Archived — Corporate Compliance Programs
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Draft for Public Consultation
This document is a draft and should only be used for the purposes of this public consultation(September 18 - November 17, 2014).
Aussi offert en français sous le titre Les programmes de conformité d'entreprise.
The Competition Bureau (the "Bureau") is an independent law enforcement agency that ensures Canadian businesses and consumers prosper in a competitive and innovative marketplace. The Bureau investigates anti‑competitive practices and promotes compliance with the laws under its jurisdiction, namely the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act and the Precious Metals Marking Act (collectively, the "Acts"). The Competition Act includes amendments that came into force on July 1, 2014 as a result of Canada’s Anti-Spam Legislation ("CASL").
This Bulletin provides guidance regarding credible and effective corporate compliance programsFootnote 1 designed to ensure compliance with the Acts. In particular, this Bulletin describes measures that Canadian individuals and businessesFootnote 2 should consider in order to prevent or minimize their risk of contravening the Acts, and to detect contraventions should they occur. It also provides tools to help businesses develop their own compliance programs. For example, a Corporate Compliance Program Framework setting out the essential components of a credible and effective program has been included with this publication as an appendix.Footnote 3 In addition, this publication provides hypothetical case studies illustrating how the Bureau may consider the credibility and effectiveness of a compliance program.Footnote 4
Implementing a corporate compliance program is not required by the Acts, but can, in certain circumstances, be ordered by a court,Footnote 5 agreed to in a consent agreement or required as part of an alternative case resolution ("ACR") as a condition of the Bureau not pursuing enforcement action. Businesses should nonetheless take a proactive approach and recognize the value of a credible and effective program.
This Bulletin outlines the essential components of a credible and effective corporate compliance program. To be credible, it must demonstrate the company’s commitment to conducting business in conformity with the law. To be effective, it needs to motivate and inform all those acting for the company, including executives, managers and employees,Footnote 6 about their legal duties, the need for compliance with internal policies and procedures, the potential costs to the business of contravening the law, and the harm contraventions cause to the Canadian economy. It also needs to include tools for management to use in order to prevent and detect contraventions of the Acts.
A good corporate compliance program helps to identify the boundaries of permissible conduct, as well as identify situations where it would be advisable to seek legal advice. Moreover, in some cases, courts have recognized a credible and effective compliance program as a mitigating factor when assessing remedies in the event of a breach.
Increasingly, credible and effective compliance programs that address a wide range of legal and ethical obligations are expected of companies around the world. The Bureau recognizes that many businesses may already have a program in place and encourages them to take the opportunity to ensure that the essential components highlighted in this Bulletin are reflected in their program.
The revisions to this Bulletin reflect the importance that the Bureau places on corporate compliance programs as a means to promote the benefits of broader compliance under the Acts. Although the Bureau will not sanction or approve such programs, this Bulletin, as well as other documents from the Bureau, is intended to provide information and guidance in developing a credible and effective program.
Table of Contents
- Importance of Compliance
- Fostering a Culture of Compliance
- Basic Requirements for a Credible and Effective Corporate Compliance Program
- Consideration Given to a Corporate Compliance Program
- 5.1 General
- 5.2 Specifics
- 5.2.1 Immunity and Leniency
- 5.2.2 Criminal Sentencing and Civil Remedies
- 5.2.3 Impact on the Bureau’s Decision to Pursue Competition Act Matters under the Civil or the Criminal Regime
- 5.2.4 Due Diligence Defence
- 5.2.5 Consent Agreements and other Non-Contested Resolutions
- 5.2.6 Where Management is Involved in the Breach
- 5.2.7 Corporate Compliance Programs Implemented for Appearances Only
- 5.2.8 Third Party Corporate Compliance Programs
- How to Contact the Competition Bureau
The Bureau publishes various guidelines, bulletins and pamphlets to provide information and to promote compliance with the Acts.
The Bureau first issued its Corporate Compliance Programs Bulletin (the "Bulletin") in 1997 to provide guidance on the Bureau’s approach to corporate compliance programs ("compliance programs"). The Bulletin was subsequently revised to reflect changes in the legislation administered and enforced by the Bureau.
This Bulletin has been updated to reflect changes on the part of the Bureau in how it recognizes the existence of a credible and effective compliance program and how it will consider such programs in the administration and enforcement of the Competition Act. The Bulletin has also been updated to incorporate advances in the design of credible and effective compliance programs.
The Bureau’s objective remains the same — to promote compliance with the law.Footnote 7 To further this objective, the Bureau has expanded the Bulletin and provided more guidance to help Canadian businesses design credible and effective compliance programs. The tools developed by the Bureau are incorporated in the Bulletin and in the attached Appendices, including a new Appendix D, which sets out hypothetical case examples of compliance issues. The Appendices provide general guidance to help businesses develop and implement effective and credible programs. They should not be seen as prescriptive tools, but rather as illustrative ones.
Each business is different and, as such, must tailor its program to address the compliance issues specific to its industry or market. For example, industry leaders, multinational companies, small start-up businesses, and companies that have a history of contravening the law, will almost certainly have different needs when establishing and implementing a credible and effective program. Accordingly, the relevant components described in this Bulletin are neither industry nor company-specific, and are recommended as the baseline for the development of any in-house program.
1.2 The Small and Medium Enterprise (the "SME") Sector
This Bulletin is designed to provide a comprehensive guide to assist all businesses in the development of a credible and effective compliance program. Corporate compliance programs can be designed according to the scale and size of the business in question. Larger businesses, generally speaking, will need more comprehensive programs. SMEs should implement and follow a corporate compliance program that is commensurate with their size and business activities.
Regardless of the size of the business, the first requirement of a credible and effective compliance program is a commitment by the owners and managers of the business to compliance with the law. However, it is the second requirement which will provide SMEs with the key guidance on how to design a compliance program that fits their unique business circumstances — that is the risk assessment. SMEs need to ask where their risk of contravention is most likely. In the vast majority of cases, this will be limited to a very few sections of the Acts involved. The other requirements — the policies it adopts, its training, monitoring, discipline and program evaluation — can be geared towards mitigating areas of higher assessed risk. At the same time, having a corporate compliance program can also help a SME identify circumstances where it potentially is being victimized by anti‑competitive conduct of other parties.
The Bureau will continue to develop resources to assist SMEs in complying with the Acts, including providing links on its website to other external sources of useful information.Footnote 8
1.3 Implementation and Advice
The decision to implement a compliance program is generally voluntary. However, the Bureau will recommend or request, whenever appropriate, that a program be established in the context of a prohibition order obtained under section 34 of the Competition Act, a probation order,Footnote 9 a consent agreement under sections 74.12 and 105 of the Competition Act, as well as in ACRs. In certain circumstances, the Bureau may request that an independent compliance monitor be appointed to monitor the implementation and operation of any such compliance program.
The views expressed herein are not intended to restate the law or to be a binding statement of how the Commissioner of Competition’s ("Commissioner") discretion will be exercised in a particular situation. This Bulletin is no substitute for the advice of legal counsel and businesses should obtain independent legal advice when developing a corporate compliance program. Enforcement decisions and the ultimate resolution of any particular matter are based on the specific circumstances of the matter.Footnote 10 Readers should refer to the specific Acts when questions of law arise and, if a particular situation gives rise to concerns, should obtain independent legal advice. The final interpretation of the Acts rests with the courts.
2. Importance of Compliance
2.1 Why is Compliance Important?
Every business and individual has a duty to act lawfully. The Bureau operates on the initial assumption that all businesses and their management wish to comply with all applicable laws. Compliance is important for all businesses, regardless of their size, for both legal and practical reasons.
There are significant legal, economic and reputational risks of non-compliance. For example, contravention of the Competition Act, whether civil or criminal, can expose a business to significant fines or administrative monetary penalties ("AMPs") and recovery of damages by private parties.Footnote 11 In addition, most provinces have procedures in place to certify class action proceedings; it is common to see such actions filed when an offence has been committed under the Competition Act.
Non-compliance can also result in negative publicity, loss of management time, significant legal costs and a prohibition from participating in government bidding processes. In addition to, or in lieu of, fines, individuals convicted of criminal offences may be sentenced to a period of imprisonment.
The importance of a compliance program in avoiding contraventions under the Acts, and in detecting and dealing with such behaviour, should not be underestimated. The procedures put in place as the result of a compliance program serve not only to identify unlawful or questionable conduct, but also to promote awareness that will result in ethical standards of conduct.
2.2 The Benefits of a Credible and Effective Corporate Compliance Program
A credible and effective compliance program must be designed to prevent contravention of the Acts, detect at an early stage inadvertent or unauthorized actions that may contravene the Acts, and identify circumstances where the company is potentially being affected by the anti‑competitive conduct of other parties. Early detection that is the result of an effective and credible program may serve a risk-management function by allowing the company or individual to be the first-in to request immunity from prosecution or to be better placed to apply for lenient treatment in sentencing. In addition, the Bureau will take into consideration the existence of a credible and effective compliance program as a mitigating factor when making recommendations to the Public Prosecution Service of Canada (the "PPSC")Footnote 12 including in conjunction with an application under the Bureau’s Leniency Program.Footnote 13 It may also be taken into account in determining whether a matter will be pursued along a criminal or civil track where both options are available, and in assessing the magnitude of AMPs the Bureau may seek in a reviewable matter.
Having a credible and effective program in place also helps to ensure that a business is aware of the formal powers available to the Commissioner. For example, under the Competition Act, the Commissioner can apply to a judge for court orders that allow Bureau staff to search and seize records and compel parties to attend oral examinations, produce records or prepare written returns. A business or individual that fails to comply with a court order could face criminal sanctions. It is thus essential that a business respond appropriately to a court order obtained by the Commissioner under the Competition Act. In addition, it is important to note that, under the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act, designated employees are authorized to enter the business premises of a dealer, without a warrant, to inspect and ensure compliance with these Acts.Footnote 14 A program should, therefore, provide tips for responding appropriately to court orders and inspectionsFootnote 15 and for protecting businesses and individuals from possible charges of obstruction of justice.Footnote 16
A credible and effective compliance program also plays a crucial role for trade associations because they face unique compliance issues. Given that an association provides a forum where competitors collaborate on association activities, trade associations are exposed to greater risks of anti‑competitive conduct. A number of past Bureau cases have involved trade associations that were engaged in agreements to harm competition. It is critical that trade associations implement credible and effective programs with strict codes of ethics and conduct and appropriate procedures and compliance steps to prevent improper conduct and to protect the trade association and its members from being used as a conduit for illegal activities.Footnote 17
Some of the specific benefits of a credible and effective program may include the following:
- compliance with the law;
- reducing the risk of non-compliance;
- triggering early warnings of potentially illegal conduct;
- maintaining a good reputation;
- reducing costs related to litigation, fines, AMPs, adverse publicity and the disruption to operations resulting from a Bureau investigation and/or proceedings before the court;
- reducing the exposure of employees, management and the business to criminal or civil liability;
- increasing awareness of possible conduct in breach of the Acts among competitors, suppliers and customers in the market;
- assisting a business and its employees in assessing the competition risks they may face;
- assisting a business and its employees in their dealings with the Bureau; for example, by identifying contraventions of the Acts early enough to request immunity or leniency;
- improving a business’ ability to recruit and retain staff — a business with a reputation for compliance is likely to attract higher-quality employees and have a better employee retention rate;
- reducing instances of internal theft and fraud by encouraging ethical and legal conduct by employees toward the company, i.e., those who will steal for you may also steal from you;
- improving a business’ ability to attract and retain customers and suppliers who value companies that operate ethically; and
- allowing a business to qualify for favourable treatment in sentencing or AMPs.Footnote 18
3. Fostering a Culture of Compliance
Policies, procedures and training are, on their own, insufficient to ensure compliance. To be effective, these must be part of a larger culture that instills compliance as a fundamental value at all levels of an organization.
Fostering a culture of compliance must start at the top. Management at the highest executive levels must set the tone by their own actions and recognize that it is part of their leadership role to ensure compliance with the law.
The strongest model to ensure the full and proper execution of compliance objectives is one where management and the board of directors assign responsibility for the program to a high level executive position — a "compliance officer" or other appropriately titled position. Irrespective of the size and resources of a particular business, the person or group responsible for compliance must be in a position to act effectively, with independence, professionalism, and empowerment to implement a credible and effective program. This includes having the necessary financial and human resources, full access throughout the business, participation in senior management decision making and a solid understanding of what is taking place within the business itself, the industry in which it operates and an ability to properly assess the potential non-compliance risks to the business.
At the same time, it is important to note that, while a compliance officer may implement and operate a program, managers bear ultimate responsibility for actual compliance. History demonstrates that executives and managers are too often directly involved or complicit in cartel contraventions. Thus, for any compliance program to be truly credible and effective, it must include a particular focus on compliance risks that arise from the actions of individuals with decision-making roles, particularly senior executive and managers.
Employees also play a key role in the implementation of a successful program because they are, in effect, responsible for carrying out the day-to-day operations of the business. A business may consider asking employees who are in a position to potentially engage in, or be exposed to, conduct in breach of the Acts, to certify in writing that they have read and understand the company’s program, including its policies and procedures.Footnote 19
As noted above, it is recognized that a credible and effective program must be tailored to a business’ situation and may vary in its particulars according to, among other things, its resources. However, while resource constraints may limit the model adopted by a business, they in no way negate the necessity for such programs and, if anything, they heighten the importance of management taking a leading and active role in their promotion. While a smaller business might not have the resources to implement an elaborate program, management can nonetheless foster a culture of compliance through less resource-intensive actions, for example, by educating its employees about the law and the consequences of non-compliance. It is the level of commitment, not the amount of money spent, which is critical for the success of a compliance program.
