On Oct. 10, 2007, the Canadian Competition Bureau updated its Immunity Program, which prescribes the circumstances in which parties that violate the conspiracy and other criminal offence provisions of the Competition Act (Canada) may seek immunity from prosecution. The Bureau also released a backgrounder, “Adjustments to the Immunity Program,” and updated its Responses to Frequently Asked Questions (FAQs) to reflect changes to the program and provide additional guidance to immunity applicants.

Launched formally in September 2000, the program has since become a highly effective investigative tool. In February 2007, the Bureau sought input from stakeholders on specific elements of the program. The adjustments contained in the new program reflect the results of these consultations. The changes streamline the program, make it more accessible and more closely align it with similar programs in other jurisdictions.

Eligibility

The Bureau has broadened the program's eligibility criteria in three important ways:

1. disqualifying applicants on the basis of coercive conduct but not instigation or leadership;
2. disqualifying parties who commit an offence alone from seeking immunity rather than the “sole beneficiary” of illegal activity in Canada; and
3. adding agents as a class of persons eligible for immunity.

First, prior to the recent changes, an applicant considered by the Bureau to be the leader or instigator of the illegal activity was not eligible for immunity. Under the new program, applicants will be eligible for immunity unless there is clear and objective evidence that the applicant coerced unwilling participants to be party to the illegal activity. The coercion test is more precise than the leader or instigator test because of the factual challenges involved in identifying the leader or instigator of a cartel, which may shift and evolve over time. Disqualification for coercive activity is also consistent with trends observed in other jurisdictions which assess the degree of moral culpability when determining suitability for immunity.

Unfortunately, the program provides minimal guidance regarding the types of behavior the Bureau considers coercive. The FAQs reveal that the Bureau will only disqualify a party where there is evidence that the party expressly or impliedly pressured unwilling participants to be involved in the offence. In contrast, the U.K. Office of Fair Trade's Leniency and No-action Program Guidance Notes define the term “coercer,” identify specific examples of conduct that will (and will not) amount to coercion, and provide for no-names confidential guidance as to whether the coercer test may be an issue.

Second, the old program disqualified those applicants that were the sole beneficiary in Canada of an illegal activity from eligibility for immunity. In the case of international cartels involving only one Canadian participant, the immunity program became an ineffective enforcement tool; the Canadian participant had no incentive to disclose the existence of the cartel. The program now only disqualifies an applicant that was the only party to an offence. This change limits this ground of disqualification to offences that involve unilateral action, such as price maintenance.

Third, the agents of an applicant may now qualify for immunity under the program. As with former directors, officers and employees, the Bureau will consider, on a case-by case basis, whether agents are to be included in its recommendation for immunity. To qualify for immunity, agents must, at a minimum, admit their involvement in illegal activity and provide complete and timely co-operation with the Bureau's investigation. Unfortunately, the new program does not indicate what factors the Bureau will consider in determining whether to include agents or former directors, officers or employees in an immunity recommendation. This information would be of great assistance to potential individual immunity applicants in determining whether they should seek immunity.

Procedural changes

The former program created a two-step application procedure. Before entering into a formal immunity agreement, an applicant first had to obtain a provisional guarantee of immunity. To obtain the guarantee, the applicant was required to disclose to the Bureau information relevant to the illegal activity, usually in hypothetical terms. If the Bureau was satisfied that an offence under the Act had been committed and that the applicant was eligible for immunity, it would recommend that the attorney general (now the director of public prosecutions) grant a guarantee to the applicant. If and when the guarantee was granted, the applicant would provide full disclosure of information in relation to the offence and provide continuous co-operation throughout the investigation and any prosecution. If the Bureau was satisfied with the level of disclosure and co-operation by the applicant, it would recommend that the attorney general (or director) enter into a final immunity agreement with the applicant.

