Sentencing Reasons Call For Higher Fines And Jail Time In Price-Fixing Cases

On May 3, 2012, Maxzone Auto Parts (Canada) Corp. ("Maxzone Canada") pleaded guilty to one count of contravening the foreign directed conspiracy offence, under section 46 of the Competition Act (the "Act"). Maxzone Canada is an affiliate of a Taiwan-based manufacturer and is involved in the manufacture, distribution and sale of aftermarket automotive replacement lighting parts. Chief Justice Crampton of the Federal Court accepted the parties' jointly recommended sentence and imposed a fine of $1.5 million on Maxzone Canada for its role in a price-fixing scheme, albeit not without reservations. As promised, on September 24, 2012, the Chief Justice issued sentencing reasons (Canada v. Maxzone Auto Parts (Canada) Corp., 2012 FC 1117, available here) highly critical of the evidentiary record and submissions that were made in support of the jointly recommended sentence.

Through these supplementary reasons the Chief Justice aims to alter future expectations by noting that, going forward, the Court will require a more fulsome evidentiary record and more detailed submissions to be satisfied as to the appropriateness of a sentence. In effect, the reasons could have a significant impact on the Competition Bureau's (the "Bureau") Leniency Program and on follow-on civil/class actions for damages.

Implications of the Reasons

Higher Fines

In his reasons, the Chief Justice makes a vigorous case for larger fines stating that he expects price-fixing and other hard-core cartel agreements to be treated on par with, if not more severely than, fraud and theft. He states that future price-fixing convictions will require the imposition of a fine that:

(i) ensures the accused corporation does not profit from its illegal conduct; and

(ii) includes an additional significant amount to recognize the very serious nature of such illegal conduct, its substantial adverse impact on the economy, and society's abhorrence of the crime.

The sentence must be determined in a manner, and must be supported by an evidentiary record, that enables the Court to be satisfied that it reflects the above principles. Moreover, the Chief Justice emphasizes that it will be necessary to adduce evidence that will provide the Court with some sense of the magnitude of any agreed upon or contemplated overcharge and the overall economic impact of the illegal agreement. The Chief Justice suggests that a multiple of three (of the expected gain from the overcharge) would be a very conservative rule...