4. Basic Requirements for a Credible and Effective Corporate Compliance Program
Given the differences in the nature of the Acts, certain elements of a program must reflect the specific Act that is being discussed. The Bureau recognizes that businesses need to have the flexibility to adopt an integrated program encompassing all the Acts, or separate programs for each individual Act, provided that the basic requirements of a credible and effective program are properly addressed.
However, there are seven elements that are fundamental to a credible and effective compliance program, regardless of the particular model adopted, its level of complexity or the size of a business. The essential elements that should be incorporated in every program are:
- 4.1 Management Involvement and Support
- 4.2 Corporate Compliance Risk Assessment
- 4.3 Corporate Compliance Policies and Procedures
- 4.4 Training and Education
- 4.5 Monitoring, Auditing and Reporting Mechanisms
- 4.6 Consistent Disciplinary Procedures and Incentives for Compliance
- 4.7 Compliance Program Evaluation
Each of these elements is discussed below.
4.1 Management Commitment and Support
Management's clear, continuous and unequivocal commitment and support is the foundation of a credible and effective corporate compliance program.
Management, in the performance of its fiduciary duties, must always exercise care, skill and diligence and act in the best interests of the business, including compliance with the relevant statutes and regulations. In addition to the broad range of traditional risks faced by a business, management must also identify and assess the principal compliance risks the business faces and implement appropriate systems to manage those risks.
Management must foster a culture of compliance within the business by both actively participating in the compliance program and assuming a highly visible role in its promotion on an ongoing basis. By demonstrating its clear, continuous and unequivocal commitment to compliance, management is conveying the message that contraventions of the Acts are not acceptable under any circumstances. Presenting values and principles, but not acting upon them undermines the credibility of a program and reduces the potential benefits a company could otherwise attain as a result of its program. Failure to execute is the main reason compliance programs fail.
Where there is a board of directorsFootnote 20, it should be involved in the appointment of the compliance officerFootnote 21 and endorse the company’s compliance program. The compliance officer should communicate with the board of directors and report directly on compliance program issues, such as the implementation and effectiveness of the program, disciplinary actions resulting from a breach of the program’s policies and procedures as well as any allegations of contraventions of the Acts. The compliance officer should only be removable by the board of directors on terms set in advance by the board. The involvement of the board of directors serves as an additional level of fiduciary protection where managers may be the perpetrators of a contravention of the law.
The board of directors and management must also commit to allocating the necessary financial, human resource and infrastructure support to ensure that the compliance officer is able to fully implement the program.
Suggestions to help meet this requirement include the following:
- management should be responsible for clearly promoting compliance with the Acts as a fundamental part of their business policy, and be held accountable for their actions in this regard;
- management should expressly commit to compliance, ensure that an appropriate compliance program is established, actively participate in programs designed to educate and support compliance, and create incentives that promote adherence to the business’ compliance program;
- a committed and capable member of management should be appointed as a compliance officer, responsible for the business’ compliance program and for dealing with all questions and concerns pertaining to compliance with the Acts;
- the board of directors should have full responsibility for the selection and the terms for dismissal of the compliance officer; and for the approval of an appropriate compliance program;
- the board of directors should be informed of any disciplinary actions resulting from breaches of the compliance program; and
- the compliance officer should report to the board of directors on any compliance issues.
4.2 Risk-Based Corporate Compliance AssessmentFootnote 22
A thorough assessment of the potential risks faced by a company will allow it to properly design compliance strategies that address those risks.
As previously discussed, non-compliance with the Acts exposes a business and its staff to civil and criminal penalties, the risk of private civil litigation and reputational damage, among other negative consequences. As a result, risk management is essential in order to properly address the breadth of potential exposure to non-compliance risks.
The compliance officer, in conjunction with management, must work to identify the key legal risks faced by the business. Adopting a risk-based approach to the design of its compliance program allows the business to tailor the program to the specific risks faced and to design proportionate compliance measures to meet the most likely and most serious of those risks. A proportionate approach provides the flexibility to incorporate specific approaches to compliance into a program based on, among other things, the size of the business; the nature of the industry; and the internal culture of the business. For example, all businesses, regardless of their size, should include measures that address their potential exposure to the criminal provisions of the Competition Act relating to bid-rigging, price fixing and other cartel activities. The risks associated with other provisions of the Competition Act, such as the abuse of dominance provisions, will depend upon the nature and size of the business. However, the business must be cognizant that those risks may change as the business evolves and its compliance program will need to be sufficiently flexible to allow it to adapt. For example, new potential risks can arise in new or unusual circumstances, such as when the business becomes a party to a proposed merger, or enters a new product or geographic market.
One approach to identifying risks is to determine who in the business has the greatest opportunity to contravene the law.Footnote 23 Individuals who are likely to have contact with competitors, such as those in sales and marketing roles, as well as participants in trade association activities and conference attendees, are at a higher risk of engaging in cartel activities than individuals in manufacturing or financial positions. Similarly, the marketing department and retail businesses generally will need, at a minimum, guidance on the false and deceptive marketing provisions of the law. However, all employees should be made aware of the compliance program as a disaffected employee may be inclined to take some form of action that puts the business at risk. In those circumstances, tools that promote a positive employee environment throughout the organization, including in human resources, may help identify and prevent contraventions of the law.
Where the duties associated with managers’ and employees’ positions are unlikely to change significantly from year to year, businesses should be able to incorporate a risk assessment and requisite mitigation plan into their job descriptions. At the same time, businesses must recognize that the assignment of new duties to specific positions may alter the existing risk profile and ensure that the mitigation strategy is sufficient to address any new risks.
Significant changes to the business activities can affect risk profiles. For example, a reduction in the business’ workforce might create changes that undercut previously effective compliance controls. A decision to enter a new productFootnote 24 or geographic market can change the risk calculation. A merger transaction or a new marketing campaign can change or add new risks that need to be considered.
Similarly, the business’ ongoing risk assessment must also be able to identify new risks that may arise from other sources, such as changes in the law and the associated jurisprudence, the Bureau’s enforcement policies and changes in the industry (for example, the characteristics of the markets in which it operates, new products, new geographic markets, deregulation, changes among competitors, and changes in supply and demand levels and chains).
Suggestions to help meet this requirement include the following:
- the compliance officer, in conjunction with management, should conduct risk assessments annually to better assess compliance issues and identify priorities;
- the types of risk factors the compliance officer and management should consider include:
- whether staff participate in trade associations in conjunction with their competitors;
- whether the business regularly recruits employees from competitors (particularly managers, marketing executives and salespeople);
- whether markets are characterized by a small number of competitors (e.g., whether there are frequent occurrences where the same bidders compete on tenders);
- whether it is common practice to have, or it is easy to gain, competitor intelligence within the sector;
- whether joint ventures among competitors are common;
- whether competitors of the business are also its customers;
- the compliance officer can initially use existing job descriptions to identify risk factors associated with positions in the business and incorporate the appropriate mitigation strategies as part of the requirements of the position. The compliance officer should regularly review job descriptions and speak with employees to ensure that the requirements of their job descriptions have not changed in a way that introduces new risk factors for the position.
- the compliance officer should ensure that new risks arising from changes from both within and outside of the business are monitored and assessed and that strategies are developed to properly address those risks.
4.3 Corporate Compliance Policies and Procedures
The substantive content of a corporate compliance program should be described in a company publication.
The development and documentation of compliance policies and procedures tailored to a business’ operations are critical to the success of a program. Compliance policies and procedures should be designed in a manner most relevant to the business’ operations and employees’ daily activities. For example, if a business often submits bids, a list of "dos and don’ts" when preparing a bid submission should be included in its policies and procedures. Similarly, it should be made clear that employees are not to engage in discussions with competitors about pricing, allocating markets or customers, or limiting supply of any products, in any situation whether professional or social.
Furthermore, the compliance policies and procedures should establish internal controls designed to prevent contraventions from happening. Examples of such internal controls may include:
- ensuring that employees who handle purchases from suppliers who are also competitors are distinct from employees responsible for sales and/or marketing;
- requiring that employees obtain prior approval and undergo compliance training before attending trade association meetings where competitors may be present; and
- limiting employee participation in trade associations to those that have implemented their own credible and effective compliance programs.Footnote 25
Policies and procedures should be updated when required to reflect changes to the business or the industry, the law and jurisprudence, and the Bureau’s enforcement policies that have been identified in the risk assessment process. All staff should be promptly notified of any changes in the program, and the policies and procedures should be available to all employees and managers in a readily accessible, easy to understand format.
From a broader perspective, the company should encourage third parties, such as trade associations and those acting for the company, to address risks associated with their operations. This may include monitoring third parties’ conduct and requiring that third parties acting for the company, or any trade associations that they are associated with, implement their own credible and effective compliance programs.
Programs should be updated at regular intervals to ensure that they are relevant to ongoing compliance risks, and the business’ compliance officer should document efforts to promote and improve the program.
Suggestions to help meet this requirement include the following:
- establish clear, written, compliance policies and procedures and distribute them to all relevant staff;Footnote 26
- take reasonable measures to promptly notify staff of changes to these compliance policies that result from changes to the business’ compliance risks profile due to changes in business activities, the industry, the law and jurisprudence, and the Bureau’s enforcement practices;
- design policies and procedures for different business units based on the compliance risks that may arise (for instance, a list of "dos and don’ts" and "Red Flag" issues); and
- require employees to sign a certification letter (see sample at Appendix B) stating that they have read and understand the company’s code of conduct and applicable compliance policies.
4.4 Training and Education
A credible and effective corporate compliance program includes an ongoing training and communications component focusing on compliance issues for staff at all levels who are in a position to potentially engage in, or be exposed to, conduct in breach of the Acts.
(a) Why Businesses Need Compliance Training
A major objective of a compliance program is to prevent contraventions of the Acts. All staff members need to understand the parameters of acceptable behaviour. Training managers and employees to be able to detect prohibited conduct and educating them about the range of penalties and remedies for non-compliance is essential. Training should also motivate employees to respect the law. Given the unique characteristics of each business, the Bureau recognizes that a business requires flexibility in designing effective compliance training and communication programs.
(b) How to Train Employees
Education and training should demonstrate, in a practical way, how compliance policies and procedures affect daily activities.Footnote 27 Documents alone can only go so far in promoting compliance. The most important thing in this context is that a business chooses the most effective methods for training and communicating to its employees based on the company’s size and compliance risk assessment. For example, a business can use small group seminars, manuals, email messages, online training or workshops to effectively educate staff. Bringing together employees who perform similar duties to present and discuss scenarios dealing with the specific realities of their work provides the link between the business’ policies and procedures and the situations an employee may face. Additional training could include descriptions of prohibited conduct and the issuance of regular bulletins that discuss current compliance issues that may affect the operations of the business.
A credible and effective program must be successful at providing training on the general principles and the business’ specific policies for individuals who deal with situations that could raise issues under the Acts. Case studies drawn from circumstances faced by the business can be particularly effective, including those where contraventions resulted in discipline.
The Bureau offers a variety of publications and compliance tools that can be used in the training and education component of a business’ program.Footnote 28
(c) Delivery of Training
Effective training is best delivered by experts (i.e., by knowledgeable legal counsel or a compliance officer) and should be delivered in a consistent manner throughout the business to avoid different employees receiving conflicting information. For example, businesses can use blended methods where online training is used to communicate a base level of information to a broader group, with additional live training that is focused on the highest risk staff or is targeted at specific circumstances that certain employees may encounter. Regardless of the methods used, it is crucial to provide opportunities for extensive discussions and time for questions in training sessions.
The business should have mandatory compliance training as part of a compliance program framework for all staff in positions with identified risks for non-compliance. New appointments to these positions should be required to take training as part of assuming those duties. Incumbent managers and employees should be required to renew their training on a periodic basis, depending upon the risks associated with the position.Footnote 29 To ensure all employees receive the training, the company should document attendance and consider it a factor in the employee’s performance review for that time period.
Management should also play an active role in delivering compliance messages to employees, reinforcing their support for the program, by taking the necessary compliance training themselves, sending emails supporting the compliance program and referring to the program during meetings, presentations and other speaking opportunities. As such, management may wish to capitalize on the educational information from the Bureau to assist in training and reference examples of businesses and individuals that have been sanctioned for breaching the Acts.
Suggestions to help meet this requirement include the following:
- train all staff as soon as possible (for instance, during an initial orientation session) regarding the importance and expectation of compliance;
- tailor training to address particular real-life situations faced by the business;
- make regular training a requirement of performance review for medium and high risk positions;
- regularly assess the knowledge and attitudes of staff towards compliance policies and procedures; and
- document the content of all training sessions and record attendance.
4.5 Monitoring, Auditing and Reporting Mechanisms
Monitoring, auditing and reporting mechanisms are vital to the success of any corporate compliance program.
Effective monitoring, auditing and reporting mechanisms help prevent and detect contraventions and high risk conduct, educate staff, provide both employees and managers with the knowledge that they are subject to oversight and determine the program’s overall efficacy.
The most effective monitoring, auditing and reporting procedures are those that also enable businesses to identify areas of risk, areas where additional specific training is required and areas where compliance issues may require new policies to be developed. This can be achieved in many ways and will depend on the business’ particular needs, such as the extent of its exposure to potential contraventions of the Acts. The Bureau does not endorse any particular procedure or combination of procedures; rather, a business should be satisfied that the measures it implements are generally effective to prevent breaches of the Acts and to detect and address them if and when they do occur.