The new program eliminates the redundancy created by the guarantee process. Now an applicant can secure a “marker” as first-in-line to request immunity by providing limited hypothetical disclosure sufficient to identify the nature of the criminal offence in respect of a specified product. If the applicant obtains a marker and decides to proceed with the application, it must provide a more detailed “proffer” that discloses the particulars of the offence in hypothetical terms. If the Bureau concludes, following investigation, that the applicant may meet the requirements of the program, it will make a recommendation to the director of public prosecutions. If the director accepts the Bureau's recommendation for immunity, it will execute an immunity agreement that includes in its terms all of the applicant's ongoing obligations. The new streamlined process more closely resembles that followed in other jurisdictions and will be familiar to foreign applicants.

Restitution

The restitution requirement has been removed from the program. The Bureau appears to have recognized that the right of private action in s. 36 of the Act and an increasingly sophisticated plaintiffs' bar are sufficient to protect the interests of individuals who suffer harm as a result of anti-competitive conduct. The Bureau's resources are better directed to detecting and investigating anti-competitive conduct rather than assessing complex issues of damages.

Confidentiality

Confidentiality is vital to the program's success and is beneficial both to the applicant and to the Bureau. The program obliges both parties not to disclose information relating to the investigation. However, the Bureau's confidentiality obligations are not absolute. The program identifies limited instances where the Bureau may disclose the identity of an applicant, such as to obtain judicial authorization for the exercise of investigatory powers or to a Canadian law enforcement agency in furtherance of that same purpose. The program also clarifies that the Bureau will not release the identity of the applicant to any foreign law enforcement authority without the applicant's consent.

Revocation

Under the former policy, an applicant that entered into an immunity agreement but failed to comply with its requirements risked losing immunity. The new program provides that the director of public prosecutions will give 14 days' written notice to a party before revoking immunity. The notice period is intended to allow a party that has obtained immunity but is not in compliance with its immunity agreement to bring itself back into compliance. In addition, the FAQs have been updated to clarify that failure to disclose other offences under the Act will only be grounds for revocation where the non-disclosure is intentional.

To date, revocation has not been an issue of concern in Canada. The Bureau recently advised that, since the program began, immunity has only been revoked twice, and in those cases, no prosecutions resulted. However, the director of public prosecutions will still need to exercise caution when drafting immunity agreements to ensure the availability of revocation should a question about non-compliance arise. As the recent U.S. experience in Stolt-Neilson (United States of America v. Stolt-Nielsen S.A., et al., 2007 U.S. Dist. LEXIS 88628) demonstrates, failure on the part of the director to set out with precision both the facts relied upon in granting immunity and the obligations of the immunity applicant may make it difficult for the prosecuting authorities to establish non-compliance with the immunity agreement down the road.

Leniency

The Bureau is developing a formal leniency program for parties that do not qualify for immunity but nonetheless cooperate with the Bureau's investigation. A draft bulletin on leniency and sentencing is expected later this year.

Conclusion

The prosecution of domestic and international cartels is an enforcement priority for the Bureau. To date, the Immunity Program has been an important mechanism for detecting cartel activity. While there are some areas where further guidance from the Bureau would be helpful, the Bureau's sensible and pragmatic updates to the program are likely to ensure its continued success.

On March 28, 2008, the Supreme Court of Canada released its decision in Tele-Mobile Company (a.k.a. Telus Mobility) v. Her Majesty the Queen (Ontario), et al. The court unanimously dismissed Telus' appeal, which sought reasonable compensation for compliance with production orders issued under the Criminal Code.

In 2004, the Criminal Code was amended to introduce production orders as a new investigative tool for law enforcement agencies. Production orders compel innocent third parties, under penalty of fine or imprisonment, to produce and analyze documents or data for use in criminal investigations. Anyone named in a production can apply for an exemption from the order, including in instances where “it is unreasonable to require the applicant to produce the document, data or information.” Prior to the amendments to the Criminal Code, the police were required to obtain and execute search warrants to obtain this kind of information, and the performance of these services and the associated costs was the responsibility of the police.

