Punishing Cartels In Canada: Is A 'Sea Change' On The Horizon?

1. The Canadian Track Record in Punishing Cartel Conduct

   Canada has a long history of pursuing and prosecuting cartels (more commonly referred to in Canadian competition law as "conspiracies"). The first criminal anti-cartel prohibition was enacted in Canada in 1889, one year prior to passage of the Sherman Act in the United States. Since that time, there have been numerous cartel prosecutions in Canada involving a myriad of industries.1 Canada also has an active and sophisticated immunity (amnesty)/leniency program, and is considered to be among the first jurisdictions that participants in global cartels should contact when approaching the authorities.2

   And yet, notwithstanding its established pedigree of cartel prosecution, there is one area of anti-cartel enforcement in which Canada is seen as lagging behind, especially in comparison to the United States - penalties and sanctions.

   It's not that the theoretical penalties for cartel conduct in Canada are negligible. For example, the Competition Act's core prohibition against cartel conduct makes it a criminal offence for competitors (or potential competitors) to agree to fix prices, allocate markets or restrict output. Parties found to have committed this offence are liable to imprisonment for a term of up to 14 years and to fines of up to CDN$25 million per count. Similarly, violations of the criminal prohibition against bid-rigging expose parties to the potential of fines "in the discretion of the court" and to imprisonment for a term not exceeding 14 years.

   In practice, however, the sanctions imposed in Canada for cartel offences have been relatively modest.

   In 2012, for example, a total of approximately CDN$22.5 million in fines was imposed on parties convicted of violating the Competition Act's conspiracy and bid-rigging offences. This compares to the approximately US$1.13 billion in cartel-related fines obtained by the U.S. Department of Justice in 20123. Even if one takes into account the rule of thumb that the Canadian economy is approximately 1/10 the size of the U.S. economy, the Canadian fine total in 2012 was still small in relative (and not just absolute) terms.4

   The distinction between Canada and the United States is even more pronounced when it comes to sanctions imposed against individuals. While 14 individuals in Canada were penalized for cartel offences in 2012, the fines imposed on these individuals ranged from CDN$3,000 to CDN$10,000, with a median fine of CDN$5,000. Moreover, no individual was sentenced to serve any time in jail. By contrast, the U.S. Department of Justice secured convictions against 43 individuals in 2012, who were sentenced to a total of more than 33,600 days in prison - records for the U.S. on both counts.5

2. Signs of Change?

   The disparity between the Canadian and U.S. experience in punishing cartel conduct is no secret to Canada's competition authorities. Indeed, it is fair to say that it has been a consistent objective of the Competition Bureau to bridge that gap and to make the Canadian sanction regime more robust in practice. In arguing for heightened sanctions, the Bureau has pointed in particular to the amendments in 2009 that (a) changed the conspiracy offence into a per se offence, and (b) increased the penalties for committing this offence from a maximum of CDN$10 million in fines per count to CDN$25 million per count and from a maximum of 10 years in jail to 14 years imprisonment.6 In the Bureau's view, this change signalled a "reinvigorated mandate" from Parliament to pursue...