While all such mechanisms are crucial to the success of any compliance program, the compliance program must allow the compliance officer to conduct a detailed, professional investigation of compliance issues raised,Footnote 30 and allow the compliance officer to take the necessary steps to stop ongoing, and prevent future, contraventions. The independence of the compliance officer’s investigations is paramount, given that management may be involved in a possible contravention, or may be complicit through lack of action. Ensuring that the compliance officer has access to the resources necessary to conduct the investigation and can report directly to the board of directors is equally important.
Monitoring refers to the ongoing procedures implemented to prevent contravention of the Acts. Evidence of such efforts may also support a due diligence defence, where applicable, should litigation arise.Footnote 31 Depending on the risks, periodic or continuous monitoring may be necessary. A business should take the opportunity to verify whether any of its internal or external practices may potentially contravene the Acts.
Audits may be periodic, ad hoc or event-triggered and are designed to determine whether a contravention of the law has occurred and, if so, to ensure that it has been dealt with appropriately. Compliance audit practices are likely to vary from one business to another depending on the specific risks faced. They can also be used to examine the effective operation of the compliance program.Footnote 32
An internal reporting procedure encourages staff to provide timely and reliable information that can be the basis for further investigation by the compliance officer. Managers, employees and others acting for the business must be able to obtain advice and raise concerns without fear of retaliation and without first having to raise issues with their superiors or supervisors. Staff must be encouraged to freely report conduct that they believe contravenes the Acts or compliance policies. The program should clearly identify which actions require reporting, and when and to whom they should be reported.
An effective reporting system can be achieved in different ways, for example by implementing a confidential reporting system, promoting an anonymous hotline or by identifying legal counsel as compliance resources. Anyone reporting a concern or cooperating in an investigation should be guaranteed the strongest of protections from retaliation by others in the business, including management.
While an internal reporting mechanism is important, there may be situations where the use of an external reporting mechanism would be more appropriate. A program should educate employees who are in a position to engage in, or be exposed to, conduct in potential breach of the Acts on the Bureau’s Immunity Program, Leniency Program and whistleblowing provisions (sections 66.1 and 66.2 of the Competition Act).Footnote 33
Suggestions to help meet this requirement include the following:
- monitor business activities continuously or periodically, as appropriate, to ensure compliance;
- identify employees who are exposed to a heightened risk (for instance, based on roles and responsibilities, previous issues and misconduct) and ensure training is taken as a mandatory condition of performance review;
- plan and conduct audits, either by appointment or unannounced, to confirm whether a business, or area of a business, is fully complying with the Acts; an audit may include a review of paper and computer files (especially emails and other electronic message systems) of staff who are in a position to engage in, or be exposed to, conduct in potential breach of the Acts;
- take immediate action to stop any contravention of the Acts;
- put in place a confidential reporting procedure (for instance, inform the compliance officer, and through that position the board of directors, when an incident occurs and report to legal counsel);
- cooperate with the government where a breach has occurred (which involves self-reporting); and document all compliance efforts (this will also assist in advancing a defence of due diligence, where available).
4.6 Consistent Disciplinary Procedures and Incentives for Compliance
Consistent disciplinary actions as well as appropriate compliance-related incentive plans demonstrate the seriousness with which the business views conduct in breach of the Acts and its commitment to compliance.
A disciplinary code or policy setting out the consequences for individuals who initiate or participate in conduct in breach of the Acts, or otherwise do not abide by a business’ program, deters misconduct and reflects a commitment to compliance. A credible and effective program should explicitly state that disciplinary actions (for example, suspension, demotion, dismissal and even legal action) will be taken when a manager or an employee fails to comply with the compliance program or contravenes the Acts. It should also state that disciplinary actions will be taken where a manager fails to take reasonable steps to prevent or detect misconduct.
Providing appropriate incentives for performing in accordance with the compliance program can also play an important role in fostering a culture of compliance (for instance, compliance and active support of the program should be considered for the purposes of employee evaluations, promotions and bonuses). Incentives work as effective tools for a business that wishes to promote compliance by employing concrete actions.Footnote 34
All disciplinary actions and procedures involving specific individuals or groups in a business should be recorded as proper documentation may be relevant in the context of a contravention of the Acts.Footnote 35
Suggestions to help meet this requirement include the following:
- take appropriate and consistent disciplinary action (up to and including dismissal) for failure to comply with the business’ program or with the Acts;
- when a contravention occurs, examine whether management took all reasonable steps that would have prevented or detected the contravention and hold managers accountable to that standard; and
- create an incentive system for staff at all levels to adhere to and actively support the business’ compliance program.
4.7 Compliance Program Evaluation
A program’s ability to deliver its core objective must continuously be assessed. It is also necessary to monitor new developments in the law and business activities to determine their impact on the program.
Evaluating a compliance program on a regular basis will ensure that it is achieving its goal of promoting compliance. This will also allow an assessment of whether the program captures new or emerging risks.
The compliance officer should be given the responsibility and authority to undertake this review and to make the necessary changes to the compliance program. In situations where changes to the law or the jurisprudence have an immediate effect on the business’ risk exposure, the compliance officer should take immediate steps to notify staff of what is required to remain compliant with the law.
To evaluate the effectiveness of an existing program, the compliance officer could conduct surveys, informal post-training follow-up meetings, focus groups and exit interviews with key individuals. For example, the effectiveness of a compliance training program can be measured by regularly testing knowledge of the law and compliance policies and procedures, as well as attitudes and beliefs about compliance, to determine whether the program needs to be updated or modified. Another source of input is to monitor developments from areas of corporate compliance outside of competition law and, when appropriate, incorporate their best practices into the program.
Regular evaluation also allows an opportunity to refresh the training material and the course presentation styles to ensure that staff remains engaged during training process; repeated training with the same material or approach can quickly become stale and managers and employees can lose interest.
There are a number of elements in a compliance program that can be assessed. For example, the program’s overall design can be evaluated. Another area is the approach used to implement the program, in order to test whether all the elements have been effectively rolled out. In addition, the compliance officer can test the program’s impact to measure how well it is working and whether employees are retaining its core messages.
Evaluation can also test separate elements of the compliance program. Are the training methods working? Are written policies and procedures easily understood? Is the auditing function properly designed to detect illegal conduct? Does the reporting system work as intended, and are employees willing to use it or is there a fear of retaliation?
The review should extend to include the resources provided by the business to support the compliance program. It is recognized that these programs are ancillary to a company’s main business and that other demands will dictate where resources are directed. However, the risks associated with a contravention of the law are sufficiently high that the board of directors and managers cannot ignore the benefits of a properly resourced, credible and effective compliance program.
Suggestions to help meet this basic requirement include the following:
- the compliance officer (in conjunction with legal counsel, when necessary) should regularly review all aspects of the compliance program, including implementation, training, audit procedures and reporting systems, to ensure that it is accurate and reflects any recent legislative and jurisprudential developments;
- the compliance officer should, either immediately or at the end of the review, depending upon the circumstances, take the necessary steps to strengthen the program;
- the review should extend to the resources allocated to support the program to ensure that it is able to function properly; and
- various tools should be available to conduct a review, including individual and group interviews, focus groups, surveys and exit interviews.
5. Consideration Given to a Corporate Compliance Program
The existence of a compliance program does not immunize businesses or individuals from enforcement action by the Commissioner or from prosecution by the PPSC. However, in determining the most appropriate means to resolve cases, including offences where the exercise of due diligence is a defence, the Bureau may give weight to the pre-existence of a credible and effective program in determining how to proceed against companies and in making sentencing recommendations to the PPSC, including recommendations on the fine that should be imposed, or in determining the magnitude of remedy to seek in with respect to reviewable matters.
A compliance program will be considered credible and effective where the company can demonstrate that it was reasonably designed, implemented and enforced in the circumstances. The burden of establishing this is always on the company. Companies that make such claims do so voluntarily and on the understanding that the Bureau will test the credibility and effectiveness of the compliance program. In these circumstances, the Bureau will expect timely access to relevant records and individuals in order to properly assess the integrity of the company’s program.Footnote 36
Implementing a credible and effective program, or taking verifiable steps to strengthen an existing program in response to a contravention of the Act, can also have a positive impact on the Bureau’s sentencing recommendations, or on remedies sought in civil reviewable matters. However, the potential benefits available to a company with a pre-existing credible and effective compliance program will be greater, in most circumstances, than for a company that waits until it is investigated before implementing or enhancing a program.
5.2.1 Immunity and Leniency
Businesses or individuals involved in activities that may violate the criminal provisions of the Competition Act can, in certain circumstances, approach the Bureau and request immunity from prosecution in return for co-operating with the Bureau’s investigation and any ensuing prosecutions. Under the Bureau's Immunity Program, the Commissioner will recommend that the PPSC grant immunity to the first party that comes forward and satisfies the identified criteria.Footnote 37 However, the PPSC has ultimate discretion to accept or reject the Commissioner’s recommendation.
The Bureau will recommend immunity from prosecution for the business or individual involved in the offence that is first-in to make an application and meet all the requirements of the Immunity Program. Subsequent parties to come forward are able to request that the Bureau recommend to the PPSC other types of lenient treatment, such as recommendations to the court for reduced fines in return for co-operation with the Bureau and the PPSC. The degree of lenient treatment recommended by the Bureau is generally reduced with each subsequent application.
Consequently, the timing of a request for lenient treatment is important. A compliance program may assist a business in the early detection of a contravention of the criminal provisions of the Competition Act, thereby allowing it to benefit from the advantages of being either the immunity applicant or receiving a greater degree of leniency.
A business, after making an application for immunity or leniency, may choose to either implement a new corporate compliance program or make adjustments to a pre-existing program to better enable it to comply with the provisions of the Competition Act. This will assist in ensuring that it adopts policies and practices that conform with the law in the future. The Bureau may encourage the PPSC to require that an applicant implement a credible and effective program using this Bulletin as a guide in conjunction with any grant of immunity or leniency.
5.2.2 Criminal Sentencing and Civil Remedies
The mere pre-existence of a program will not automatically result in a favorable recommendation. However, when the Bureau is satisfied that a compliance program, in place at the time the offence occurred, is credible and effective, in keeping with the approach set out in this Bulletin, the Bureau will treat the program as a mitigating factor when making recommendations to the PPSC in conjunction with an application under the Bureau’s Leniency Program.Footnote 38
In this regard, responsibility for the review of a company’s program will rest with the Chief Compliance Officer (the "CCO") of the Bureau. The CCO will conduct this review, with the sole purpose of determining whether the compliance program meets the criteria described in this Bulletin regarding its credibility and effectiveness. At the same time, information gathered during the investigative process that pertains to the credibility and effectiveness of a compliance program will be shared with the CCO.Footnote 39
If a leniency applicant requests fine mitigation on the basis of the company having a credible and effective corporate compliance program, the CCO will require timely access to all appropriate corporate records and staff to make a determination.
While such access is voluntary and the decision to grant access rests with the leniency applicant, it should be recognized that an inability to properly assess the compliance program will affect the recommendation of the CCO regarding any additional leniency considerations. The CCO’s recommendation will be communicated to the Senior Deputy Commissioner of Competition for the Criminal Matters Branch, who is ultimately responsible for making leniency recommendations to the PPSC. Regardless of the nature of the offence, it is important to note that the PPSC has ultimate discretion whether to accept or reject the Bureau’s recommendation, but the Bureau’s recommendation is given due consideration by the PPSC.Footnote 40
In reviewable matters, the Commissioner may apply to the Tribunal or, in the case of deceptive marketing practices, either the Tribunal or a court, for a remedial order. In this regard, the pre-existence of a credible and effective program may enable a business to demonstrate mitigating conduct, including evidence that the activity is contrary to its policies and the statements of management, that those committing the contravention took steps to avoid detection, and that the conduct was terminated as soon as it became known to management. Depending on the circumstances, the pre-existence of a credible and effective program may have a positive impact on the magnitude of the remedy sought by the Commissioner. For example, it may reduce the amount of the AMP and/or other remedy sought by the Commissioner in a case involving deceptive marketing practices. It is important to note that the Tribunal or court has discretion whether to accept, reject or modify the Commissioner’s remedy recommendation.
The false or misleading representations and deceptive marketing practices provisions of the Competition Act, which prohibit making a materially false or misleading representation to the public for the purposes of promoting a product or a business interest, may be pursued either civilly or criminally if there is evidence that the conduct was engaged in knowingly or recklessly. The Bureau’s decision of whether to pursue a matter under the civil or criminal track may take into account, among other things, the pre-existence of a credible and effective program, as well as whether it is in the public interest to recommend to the PPSC to charge a company, an individual, or both.
5.2.4 Due Diligence Defence
For certain false or misleading representations and deceptive marketing practices provisions under the Competition ActFootnote 41 and certain provisions of the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act, a company may argue that it had exercised due diligence to prevent the conduct.
Although the pre-existence of a program is not, in and of itself, a defence to allegations of wrongdoing under any of the Acts, a credible and effective program may enable a business to demonstrate that it took reasonable steps to avoid contravening the law. In this regard, such a program may support a claim of due diligence. Documented evidence of a credible and effective corporate compliance program will assist a company in advancing a defence of due diligence, where available.
5.2.5 Consent Agreements and other Non-Contested Resolutions
Depending on the circumstances, conduct contravening the Acts may be resolved without fully contested proceedings. The Competition Act allows for the registration of a consent agreement with the Tribunal under section 105 to address civil reviewable matters under Part VIII of the Act. Similarly, a consent agreement may be registered with the Tribunal under section 74.12, which may include the publication of corrective notices. Section 34 provides that a court may, on application of the Attorney General of Canada, issue a consent prohibition order with or without an admission of guilt.Footnote 42 The Bureau’s effort to increase compliance without the need for contested proceedings is also supported by the availability of ACRs which may include, among other compliance instruments, undertakings, information contacts, information letters, warning letters and compliance meetings.