In this case, Telus sought exemptions in respect of two production orders on the grounds that the burden of compliance would be unreasonable without compensation due to the cost of retrieving the archived data. Telus spends approximately $662,000 each year responding to production orders. The Ontario Court of Justice dismissed the application for exemptions on the basis that a judge did not have the power to impose a term that a party receive its reasonable costs of compliance with a production order, and that compliance with a production order was only “unreasonable” when the expenditure incurred was “significant to [the third party's] financial health.” Telus appealed directly to the Supreme Court, pursuant to s. 40(1) of the Supreme Court Act.

The appeal considered two key issues: (1) whether a judge may require that an innocent third party be paid the reasonable costs of complying with an order made under the “production order” provisions in section 487.012 of the Criminal Code; and (2) what is the appropriate test for granting an exemption from compliance with a production order under section 487.015 of the Criminal Code.

The Canadian Bankers Association intervened in support of Telus. In addition to being regular recipients of general production orders, financial entities are subject to production order provisions, which are specifically directed at financial institutions and which can be more easily obtained by the police. The Attorney General of British Columbia, the Attorney General of Quebec and the Canadian Association of Chiefs of Police intervened in support of the Attorney General of Ontario and the Attorney General of Canada.

In dismissing Telus' appeal, Justice Abella, writing for the court, concluded:

“The outcome of this case depends on statutory interpretation. The legislation makes no reference to compensation...

“A review of the history preceding the creation of the production order scheme is significant in discerning what the legislature's intention was in connection with compensation for compliance. That history shows that the question of whether compensation should be paid to telecommunications service providers for the costs of compliance with court orders has been part of an ongoing conversation between these providers and the government for some time.

“...While it cannot be said that legislative silence is necessarily determinative of legislative intention, in this case the silence is Parliament's answer to the consistent urging of Telus and other affected businesses and organizations that there be express language in the legislation to ensure that businesses can be reimbursed for the reasonable costs of complying with evidence-gathering orders. I see the legislative history as reflecting Parliament's intention that compensation not be paid for compliance with production orders.

“...In the absence of a specific provision permitting the recovery of costs in the production order scheme, therefore, and in light of the legislative history, the ex parte procedural mechanisms set out in the legislation, and the principle that compensation is not ordinarily recoverable in criminal matters (Foster, at para. 56), I agree with Vaillancourt J. that s. 487.012(4) and (5) cannot be interpreted so broadly as to permit a judge to order compensation for compliance with production orders.”

With regard to the test for an exemption under the Criminal Code, the court concluded:

“The object of an unreasonable production order is not without remedy. It lies in an application for an exemption pursuant to s. 487.015...

“In essence, the financial consequences must be so burdensome that it would be unreasonable in the circumstances to expect compliance. This, I readily acknowledge, is a somewhat tautological explanation, but I see no purpose in offering alternative definitions for a term so well known and understood as having a fact-specific compass. What is reasonable will be informed by a variety of factors, including the breadth of the order being sought, the size and economic viability of the object of the order, and the extent of the order's financial impact on the party from whom production is sought. Where the party is a repeated target of production orders, the cumulative impact of multiple orders may also be relevant.”

Although the court's decision requires innocent third parties to bear some measure of the costs of compliance with production orders, the ruling has expanded the list of factors to be considered in determining whether an exemption should be granted. In addition, the court has confirmed, at the urging of both Telus and the Canadian Bankers Association, that partial exemptions from production order requirements may be granted, notwithstanding that the Criminal Code does not expressly empower a judge to do this. As a result, third parties who find themselves repeat targets of production orders that are overly broad and burdensome will be well-positioned to bring exemption applications in order to obtain the assistance of the courts to review and modify, at least, the more problematic terms of production orders.

Introduction

On March 12, 2008, the House of Lords gave judgment in Ian Norris' long-running battle against extradition to the U.S. (Norris v. Government of the United States of America [2008] UKHL 16) to face charges of conspiracy to fix prices. Two main conclusions emerge from this case. First, before the introduction of the U.K. criminal cartel offence under the Enterprise Act 2002 in June 2003, price-fixing was not a criminal offence in the U.K. Second, the Lords came to an important conclusion on the approach to be taken to assessing extradition requirements but did not limit the controversial operation of the new extradition arrangements, as regards the quality of evidence required, so that extradition will remain relatively straightforward for activity which meets the U.K. test of the new statutory cartel offence.

