A revival or an aberration? Prohibition orders without a conviction for cartel offences under the Competition Act

  • November 25, 2019
  • John Bodrug and Charles Tingley, Davies Ward Phillips & Vineberg LLP

Early this year, the Public Prosecution Service of Canada resolved bid rigging allegations against two separate engineering firms under section 47 of the Canadian Competition Act with prohibition orders and financial payments—but no guilty pleas, convictions or admissions of liability.[1] This article examines these two cases and their implications in light of the Canadian government’s debarment policy and other types of potential non-trial resolutions of criminal conduct investigations.

Genivar Inc. (now WSP Canada), Dessau Inc. and another engineering firm were implicated in an alleged bid-rigging scheme between 2003-2011 targeting public infrastructure contracts in parts of Quebec. For Genivar and Dessau, the Quebec Superior Court issued, with the consent of each company, a 10-year prohibition order under sections 34(2) and (2.1) of the Act requiring payment of a fine and prohibitions against breaching section 45 or 47 in the future.

The agreed statement of facts filed with the court for each company highlighted that:

  • Relevant employees were either fired (Dessau) or no longer with the company (Genivar);
  • The company had paid back the entire overcharge through a Quebec voluntary reimbursement program and entered into settlements with the relevant municipalities and public agencies;
  • The company had offered to cooperate with PPSC “early in the process” in order to reach settlements; and
  • The prohibition order was considered an effective and appropriate remedy that avoided additional costs to the justice system.

Genivar’s agreed statement of facts also said that it had adopted a credible compliance program and monitoring mechanisms consistent with the Competition Bureau’s corporate compliance programs bulletin, and the prohibition order required Genivar to adhere to its compliance program. (Dessau’s order did not address this factor, likely because it was in the process of dissolution.)

The overall investigation also led to charges against four individuals, including a former Genivar executive, two former Dessau executives, and one former executive of a third engineering firm, Cima+. All subsequently pled guilty, with three receiving 12-month, 18-month and 22-month conditional sentences respectively: one has yet to be sentenced.

While section 34(1) of the Competition Act permits a Court to prohibit a person convicted of certain Competition Act offences from repeating the offence (or anything directed toward it), section 34(2) allows a Court to prohibit anyone from committing an offence (or doing anything directed toward it) where the Court finds that a person has done or is likely to do anything directed toward the commission of such an offence. (Section 34(2.1) expands the scope of both section 34(1) and (2) to permit orders to take positive steps necessary to prevent the commission of an offence, or as may be agreed by the Crown and the respondent.)

In the past, sections 34(2) and (2.1) have been used to resolve both domestic and international conspiracy and bid rigging investigations without admissions of guilt.[2] However, sections 34(2) and (2.1) appear to have fallen into disfavour with the bureau in recent years The bureau has emphasized its desire to obtain criminal convictions and jail terms for conspiracy and bid rigging, which the current Commissioner has termed the “supreme evil of antitrust”. Notably, the bureau’s press releases on the Genivar and Dessau resolutions did not mention the absence of a conviction or admission of guilt as part of the resolution. Accordingly, it may be that PPSC is relatively more open to such resolutions than is the Bureau. (Ultimately, PPSC has carriage over criminal proceedings under the Competition Act.)

The bureau press release indicates that one of the convicted former Dessau officers received leniency in sentencing because he cooperated with the investigation and did not instigate the scheme. However, the court filings give no indication that anyone received immunity in respect of the conduct to which the Genivar and Dessau orders relate, or that either Genivar or Dessau participated in the bureau’s leniency program. Indeed, a guilty plea is required of a leniency recipient under that program.[3]

Debarment policies in Canada and elsewhere may result in the company being barred from government business for many years in the event of a conviction or admission of guilt of Competition Act offences.

Under the current version of the Canadian government’s Integrity Regime, suppliers convicted of certain cartel, bid-rigging and deceptive marketing offences under the Competition Act (among certain other federal offences) face automatic ineligibility for 10 years, with the possibility of obtaining a reduction of up to five years under a negotiated “administrative agreement” with Public Services and Procurement Canada (PSPC) if the supplier can demonstrate that it cooperated with law enforcement authorities or has undertaken remedial actions to address the conduct that led to its ineligibility.[4]

The federal government adopted a deferred prosecution agreement regime effective in September 2018 (referred to as “remediation agreements”)[5] partly to address the potentially disproportionate negative effects of a corporate criminal conviction on innocent parties (e.g., employees, customers and pensioners) beyond the immediate wrongdoers. However, DPAs are not available for companies charged with offences under the Competition Act.

Compliance with a DPA results in charges being withdrawn (and no criminal conviction) upon expiry of the DPA. Common requirements of a DPA include: an admission of responsibility, payment of financial penalties and/or reparation, reform of corporate policies and practices, and full cooperation with the government’s investigation. Given that companies charged with Criminal Code offences such as fraud and bribery that may lead to debarment under the Integrity Regime may benefit from DPAs, it is not clear why the Canadian DPA regime is not available to companies facing charges for cartel and bid-rigging conduct under the Competition Act.

In the United States, DPAs are available for antitrust offences. Earlier this year the U.S. Department of Justice announced a DPA with a generic pharmaceutical company charged with conspiring to fix prices, rig bids and allocate customers for a medicine used to treat diabetes. In its press release, the Department of Justice noted that a factor in reaching the DPA was that “a conviction (including a guilty plea) would likely result in […] mandatory exclusion of [the company] from all federal health care programs for a period of at least five years, which would result in substantial consequences, including to American consumers.”[6]

The two recent settlements of bid-rigging allegations without convictions under the Competition Act suggest that PPSC may be alive to the potentially severe consequences of debarment facing companies charged with offences under the Competition Act. Whether or not PPSC will be open to future settlements without convictions remains to be seen, but the continued spectre of debarment may disincentivize leniency applications to the Bureau and result in some corporate defendants contesting charges of cartel conduct or seeking alternate forms of resolution without a conviction, such as prohibition orders under sections 34(2) and (2.1).

John Bodrug and Charles Tingley are Partners at Davies Ward Phillips & Vineberg LLP.

[1] R. v. Genivar Inc. (now WSP Canada Inc.), March 13, 2019, and R. v. Dessau Inc., Feb. 19, 2019, Que. Superior Court.

[2] See, for example, R. v. Southeby’s and Southeby’s Canada, Federal. Court., August 28, 2006; and R. v. The Saskatchewan Roofing Contractors Association, Sask. Ct. of Queen’s Bench, June 18, 2009.

[3] Competition Bureau, Immunity and Leniency Programs under the Competition Act, March 2019, para. 117(d), https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04391.html#sec02.

[4] Proposed revisions to the Integrity Regime would introduce some additional flexibility to reduce the period of ineligibility, but their status is uncertain.

[5] See Criminal Code, Pt. XXII.1, ss 71.5.3 - 71.5.43.

[6] See: https://www.justice.gov/opa/pr/pharmaceutical-company-admits-price-fixing-violation-antitrust-law-resolves-related-false. In addition, in a recent departure from past enforcement practice, the U.S. Department of Justice announced in July 2019 that it will now consider the existence of an effective compliance policy as a relevant factor when deciding whether to charge parties implicated in alleged cartel conduct. Previously, any credit for effective corporate compliance policies would be considered only at the sentencing stage. See: https://www.justice.gov/opa/pr/antitrust-division-announces-new-policy-incentivize-corporate-compliance.