public sources of information for potential cartel conduct. This includes monitoring the websites of foreign antitrust agencies for cases that could have a connection to Canada. The Bureau also benefits from information sharing within the agency.
- These monitoring efforts have proven to be successful at detecting cartels in Canada. For example, as part of its active monitoring of retail gas prices and news media, the Bureau became aware of allegations of price‑fixing among gas stations in several communities in Québec. In particular, it was reported that a number of gasoline pumps had been damaged purportedly because the retailer had not gone along with the price increases of others in the city.
- Following an investigation by the Bureau, which included the use of "mystery shopping", wiretaps and searches, charges were laid in June 2008, July 2010 and September 2012 against a total of 39 individuals and 15 companies.Footnote 11 To date, 33 individuals and seven companies have pleaded or were found guilty, with fines totally over CAD$3 million. Of these 33 individuals, six have been sentenced to terms of imprisonment totalling 54 months. Further criminal trials are scheduled for 2014 for other parties accused of price fixing.
- This investigation of retail gas prices in Quebec has been one of the Bureau’s most successful cases to date, and only came about as a result of proactive monitoring by Bureau employees.
3.4.4 Increased public awareness of the Bureau’s mandate and programs
- Maintaining and improving public awareness of the Bureau’s role and mandate is a crucial feature of maintaining a credible enforcement program. In order to improve public awareness, the Bureau regularly publishes press releases following the laying of charges and/or guilty pleas, and publishes many speeches that are given by Bureau officials. These announcements are circulated by e‑mail to subscribers and are also available on the Bureau’s website. The Bureau also publishes specific price‑fixing and bid‑rigging awareness materials on its website.
- The Bureau’s cartel awareness efforts, especially the media attention that high profile cases draw, increase awareness of competition law throughout Canada. For example, on June 6, 2013, the Bureau announced that criminal charges had been laid against three companies and three individuals accused of conspiracy under the Act for their alleged role in fixing the price of chocolate confectionery products in Canada. Following the announcement, a total of 33 major national and regional daily newspapers across Canada printed articles the next day reporting the facts of the Bureau’s announcement. These charges also generated extensive radio and television coverage in national, regional and local news broadcasts across Canada. In the week following the announcement, there were 2,704 visits to the announcement on the Bureau’s website and 345 Twitter hits related to the matter.
- This increased awareness helps to ensure that the public is knowledgeable about the role and mandate of the Bureau, and familiar with the tools that can be used to report suspected cartel activity and other violations of the Act. Increased public awareness also aids in deterring cartel behaviour.
- While the Immunity and Leniency Programs continue to be the Bureau’s most important tools for detecting, investigating and prosecuting cartels, the Bureau also uses a number of other reactive and proactive methods to increase its detection of cartels. These methods effectively complement the Immunity and Leniency Programs, creating a more comprehensive and successful regime for detecting and deterring cartels. This ultimately results in greater competition in Canada, including lower prices and increased product choice for consumers.
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