With the long arm of enforcement efforts in the U.S. and elsewhere extending and the increased use of extradition in cartel cases, the judgment will have important practical and legal consequences for business people with cartel exposure and their advisers. The case is a welcome clarification of the scope of U.K. domestic law for criminal cartel activity and on the requirements for extradition. However, it is also significant for what it does not address.

In context

For those not familiar with the background, Norris was the CEO of Morgan Crucible plc (Morgan). In 1999, the U.S. Department of Justice (DoJ) began an investigation into alleged price-fixing in the carbon industry in the U.S., where Morgan subsidiaries were active (price-fixing is a federal criminal offence in the U.S. under s. 1 of the Sherman Act).

In 2002, Morgan agreed to a plea bargain with the DoJ under which it paid a fine of US$11 million, but which stopped short of granting Norris immunity. (In 2004, Morgan companies were fined CDN$1 million for obstruction and price-fixing in relation to the Canadian authorities' investigation.) In 2004, the DoJ obtained a grand jury indictment against Norris for his involvement in the U.S. price-fixing and for alleged conduct falling within the U.S. crimes of conspiracy to obstruct justice, witness tampering and corruptly persuading others to destroy documents.

In 2005, a U.K. magistrate approved the extradition of Norris to the U.S. This was subsequently endorsed by the Divisional Court, on the basis, not previously decided, that price-fixing fell within the U.K. common law offence of conspiracy to defraud. Critically, the conduct in question took place before the entry into force on June 20, 2003 of the Enterprise Act, which created a statutory criminal offence of price-fixing (for which individuals but not companies may be liable).

Under the Extradition Act 2003, the U.S. had to show that, at the time in question, it was a criminal offence in the U.K. to engage in price-fixing. If price-fixing in the U.K. could constitute the common law criminal offence of conspiracy to defraud before the statutory offence came into force, the U.K. business community was potentially exposed to both retrospective domestic price-fixing prosecutions (in a period when this had previously been thought not to be a crime) and an increased risk of extradition to the U.S. These risks would, of course, decline with time.

Implications for U.K. domestic cartel regulation

The Lords decided the most important antitrust extradition case to date in a powerful, well-reasoned, concise judgment of some 27 pages.

They ruled that making and implementing a price-fixing agreement was not, before the Enterprise Act came into force, a criminal offence in the U.K., provided there were no aggravating features. They analyzed the authorities, and, interestingly, the parliamentary approach (both as to legislative intent and matters of principle) on the issue of conspiracy to defraud and held that price-fixing, simpliciter, does not form part of the common law offence of conspiracy to defraud.

However, the Lords ruled that where an agreement to fix prices contained some “additional dishonesty” or deception, then price-fixing may fall within the common law offence of conspiracy to defraud. The judgment does not set out what would amount to the necessary misleading conduct or deception. It is clear that simply covert behaviour (“smoke-filled rooms”) will not establish the offence. What behaviour is likely to be sufficient is difficult to determine, which is actually conceivable in the context of a cartel. The Lords were likely well aware of this difficulty (which is relevant in another case that is currently before them) but were not troubled by it, on the basis that they were not seeking to extend the common law offence, given the introduction of the Enterprise Act criminal cartel offence. It seems that some form of overt conduct would be required, such as a dishonest representation that the market in question or the pricing structure was competitive in a way that actively misled a counterparty.

The judgment is significant in terms of its reasoning and practical implications, although it is important to note its scope and limitations.

• The judgment does not actually prevent prosecutions by the U.K. Office of Fair Trading or Serious Fraud Office in respect of conduct pre-dating the Enterprise Act seeking to establish aggravating factors. In practice, however, given the flavour of the judgment and the agencies' enforcement priorities, the risks of U.K. authorities starting new investigations into behaviour before June 20, 2003 must be relatively slight. Egregious behaviour would have to come to light, which made it appropriate.
  