In certain circumstances, the Commissioner may be more inclined to consider an alternative form of resolution to litigation, including entering into a consent agreement, where the business can demonstrate that:
- the conduct was contrary to a credible and effective corporate compliance program in existence at the time of the contravention; and
- it terminated the conduct in breach of the Acts as soon as it was detected;
- it attempted to remedy the adverse effects of the conduct; the contravention occurred at a lower level in the business and was not carried out or endorsed by management.
Although an in-house program is not a prerequisite for ACRs in either civil or criminal matters, the existence of a credible and effective program may provide a business the tools through which it is able to satisfy the above-noted requirements.Footnote 43
If it is determined that an alternative form of resolution is appropriate to resolve a matter, and a credible and effective program is not already in place, the Commissioner will, whenever appropriate, require the implementation of such a program as part of the resolution. Where a program is already in place, the Commissioner will, whenever appropriate, require the business to review its program and make the appropriate changes to prevent repetitions of the conduct in question.
When the implementation of a program forms part of the resolution of a matter, the business may be required to demonstrate to the Commissioner that its program is likely to prevent conduct in breach of the Acts. As a starting point, businesses may wish to refer to section 4 of this Bulletin — Basic Requirements for a Credible and Effective Corporate Compliance Program — to assess whether the proposed program is likely to be credible and effective.
5.2.6 Where Management is Involved in the Breach
If one or more managers either participated in or condoned conduct that breaches the Acts, it may be apparent to the Bureau that management’s commitment to compliance was not serious and the program was neither credible nor effective. Knowingly contravening the law despite the existence of a program may be considered an aggravating factor for individuals. In such cases, the Commissioner may also recommend that charges be laid against the company. The Commissioner may, in those circumstances, give consideration to evidence from the company that it exercised due diligence to prevent the commission of the offence.
5.2.7 Corporate Compliance Programs Implemented for Appearances Only
If a program is established for appearances only, with no intention or steps taken to implement it, or if it is used only to conceal evidence or obstruct justice, this also may be considered an aggravating factor for sentencing purposes or any other form of a resolution, including AMPs. In such circumstances, the conduct of the parties in a business will be closely examined.
5.2.8 Third Party Corporate Compliance Programs
Competition law compliance risks can arise outside of the proprietary business activities of companies, such as through relationships with third parties. As part of their compliance program, companies should examine the third parties with whom they do business, or interact with respect to business, for potential risk. Where third parties represent significant risk, companies should encourage or require, as appropriate, that those parties also have credible and effective compliance programs. Thus, a company may determine that its participation in a trade association represents a significant risk relating to potential cartel behaviour, and may prohibit its representatives from participating unless the association implements a credible and effective competition law compliance program. In other situations, it may assist smaller companies who are seeking to act as a sales agent for the company to implement a competition law compliance program.
In relevant scenarios, the extent to which companies encourage, require and facilitate the implementation of credible and effective compliance programs with third parties is another important factor that the Bureau will evaluate in determining what consideration it will give to a company’s compliance program.
The success of Canadian competition laws is largely attributed to compliance by firms and individuals. A credible and effective compliance program is a valuable tool in preventing and detecting contraventions of the law.
A compliance program educates company staff about competition law and the significant harm that may result from a failure to comply. It safeguards the reputation of the business. It educates employees on the penalties for both the business and them as individuals, as well as the civil risks associated with private litigation. An effective compliance program can also make an important contribution to broader public knowledge and understanding of the laws and the importance of free and fair competition. Credible and effective compliance programs thus serve a public purpose and make an important contribution to ensuring that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
As a result, it is important to have a credible and effective program that will help to clarify the limits of legitimate business conduct. Such a program will enhance the understanding of what is acceptable behaviour so that legitimate competitive practices can be vigorously pursued without contravening the law.
Anyone wishing to obtain additional information about the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act, the Precious Metals Marking Act or the program of written opinions, or to file a complaint under any of these acts should contact the Competition Bureau's Information Centre.
50 Victoria Street
National Capital Region: 819-997-4282
TTY (for hearing impaired): 1-800-642-3844
Anyone wishing to apply under the Commissioner’s Immunity Program may contact:
Senior Deputy Commissioner, Criminal Matters 819-997-1208, or
Deputy Commissioner, Fair Business Practices 819-997-1231
Anyone wishing to apply under the Commissioner’s Leniency Program may contact:
Senior Deputy Commissioner, Criminal Matters 819-997-1208
Appendix A: Corporate Compliance Program Framework
This Corporate Compliance Program Framework ("Framework") was designed to help Canadian businesses design their own corporate compliance program in relation to one or more of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act ("Acts"). It should be used in conjunction with the Competition Bureau’s ("Bureau") Bulletin on Corporate Compliance Programs. The Framework refers to Appendices (such as a Training and Education Program, Procedures for Monitoring, Auditing and Reporting and a Disciplinary Code) to be drafted by businesses to suit their specific needs and the competition risks they may face.
The Framework is a flexible tool that should be adapted to the specific activities and resources of a particular business. The Framework is a general guide only and the Bureau will not deem a compliance program deficient or non-credible if a company deviates from the Framework, where the deviation is reasonable in the circumstances. The Bureau encourages any innovations that are designed to improve the effectiveness of the Framework.
The Framework is offered for the purpose of providing guidance. It is not to be taken as a substantial corporate compliance program and needs to be tailored to a business’ needs. Furthermore, the content of the Framework and accompanying Appendices are not intended to serve as legal advice. Readers should obtain independent legal advice when developing a corporate compliance program.
To be completed by the subject company:
[COMPANY X] Corporate Compliance Program
This Corporate Compliance Program ("Program") has been established so that our business complies with the competition and labelling laws that apply to our business.
It includes practical advice concerning rules of conduct that will help our business anticipate and prevent contraventions before they occur, and detect and report contraventions if they do occur. This Program is for use in our daily business by all employees.
1.2 Commitment to Compliance
1.2.1 [Company X] is committed to complying with the law in letter and in spirit. There may be instances where this Program sets standards that are higher than those required by the law. Nevertheless it is imperative that you follow the rules of conduct established by this Program strictly.
[A personal statement by the chief executive officer or his/her equivalent stressing his/her personal commitment to the Program, and his or her uncompromising adherence to the competition and labelling laws and the principle of competitive markets may be incorporated. This is more powerful if it is personal, rather than being written by company lawyers, and may include examples from the executive’s experience.]
1.2.2 Our board of directors [or the business’ highest appropriate governing authority] has designated a senior corporate officer responsible for the development, implementation and maintenance of the Program. The [Compliance Officer or other appropriately titled position] may be contacted at: [Contact Information].
1.3 Employees’ Responsibility for Compliance
1.3.1 While the [Compliance Officer or other appropriately titled position] manages the Program, daily responsibility for compliance with the law rests with each and every officer, manager and employee of the business. Compliance with the law protects not only our business, but also each of us individually.
1.3.2 In addition, our business has developed Policies, Procedures and Practical Guides that are available [link to intranet, or indicate other readily accessible location], in order to assist you in recognizing improper conduct and knowing when and how to seek advice.
1.4 Canadian Competition Law
The purpose of Canadian competition law is to maintain and encourage effective competition in Canada. Effective competition benefits all of us by ensuring competitive prices, service and quality, and by encouraging greater innovation. The Acts maintain a competitive marketplace by prohibiting certain activities that might reduce or prevent competition or harm consumers. The Commissioner of Competition and staff of the Competition Bureau (the "Bureau") administer and enforce these Acts. A general description of each of these Acts is set out in the appendix attached to this Program.
1.5 Penalties and Remedies under the Acts
1.5.1 A contravention of the Acts, whether civil or criminal, can have serious legal consequences for our business and our employees. For example, contraventions can:
- expose the business to significant criminal fines or civil administrative monetary penalties, restitution, orders from the courts or Competition Tribunal that prohibit the continuation of the practice and/or impose other obligations on the company, and the recovery of damages by private parties; and
- expose employees convicted of criminal offences to fines and imprisonment or to administrative monetary penalties.
1.5.2 [Discuss the penalties and remedies for both the company and employees that are associated with the provisions of the Acts that are the most likely to apply to the business’ activities based on the risks you may face.]
1.6 Subject Personnel
1.6.1 The Program applies to all of us, at all levels of the business; this is important for anyone in a position to potentially engage in, or be exposed to, illegal conduct. When we refer to "employees", we mean it in the broadest of terms, including officers, managers, employees and anyone else acting for our company.
1.6.2 It is the personal responsibility of all employees to conduct their activities on behalf of our business in compliance with both the letter and the spirit of the law. No one who is employed by our company has the authority to engage in any conduct, or knowingly permit a subordinate to engage in any conduct, that contravenes the law or this Program.
1.6.3 Anyone who engages in such conduct or who otherwise contravenes the Program or the law may be subject to appropriate disciplinary or corrective measures, up to and including dismissal. Any manager or supervisor who fails to take reasonable steps to prevent or detect contraventions will also be subject to discipline. This is in addition to any criminal or civil liability that may be imposed on the individual as a result of a finding of the courts or the Competition Tribunal.
1.7 Employee Acknowledgment
1.7.1 Each employee is required to acknowledge that he/she has read and understands this Program and that he/she understands his/her obligations under it. Such an acknowledgement will also be sought in the event that significant changes to the Program take place.
2. Management Involvement and Support
2.1 Our business recognizes that management’s clear and unequivocal support is the foundation of a credible and effective compliance program.
2.2 As part of acting in the best interests of our business, management must always demonstrate leadership and a commitment to legal and ethical conduct.
2.3 It is management’s duty to promote and ensure compliance with the law. Management is accountable for promoting and complying with the law.
2.4 While management is accountable for compliance, the responsibility to manage the Program is delegated by the board of directors [or the highest governing authority] to the [Compliance Officer or other appropriately titled position].
3. Corporate Compliance Policies and Procedures
3.1 The business recognizes that strong compliance policies and procedures are critical to the success of the Program.
3.2 Our company’s Compliance Policies, Procedures and Practical Guides are available at [either an attached hyperlink or attached in Appendix [ ], whichever is appropriate]. These Policies and Procedures will be updated to reflect changes in the business, the law, the Bureau’s enforcement policies, or the industry. Reasonable measures will be taken to promptly notify all employees of such changes.
Policies and Procedures shall:
- be written in plain language and made available to all employees;
- identify activities that are illegal or questionable and the consequences for contravention under the Acts;
- provide examples to illustrate the specific practices that are prohibited, so that employees can easily understand how the application of the Acts may impact on their own duties and responsibilities;
- provide guidance on the company’s policies regarding the creation and management of corporate documents;
- provide guidance to employees on the criminal risks of obstructing an inquiry by the Commissioner, including providing examples of the types of activities that may constitute obstruction;
- outline the possible consequences of breaching the Program and the law;
- inform employees about the provisions of the Competition Act that protect whistleblowers, including a discussion of the consequences of any retaliation against whistleblowers for the company;
- inform employees about the Bureau’s Immunity and Leniency Programs;
- provide a code of conduct giving instructions on how to respond when a search warrant is executed or when an inspection is being conducted by the Bureau;
- provide a code of conduct giving instructions on how to respond when a court order compelling the production of records or oral testimony is served; and
- provide a code of conduct regarding the participation of its employees to any trade association activities.
4. Training and Education
4.1 Our business recognizes that to be effective, the Program must include an ongoing training component that addresses compliance issues for all employees.
4.2 An outline of our company’s Training and Education Program is attached at Appendix [ ].
The Training and Education Program shall:
- require each employee to participate in appropriate ongoing training provided by our business;
- require all new employees to participate in training as soon as practicable after the commencement of their employment, but prior to being put in position where they might violate the law;
- cover all compliance issues the company may face that are relevant to the duties of that employee;
- provide employees that face particular exposure to compliance risks with more in-depth training;
- provide guidance on specific business conduct that should be avoided;
- ensure that all relevant training materials are available;
- allow sufficient opportunity for questions and discussion during training sessions;
- ensure that training is delivered by experts and that it is consistent throughout the company; and
- be evaluated regularly to make sure it is working and reflects the business activities and the state of the law.
4.3 A copy of the company’s appropriate guidance materials relating to this Program will be distributed to all employees upon commencement of their employment.
5. Monitoring, Auditing and Reporting Mechanisms
5.1.1 The [Compliance Officer or other appropriately titled position] shall ensure that the Program provides for monitoring of business activities continuously or periodically, as appropriate based on the risk assessment associated with those activities, to ensure compliance; and
5.1.2 The [Compliance Officer or other appropriately titled position] shall ensure that the Program is reviewed and evaluated periodically, and that the Program is updated when issues arise, when there are new developments in the law or the business activities of our company, and when opportunities for improvement are detected.
5.2.1 The [Compliance Officer or other appropriately titled position] shall conduct periodic, ad hoc audits, or event-triggered investigations, as appropriate, to confirm whether our business is fully complying with the Acts and whether our Program is being implemented properly and operating effectively;
5.2.2 The [Compliance Officer or other appropriately titled position] shall review and update this Program when issues are detected; and
5.2.3 Procedures for Auditing are attached at Appendix [ ].
5.3.1 All instances of non-compliance with the Program or the law shall be reported and communicated to the [Compliance Officer or other appropriately titled position], who shall regularly report to [the highest governing authority] in our company;
5.3.2 The Program is intended to help employees comply with the requirements of the law, recognize improper conduct, understand how you must behave because of the law, and know when to seek advice;
5.3.3 If employees have any questions concerning the Program or the law, they should contact the [Compliance Officer or other appropriately titled position] and/or company legal counsel [for companies that have one];
5.3.4 If employees become aware of a breach or possible breach of the Program or the law, they must report it to the [Compliance Officer or other appropriately titled position] immediately;
5.3.5 No employees shall suffer any adverse employment consequences for reporting a possible contravention of the Program or the law. In that regard, the company undertakes to guarantee the employee’s [pay level, employment level; promotion opportunities, etc.] and guarantees that in circumstances where there are bona fide grounds for concern, regardless of whether in the end it proves to be a contravention of a law, that the employee will not be demoted or suffer any other form of punishment; and
5.3.6 Procedures for Reporting are attached at Appendix [ ].
6. Disciplinary Procedures and Incentives
6.1 The business is strongly committed to compliance with this Program and the law. We take non-compliance very seriously.
