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Toronto criminal competition law and white collar crime lawyer

Toronto COMPETITION Lawyer

Competition law is a highly specialized and complex area of law. The conduct and transactions that are regulated and prohibited under the Competition Act flow, not from any moral or philosophical sense of right and wrong, but from then need for the fair and efficient operation of the Canadian marketplace. Brian Weingarten is a Toronto lawyer who has experience working on a number of high profile competition law matters including: immunity and leniency applications, price fixing, and civil liability matters stemming from conspiracies to fix prices. Brian has also advised clients on whether various marketing materials comply with the misleading advertising provisions of the Competition Act.

What Types of Conduct Attract Criminal Sanctions Under the Competition Act?

Competition law matters are addressed under one of two streams: 1) the civil stream; 2) the criminal stream. As a result of recent amendments to the Competition Act, the number of practices that will be dealt with by way of criminal sanctions has decreased. Conduct, such as predatory pricing that were traditionally subject to prosecution under the criminal stream are now addressed civilly under the “Abuse of Dominance” provisions.

Matters that are addressed by way of the civil stream are not subject to prosecution by the Director of Public Prosecutions. Instead, civil liability flows from a finding that the conduct in question acted to lessen competition. Proposed mergers and cases of a potential abuse of dominance will be addressed through the civil stream. Other conduct such as “refusals to deal,” “tied selling,” predatory pricing and most misleading advertising matters will also be approached through the civil stream. In some cases, however, misleading advertising may be subject to the criminal stream.

The following are examples of the types of anti-competitive conduct may be approached through the criminal stream:

  • Cartels, and conspiracies to fix prices, allocate markets or sales, or to fix, maintain, control or lessen production or the supply of a product (s. 45(1));
  • The implementation of foreign directives that would be an offence under s. 45(1);
  • Bid-rigging (s. 47);
  • False or misleading advertising (s. 52);
  • Deceptive Telemarketing (52.1(3));
  • Pyramid Scheme selling (55.1)

What are Some of the Penalties Associated with “Criminal” Competition Act Offences?

The Competition Bureau of Canada spends a considerable amount of resources combating the most serious cases of price-fixing, bid-ridding, and other conspiracies under s. 45 of the Act. Section 45 and 47 offences may attract very severe penalties in the right situation.

Section 45 convictions for price-fixing and other conspiracies to lessen competition carry the potential for a maximum of 14 years in jail and a maximum fine of $25 Million or both. Section 47 convictions for bid-rigging carry the potential for a maximum sentence of 14 years in jail, a fine in the discretion of the Court, or both.

Convictions for misleading representations or advertising may attract severe penalties. Where the matter proceeds by way of indictment, the accused is liable to a maximum of 14 years imprisonment, a fine at the discretion of the court, or both. Where the matter proceeds by way of summary conviction, the maximum penalty is one year in jail, a fine not exceeding $200,000, or both.

Pyramid Scheme Selling carries a maximum penalty of 5 years imprisonment, a fine in the discretion of the Court, or both, where the matter proceeds by way of indictment. Where the matter proceeds summarily, the maximum penalty is a one year term of imprisonment, a fine not exceeding $200,000, or both.

What Does the Prosecution Have to Prove in a Conspiracy, Price-Fixing, or Cartel Case?

Section 45 of the Competition Act outlines the elements of the conspiracy/price-fixing offences. The section states:

45. (1) Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges

(a) to fix, maintain, increase or control the price for the supply of the product;

(b) to allocate sales, territories, customers or markets for the production or supply of the product; or

(c) to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.

Prior to the recent amendments to the Competition Act, the Prosecution was required to prove “undue lessening of competition,” stemming from the alleged agreement or conspiracy to engage in the prohibited conduct. This is no longer the case.

In conspiracy cases, the Prosecution is now only required to prove the following elements:

  • An agreement or arrangement with a competitor;
  • To engage in one or more of the prohibited types of conduct outlined in subsections (a) to (c);
  • The requisite mens rea, or mental element of an intention to enter into an agreement to engage in the prohibited conduct.

It is important to note that the Prosecution does not have to prove that an agreement was actually concluded. A meeting of the minds is sufficient to establish an “agreement” for the purpose of the section.

Does the Competition Bureau Target Every “ Agreement” Between Competitors?

Not every agreement of interaction between clear competitors will attract scrutiny under the Competition Act. The Competition Bureau is only concerned with true or “naked” restraints on competition. In certain circumstances, agreements between competitors may have legitimate goals, such as collaboration on research and development, a strategic alliance, or a joint venture that neither company would be able to proceed with by alone.