  
• Cartel conduct after June 20, 2003, will be subject to the Enterprise Act, which may result in criminal sanctions against individuals including imprisonment for participating directors and employees. However, the Enterprise Act does not impose criminal liability on companies.

Extradition

In addition to the implications for U.K. domestic law, the case has significant implications for the controversial issue of the “double criminality” requirement for extradition. In order to extradite a person to a foreign state, there must be a criminal offence covering the relevant conduct in both the requesting state (in Norris, the U.S.) and the requested state (in Norris, the U.K.). With respect to double criminality, the issue was whether there needed to be equivalence of the elements of the crime in both the requesting state and the requested state (the offence test) or whether it was sufficient for the conduct in question to have been criminal in each, although not necessarily under the same offence (the conduct test). The Lords clearly decided that the conduct test should apply, thereby placing the law in the U.K. on an equal footing to the rest of the common law jurisdictions.

Although Norris successfully appealed against extradition on the basis of conspiracy to defraud, the Lords held that if Norris had done in England what would have amounted to the ancillary indictments in the U.S., he would have been guilty of an offence of obstructing justice by interfering with a price-fixing investigation.

Accordingly, the Lords sent the case back to a district judge to consider whether extraditing Norris on these more limited indictments (the cartel issue having fallen away) would be proportional and not a breach of his rights under the European Convention on Human Rights.

In terms of how antitrust enforcement operates internationally, the case may not be such a victory for the business community as some have hoped.

• Depending on how the lower court decides the case with respect to Norris on the questions of proportionality and human rights, a greater focus may be expected in the U.S. on bringing prosecutions against U.K. nationals (and nationals from other common law countries which have not yet implemented statutory criminal cartel offences but whose legal systems contain an offence of conspiracy to defraud or similar) for ancillary offences such as obstruction of justice and making false and misleading statements, whether or not the statutory cartel offence is relevant. The way in which businesses respond to DoJ and Federal Trade Commission investigations can therefore be expected to assume greater importance, given the need not to do anything which may amount to – or be seen to amount to – destroying documents, making false statements to government officials or encouraging others to do so.
  
  
• Whether extradition for an offence is contrary to an individual's human rights must be assessed on a case-by-case basis. The lower court had held that extradition would not infringe Norris' right to respect for his private life, nor constitute unjustified discrimination in the enjoyment of his Convention rights, nor amount to unfair retroactivity with respect to the full indictment. Given that the Lords thought it necessary that the arguments of proportionality raised by Norris on human rights grounds should be reconsidered on the more limited double criminality basis, it will be interesting to see what effect the judgment will have on the way in which the DoJ seeks candidates for extradition in the future.

Implications for similar legal systems

A broader international perspective may be useful on this issue. The U.S. has long pressed for the harmonisation of antitrust laws, particularly with countries that share their antitrust goals and whose courts are familiar with this field of law. The U.K., European Union and Commonwealth countries (for example, Australia and Canada) have co-operated on initiatives to co-ordinate the prosecution of international cartels.

For example, as early as 1994, extradition from Canada appears to have been under consideration in the Disposable Plastic Dinnerware case in the U.S. While there is no public reference to extradition, the risk of extradition is believed to have been influential in the decisions of the Canadian defendants to go to the U.S. to plead guilty.

A Canadian precedent may be of interest, not in the context of extradition, but as an interpretive insight into judicial acceptance of the similarity between a classic cartel offence and offences based on fraud. In the Canadian Dredging case (R v. McNamara (No. 1) (1981) 56 C.C.C. (2d) 193), individuals and corporations were convicted of conspiracy to defraud under the Criminal Code. The case concerned dredging contracts between public authorities and the defendants, where the bids were alleged to have been made on a collusive basis. Such bid-rigging is one of the more common offences under s. 1 of the U.S. Sherman Act. Although bid-rigging is equally clearly an offence under what is now the Canadian Competition Act, this case was prosecuted as conspiracy to defraud, rather than bid-rigging. While the case ultimately went to the Supreme Court of Canada, the characterisation of the offence was not considered in detail; however, it was clear that bid-rigging could constitute conspiracy to defraud.