6.2 Each employee’s commitment to this Program is taken into account as part of our incentive program, and in decisions about advancement and promotion in our company. [Provide further details here].
6.3 Any breach of this Program and/or the Acts will result in disciplinary action, as described in the Disciplinary Code.
6.4 A Disciplinary Code is attached at Appendix [ ].
[Signature of management]
Appendix A — Overview of the Laws Enforced by the Commissioner of Competition
The Competition Act
Canadian competition law is contained in the Competition Act, a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing certain advertising practices and sets out certain prohibitions on how competitors may deal with each other, as well as how businesses treat their suppliers and customers. Specifically, the Competition Act addresses, among other things, conspiracy (such as price fixing, market allocation and output restriction), bid-rigging, merger review, abuse of dominance, false or misleading representations, double ticketing, multi-level marketing and pyramid schemes, bait and switch selling, sale above advertised price, refusal to deal, price maintenance, exclusive dealing, tied selling, and market restrictions. The most recent amendments to the Competition Act came into effect on July 1, 2014 as a part of CASL.
The Consumer Packaging and Labelling Act
The Consumer Packaging and Labelling Act is a law that establishes the requirements relating to the packaging, labelling, sale, importation and advertising of pre-packaged products. It requires that pre-packaged consumer products bear accurate and meaningful labelling information to help consumers make informed purchasing decisions. The Consumer Packaging and Labelling Act prohibits false or misleading representations and sets out specifications for mandatory label information, such as the product’s name, net quantity and dealer identity.
The Textile Labelling Act
The Textile Labelling Act is a law relating to the labelling, sale, importation and advertising of consumer textile articles. It requires that textile articles bear accurate and meaningful labelling information to help consumers make informed purchasing decisions. The Textile Labelling Act prohibits false or misleading representations and sets out specifications for mandatory label information, such as the generic name of each fibre present and the dealer's full name and postal address or a CA identification number.
The Precious Metals Marking Act
The Precious Metals Marking Act is a law relating to the marking of articles containing precious metals. It provides for uniform description and quality markings of articles made with gold, silver, platinum or palladium to help consumers make informed purchasing decisions. The Precious Metals Marking Act prohibits the making of false or misleading representations related to precious metal articles. It also requires that dealers who choose to mark their articles with representations related to the precious metal quality, do so as described by the Act and accompanying regulations.
Enforcement of the Acts
The Commissioner investigates matters under the Competition Act through the use of investigative powers set out in the Act. These include, among others, the ability to search offices, seize records and interview individual employees under oath. In situations involving the criminal provisions of the Act, the Commissioner refers the case to the PPSC which assumes responsibility for laying charges and pursuing the case in the courts. In situations involving the civil provisions of the Act, the Commissioner will pursue the matter directly by filing an application with the Competition Tribunal or, in certain cases, the courts.
Under the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Prec ious Metals Marking Act, inspectors can enter and inspect business premises of a dealer of pre-packaged products, textile fibre products or precious metal articles, and seize such products and articles.
Appendix B: Certification Letter
A business may consider asking all employees, including all levels of management, who are in a position to potentially engage in, or be exposed to, conduct in breach of the law to certify in writing that they have read and understand the company’s compliance program and their obligations under it. The business should make it known that this is a requirement for all employees at risk, so that it is clear that everyone in such a position is required to adhere to the policy. This Certification Letter is intended to be adapted by each business prior to being signed by employees. Readers should obtain independent legal advice regarding this Certification Letter.
I, ____________________ of the City of ____________________, am employed by [Company X] in the capacity of [job description or title]. I acknowledge that I am subject to and am required to comply with [Company X]’s Corporate Compliance Program, including its Code of Conduct (the "Program").
This is to advise that I have read and understand [Company X]’s Code of Conduct, the goal of which is to promote ethical conduct and compliance with the law.
I understand that compliance with [Company X]’s Program is a condition of my continued employment with [Company X] and that failure to comply with the Program may result in disciplinary action, including termination of employment. I also understand that this certification letter is not a guarantee of continued employment with [Company X].
WITNESSED THIS ______ DAY OF ______, ______.
Appendix C: Due Diligence Checklist
The following Due Diligence Checklist is designed to help businesses comply with the Acts.Footnote 44 The Checklist provides examples only and is not exhaustive. This Checklist is intended for compliance officers or other compliance experts within a business. These examples are meant to be adapted by each business as a starting point and should be tailored prior to being distributed to employees. Readers should obtain independent legal advice if a particular situation gives rise to concerns.
- Ensure that any wrongdoing is promptly reported to your business’ legal counsel, management or compliance officer.
- Ensure that the identity of the compliance officer and how to contact this officer is known to all employees.
- Ensure that any potential issues of compliance with the Act are considered when preparing documents or presentations.
- Ensure that the Competition Bureau is contacted if you suspect or have information that the company, competitors or suppliers are breaching or have breached the Act.
- Ensure that legal advice is sought if a particular situation gives rise to concerns.
- Ensure that all employees have access to the business’ corporate compliance officer and are familiar with the compliance program.
- Ensure that all employees acknowledge that they have read and understood the code of conduct, are familiar with the compliance program and that they understand their obligations.
- Be aware that businesses may be held responsible for representations made by employees.
- Be aware that management will be held accountable first and foremost.
- Consider requesting a written opinion from the Commissioner prior to engaging in business activities that may raise concerns under the Competition Act. Advice can also be sought under the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.
- Be aware that the Bureau has Immunity and Leniency Programs where parties can self-report their involvement in criminal activities in return for immunity or favourable treatment in criminal prosecutions.
Conspiracy and Bid-rigging
- Ensure that all pricing decisions are made independently of competitors or others outside of your company.
- Ensure that legal advice is sought before contacting competitors, as contact with competitors may result in concerns under the Competition Act.
- Ensure that records of any contacts with competitors are kept where concerns may arise.
- Ensure that legal advice is sought before entering into any agreement with a competitor.
- Be aware that reaching an agreement, including any informal understanding or discussion, with competitors about pricing, market or customer allocation, production levels or other agreements dealing with an element of competitive rivalry contravenes the Competition Act.
- Be aware of the compliance risks that can arise when a competitor is a customer and also a supplier or joint venture partner, and seek legal assistance as appropriate.
- Be aware that agreeing with competitors not to compete for certain customers or in a particular product or geographic market contravenes the Competition Act.
- Be aware that agreeing with competitors on preventing other businesses from competing in a particular product or geographic market contravenes the Competition Act.
- Be aware that discussing prices, changes in industry production, capacity or inventories contravenes the Competition Act.
- Be aware when pre-announcing prices or price lists, or engaging in any behaviour that could increase one’s ability to coordinate pricing, market allocation, production levels or any other element of competition.
- Be aware of making any comments that could be viewed as signaling to competitors any intentions or expectations regarding price, trade terms or other elements of competition.
- Be aware when making any comments that can be perceived as threats or promises to competitors regarding pricing, market share or any other element of competition.
- Be aware that discussing pricing, market allocation, production levels or another element of competitive rivalry in "informal meetings" or "off-the-record" conversations at the business’ functions, through social media, or as a component of any electronic information package, contravenes the Competition Act. If improper discussions arise, business representatives should leave the meeting and have their departure recognized. The incident should be reported immediately to the appropriate authorities or legal counsel.
- Ensure that all discussions with competitors are confined to the immediate subjects for which the meeting was convened. If you have questions about the topics to be discussed and the topics to be avoided, consult your business’ legal counsel in advance.
- Ensure that you adhere to a clear and written agenda prior to meeting with competitors. You may wish to have legal counsel attend the meeting to provide guidance during the course of the meeting.
- Ensure that you consult with your business’ legal counsel any time there are concerns about discussions that took place at a meeting or function or elsewhere with competitors.
- Ensure that the Competition Bureau is contacted where suspicions of bid-rigging exist (e.g. a business is a victim of bid-rigging or has information about a bid-rigging scheme).
- Be aware that agreeing with a person to submit prearranged bids without prior notice of the agreement to the tendering authority is a criminal offence.
- Be aware that agreeing with a person not to submit a bid without prior notice of the agreement to the tendering authority is a criminal offence.
- Be aware that agreeing with a person to withdraw a bid without prior notice of the agreement to the tendering authority is a criminal offence.
Restrictive Trade Practices: Abuse of Dominance,Footnote 45 Exclusive Dealing, Tied-selling, Market Restrictions, Price Maintenance and Civil AgreementsFootnote 46
Ensure that, where questions arise, legal advice is sought or that the Bureau is contacted before engaging in practices that may impact the state of competition (this can be of concern in circumstances where you may be considered a leader in a marketFootnote 47 or have some degree of market power, or where you are considering an agreement with a competitor that may significantly lessen competition in a market.) For example, exercise caution in the following situations:
- before implementing a loyalty program or an exclusivity agreement with your customers;
- when using one product as leverage to force or induce a customer to purchase another product;
- before selling articles at a price lower than your cost;
- before penalizing a customer that supplies a product outside a defined market;
- when refusing to supply a product to a would-be customer if this would-be customer may be substantially affected or precluded from carrying on business because of the refusal;
- when entering into agreements with, or making promises or threats to, resellers of products to influence upward, or discourage the reduction of, the price at which they sell or advertise a product within Canada;
- suggesting retail prices — in such a case, ensure that it is clearly stated that suggested retail prices are provided as guidelines only and that producers or suppliers have no obligation to charge the suggested prices;
- refusing to supply a product to, or discriminating against, another business because of its low pricing policy; and
- when entering into, among other things, information sharing agreements, research and development agreements or joint production agreements.
- Ensure that legal advice is sought or that the Bureau is contacted when in doubt on the requirement to notify the Commissioner of a merger.
- Ensure that all appropriate documents are produced as part of any required notification to the Commissioner.
- Before closing, beware of taking steps to coordinate with an acquisition target before the Bureau has provided its advice regarding the potential impact of the merger.
- Consider a due diligence exercise before any transaction to determine if there are likely competition law issues arising as a result of any proposed merger and whether the merger target has a compliance program.
- Plan for implementation of a compliance program after an acquisition occurs.
False or Misleading Representations and Deceptive Marketing Practices
- Be aware of the amendments to the Competition Act that came into effect on July 1, 2014 as a result of CASL.
- Ensure that no electronic message contains false or misleading sender information or subject matter information.
- Ensure that no false or misleading representations are made in locators (e.g., a URL or metadata
- Ensure that, when engaging in telemarketing, the following is disclosed at the beginning of every communication:
- the name of the company or person the communicator is working for;
- the type of product or business interest the communicator is promoting; and
- the purpose of the communication.
- Ensure that, when engaging in telemarketing, the following is disclosed at some time during every communication:
- the price of any product being promoted; and
- any restrictions or conditions that must be met before the product is delivered.
- Be aware that telemarketers are forbidden to:
- make any representation that is false or misleading in a material respect;
- conduct a contest, lottery or other game where delivery of the prize is conditional on payment in advance, or where the approximate value of the prizes and other facts that affect the chances of winning are not fairly disclosed;
- offer a free gift or a product at minimal cost as an inducement to buy a second product (this is acceptable if they disclose the approximate value of the gift or premium); and
- require payment in advance where the price of the product upon delivery is found to be significantly in excess of the fair market value of that product.
- Ensure that fine-print disclaimers are avoided. If used, ensure that the overall general impression created by an advertisement and a disclaimer are not false or misleading. Ensure that all material information in an advertisement is fully and clearly disclosed and that no material information is omitted.
- Ensure that the terms or phrases used in an advertisement are meaningful and clear to the ordinary person.
- Be aware that the false or misleading representations and the deceptive marketing practices provisions apply whether the target of the representations is in Canada or not.
- Be aware that the false or misleading representations and the deceptive marketing practices provisions apply whether the representations are made in a place accessible to the public or not.
- Ensure that the overall general impression created by a representation, as well as the literal meaning, are not false or misleading in a material respect.
- Ensure that the lowest price appearing on a product is charged.
- Ensure that reasonable quantities of a product advertised at a bargain price are available. If a business runs out of a product, a rain check should be offered and honoured.
- Ensure that, when conducting a contest, all material details required by the Competition Act are disclosed before potential participants are committed to the contest.
- Ensure that contest rules are disclosed in a reasonably conspicuous manner prior to a potential contest participant being inconvenienced in some way or committed to the advertiser’s product or to the contest.
- Ensure that promotional contest participants are provided with a short list of the contest rules on the outside of each package if in-store displays promoting the contest are not permitted.
- Ensure that the distribution of prizes when conducting a contest is not unduly delayed.
- Ensure that legal advice is sought when in doubt as to the legality of a proposed advertisement, price disc losure or contest.
- Ensure that the terms "regular price" or "ordinary price" are not confused with "manufacturer's suggested list price" or a like term. They are often not the same.
- Ensure that the term "regular price" is not used in an advertisement unless the product has been offered in good faith for sale at that price for a substantial period of time, or a substantial volume of the product has been sold at that price within a reasonable period of time.
- Ensure that the words "sale" or "special" are not used in relation to the price of a product unless a significant price reduction has occurred.
