Bennett Jones LLP
3400 One First Canadian Place, P.O. Box 130
Toronto, Ontario, M5X 1A4 Canada
T: 416.863.1200
F: 416.863.1716
Randy Hughes
Partner
Direct Line: 416.777.7471
e-mail: hughesr@bennettjones.com
Emrys Davis
Partner
Direct Line: 416.777.6242
e-mail: davise@bennettjones.com
July 20, 2018
By Email: jean-sebastien.rivard@cb-bc.gc.ca
Jean-Sebastien Rivard
Cartels and Deceptive Marketing Practices Branch
Competition Bureau
50 Victoria Street
Gatineau, Quebec
KlA 0C9
Table of Contents
- Comments further to the IBA's January 22, 2018 Submission
- Other Comments on the Revised Immunity Program
- Up to 50% Cooperation Discount for all Applicants
- Up to 20% Additional Discount for Pre-Existing Compliance Program
- Pre-Guilty Plea Witness Interviews
- Ability to Pay Considerations
- Concluding Considerations
Dear Mr. Rivard:
Re: Comments on the Public Consultation Version of the Competition Bureau's Immunity and Leniency Programs ("Revised Immunity and Leniency Programs")
Thank you for the opportunity to comment on the Competition Bureau's Revised Immunity and Leniency Programs. We make this submission on our own behalf. It is not a reflection of the views of Bennett Jones LLP or any of its partners, other than us.
Summary
We respectfully propose that the Bureau consider the following amendments to enhance transparency and certainty for applicants in the Canadian immunity and leniency process:
- We urge more transparency about whether the Bureau and PPSC will recognize as privileged documents and other work product created by the applicant's lawyers or at their direction in the course of the their internal investigation.
- Given the international dimensions of corporate wrongdoing, we suggest that the Bureau and PPSC provide more details concerning the scope of conduct considered when identifying an immunity or leniency applicant as a recidivist, or when expecting an applicant to disclose prior criminal conduct.
- We suggest more details concerning when the Bureau may not require waivers.
- We caution against requiring witness interviews before a guilty plea can be accepted since not every corporate applicant will be in a position to make relevant witnesses available for such an interview.
Immunity Program
We applaud the Bureau's continued commitment to a strong immunity program as manifested in the Revised Immunity Program. A well-constructed immunity program is vital to effective cartel enforcement. Over the last three decades, immunity programs have proliferated around the world. They have detected numerous cartels that without such programs would likely have remained undetected. As importantly, by increasing the risks of detection, immunity programs deter cartel formation. Everyone benefits from the competitive markets and lower prices that result.
International experience has shown that effective immunity programs must carefully balance the benefits available to an immunity applicant with the costs imposed by cooperating with a government investigation. Benefits, and the process to obtain them, must be certain and predictable. Burdens and costs must not outweigh these benefits. Immunity applicants will not come forward if they are worse off having done so than if they had stayed silent. At the same time, immunity programs must demand cooperation from applicants sufficient to permit prosecution and conviction of other cartel participants. Immunity from prosecution is attractive only when paired with a credible threat of prosecution and conviction. If cartel participants believe that they cannot or will not be prosecuted and convicted, they will not seek immunity.
We recognize that the Revised Immunity Program aims to balance the burdens and costs imposed on the immunity applicant with the government's need for timely and complete cooperation to prosecute co-conspirators effectively. In this respect, the Revised Immunity Program maintains many key elements of the Bureau's already strong Immunity Program: specific criteria to qualify for immunity, a clearly described application process beginning with a no-names marker request, and a hypothetical proffer process. We support maintaining these critical elements of the Bureau's Immunity Program. We also commends the Bureau for combining its existing guidance into one comprehensive guidance document, which increases transparency for potential immunity applicants.
Comments further to the IBA's January 22, 2018 Submission
We contributed to the January 22, 2018 submission by the Cartels Working Group of the Antirust Committee of the International Bar Association concerning the CCB's draft for public consultation regarding the revised Immunity Program ("IBA Submission"). We are pleased to see positive change to the revised Immunity Program as compared to the October 2017 draft. More is needed.
As you know, the IBA Submission commented on four aspects of the Revised Immunity Program that depart from the Bureau's existing Immunity Program:
- the interim grant of immunity,
- immunity for a more limited set of employees,
- audio or video recording of proffers and witness interviews, and
- the potential uncertainty regarding disclosure of lawyer-created documents.
