Criminal Competition Law Developments In 2011

The enforcement of sanctions against antitrust cartels remained at the forefront of both Canada's Competition Bureau and global antitrust regulators in 2011. While there continue to be only a small number of multinational coordinated investigations, regulators continued their enforcement efforts in domestic price fixing and bid-rigging cases with a pattern of escalating fines and, in the U.S., increased terms of imprisonment for individuals.

In our second annual report on Canadian and International criminal antitrust developments, we bring together the major developments in this important enforcement area and examine trends in enforcement activity. We commence with an examination of the Canadian scene.

Bureau Case Resolutions

Canada's Competition Bureau announced several resolutions of both international and domestic cartel and bid-rigging probes this year.

Cartel Cases

Kason Industries Inc. pleaded guilty on March 8, 2011, to a customer allocation conspiracy for the sale of refrigeration and food service equipment components in Canada and the U.S. The Bureau determined that Kason had approximately 40% of the overall sales of food service equipment components in Canada and the U.S., to a value of $3.16 million to the allocated Canadian customers. The Company was fined $250,000. Based on the announced figures, this amounts to a proportional fine of approximately 8%; as well, the Company's fine was payable over five years with a $50,000 initial instalment. (Kason had previously pleaded guilty in the U.S. and paid a US$3.3 million fine.) The Bureau's continuing Inquiry into Price Fixing in Certain Retail Gasoline Markets in Quebec resulted in additional pleas of guilty for three individuals. On May 30, an owner of a service station in Magog pleaded guilty and was sentenced to a fine of $20,000 and on June 10, two additional individuals pleaded guilty and paid fines of $10,000 and $15,000 in relation to a conspiracy to fix the price of retail gasoline in the Thetford Mines region of Québec. (These penalties continue the Bureau's trend of imposing either fines or conditional-sentence (house arrest) imprisonment for individuals in this probe). Bid-Rigging Cases

On July 19, Les Entreprises Promécanic Ltée. pleaded guilty to three counts of bid-rigging and was fined $420,000 for its role in an agreement to rig bids for private sector ventilation contracts in residential highrise buildings in Montreal. While no individual charges were laid, an employee of the Company who was involved in estimations was subject to a prohibition order (together with the Company) for a period of 10 years. The prohibition order also specified that the Company and individual were required to cooperate with the prosecution of the remaining accused in this case. Thus, it is likely that the Company and individual took advantage of the Bureau's leniency program in the resolution of this matter. On November 22, the Bureau announced that it had laid bid-rigging charges against six companies and five individuals alleged to be involved in a specialized sewer service cartel relating to municipal tendering processes in the years 2008/2009 with a total value of $3.3 million. One Company, MSC Réhabilitation Inc., pleaded guilty in relation to 12 calls for tenders and was fined $75,000. Once more, the Bureau appears to have benefited from its leniency program in obtaining the cooperation of certain corporations and individuals in the investigation and eventual prosecution of the case. Deceptive Marketing Practices and Related Cases

On August 30, five individuals associated with Ambus Registry Inc. were sentenced for involvement in a cross-border deceptive telemarketing operation in relation to business directories. The individuals were convicted both of deceptive telemarketing under section 52.1 of the Competition Act and also of the offence of fraud under section 380 of the Criminal Code. The two co-founders of the Company were sentenced to a collective term of two years in a federal penitentiary, while two managers received 16 month terms, with the first eight months to be served under conditional sentencing (house arrest) and the remaining eight months on probation. Another manager was given a suspended sentence and placed on two years' probation. In 2007, an individual associated with the Company pleaded guilty and received a $15,000 fine. The Bureau's investigation indicated that over $3.75 million in victim losses arose from the operation of the business directory scheme. On September 22, the Bureau announced that charges had been laid in the Bureau's IT Data Direct case against five individuals and four Montreal-based companies in relation to allegations of fraudulent telemarketing that generated over $172 million in gross sales. The scheme marketed directories, subscriptions to online directories, office supplies and medical kits at inflated prices and promoted these to businesses across Canada, the U.S., Europe and Central America. Contested Cases

On April 12, the Ontario Divisional Court dismissed Toshiba of Canada Limited's application for leave to appeal from the decision of the Ontario Superior Court dismissing its preliminary application for disclosure of Bureau documents and to cross-examine a Bureau affiant as interlocutory proceedings in Toshiba's main motion which challenged the Commissioner's ability to obtain foreign-source documents under subsection 11(2) of the Competition Act in relation to an inquiry into an alleged cartel for cathode ray tubes (CRTs). In complex reasons, Wilson-Siegel, J. held that the proceedings brought by the Commissioner for the Section 11 Order were properly characterized as criminal proceedings to which the Criminal Proceedings Rules applied and thus, on jurisdictional grounds, no appeal was permitted from the initial decision. Interestingly, the Bureau took the position that its inquiry commenced under section 10 of the Competition Act was a criminal proceeding to which the Criminal Proceedings Rules applied. In alternative, Wilson-Siegel, J. determined that the Superior Court's decision refusing production of the Competition Bureau documents was correct in that Toshiba's argument in support of production was based upon mere speculation; however, the Court held that, on a close examination of the underlying materials, there was a basis to doubt the correctness of the ruling by the Superior Court that Toshiba should not be permitted a right to cross-examine the affiant. The Court also concluded that the grounds raised by Toshiba on its challenge to subsection 11(2) of the Act were substantial. On December 8, the Supreme Court of Canada dismissed an application for leave to appeal from the decision of the Ontario Divisional Court. A link to the decision in this case is provided here. Criminal Law Cases with Competition Law Implications

This year there were a number of criminal law decisions that may have impact on Canadian criminal competition cases, as follows:

R v. Nixon 2011 SCC 34 (June 24, 2011): This Supreme Court of Canada case dealt with the issue of whether the prosecution can repudiate a plea agreement reached with defence counsel. The accused was charged with the offence of dangerous driving causing death (the accused had driven her motor home through an intersection, striking another vehicle, with the result that a husband and wife were both killed and their young son seriously injured). Initially, Crown Counsel entered into a plea agreement for a plea of guilty to an offence of careless driving and recommendation of a $1,800 fine. On review by senior Justice managers, the proposed arrangement was repudiated as being contrary to the interests of justice and that it would bring the administration of justice into disrepute. The Crown accordingly withdrew the plea agreement and proceeded to trial. The accused brought an application under Section 7 of the Charter alleging abuse of process and seeking a stay of proceedings. The trial Judge allowed the application, but the Alberta Court of Appeal disagreed, holding that repudiating a plea agreement is not reviewable by the courts. The Supreme Court dismissed the further appeal, holding that resiling from a plea agreement was a "core" discretionary function of the Crown and could be reviewed only by a finding of abuse of process. Since, in this case, there was no evidence of prosecutorial misconduct, improper motive or bad faith and the accused was not prejudiced as she was merely returned to the same position she was in initially, there was no abuse of process and, accordingly, the Crown was correct in rejecting the plea...