- Ensure that a "sale" is not held for a long period or is not repeated every week.
- Ensure that the price of a product is not increased to cover the cost of a free product.
- Ensure that the illustrations used are not different from the product being sold.
- Ensure that a performance claim is not made unless it can be proven by a test conducted before the claim is made, even if a business believes it is accurate. Testimonials usually do not amount to adequate proof.
- Ensure that a product is not sold above the advertised price.
- Ensure that advertised products are actually available and not used as a means to switch customers to other, less desirable or more expensive products (i.e., bait and switch).
- Ensure that information that may alter the principal representation when promoting a product is not placed in a disclaimer.
- Be aware that no one actually needs to be misled for a court to find that an advertisement is false or misleading.
Trade AssociationsFootnote 48
- Ensure that legal advice is sought before joining or renewing membership in a trade association.
- Ensure that no company representative participates in a trade association or attends any trade association function unless he/she has competition law compliance training.
- Ensure that the trade association has its own competition law compliance program supported by knowledgeable legal counsel.
- Ensure that a clear copy of the agenda for all trade association meetings is obtained prior to a meeting. Competing firms should not participate in a meeting where such an agenda is not provided.
- Ensure that the trade association minutes are reviewed and that mistakes are reported.
- Ensure that representatives use caution when participating in trade association events and are alert to the types of discussions that may raise concerns. If improper discussions arise, he/she should leave and have his/her departure recognized (e.g., in the minutes). The incident should immediately be reported to the compliance officer, legal counsel or any other appropriate individual identified in the business’ corporate compliance program.
- Never participate in any trade association activities that are "off the record".
- Ensure that legal advice is sought if a particular situation gives rise to concerns.
- Be aware that discussing sensitive competition issues with other members that relate to pricing, markets, production levels, customers and other competitive information may be anti‑competitive.
- Review all standard-setting activities with legal counsel.
- Seek legal advice before reaching agreements on sensitive competition issues.
Consumer Packaging and Labelling Act, the Textile Labelling Act or the Precious Metals Marking Act
Consider requesting advice from the Competition Bureau prior to engaging in business activities that may raise concerns under the Consumer Packaging and Labelling Act, the Textile Labelling Act or the Precious Metals Marking Act.
Consumer Packaging and Labelling Act
- Ensure that prepackaged consumer products conform with claims made on their labels relating, for example, to type, quality, performance, function, origin and method of manufacture.
- Ensure that the container for a product is constructed, filled and displayed so that consumers are not misled about either the quality or quantity of the product.
- Ensure that all prepackaged consumer products for sale meet the specifications set out in the Consumer Packaging and Labelling Act and accompanying regulations for mandatory label information, such as product identity, net quantity, dealer’s name and principal place of business and bilingual requirements.
- Ensure that all offered prepackaged consumer products bear accurate and meaningful labelling information to help consumers make informed purchasing decisions.
- Be aware that making any false or misleading representations to the public by any means for the purpose of promoting directly or indirectly the sale of prepackaged consumer products is illegal.
Textile Labelling Act
- Ensure that the textile articles to be offered for sale bear accurate and meaningful labelling information to help consumers make informed purchasing decisions.
- Ensure that all fibre content information on the label of textile articles is bilingual.
- Ensure that all textile articles for sale meet the specifications set out in the Textile Labelling Act and accompanying regulations for mandatory label information, such as the generic name of each fibre present and the dealer’s full name and postal address or a CA identification number.
- Be aware that making any false or misleading representations to the public by any means for the purpose of promoting directly or indirectly the sale of textile fibre products is illegal.
Precious Metals Marking Act
- Ensure that when a precious metal article is quality marked, a valid registered Canadian trade-mark is also applied on the article or that an application for registration has been made with the Canadian Intellectual Property Office. The trade-mark must be applied by the same method as the quality mark.
- Ensure that the quality of a precious metal article is factual and in the manner prescribed by the Precious Metals Marking Act and accompanying regulations before marking or advertising a precious metal article for quality (e.g., "14K" for gold or "sterling silver").
- Ensure that the quality difference is discernible by colour when applying dual markings on precious metal articles (e.g., "14K — 18K" or "10K — Sterling"). The quality making up the greater proportion in the article must appear first.
- Ensure that no guarantee is made with respect to the durability or wearability of the precious metal plating of the articles for sale.
- Be aware that making any false or misleading representations to the public by any means for the purpose of promoting directly or indirectly the sale of precious metal articles is illegal.
Appendix D: Hypothetical Case Examples of Compliance Issues
The following hypothetical examples are intended to illustrate the analytical framework that the Bureau will generally apply in considering a pre-existing competition law compliance program. The Bureau’s analysis in the hypothetical examples below does not replace the advice of legal counsel and is not intended to restate the law or to constitute a binding statement of how the Commissioner will exercise discretion in a particular situation. The enforcement decisions of the Commissioner and the ultimate resolution of issues will depend on the particular circumstances of the matter in question.
The Bureau cannot guarantee specific sentencing outcomes in cartel cases. The PPSC has independent discretion to consider the Bureau’s sentencing recommendations. The Competition Tribunal and the courts are ultimately responsible for imposing civil remedies and criminal penalties.
Hypothetical 1 — Ineffective Compliance Program
Company A is a large, publicly-owned Canadian manufacturer of widgets. Company A has operations throughout Canada and the United States. Five years ago, there was a change in ownership at Company A. New management was brought in and several Directors were replaced. Compensation for the new management team was heavily tied to Company A’s stock market performance.
Three months ago, after officers from the Bureau conducted searches of several of Company A’s offices, lawyers for the company contacted the Senior Deputy Commissioner of Competition for the Criminal Matters Branch and obtained a first-in marker under the Bureau’s Leniency Program.
Company A proffered that for two years prior to the searches, staff from its sales department, including regional sales directors, met with their counterparts from Companies B and C, after annual trade association meetings and at social occasions such as customer sponsored social events, to agree on price increases and not to solicit each other’s long standing customers. These meetings were followed by telephone conversations to implement the agreements or on a few occasions to correct "mistakes" when one of the co-conspirators failed to adhere to an agreement.
In discussions with the Bureau’s investigative team and PPSC counsel regarding the potential fine that the Crown and Company A would submit in a joint sentencing submission to the court, lawyers for Company A argued that the potential fine should be reduced on the basis that it had a pre-existing corporate compliance program; the illegal conduct was contrary to Company A’s corporate policy to comply with the Competition Act; and the illegal conduct did not involve executive level officers or Board members. In addition, Company A took several measures to strengthen its corporate compliance program since its admission to the Leniency Program.
Company A’s Compliance Program
The program was introduced 10 years earlier with the strong support of the former President of Company A and its then Board of Directors. Working with outside legal counsel, the former President realized the significant risk of cartel activities given the highly concentrated nature of the widget industry.
Company A’s General Counsel was appointed as the Compliance Officer by the Board of Directors, and for several years the program appeared to work well with regular training sessions, updates to reflect changes in the law and periodic unannounced audits, particularly in the sales department, which posed the greatest risk of cartel contraventions. One employee was disciplined by being ruled ineligible for promotion for a year for not reporting an unauthorized discussion with a competing sales representative about industry prices. The General Counsel always attended trade association meetings, and provided warnings to Company A’s attendees to respect policies in the compliance program regarding interactions with competitors.
Five years ago, both demand and prices fell for widgets as a result of a recession. Company A’s legal department and budget for outside counsel were cut in half, and employee training was severely cut back. The new President of Company A stressed the importance of cutting "red tape" and empowering managers and employees to be action oriented and to take risks to improve results.
Against the advice of Company A’s General Counsel, compliance reports were no longer provided directly to the Board of Directors; the employee hotline was eliminated; and in-person training was replaced by on-line texts and tests in order to cut costs. Responsibility for administering and enforcing the corporate compliance program was transferred to a junior lawyer in the legal department with no prior training or experience in corporate compliance. The annual certification of compliance letters continued to be nominally required from key officers, supervisors and employees, but the rate of delinquency increased significantly, particularly outside of Company A’s head office. Finally, there was less oversight and monitoring of trade association activities.
The Bureau conducted an examination of the corporate compliance program in effect prior to Company A’s leniency application. In addition to reviewing the written content of the program, record keeping, reporting, audit records, incentives, training content and attendance were evaluated. Key individuals were also interviewed by the Bureau’s Chief Compliance Officer.
At the completion of the examination, the Bureau’s Chief Compliance Officer provided a report to the Senior Deputy Commissioner of Competition for the Criminal Matters Branch recommending that the fine for Company A not be reduced because it did not meet the Bureau’s standard of having a credible and effective program at the time the illegal conduct occurred. The report concluded that despite the existence of the program and the fact that no senior officers or Directors were involved in the illegal conduct, a combination of negligence and the imposition of a "win at all costs" culture by Company A’s management helped to create a climate susceptible to the illegal conduct in the sales department. Similarly, the report concluded that Company A’s Board did not provide adequate oversight of management or the competition law compliance program.
Over the past five years, management of Company A significantly reduced its commitment to its corporate compliance program, resulting in it losing its credibility and effectiveness. Interviews with key sales department staff revealed that by the time the illegal conduct occurred, most employees felt that the corporate compliance program was just a bureaucratic exercise that could be ignored owing to pressure to improve Company A’s results and stock market performance. They indicated that managers and supervisors in the sales department never mentioned the program and that it was not a factor in annual evaluations.
Reducing the influence and independence of the Compliance Officer was a clear signal to staff that competition law compliance was not a priority. One example was the elimination of the employee hotline, thereby reducing the ability of employees to anonymously ask questions and report suspect behaviour while heightening employee concerns about possible retaliation for blowing the whistle. Eliminating the employee hotline also reduced the ability of the Compliance Officer to monitor adherence to the program. Company A’s new Compliance Officer admitted spending more time on labour and workplace safety issues than competition compliance, and was under pressure not to discipline sales staff beyond issuing warnings that communicating with competitors could lead to a government investigation.
In interviews, most sales department staff could not remember any details of the on-line compliance training. One sales representative recalled receiving a warning not to discuss business issues with competitors at a customer sponsored social events, but his manager said that lawyers were always exaggerating the risk of a government investigation.
Finally, the Bureau’s Chief Compliance Officer recommended that Company A’s recent efforts to strengthen its competition law compliance program did not merit reducing Company A’s potential fine because it merely brought the program back to a state where it could potentially be effective in the future.
Hypothetical 2 — Senior Management Involvement
Company B was a co-conspirator in the widget manufacturers conspiracy described in hypothetical 1 above. Like Company A, Company B has operations throughout North America. It’s a privately-owned company headquartered in Asia controlled by a family that lives outside of Canada.
Six years ago, Company B was convicted of price-fixing with competitors in the United States and paid a considerable fine. The former Vice-President of Sales and Marketing, along with a junior executive in the Sales and Marketing Department, were also convicted and sentenced to imprisonment. Both individuals returned to administrative positions at Company B after serving their prison terms. After a year, the former Vice President of Sales and Marketing was transferred to Montréal to head up Company B’s Canadian subsidiary. The President wanted to dismiss the former Vice-President of Sales and Marketing, but felt that this step would have jeopardized his own position at Company B because the former Vice President of Sales and Marketing was married to a member of Company B’s founding family.
With the recession, there was more and more discussion at trade association meetings and customer sponsored social events of how distressed the industry had become and the need to maintain prices and protect each other’s traditional customers. The new President of Company B’s Canadian subsidiary encouraged sales representatives to develop competitor contacts. Eventually, discussions led to agreements and arrangements among the widget manufacturers to fix prices and allocate customers in the Canadian market.
After the searches, Company B decided to participate in the Bureau’s Leniency Program. Company B’s lawyers argued that the potential fine should be reduced on the basis that Company B had a pre-existing corporate compliance program.
Company B’s Compliance Program
Company B’s corporate compliance program was introduced on the heels of its conviction for price-fixing in the United States. The President of Company B was very concerned with the damage that accrued from the investigation and conviction. With the help of an outside law firm, Company B implemented a competition law compliance program with the General Counsel appointed as Company B’s Compliance Officer. Although he would have preferred to dismiss the former Vice-President of Sales and Marketing had it not been for the family connection, the President believed that implementing a compliance program and transferring the former Vice-President of Sales and Marketing to Canada would keep Company B out of trouble in the future.
Company B’s General Counsel had very limited knowledge of competition laws and retained the services of the above mentioned law firm to provide training to sales staff. In its first year of operation, in-person compliance training was limited to employees in the United States, while sales staff abroad was linked into the training sessions by teleconference. No specific training was provided to the executive team of Company B, although the General Counsel did provide a report along with a video of the training session to the President. Sales representatives were required to provide an attestation that they attended the training sessions and would abide by Company B’s compliance program.
Once the recession struck, compliance training was limited to rebroadcasting the video of the training session. Sales staff was still required to provide annual attestations but Company B’s General Counsel did not audit or monitor adherence to the compliance program.
The Bureau’s Chief Compliance Officer conducted an examination of Company B‘s corporate compliance program in effect prior to Company B’s leniency application.
At the completion of the examination, the Chief Compliance Officer provided a report to the Senior Deputy Commissioner of Competition for the Criminal Matters Branch recommending that the fine for Company B not be reduced on the basis that it had a credible and effective program at the time the illegal conduct occurred. The report concluded that Company B’s "paper and preach" approach reflected a lack of commitment to compliance by senior management. The fact that the President of Company B’s Canadian subsidiary encouraged representatives to develop competitor contacts amply demonstrated that management’s commitment to compliance was not serious and that the program was neither credible nor effective.