In our view, the first two changes are consistent with some international approaches to the immunity/leniency process and are unlikely to discourage participation in Canada's immunity program.
With respect to the third change regarding the recording of proffers and witness interviews, we are pleased to see that the Bureau has revised these positions consistent with the IBA's comments. For the reasons set out in the IBA Submission, we believe that recording proffers will unnecessarily discourage immunity applications. Similarly, recording witness interviews under oath at too early a stage of an investigation risks prejudicing the Bureau's own investigation and/or those of international enforcement agencies. This latter concern may discourage international immunity applications in Canada.
With respect to the fourth change regarding privilege, we observe continued uncertainty in the Revised Immunity and Leniency Programs regarding whether the Bureau and PPSC will recognize as privileged documents and other work product created by the applicant's lawyers or at their direction in the course of the their internal investigation. Silence on this critical issue creates significant uncertainty for potential immunity applicants. Many may choose not to seek immunity in Canada as a result. Thus, we support the position in the IBA Submission that — at a minimum — the Bureau clarify whether the obligation to produce all relevant, non-privileged documents requires production of documents created by the applicant's lawyers in the course of their internal investigation and, if so, which documents (e.g., only witness interview notes or other documents). If immunity in Canada requires production of such documents, potential applicants ought to be told that. Likewise, if immunity does not require such production, the Bureau benefits by removing the uncertainty that only serves to dissuade applications.
As it considers clarifying this aspect of the Revised Immunity Program, we urge the Bureau and PPSC to treat as privileged and not require production of documents the applicant's lawyers create during their internal investigation. Lawyers conduct internal investigations so that they can provide legal advice to the corporation. The corporation directs its officers and employees, as part of their duties to the corporation, to provide truthful information to the corporation's lawyers. These natural persons are the conduit through which the legal entity of the corporation provides information to its lawyers for the purposes of it obtaining legal advice.
Treating as privileged the information disclosed by a corporation's employees in this context serves the well-established goals of solicitor-client privilege. It encourages candour and completeness without which the lawyer cannot properly advise the corporation. Ultimately, the public interest benefits from that candour and completeness because it often leads to immunity applications and thus to cartel detection.
Moreover, the Bureau does not require production of lawyer-created documents during their internal investigation to learn the relevant facts. An immunity applicant must produce relevant pre-existing business documents and make relevant employees available to testify. These are direct evidence of the offence and ought to suffice.
Other antitrust enforcement agencies, such as the Antitrust Division of the U.S. Department of Justice, recognize internal investigation documents as privileged, do not require an applicant to waive privilege over them to obtain immunity, and do not require production of these documents as part of the cooperation process. We urge the Bureau to follow these examples.
Other Comments on the Revised Immunity Program
We note that paragraph 80 of the Programs provides the DPP discretion to refuse a Grant of Interim Immunity (and therefore ultimately full immunity) if the DPP determines that the applicant is a "recidivist". What "recidivist" means in this context is not clear. We urge increased clarity given the different legal regimes that govern cartel conduct internationally and the reality of businesses that operate in multiple jurisdictions, either directly or through affiliates. For example:
- What period of time will the DPP consider when deciding that an applicant is a recidivist?
- Is a prior immunity application in Canada evidence that the applicant is a recidivist or must the applicant have been convicted ofan offence?
- What prior offences qualify? Is a prior conviction under s. 45 evidence of recidivism to a charge under s. 47? What about a prior conviction for an entirely unrelated offence, such as an environmental offence or a foreign corrupt practices offence?
- Will the DPP consider a Canadian subsidiary a recidivist owing to a prior conviction of a foreign parent? What about a Canadian parent and a foreign subsidiary?
- How does this recidivism factor interact with the Bureau's Immunity Plus program?
- Will the DPP consider prior convictions outside of Canada? If so, how will the DPP consider results in jurisdictions that do not have criminal regimes but sanction anti competitive conduct through administrative regimes and penalties?
We have similar questions regarding paragraph 95 and the requirement that an immunity applicant disclose criminal activity in Canada or abroad.
