Cutting through the noise

Remarks by John Pecman, Commissioner of Competition

Goodmans LLP

Toronto, Ontario

December 8, 2015

(As prepared for delivery)


Introduction

Thank you, Cal.

Good evening, everyone. I am pleased to be here with you today and I am looking forward to our question and answer session following my prepared remarks.

I wanted begin our visit today by speaking about the Bureau’s enforcement record, particularly as it relates to cartel investigations. Some commentators have been critical of the outcome of certain recent cases. They have speculated about the impact those outcomes might have on the calculation companies and individuals make when deciding whether to self‑report their involvement in a cartel and plead guilty in exchange for leniency in sentencing.

Of course, any law enforcement agency wants to see offenders brought to justice. Anyone seeking leniency obviously wants to see the same thing—so they won’t be the only ones in a group of conspirators facing a penalty for their behaviour.

But no enforcement agency has a success rate of 100 per cent. No lawyer has a 100 per cent success rate. No individual or company contemplating pleading guilty—to any violation of any law—has 100 per cent certainty about how the future will unfold. To pretend otherwise is to live in a castle in the sky.

In a recent paper, the C.D. Howe Institute said, depending on certain assumptions, "an effective agency’s active caseload will involve resource‑intensive, time‑consuming, and tough‑to‑resolve cases. That would mean an effective Bureau would look to be performing poorly on measures of caseload".Note de bas de page 1

Easy cases don’t usually proceed to litigation. The cases that are being litigated are not simple. They are resource‑intensive, time‑consuming and tough to resolve.

One thing is certain, though. As Wayne Gretzky says, "You miss 100 per cent of the shots you never take." That goes for the Bureau when it comes to referring evidence to the Public Prosecution Service of Canada, where prosecutors will determine whether charges will be laid. That goes for individuals and companies as they decide to seek leniency and cooperate with the Bureau, in exchange for a guarantee that individuals won’t be charged, a significant reduction in recommended fines, and the ability to move on with some certainty to a future of better compliance.

So I will begin today by giving an overview of our Immunity and Leniency Programs. I’ll then discuss some of the recent developments that have garnered significant interest and commentary by competition law watchers because of how they relate to our leniency program.

The preliminaries

I must underscore the importance of a well‑designed, credible, and effective corporate compliance program and building the ethical culture it needs to succeed. This pro‑active, preventative approach is an important line of defence against unethical and illegal conduct.

But if these efforts fail, and you discover that employees have engaged in activities that contravene the Competition Act, the way forward must be decided.

The Bureau operates the Immunity and Leniency Programs, which offer incentives for individuals and companies who come forward and cooperate with the Bureau. In exchange, the Bureau will recommend to prosecutors that these individuals or companies receive immunity from prosecution or significantly reduced sentencing. The Immunity and Leniency Programs are the Bureau’s most useful tools for detecting and deterring secret cartel agreements.

I want to make it clear that decisions to prosecute, and decisions on granting immunity or leniency, fall entirely within the authority of the Public Prosecution Service of Canada. The Bureau investigates and refers evidence to prosecutors, who undertake an independent determination of whether or not the evidence is sufficient to warrant charges. During the investigation, Bureau investigators regularly receive advice from prosecutors to ensure that particular angles are explored or that evidence thresholds are met.

The Chocolate investigation, Durward, and Justice Nordheimer’s decision in Nestlé

In the Chocolate price‑fixing case, prosecutors decided‑based on the Bureau’s investigation‑that charges should be laid by direct indictment. Prosecutors, however, also decided to stay the charges against all of the accused two years after the direct indictment. This is after a leniency applicant had pleaded guilty and was fined $4 million.

I am confident the Bureau conducted a thorough investigation of this matter, which justified the initial decision by the prosecutors to lay charges. However, as you know, the prosecutors are independent and have prosecutorial discretion. How this case was concluded was not what the Bureau expected when price‑fixing charges were laid against the non‑cooperating accused.