The President of the Canadian subsidiary admitted that socializing with competitors and encouraging sales staff to develop competitor contacts was risky. This serious problem might have been prevented by providing training to Company B executives and by making compliance part of their evaluations and promotion criteria. Several Canadian employees remarked that the family connection of the President of Company B’s Canadian subsidiary to the owners of Company B and the general lack of policies and procedures to report actual or suspected misconduct created a concern about possible retaliation if they reported concerns about inappropriate interactions with competitors. They also reported that they had no confidence that their concerns would be taken seriously.
Other issues identified in the Bureau’s examination included:
- The program did not address Canadian competition law requirements — there had been no risk assessment.
- The Compliance Officer failed to monitor the activities of the President of Company B’s Canadian subsidiary, an individual with a conviction for illegal conduct.
- There were no incentives to promote the compliance program.
- Staff did not have the ability to report any actual or suspected misconduct through an employee hotline or other similar means.
- Training, record-keeping relating to who had attended training, the effectiveness of the Compliance Officer, given both his other responsibilities at Company B and lack of training in compliance issues, a lack of program auditing and monitoring, all fell well short of best compliance practices.
- There had been no internal evaluation of the program, which would have disclosed the weakness identified above.
Finally, the Bureau’s Chief Compliance Officer recommended that the implementation of a credible and effective corporate compliance program as part of a section 34 prohibition order should be included in the Bureau’s leniency recommendations to the PPSC. Given the company’s lack of commitment to its previous program, the Bureau also recommended to the PPSC that the company be required to appoint an independent compliance monitor to ensure that it implement the compliance program pursuant to the court’s instructions.
Hypothetical 3 — Effective Compliance Program
Company X is a multinational parts manufacturer. Its primary customers are multinational original equipment manufacturers. Only well-financed, technically sophisticated parts suppliers with manufacturing plants located in close proximity to the equipment manufacturers’ assembly operations are qualified to supply the equipment manufacturers.
After several years operating in intensely competitive market conditions, a number of parts manufacturers resorted to price-fixing. Unbeknownst to Company X, one of the parts manufacturers decided to cooperate with the authorities by applying for immunity from prosecution in Canada, the United States and the European Union. As a result, the Bureau and the authorities in the United States and the European Union conducted simultaneous searches of several parts manufacturers, including Company X.
Company X decided to cooperate with the Bureau and obtained a marker under the Bureau’s Leniency Program for a specific part sold to certain original equipment manufacturers. Company X proffered that an account manager who had transferred to Company X’s North American subsidiary in the United States two years earlier had entered into two price-fixing agreements for parts supply contracts. The investigation revealed that the agreements were prompted by the account manager’s personal relationship with a former supervisor now working for a competitor.
In discussions with the Bureau’s investigative team and PPSC counsel regarding the potential fine that Crown and Company X would submit in a joint sentencing submission to the court, lawyers for Company X argued that the potential fine should be reduced along the lines set out in the hypothetical case examples 1 and 2 above.
Company X’s Compliance Program
Company X’s competition law compliance program was introduced in the early 1990s and was administered by its legal department with the occasional assistance of outside counsel.
In the mid-1990s, Company X established manufacturing and sales subsidiaries in North America, South America and Asia, and its compliance obligations became more complex. The Board of Company X decided to appoint a Compliance and Ethics Officer who could only be removed by the Board and would periodically report to the Board. Competition compliance manuals were updated and included country-specific requirements, an employee hotline was installed, and the President issued an annual reminder of the importance of competition law compliance. Business units each had a representative with responsibility for promoting and administering the compliance program in that unit. Mandatory training for executives and sales and marketing staff was held each year. Records of attendance at training seminars and attestations of compliance were rigorously maintained by the Compliance Officer. More importantly, a number of rules and controls were tightened. Attendance at trade association meetings required pre-clearance by the Compliance Officer. The compliance manual explicitly stated that participating in, encouraging or condoning illegal conduct was subject to disciplinary procedures, including loss of employment. Finally, adherence to Company’s X’s compliance program was made one of the factors the Board considered in determining executive compensation.
The Chief Compliance Officer at the Competition Bureau conducted an examination of Company X’s corporate compliance program in effect prior to Company X’s leniency application.
At the completion of the examination, the Chief Compliance Officer provided a report to the Senior Deputy Commissioner of Competition of the Criminal Matters Branch recommending that the fine for Company X should be reduced on the basis that it had a credible and effective program at the time the illegal conduct occurred. Company X’s program addressed each of the seven key elements in the Bureau’s Corporate Compliance Programs Information Bulletin. The report concluded that the two instances of price-fixing were the result of the account manager’s actions, which were clearly in contravention of Company X’s compliance program, and that the account manager had, in fact, taken steps to avoid detection by managers at the company. Company X’s Compliance Officer was able to provide documentation proving that the account manager attended annual training sessions and signed attestations of compliance. In this case, the price-fixing offences clearly resulted from the unethical behaviour of one individual with responsibility for pricing and bidding transactions.
Other findings in the Chief Compliance Officer’s report supporting possible fine mitigation for Company X included:
- The leadership of Company X provided strong support for the compliance program.
- Company X’s Board provided adequate oversight of management insofar as competition law compliance was concerned.
- The Compliance Officer had sufficient authority and operating and reporting independence to overcome any potential internal pressures at Company X to engage in non-compliant conduct. The Compliance Officer also participated in senior management decision-making meetings.
- There had been thorough and on-going compliance risk assessment. Compliance audits were targeted at higher risk points, including senior management.
- Staff had the ability to report any actual or suspected misconduct through Company X’s employee hotline. There were strong safeguards against retaliation, including follow up with staff that had raised issues, and disciplinary measures were taken against managers who engaged in, or threatened, retaliation.
- The compliance program had been evaluated from time-to-time, and measures to improve the program were implemented on a timely basis.
- Disciplinary measures were taken against managers who had failed to ensure that all necessary employees had taken compliance training.
- Company X’s compliance program met Bureau best practices in terms of compliance policies and procedures, training, reporting mechanisms and disciplinary and incentive procedures.
Hypothetical 4 — Compliance Program for Appearances Only
After receiving many complaints, the Commissioner started an inquiry into allegations that ABC Marketing Ltd. engaged in false or misleading representations over the telephone and failed to make required disclosures regarding its business directory services. During the course of the investigation, officers from the Bureau conducted searches of the premises of ABC Marketing Ltd. and seized a large volume of records. These included binders of corporate policies, including a list of "dos and don’ts" for sales representatives that set out a number of prohibitions on making false or misleading claims to the public regarding ABC Marketing Ltd.’s services.
At the completion of the inquiry, the Commissioner referred evidence of alleged contraventions of sections 52 and 52.1 of the Competition Act to the PPSC along with a sentencing reco mmendation which concluded, among other things, that ABC Marketing Ltd.’s compliance program was designed for appearances only, to deflect liability and interfere with government investigations. Accordingly, in the Commissioner’s sentencing recommendation, the compliance program was deemed to be an aggravating factor supporting a higher penalty submission that the Crown could advocate for upon conviction.
ABC Marketing Ltd.’s Compliance Program
ABC Marketing Ltd.’s compliance program was prepared a number of years ago by the President of the company as part of a broader set of corporate policies. The President distributed the compliance program document to staff at the company by email with a reminder that everyone is expected to read and understand the program, and that failure to adhere to its terms could be grounds for discipline ranging from warnings up to loss of employment. New employees were given the compliance program materials when they joined the company and were required to sign a form stating that they would adhere to the compliance policies.
The section of the compliance program document dealing with sales activities largely took the form of a technical and legalistic recitation of the law written in language that most employees would not understand and included telemarketing scripts that sales representatives had to follow during communications with prospective customers. ABC Marketing Ltd.’s corporate policies stated that employees owed their first duty to increasing the revenues and profits of the company, and were not to engage in any conduct that would be adverse to the company’s interests. The compliance program instructed employees to inform management of the first sign of a government investigation and not to give any information to the police or any government authorities. Employees were also cautioned not to retain copies of customer complaints and to refer all such matters to the management of the company.
The criminal prohibition on false or misleading representations and failing to make required disclosures in the course of telemarketing communications is a ‘single party’ offence. As a result, ABC Marketing Ltd. would not be eligible to participate in the Bureau’s Immunity Program, nor does the Leniency Program apply to these types of offences. However, ABC Marketing Ltd. could decide to cooperate by agreeing to plead guilty and possibly benefit from leniency in sentencing as determined solely by the PPSC. In these circumstances, the Bureau’s Chief Compliance Officer would not be formally involved in assessing ABC Marketing Ltd.’s compliance program.
On a review of the evidence available, the Bureau’s investigative team concluded that ABC Marketing Ltd.’s corporate compliance program was nothing more than an effort to deflect liability and avoid detection of illegal activity. The company’s entire business concept was based on misleading the public by leading small businesses and non-profit organizations to believe that they had a previous business relationship with ABC Marketing Ltd. (i.e. that they were their usual advertising directory supplier or that the purpose of the communication was simply to update information on the organization in the target’s directory).
There was no effort on the part of the President or others in leadership positions to conduct business in compliance with the Competition Act. Evidence obtained during the searches indicated that most sales staff used alternate scripts and that the highest paid sales representatives engaged in the most flagrant conduct. The only staff members who were disciplined or removed from the company for breaching the compliance program were the poor sales performers, who would likely have been dismissed in any event for their low sales activity. The worst offenders were not only not disciplined, but received substantial sales bonuses.
Interviews of former employees by Bureau investigators revealed that no one paid much attention to Competition Act compliance and the employees with moral qualms about business practices usually were encouraged to seek other employment very quickly. Others said that the compliance program was "just a piece of paper" and its sole purpose was just to make the company look like it was legitimate business. When the searches were underway, managers reminded employees of the company’s policy not to retain records of customer complaints and their duty not to do or say anything that would be harmful to the interests of ABC Marketing Ltd.
Concerning the section 52.1 offence, both the accused President and corporate accused have available to them a due diligence defence. The facts described in this hypothetical, however, would not support such a defence relating to the corporate compliance program. The corporate compliance program may on "paper" go far enough to establish an appearance that the accused took all reasonable steps to avoid breaking the law, but the accused failed to take any steps to ensure that the program was followed and did not even come close to the criteria set out in the Bulletin for a credible and effective program.
Hypothetical 5 — ACR
123 Service Co. is a sole proprietorship with 30 employees. It provides maintenance services in a city in Canada for parks, sports fields and the grounds surrounding public and private buildings. Acme Maintenance Ltd. is a small, family owned and operated business providing similar services in the city in question.
Recently, the Bureau received a complaint from purchasing officials and the city manager implicating 123 Service Co. and Acme Maintenance Ltd. in a bid-rigging scheme for maintenance services. Bureau officers met with the city purchasing official to obtain information regarding the alleged conduct and the two implicated companies.
The examination revealed that potentially two contracts were subject to bid "rotation" agreements over the past six months. Bureau officers learned that both companies were small businesses and the two contracts in question were of relatively modest value. City officials indicated that up until this time both companies enjoyed favourable business reputations. The Bureau did not have any record of prior complaints against either company.
The Bureau investigated the matter and decided to approach the respective owners of 123 Service Co. and Acme Maintenance Ltd.
At the meeting with 123 Service Co, the proprietor indicated that since being contacted by the Bureau, the company’s compliance officer and lawyer looked into the allegations. It seems that a new employee responsible for sales and developing quotes and submitting bids who had joined 123 Service Co. earlier that year from Acme Maintenance Ltd. had met with his counterpart in coffee shops and at social gatherings to exchange pricing information and reveal bidding intentions. The proprietor for 123 Service Co. indicated that the company has a "zero tolerance" policy for illegal conduct, and that the company had fired the sales representative in question. The lawyer also indicated that the company had recently implemented a corporate compliance program and wanted to resolve the matter explaining that it had contacted the city manager to apologize and payback the overcharge on one of the contracts in question.
At the meeting with Acme Maintenance Ltd., the President of the company told Bureau officers that he trusts his employees and couldn’t believe that they would break the law. The President said that he was not involved in any improper communications with 123 Service Co. The President indicated that the company did not have a competition law compliance program and admitted signing the bid documents that were sent to the City without asking the sales representative any questions about the prices in the quotes. Bureau officers then explained the requirements to resolve the matter through an ACR, without recommending charges.
123 Service Co.’s Compliance Program
A year earlier, a number of companies in the maintenance services industry in another city in Canada were convicted for bid-rigging. The proprietor of 123 Service Co. read about this in the newspaper. The newspaper article described how government purchasing agencies were getting tougher on companies by barring convicted companies from bidding on future contacts for periods as long as five years and how the Bureau and the PPSC were seeking more jail terms for individuals involved in bid-rigging. Given that 123 Service Co. bids for most of its business, the proprietor realized that involvement in bid-rigging could destroy the company and land individuals in jail. Meeting with the three other managers and the supervisors of the two maintenance crews, the proprietor handed out the newspaper article and stated a "zero tolerance" policy for illegal conduct. The business manager for 123 Service Co. was asked to update the company’s Code of Conduct and take on the role of compliance officer.
The business manager did an online search of compliance programs and watched the compliance video on the Bureau’s website. Using the Bureau’s Corporate Compliance Information Bulletin as a guide, the business manager developed a competition law "dos and don'ts" document focusing on the highest risk area for the company, cartel activity. In addition to the "dos and don’ts", the company’s Code of Conduct was updated so that staff were advised that they could ask questions and report potentially illegal behaviour and set out disciplinary measures up to loss of employment. The company’s law firm was also informed about the compliance program. The proprietor of 123 Service Co. held a meeting with managers, supervisors and sales representatives to explain the reasons for implementing the program and set out how it would work. A wallet sized "dos and don’ts" card was handed out, and the code of conduct and key compliance program reminders were emailed to all staff and posted on the company’s intranet. The company’s website was updated to reflect its commitment to fair and ethical business practices. During management meetings, the proprietor would also ask about contacts with competitors and issue the occasional reminder about the dangers of bid-rigging. The compliance officer also made a point of examining some of the bidding files to see if there were any signs of questionable conduct.