Should the issue of characterisation be considered in the future, the policy issues addressed in the Norris judgment may be of interest, even if the precise legal environment is quite different. This is not unrealistic: the DoJ is likely to pursue extradition in the context of a criminal antitrust offence affecting Canada or a country with a similar legal system, particularly those that have been co-operating on antitrust matters.

Interplay between criminal, administrative and civil enforcement

A further lesson from Norris relates to the interface between criminal, administrative and civil enforcement, each in their multi-jurisdictional dimensions. In circumstances where senior management may be compromised, businesses will need to consider earlier whether separate representation for the company and its officers is desirable.

In Europe, Morgan was granted immunity from fines in connection with the European Commission's administrative investigation into electrical and mechanical carbon graphite products under Article 81 of the EC Treaty. Yet today, it is the subject of civil damages claims (and at present is the lone defendant in those proceedings, although there is an application for permission to join in Morgan's co-cartelists) and Norris' fight for liberty continues. Given the multiplicity of enforcement mechanisms, it is clear that now, more than ever, corporate decision-making as part of an effective cartel defence strategy cannot be independent of the position of the individuals concerned.

Conclusions

Whether Norris ultimately “wins” his fight against extradition, the cautionary story of one 70-year-old former CEO from England has already made many in the business community face up to the reality of international cartel enforcement.

As with similar enforcement tools such as leniency, “red notices” and covert surveillance, the threat of extradition may be seen as an investment by the authorities in psychological suasion, in addition to the deterrent value (the DoJ places nationals who have been indicted in criminal antitrust cases on Interpol's “red notice” list, used by several Interpol states in their immigration and border control procedures; many such nations view a red notice as a request for provisional arrest and detention). The Norris judgment may have been only partially successful in its narrow chronological context. Nonetheless, the DoJ's appetite to continue to seek appropriate cases in which to pursue foreign nationals on price-fixing charges shows no signs of abating. The knowledge that a person is “of interest” will no doubt heighten personal concern. When coupled with the risk of temporary detention for investigation, extradition will remain a serious element for foreign executives to consider when weighing up whether to face charges in the increasing number of jurisdictions (including Brazil, Canada, France, Germany, Ireland, Japan, the Netherlands and Korea) adopting criminal cartel sanctions.

Paul Lomas and Boris Bronfentrinker are partner and associate, respectively, in the Antitrust, Competition and Trade and Dispute Resolution Practice Groups at Freshfields Bruckhaus Deringer in London. Suzanne Rab is a senior associate in the Antitrust, Competition and Trade Practice Group at Freshfields Bruckhaus Deringer in London.

Background

Australia looks set to fall into line with other jurisdictions, such as Canada, the U.K. and the U.S., where serious cartel conduct is a criminal offence. As the first step in its proposed criminalization of serious cartel conduct, the Australian federal government has released an exposure draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, which proposes two new criminal offences. The genesis of the draft bill can be traced back to 2003, when the Review of Competition Provisions of the Trade Practices Act 1974 recommended introducing criminal penalties into Australian law for hard-core cartel conduct.

The impetus to reach agreement on the legislative changes necessary for criminalization stems largely from a recent high-profile cartel case in Australia in which record financial penalties were imposed, under the current civil regime, on Visy Industries Holding Ltd. and two of its officers for their part in fixing prices in the corrugated fibreboard packaging market. The chairman of the Australian Competition and Consumer Commission (ACCC), Graeme Samuel, noted the crucial role played by the immunity process and called for criminal sanctions to be introduced: “Let me be clear – nothing concentrates the mind of an executive contemplating creating or participating in a cartel more than the prospect of a criminal conviction and a stretch in jail.”

