On October 26, 2017, the Canadian Competition Bureau (“Bureau”) released for public comment a revised version of its Immunity Program, under which a party may receive immunity from criminal prosecution if the party is the first to disclose an offence and agrees to cooperate with the Bureau’s investigation and prosecution of others. The revisions, discussed below, has led to comments and concerns from, among others, the CBA National Competition Law Section and the ABA Section of Antitrust Law. These comments and concerns are discussed below.
According to the press release, the program is being updated to increase transparency and predictability in light of legal and policy developments.
The Bureau has advised that the changes are prompted partly by the outcome of recent unsuccessful prosecutions and include the following:
- Interim Grant of Immunity: Documentary and testimonial evidence will be provided under an interim grant of immunity (IGI). Final immunity will be provided when the applicant’s cooperation and assistance is no longer required.
- End of Automatic Corporate Immunity for Directors, Officers and Employees: Automatic coverage under a corporate immunity agreement for all directors, officers and employees will no longer be provided. Instead, individuals that require immunity will need to demonstrate their knowledge of the conduct in question and their willingness to cooperate with the Bureau’s investigation.
- Greater Use of Recordings: Witness interviews may be conducted under oath and may be video or audio recorded. Proffers, statements made by an applicant (usually through counsel) to the Bureau where the applicant is expected to reveal its identity and describe in detail the anti-competitive activity, may also be audio recorded.
- Privileged Documents: Non-privileged records from companies’ internal investigations will be treated as presumptively disclosable facts in the possession of cooperating parties. And while privileged records will continue to be protected from disclosure, applicants will now be required to justify their claims of privilege.
Although billed as uncontroversial changes, the draft revisions arguably adds to the burden on, and costs to, prospective immunity applicants, raising questions of whether this may lead to less self-reporting and undermine the effectiveness of the program.
The Competition Law Section of the Canadian Bar Association released comments on the Competition Bureau’s Proposed Revisions to the Immunity Program on January 22, 2018 The CBA Section is of the view that the existing program is working well and does not need the fundamental overhaul proposed.
The CBA Section expressed serious concerns about the nature and substance of many of the proposed revisions to the Program. The changes could add significant burdens and uncertainties on immunity applicants in Canada which are inconsistent with existing leniency and amnesty programs available in other jurisdictions. The CBA Section believes that an immunity applicant should not be placed at a distinct disadvantage relative to non-cooperating parties, particularly in responding to anticipated civil litigation. But most importantly, the CBA asserts, the proposed changes would undermine incentives to self-report.
The CBA Section raised concerns with the following specific proposed changes to the Immunity Program:
- Proposed Obligation to Produce “Credible and Reliable Evidence”: Applicants typically seek immunity shortly following the discovery of potentially criminal conduct; at that time, applicants are not able to assess whether the information they have is credible or reliable. Under this proposed change, the prospective immunity applicant would presumably have to weigh and assess the credibility and reliability of its witnesses prior to seeking a marker throughout the process. The Section is of the view that this proposal would add to the uncertainties of the process and create disincentives for self-reporting.
- Proposed Elimination of the Paperless Proffer Process: The paperless process had the benefits of contributing to the speed and timeliness of the immunity process in Canada and it is similar to the process used in the US. Replacing verbal proffers with electronic audio recording of proffers would require more time and effort in the preparation of proffers, increasing the cost on applicants participating in the program. While the lawyer’s proffer has no evidentiary value in the context of a criminal prosecution, it may have significant value to a private plaintiff in a class proceeding, further increasing the costs and risks of self-reporting.
- Proposal to Record Witness Interviews: The proposal that witness interviews may be taken under oath and may be video and/or audio recorded could create significant new exposures for applicants (particularly in civil proceedings) and as a result, may make the applicant worse-off for choosing to cooperate with the Bureau.
- Proposed Changes for an Interim Grant of Immunity (“IGI”): The proposed IGI process creates new uncertainties, by pushing the timeline for the applicant to receive a binding immunity agreement into the distant future.
- Proposed Protocol for Reviewing and Adjudicating Privilege Claims by Immunity Applicants: The proposed protocol needs to firmly and clearly support the ability of an applicant to assert privilege over the investigative work product of its external counsel. The protocol lacks some basic elements of due process necessary for adjudicating privilege claims in Canada including the fact that the adjudicator would be appointed from a list of Crown agents raising institutional independence and impartiality concerns. The proposed consequences for failing to comply with the protocol – cancellation of a marker or denial of a grant of immunity – are unfair. Furthermore, this proposal is inconsistent with the approach other antitrust regulators.
The CBA Section believes that these proposed revisions would undermine the goal of effective criminal enforcement in Canada and are encouraging the Bureau to reconsider them.
The Sections of Antitrust Law and International Law of the American Bar Association (“ABA”) released their comments on the Bureau’s Draft Immunity Program on January 19, 2018. The Sections expressed concern especially with the speed at which the immunity process will unfold and the incentives for applicants to participate in the program. The Sections are of the view that it takes too long for the Bureau and the DPP to grant immunity (or some confirmation that immunity will be recommended) to willing applicants. In the lengthy interim period, the applicant is exposed to prosecution risk and must incur significant expense in the process, echoing the concerns of the CBA.
The sections expressed concern about a number of specific proposed changes and made suggestions for improvement, including the following,:
- Two-Stage IGI Process: The two-stage IGI process would unnecessarily impede and possibly discourage applicants from seeking immunity in Canada. The Sections suggest that the Bureau clarify that the IGI is a three-party agreement between the applicant, the Bureau and the DPP. They also suggest that the standards by which an applicant’s cooperation is to be assessed. And the Sections recommend that the DPP should use the same standards as the Bureau and should make that commitment in writing.
- Extensive Information Requirements to be addressed in Proffers: The proposed requirement by the Bureau that the applicant provide exhaustive information relating to the list of topics to be covered by the attorney and the initial witness proffers is too burdensome. The Sections recommend a far more collaborative process between the Bureau in the DPP at an earlier stage.
- Mandatory Confidentiality Waivers Related to Cooperation with Foreign Antitrust Authorities: The Sections advise against such mandatory waiver requirements, which are counter to the entire confidential process of immunity and leniency programs throughout the world. Immunity works because it is confidential. This proposal puts the applicant at risk of violating confidentiality policies of other countries and could expand the scope of the company’s investigative exposure. Applicants should not be made worse off as a result of the application.
- Moving away from a Paperless Application Process: The Sections are particularly concerned with the proposals to record attorney proffers and more frequent and earlier use of recorded witness interviews. This is because one of the greatest costs that a corporation must consider in deciding whether to pursue immunity and thus expose a cartel is the high probability that its decision to do so will precipitate civil damages. There is uncertainty in the US over whether materials prepared specifically for the immunity or leniency process are discoverable and thus can be used by plaintiffs as evidence in civil actions.
- Privileged Records: The Sections expressed concern with the proposed regime for review of certain privileged records (particularly if this were to be applied beyond records that were contemporaneous with the alleged offences and, and to include attorney work product and privileged attorney investigations of potentially problematic conduct), especially if it is to be used frequently.
Still to Come – Revisions to the Leniency Program
The Bureau has also indicated that there will also be changes coming to its Leniency Program (which incentivize parties who are too late to obtain immunity to cooperate with the Bureau and plead guilty in exchange for lenient treatment, including a reduction in the fines). The Bureau expects to circulate a draft of the revised program for public consultation soon. An expected change to the Leniency Program includes all leniency applicants being potentially eligible for fine discounts of up to 50% (thereby moving toward a system of rewarding applicants based on the value of their cooperation rather than who is first to contact the agency for leniency).