True, or “naked” restraints of competition will attract Competition Act scrutiny. These types of prohibited agreements include:

  • Market allocation agreements including: the allocation of customers; non-compete agreements in certain segments or geographic locations; and agreements entered into by suppliers to not compete in respect of indirect sales that are made through distributors or resellers.
  • Output restriction agreements including: agreements between competitors to limit the quantity or quality of products supplied; reduce the quantity or quality of products supplied to specific customers or groups of customers; limit increases in the quantity of products supplied by a set amount ;or discontinue supplying products to specific customers or groups of customers.
  • Joint selling agreements including: agreements purely to fix prices; as well as agreements to restrict the supply of competing product to certain territories or customers.

What are Possible Defences to a Conspiracy, Price-Fixing or Cartel Prosecutions?

There are a number of defences to conspiracy charges. It may be arguable that there really is no evidence of an agreement between competitors. Often the prosecution will be required to prove an agreement by way of circumstantial evidence. In these cases, it might also be arguable that any similarly in pricing or the perceived co-ordination of activities may be explained as “conscious parallelism.” Conscious parallelism is a term used to describe a pattern of competitors consciously, but independently, following the lead of a particular market participant. The Competitor Collaboration Guidelines issued by the Competition Bureau states that evidence of conscious parallelism is not sufficient to establish the element of “an agreement” between competitors.

In some cases it may be arguable that despite any agreement, the parties are not true competitors with respect to the product in question. Parties will only attract scrutiny under section 45 where they compete or are likely to compete in respect of the products at issue.

Section 45(4) of the Competition Act also outlines a powerful defence to conspiracy and price-fixing allegations. This section creates a defence known as the “ancillary restraints defence.” Under this defence, no offence will have been committed if it can be proven on a balance of probabilities that:

  • The “agreement” in question is ancillary to another broader or separate agreement between the same parties;
  • The ancillary agreement is reasonably necessary for giving effect to the objective of the broader agreement; and
  • The broader or separate agreement does not amount to an offence under s. 45.

How Does the Immunity Process Work?

When faced with potential prosecution for a conspiracy offence, it is vital to obtain the assistance of a lawyer as soon as possible. In certain circumstances, companies or individuals that are engaged in illegal anti-competitive behaviour (most frequently conspiracies to fix prices) may apply for immunity from criminal prosecution. The Director of Public Prosecutions retains discretion as to whether or not to accept an immunity application. Generally, immunity will only be considered where the Competition is unaware that an offence is ongoing and the party is the first to disclose it. Second, immunity may be available where the Bureau is aware of an ongoing offence, but the party is the first to come forward before there is enough evidence to refer the matter to the Director of Public Prosecutions. There are a number of additional requirements that must be fulfilled before an applicant may be granted immunity. Importantly, the party seeking immunity must cease its participation in the illegal conduct and must agree to fully co-operate with the Bureau’s investigation at its own expense.

There are a number of steps involved in obtaining an immunity agreement. The first step is to obtain a “marker.” A party may obtain a marker by being the first party to come forward and providing limited hypothetical disclosure of the anti-competitive conduct. If a party obtains a marker, the next step involves the submission of a “proffer.” This involves the disclosure of detailed information surrounding the illegal anti-competitive conduct. At this stage, the Bureau may conduct interviews with witnesses of the immunity applicant. The Bureau may also request certain documents or other information from the immunity applicant. If the Bureau is satisfied by the information obtained it will recommend that the Director of Public Prosecutions enter into an immunity agreement with the applicant.

If the DPP agrees, an immunity agreement will be concluded. Once an agreement is entered into, the immunity recipient will be protected from criminal prosecution for their involvement in the anti-competitive conduct. However, the immunity recipient must continue must continue to co-operate with the DPP and provide full disclosure. Witnesses of the immunity recipient might be required to submit to interviews or testify in Court.

It should be noted that an immunity agreement only protects against criminal prosecution. Third parties affected by the anti-competitive conduct of the immunity recipient may still pursue civil litigation for damages caused by the conspiracy or anti-competitive conduct.

How Does the Leniency Process Work?

Only the first business or individual who to come forward with information concerning criminal anti-competitive behaviour is granted immunity from prosecution. Subsequent parties who come forward may be afforded leniency in respect of their sentences if they agree to plead guilty.

The Bureau’s leniency program follows a similar set of steps to the immunity process. A party seeking immunity must first secure a “marker.” This will afford the leniency application a certain amount of time (30 days) to complete its “proffer.” The proffer must detail the anti-competitive activity, the parties to the offence, the anti-competitive agreements in place, as well as any other relevant evidence.

If the information proffered satisfies the Bureau, a recommendation will be made to the Director of Public Prosecutions that the party be given lenient treatment on sentencing. If the DPP agrees to provide leniency, a plea agreement will be negotiated.


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