Another decision that did not go our way occurred in the DurwardNote de bas de page 2 matter, which involved teaming arrangements for bids on federal government contracts. In this case, following a seven‑month trial, a jury rendered not‑guilty verdicts against seven individuals and three companies charged with rigging bids–after two leniency applicants had pleaded guilty.

Finally, Justice Nordheimer’s decision in the Nestlé caseNote de bas de page 3 clarified the scope of "settlement privilege" in cases where there are immunity and leniency applicants. Justice Nordheimer decided that settlement privilege—which protects discussions between parties prior to a settlement being concluded—does not apply to factual information provided by immunity and leniency applicants prior to the execution of an immunity agreement or a plea agreement. That information must be disclosed by the Crown when charges are laid against other parties.

Effects on the leniency calculation

So what do these cases mean, and what are the implications for cooperating parties?

With respect to Justice Nordheimer’s decision, nothing has changed. Parties should expect that factual information, both in terms of documents and testimony, may be disclosed to the accused when charges are laid against other participants to the offence. Both the immunity and leniency programs already make it clear that disclosure of such information is likely, and that possibility will already have been considered by individuals and companies making cooperation decisions.

With respect to the cases where individuals and companies pleaded guilty in cases where others were not sanctioned, we do not yet have the data to respond to commentators’ speculations. However, this is not the first time commentators have predicted the demise of the program, and parties have continued to apply for leniency.

In any event, ascribing trends in leniency applications to select case outcomes is problematic. An individual or company’s decision whether to apply for leniency and cooperate with the Bureau is a complex one that is made based on a host of factors.

These include:

  • The individual or corporation’s role in the offence;
  • Being a good corporate citizen and dealing proactively with transgressions of the law when they are uncovered;
  • The likelihood of co‑conspirators being brought to justice;
  • The value of protecting individuals from prosecution;
  • Benefitting from a substantial discount in the fine the Bureau recommends to the Public Prosecution Service;
  • Avoiding the cost in time and resources associated with potentially lengthy court proceedings; and,
  • Maintaining a good business reputation and the ability to attract and retain customers who wish to do business with companies that operate ethically.

It’s our view, based on our experience, that the incentives for participating in the program still make it an attractive option for individuals and companies whose conduct has contravened the cartel provisions of the Competition Act.

In a decision on a case called MaxzoneNote de bas de page 4, Chief Justice Paul Crampton of the Federal Court strongly supported the Bureau's Leniency Program as a framework for developing sentencing recommendations and underscored the need for corporate compliance programs.

Lessons learned, continuous improvement, and partnerships

Don’t get me wrong, however. Our belief in the effectiveness of our immunity and leniency programs does not mean that the Bureau will rest on its laurels in light of these recent court decisions, content that we have a program that provides cooperation incentives.

On the contrary, we are using these decisions to adapt, to learn, and to improve.

First, we are currently reviewing the Immunity and Leniency Programs (and corresponding Frequently Asked Questions) to determine whether changes or clarifications are necessary. If this is necessary, we will consult on the revised documents in 2016.

Second, in light of the Chocolate and Durward decisions, the Bureau has begun a "lessons learned" evaluation process with respect to our investigative procedures, to determine whether there is anything we need to do differently.

And we are updating our investigative tools and partnerships.

Our investigations are changing, and our tools and methods have to keep up with a new reality: a high and increasing volume of information obtained in our cases. The Bureau is currently developing a criminal intelligence unit like many of our enforcement partners. In addition to providing analytical expertise on cases, the unit will include a central repository for information gathered from all cartel investigations, complaints and intelligence from other law enforcement agencies. This will contribute to better detection of cartel activity and provide stronger analytical tools to improve investigative efficiency.

With respect to partnerships, on the domestic front, the Bureau has signed memoranda of Understanding with Public Works and Government Services Canada, the Ontario Provincial Police and―just last month―with the RCMP. These are recent examples of our continuous efforts to extend our network of information gathering sources and increase the sharing of investigative techniques and resources.