The Australian federal government has completed the public consultation process for the draft bill and has received a number of submissions from interested parties. Its election promise is to introduce legislation by the end of the year.

Key elements of the new criminal offences

The draft bill proposes the introduction of two criminal offences into Part IV of the Trade Practices
Act 1974 (Cth) as well as into the Competition Code of each Australian state and territory: making, and giving effect to, a contract, arrangement or understanding containing a cartel provision, with the intention of dishonestly obtaining a benefit. A cartel provision is one that fixes prices, restricts outputs, allocates customers, suppliers or territories, or rigs bids by parties that are, or would otherwise be, in competition with one another.

The offences apply to corporations carrying on business in Australia and their employees, but the legislation will not operate retroactively. The elements of the criminal offence must be established beyond reasonable doubt (as opposed to the civil standard of the balance of probabilities). Individuals found to breach the new criminal offences will face up to five years' imprisonment and a fine of up to $220,000. Corporations can be fined the greater of $10 million or three times the value of the benefit from the cartel or, where the value cannot be determined, 10 per cent of annual turnover of the Australian corporate group.

The criminal offences will operate alongside new civil prohibitions, which mirror the criminal offences but for the requirement to act with the intention of dishonestly obtaining a benefit. The maximum pecuniary penalties proposed for the new civil prohibitions are the same as those applicable to existing civil breaches: for corporations, the greater of $10 million or three times the value of the benefit from the cartel or, where the value cannot be determined, 10 per cent of annual turnover; and for individuals, $500,000.

The draft bill exempts criminal and civil penalties for notified collective bargaining (thereby retaining the current notification procedure which operates alongside the authorization regime and protects the rights of small businesses to bargain collectively; that is, to agree on their sales or acquisition terms and conditions, in certain circumstances), conduct authorized by the ACCC, and arrangements between related bodies corporate. It also reiterates the existing defence for civil liability for joint ventures that do not have the purpose or effect of substantially lessening competition.

Investigation and prosecution

A proposed memorandum of understanding between the ACCC and the Commonwealth's director of public prosecutions (DPP) will specify the responsibility of each agency in the investigation and prosecution of cartels, will establish standards of co-operation and channels of communication, and is intended to facilitate the implementation of an effective immunity policy. The ACCC will investigate potential offences and decide whether to refer a serious case to the DPP, which will then be responsible for prosecuting offenders.

The ACCC and DPP will consider, for example, whether the offending conduct is long-standing and what is its market impact, as well as the scale of detriment to consumers of the public and previous involvement in cartel conduct. The ACCC will also take into account in its reference decision whether the value of affected commerce exceeds $1 million within a 12-month period, or whether the value of a bid or series of bids exceeds $1 million within a 12-month period. The ACCC will retain the ability to grant immunity from civil proceedings, but the DPP will manage immunity from criminal proceedings.

While the draft bill enhances the ACCC's search-and-seizure and information-gathering powers, it also contains provisions relating to the protection of information received by the ACCC in confidence concerning a potential breach.

Dishonesty

The draft bill adopts dishonesty as a means of distinguishing between the criminal and civil offences. The Australian federal government has received extensive public comments on whether or not this is the appropriate test. This approach follows the example of the Enterprise Act 2002 (UK), brought into force in the U.K. in June 2003, which made it a criminal offence to agree dishonestly to engage in price-fixing, restrictions of supply or production, market-sharing or bid-rigging.

The test for dishonesty (both in the U.K. and under the draft bill in Australia) is whether conduct is dishonest according to the standards of ordinary people and is known by the defendant to be dishonest according to the standards of ordinary people.

By comparison, a number of jurisdictions where criminal sanctions have been introduced successfully, including Canada and the U.S., do not require dishonesty to be shown to distinguish serious or hard-core cartel conduct from a civil breach. The U.S. focus is on prosecutorial discretion, and in Canada, the emphasis is on whether the conspiracies or agreements in question have undue anti-competitive effects, taking into account the parties' respective market power and the impact on competition in the relevant market.