Paragraph 225 states that the Bureau will require procedural and substantive waivers "absent compelling reasons," but it does not explain what might constitute a compelling reason. We recognizes that the Bureau cannot foresee and list all possible circumstances in which a waiver may not be required, but given the importance of waivers to the practice in this area and to international enforcement efforts, it would be helpful to better understand when waivers will not be required.
Leniency
As with the Revised Immunity Program, we support the Bureau's efforts to revise its Leniency Program recognizing that years of practice can produce useful insights into ways that the Program can be improved. Having said that, we caution against changes that significantly decrease the incentives for applicants to participate in the Leniency Program.
For example, we are pleased to see that the Bureau will continue to recommend immunity for the current officers and directors of the first-in-for-leniency applicant. This is a powerful incentive for applicants to seek leniency. More importantly, it is a powerful incentive for applicants to seek leniency early to secure the first-in position. That urgency can provide the Bureau with useful cooperation evidence to supplement what it has learned from the immunity applicant. In large or multi-dimensional cartels, the immunity applicant may not have the full picture to provide to the Bureau and cooperation from another party can be invaluable.
With this introduction, we comment below on specific elements of the Revised Leniency Program.
Up to 50% Cooperation Discount for all Applicants
We recognize the underlying tension within the Bureau's Leniency Program and others like it: is it primarily a mechanism to secure guilty pleas or primarily a mechanism to secure cooperation for future contested proceedings? While it is obviously a little of both, this question goes to the heart of the most significant proposed change: the change from a fine reduction structure based on the applicant's place in line to one in which the value and timeliness of cooperation enables all participants to a 50% fine reduction.
Generally speaking, we support greater incentives to participate in leniency programs. Reducing fines does that. However, this must be weighed against the risk that the better deal received by those who seek markers later in the process, the greater the risk that everyone will delay seeking markers, including an immunity applicant and possibly a first-in-for-leniency applicant. Immunity is a powerful incentive, but its attractiveness wanes as the penalties for not seeking immunity fall.
Is the cooperation from a third or fourth in cooperating company likely to be critical to the Bureau's case? At that point, the Bureau will already have cooperation from an immunity applicant, a first in leniency applicant and possibly others. Is the change likely to incent the first-in leniency applicant to provide better and earlier cooperation? Presumably that will only occur if the Bureau reduces the presumptive 50% discount the first-in applicant receives, which the Revised Immunity Program does not state and which we would discourage.
Up to 20% Additional Discount for Pre-Existing Compliance Program
We recognize that the Bureau was an early adopter of offering fine reductions for pre-existing compliance programs. Despite its leadership role on this issue, no one has taken advantage of this opportunity.
We support incentives for companies to develop and maintain robust compliance programs. At the DOJ roundtable in April 2018 on this issue, the consensus view of in-house compliance counsel and professionals was that formal credit for pre-existing compliance programs is an important tool for them to get even more management support for compliance efforts. We expect that better defining the possible benefit (that was previously undefined) should assist this effort, and we support the change on this basis.
Pre-Guilty Plea Witness Interviews
In paragraphs 177 and following, the Revised Leniency Program describes the possibility of witness interviews in advance of a guilty plea, in part to provide evidence that will support the plea. We caution against this becoming an absolute requirement in every case. Some corporate leniency applicants may not have any cooperative witnesses either because the witnesses are no longer with the company or because the witnesses risk personal prosecution in other jurisdictions (notably the U.S.) and will refuse to provide testimony under oath to any government agency. That fact pattern should not disentitle a corporate applicant who wishes to plead guilty from doing so.
Ability to Pay Considerations
We commend the Bureau's guidance on fine reductions based on ability to pay considerations in paragraph 193 and following. We recognize that this is a highly fact-specific issue whose application will vary on a case-by-case basis. Fine reductions based on ability to pay considerations can be procompetitive if they enable the company to invest strongly in efforts to compete going forward. On the other hand, they can undermine public confidence in enforcement efforts if they are perceived to reduce the fine for the benefit of the company's shareholders.
Concluding Considerations
As contributors to the IBA's Submission, we are pleased to see positive change to the revised Immunity Program as compared to the October 2017 draft. More is needed.
We are also pleased to see that the essential elements ofthe Leniency Program remain intact. Whether the changes incent more applications remains to be seen.
Yours truly,
Randy Hughes & Emrys Davis
ED