These partnerships are bearing fruit. Let me provide you with two examples:

  • We are looking at the experiences of other jurisdictions in the area of bid‑rigging detection and the ‘screens’ they are developing to identify potential areas of concern in the procurement of public goods and services. This exercise is identifying detection tools for the Bureau as it partners with procurement authorities.
  • Recently we received information from the Office of the inspector general of the City of Montreal relating to an alleged violation of the Competition Act in the snow removal industry in the Montreal region. We’re looking at this information carefully.

Enforcement successes

While commentators have focused on some developments that did not necessarily go the way we either expected or wanted, they often fail to mention other developments that signal our cartel enforcement program continues to turn out favourable results.

For example, on May 21, 2015, a former employee of an Ottawa‑based information technology company received an 18‑month conditional sentence, with the first six months to be served under house arrest, after pleading guilty to participating in an alleged conspiracy to rig bids for federal government contracts. The individual was fined $23,000 and ordered to perform 60 hours of community service.

On June 16, 2015, prosecutors laid 44 criminal charges against three companies and four individuals accused of rigging bids for the supply of water services to municipalities in the province of Quebec between February 2005 and October 2011. Also, Les Entreprises Paysagistes Gaspard Inc. — which availed itself of the leniency program — pleaded guilty to nine counts of bid‑rigging and was fined $117,000 for its role in the alleged bid‑rigging conspiracy.

And finally, we continue to advance the Motor Vehicles Components case. This global "mega" case is the largest Cartels Directorate investigation to date, with over 200 immunity and leniency markers issued to 21 cooperating parties. We anticipate additional guilty pleas in the months ahead.

Conclusion

As you can see, we’ve had some successes in our recent history. We have also had some setbacks. I won’t pretend otherwise.

But a Chicken Little reaction that "the sky is falling" is a wholly inappropriate response. It’s inappropriate because it buys into a narrative that ignores the larger context in which we’ve had successes. It’s inappropriate because it fails to acknowledge the separation of responsibilities between the Bureau and the Public Prosecution Service of Canada. It’s inappropriate because it downplays the large incentives and moral obligation that leniency applicants still have to come forward. It’s inappropriate because it’s based on a facile and false premise that any law enforcement agency interacts with prosecutors and the courts with 100 per cent certainty.

And it’s anathema to the continuous learning culture that is essential for any law enforcement agency. The setbacks are, for any responsible organization, opportunities to re‑evaluate and respond to the challenges presented. Which we will continue to do.

The Competition Bureau is committed to vigorously enforce the criminal cartel provisions against those who engage in anti‑competitive conduct, including both businesses and individuals. Our Leniency Program has proven to be an important tool in our investigations, and we will continue to work to ensure that as much certainty as possible can be provided to applicants.

Cracking down on cartels has been, and continues to be, a top priority for the Bureau. We will continue recommend prosecution when the evidence warrants this action. Just this afternoon, Justice Despots of the Court of Québec made a ruling regarding the Bureau’s investigation into alleged bid‑rigging on contracts for the installation of ventilation systems in residential high‑rises in Montreal. While Justice Despots had initially ruled in 2013 that the accused would not stand trial, the Quebec Court of Appeal referred the case back to her this past September. The Bureau welcomes her decision today that the accused will, in fact, stand trial on bid‑rigging charges.

The Competition Tribunal underlined the importance of bringing matters before the courts even if the Bureau is not successful. In the Visa/MasterCard case, the judges wrote:

"The Commissioner advanced a case which should be brought; even if she was not entirely successful. Competition law in Canada will not advance if a Commissioner is afraid to lose cases which ought to be brought. The courage to advance these cases is in the public interest. Gaps in our laws and policy will not be identified or remedied. Canadian competition law will develop more opaquely behind the scenes.

There is a broad public interest in bringing this case. It is even so for the Respondents as it may add some certainty to their position. The public debate on the issues in this case and more broadly are enhanced by this proceeding."Note de bas de page 5

While the Visa/MasterCard case was a civil proceeding, the spirit of the Tribunal’s words is fitting for our discussion today.

Thank you. I look forward to your questions.

Footnotes

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