Concern has been raised that the dishonesty requirement of the new criminal offences is unnecessary and, in particular, is likely to be problematic to prove before a jury, as it has a subjective element; that is, the defendant must have known the conduct was dishonest by ordinary standards.

Telephone interception

Telephone-tapping powers under current legislation are available if the offence is punishable by imprisonment of seven years or more. As mentioned, the proposed cartel offences impose a maximum five years' imprisonment. The Australian federal government asked for views on whether increased interception powers could be justified for an offence with a jail term shorter than seven years.

Conclusion

Comments were invited on any matters related to the initiatives contained in the draft bill and, specifically, on two particular questions, namely: (i) how to distinguish criminal from civil prohibitions; and (ii) whether telephone interception warrants should be available for the new criminal cartel offences. Public consultation is now complete, and the antitrust community awaits the government's response.

Introduction

Forensic economic analysis of the investigation of price-fixing cartels generally falls into two categories:

1. Forensic investigation of the firms and individuals involved, to identify any evidence of the operation of a cartel (or negative assurance regarding the lack of such evidence); and
2. Economic and statistical analysis of the indirect evidence embodied in the operation of the market(s) in question.

Forensic investigation

A forensic investigation may yield direct evidence of firms' attempts to reach or enforce a collusive agreement (i.e., evidence of the proverbial “meetings in smoke-filled rooms”). For example, such evidence may be embodied in incriminating documents or through testimony by co-operating parties produced during the investigation.

In many cases, however, such evidence is incomplete. Where this is the case, the forensic investigation can uncover indirect evidence which may either demonstrate a pattern of behaviour consistent with the existence of a cartel, or provide negative assurance that no such pattern exists.

Read the full text

Welcome to the inaugural issue of The Marker, the newsletter of the Criminal Matters Committee. I hope you find it to be a stimulating and useful collection of articles. There have been numerous developments of importance on the criminal side of Canadian competition law practice, and this publication, along with events such as the spring meeting, are a part of the Criminal Matters Committee's efforts to provide value to its members.

In addition, the Committee's leadership has been active on your behalf in promoting dialogue among members of the DPP, the Criminal Matters Branch, and the private bar through participation in formal and informal consultations on matters of significance. It is only due to the committed involvement of the Committee's Vice-Chairs, Mark Katz, John Pecman and Graham Reynolds, that this has been possible.

Notwithstanding this, there is always work to be done, and we would welcome the involvement of both new members of the Committee (especially newer members of the bar) and existing members to expand our activities. If you are interested in the work of the Committee, and have ideas or projects to propose, please do not hesitate to contact any of us to get involved. From a personal perspective, I have found my involvement in the Committee's activities to be a source of great personal and professional satisfaction, and I am sure you will too.

Subrata Bhattacharjee, Heenan Blaikie
416-643-6830
sbhattach@heenan.ca

Our objective in compiling this issue of The Marker - aside from simply getting it off the ground - was to try to present articles on a wide variety of different topics relevant to the criminal aspects of competition law practice in Canada. In particular, we wanted to be able to report on and reflect some of the many developments of interest taking place in other jurisdictions.

We think, and hope you agree, that we have accomplished this objective, with articles by Paul Lomas, Suzanne Rab and Boris Bronfentrinker of Freshfields on the Norris extradition case and David Brewster, Fiona Crosbie and Helen Anness of Allens Arthur Robinson on proposed changes to Australia's cartel law. Shifting the focus back to Canada, Linda Plumpton and Jonathan Gilhen of Torys discuss the Bureau's new immunity program and Charles Toth of Faskens goes outside the strict realm of competition law to assess the recent Telus Mobility decision. Finally, Mark Berenblut and Bradley Heys of Berenblut Consulting provide an economist's perspective on forensic economics in cartel investigations.

Thanks to all of the contributors. Your efforts are greatly appreciated. Special thanks to Corinne Lester of Davies for her invaluable assistance in making this issue a reality.

We are aiming to publish a second issue of The Marker in the fall. Please contact either one of us if you would be interested in participating.