In this hypothetical scenario, the Bureau would be prepared to resolve the matter with 123 Service Co. using an ACR because the affected volume of commerce and duration of the illegal conduct were relatively modest, there were no prior complaints or convictions, the offence appeared to have taken place at a lower level in the company, the company took steps to payback the overcharge on one of the city contracts and the company fully cooperated with the Bureau.
Many aspects of 123 Service Co.’s compliance program meet the Bureau’s criteria for a credible and effective corporate compliance program given the relatively small size of the company. The company’s actions in the areas of management involvement and support, risk assessment, communications, monitoring, auditing and reporting mechanisms, and disciplinary procedures collectively represented a serious effort to prevent contraventions. The company’s program could have been better in the area of training, incentives and controls over hiring and pricing, but these issues in this scenario would not disqualify the company from the option of an ACR.
If Acme Maintenance Ltd. wanted to resolve the matter with an ACR, the Bureau would insist on any ACR being conditional on Acme Maintenance Ltd. admitting responsibility for the illegal conduct, implementing a credible and effective compliance program, and taking steps to pay back the city for the overcharge on the contract it won through bid-rigging.
Hypothetical 6 — Failure to Notify a Merger
Corporation A is a large multinational company based in the United States which conducts, directly and through subsidiaries, manufacturing activities in the United States, Canada and a number of European countries. Corporation A’s Canadian subsidiary has assets in Canada in excess of $400M. Corporation A is a widely-held public company; its largest shareholder is Corporation B, a European-based multinational company. Corporation B’s voting interest in Corporation A has fluctuated over time, but until recently it has never exceeded 18%.
Last month, Corporation B bought additional voting shares of Corporation A on the open market, as the Director of Corporation B’s Trading Department felt that Corporation A’s shares were currently undervalued, increasing Corporation B’s voting interest in Corporation A to 21%.
A week later, the transaction is briefly mentioned at a Board Meeting of Corporation B. Corporation B’s General Counsel asked the Director whether anyone had checked with the Legal Department, prior to making the acquisition, to ensure that no pre-merger notification filings were required under the competition laws of countries where Corporations A and B have operations. The Director replied that this was not necessary as this acquisition of shares was only made for investment purposes and that Corporation B was not acquiring control of Corporation A. General Counsel said that in Canada the competition legislation does not require that control be acquired to trigger a notification obligation; adding that given the size of Corporation A’s Canadian subsidiary, a filing was likely required and that their failure to notify prior to the acquisition may well be an offence under the Competition Act. It was decided that an external Canadian competition counsel should be appointed to confirm whether the General Counsel’s preliminary reaction was correct and to advise on appropriate corrective measures.
Canadian counsel confirmed that under the Competition Act, a filing is required in respect of an acquisition of voting shares that are publicly-traded if the proposed acquisition results in the acquiring party, together with its affiliates, holding in excess of 20% of the target corporation's voting interests, and that certain financial thresholds were exceeded. Corporation A’s Canadian subsidiary has sufficient assets and/or revenues to exceed those financial thresholds, and Canadian counsel concluded that there had been a failure to notify and that corrective measures should be taken immediately.
Canadian counsel also pointed out that although Corporation A’s shares were acquired on the open market, rather than pursuant to an agreement between Corporations A and B, Corporation A also had a notification obligation. He recommended that Corporation A be contacted without delay and that notification filings be prepared by both parties and submitted as soon as possible to the Bureau, togethe r with the applicable filing fee and a letter explaining the circumstances of the failure to notify, as described above, stressing that the failure was inadvertent and that both parties acted diligently as soon as they became aware of the issue and are in the process of implementing measures to prevent future notification failures.
Corporation B’s Compliance Program
Internal verifications within Corporation B revealed that Corporation B had a competition law compliance program, but that it had not been updated since it made its initial acquisition of shares of Corporation A two years ago (this was Corporation B’s first acquisition outside Europe). Canadian counsel recommended that Corporation B’s competition law compliance program be updated immediately; in particular to cover the requirements of the Competition Act, including with respect to the pre-merger notification requirements of the Competition Act, along with supplemental compliance training for Corporation B’s managers.
All of Canadian counsel's recommendations were accepted and a corrective merger filing was submitted to the Bureau three weeks after the acquisition was completed.
Parties that complete a notifiable transaction without submitting a notification under subsection 114(1) may have committed a criminal offence under subsection 65(2) of the Competition Act, and may be liable to a maximum fine of $50,000.
As stated in the Bureau’s Procedures Guide for Notifiable Transactions and Advance Ruling Certificates Under the Competition Act where a transaction has been completed in contravention of the Act, it is important to bring the matter to the attention of the Merger Notification Unit and submit a notification, together with the applicable filing fee and an explanation for the failure to notify, as soon as possible. The explanation should be submitted by an officer or director of the company, setting out the reasons why the notification was not filed in a timely manner, how and when the failure was discovered, and what steps have been taken to prevent another contravention of the Competition Act in the future.
In the present case, once the corrective filing was received, the Bureau assessed the transaction to determine whether it was likely to result in a substantial lessening or prevention of competition, as the Bureau would normally do in respect of any proposed transaction that is brought to its attention by way of a pre-merger notification. While the specific facts are not discussed here, for the purposes of this hypothetical scenario it is assumed that the transaction did not raise any substantive competition issues and that the Bureau decided not to challenge the transaction under section 92 of the Competition Act. Consequently, the Bureau informed the parties that the Commissioner did not, at this time, intend to make an application under section 92 of the Competition Act in respect of the transaction.
With respect to the failure to comply with Part IX of the Competition Act, given that the parties have voluntarily reported the failure and have complied with all corrective measures, as outlined in the Bureau’s policy, the parties were informed that, in this case, the Commissioner was of the view that there was no need to commence an inquiry under section 10 of the Act or to refer this matter to the PPSC for prosecution.
Hypothetical 7 — Partially Effective Compliance Program / Digital Economy
Company Y is a consumer electronics retailer with 15 stores across Canada. Purchases can also be made from anywhere in Canada, from the nearest store, via Company Y’s website and mobile website. Company Y is planning a back-to-school sale that will run from mid-August to the end of September: 20% off all laptops with the purchase of an all-in-one printer of at least $100. Company Y’s Marketing Department decides that the best way to promote the sale is via four media platforms: Company Y’s website, their mobile website, emails and text messages.
To promote the back-to-school sale on its website, which is designed for the screens of desktop and laptop computers, Company Y creates a new webpage. Near the top of the page are the words "20% off all laptops" in 24 point font, and immediately underneath is 20 point font text stating, "Requires minimum $100 purchase of an all-in-one printer". The text is on the left-hand-side of the page, and beside the text is a graphic showing a laptop beside a printer, both of which are models available in Company Y’s stores. At the bottom of the webpage, there is a disclaimer stating, "Sale available on the models pictured above and other available models. Contact your nearest Company Y store for details."
For its mobile website, Company Y creates a similar webpage, with some notable differences. Due to the smaller screen size of tablets and smartphones for which the mobile site is designed, the text and graphics are displayed differently. The text "20% off all laptops" is in 16 point font near the top of the mobile page, underneath which is the graphic of the laptop. The graphic of the printer does not appear. Finally, the text "Requires minimum $100 purchase of an all-in-one printer" is contained in the disclaimer.
The emails are sent to members of Company Y’s frequent shoppers club and other consumers who signed up to Company Y’s promotional messaging list. The emails are all based on an email template designed for the campaign, with a minor variation to personalize it for individual members. The subject line states "20% off all laptops." If the email is opened, it is addressed to "Dear", followed by the name of the consumer. The remainder of the email content for all recipients resembles the webpage on the website designed for desktop and laptop computers, with the addition of Company Y’s contact and unsubscribe information required by regulatory legislation enforced by the Canadian Radio-television and Telecommunications Commission (the “CRTC”).
The text messages are also sent to members of Company Y’s frequent shoppers club and other consenting consumers. Additionally, text messages are placed on a popular social networking site accessible to the public. The text messages all state, "20% off all laptops. Contact your nearest Company Y store for details." The text messages sent to consumers have one additional sentence first, stating "Dear" followed by the consumer’s name. Finally, the text messages contain the contact information required by the CRTC but no unsubscribe information.
Company Y’s Compliance Program
Company Y’s Compliance Program was created in 1997 and has not been updated since. It states that prior to launching a promotional campaign, marketing materials must be reviewed by Senior Management of the company and in-house counsel to ensure the materials comply with the Competition Act. A meeting is always arranged for such review, but due to time constraints for some campaigns, Senior Management and counsel do not always review all promotional material.
For the back-to-school sale, the Marketing Department arranges the meeting with Senior Management and counsel in early August. At the meeting, the Director of Marketing explains the plan for the back-to-school campaign, but presents only a mock-up of the proposed new webpage for the website that is designed for the screens of desktop and laptop computers. Detailed notes taken during the meeting indicate that Senior Management and counsel conducted a diligent review of the website mock-up. One Senior Manager noted that while the sentence "Requires minimum $100 purchase of an all-in-one printer" is smaller than the sentence "20% off all laptops," both are in the main part of the representation, and the nearby graphics of the laptop and printer should support a consumer’s impression that the laptop offer is connected to a printer purchase. While counsel was of the view that the disclaimer is not likely to be read by the average consumer viewing the webpage on a desktop or laptop screen, due to the disclaimer’s size and placement, counsel was not ultimately concerned since the disclaimer does not contain material information. The disclaimer on the website adds, but does not detract, from one’s impression from the main part of the representation.
Senior Management and counsel approved the website mock-up as complying with the Competition Act, including the false or misleading representations and deceptive marketing practices provisions. Senior Management then directed the Marketing Department to work with Company Y’s in-house IT Department to adapt the website mock-up for the company’s mobile website, and to create the emails and text messages. Neither the staff of the Marketing Department nor those in the IT Department were given a copy of the notes of the meeting with Senior Management and counsel.
Following complaints about the mobile, text message and email advertisements, the Bureau investigated the marketing campaign and decided to pursue Company Y under the false or misleading provisions of the Competition Act.
The application of Company Y’s Compliance Program to the back-to-school sale is only partially effective due to several significant factors. Most importantly it fails to take into account changes in the digital economy and amendments to the Competition Act including those made under CASL.
In its case assessment, the Bureau recognized that Company Y had made efforts to establish a credible and effective program and, taking that into consideration, decided to pursue the offence under the civil track. It also gave moderate consideration to the Program, as a mitigating factor, when determining the magnitude of AMPs it would seek as a remedy. The level of mitigation was limited because the Program was so dated and clearly not effective in all areas.
Each version of the promotion, (i.e. for each platform), should have been reviewed by Senior Management and counsel, or at least evaluated by someone else in Company Y, to ensure compliance with the Competition Act. While the webpage designed for desktop computers and laptops did not appear to raise issues under the Act, the representations in the other platforms did raise issues under the false or misleading representations and deceptive marketing practices provisions.
The mobile webpage might be viewed as false or misleading because material information, namely the important limitation "Requires minimum $100 purchase of an all-in-one printer" is only contained in the disclaimer. Indeed, the Bureau received several complaints of this nature. Since, as Company Y’s counsel had noted, consumers are unlikely to read the disclaimer on a relatively large desktop screen, it is even less likely that consumers would read the disclaimer on a smaller tablet or smartphone screen.
Each email representation could also raise an issue under new amendments to the Competition Act that came into force with CASL, namely sections 52.01(1) and 74.011(1). Under these provisions it is prohibited to send, or cause to be sent, a false or misleading representation in the subject matter information of an electronic message. The subject line of each emails states "20% off all laptops" and thus could be seen as false or misleading since it omits important information about the printer limitation. This false or misleading representation cannot be cured by the more detailed information provided in the body of each email. Sections 52.01(1) and 74.011(1) are specific new violations (criminal and civil, respectively) that differ from those previously in the Competition Act, especially as it was in 1997.
Each text message may also be viewed as false or misleading because material information about the printer limitation is omitted.
As an additional consideration, the text messages do not have the unsubscribe information required under provisions of CASL enforced by the CRTC. Though not of primary importance for the Bureau, Company Y should be aware of its compliance obligations under CASL, the provisions of which are enforced by the Bureau, the CRTC and the Privacy Commissioner.
While the Bureau did not make specific recommendations to Company Y, it is clear that Company Y’s Compliance Program is out of date and that a process should be set up to ensure that it is regularly reviewed. There have been significant changes in the law, in electronic communications and in business operations in the last fifteen years and without taking these into account the Program cannot be effective.
In order to ensure that its Program is credible and effective for the future, Company Y should conduct a thorough review of its policies and procedures so that they reflect changes to the business as well as to the industry as a whole, the law and jurisprudence, and the Bureau’s enforcement policies. Company Y’s Board of Directors, together with its Compliance Officer, should commit to conducting such a review on a regular basis so that they are aware of ongoing developments and can ensure the appropriate training of all staff.
In conducting its review Company Y should pay particular attention to those areas that have been identified through its risk assessment process. Moreover, it should review its risk-assessment now, and on a regular basis in the future, to ensure that it remains valid.
All Company Y staff should be promptly notified of any changes in the Compliance Program, and all policies and procedures should be made available to them in a readily accessible, easy to understand format. Regular training should be provided and monitoring and auditing should be carried out to ensure that staff understands all of the requirements set out in the Program.
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