New competition bureau immunity and leniency programs alter risk-benefit analysis for applicants

On September 27, 2018, the government of Canada’s competition bureau issued new immunity and leniency programs following extensive public consultations.

These two programs, which were first issued in 2000 and 2010, are the bureau’s most important tools for detecting and enforcing criminal conspiracies and other criminal offences under the Competition Act. They also offer parties to criminal competition law offences significant potential safe harbours from criminal competition law liability.

In general, parties may be entitled to full immunity from prosecution (under the bureau’s immunity program) or leniency in sentencing (under the leniency program) for reporting a Competition Act offence and co-operating with an investigation.

Importantly, immunity is only available for the first applicant that successfully fulfils all of the requirements of the bureau’s immunity program. In contrast, applicants under the Leniency Program must plead guilty to an offence under the Competition Act, incur a penal sentence and are only eligible to receive reductions in fines.

As such, there is a strong incentive to seek immunity as quickly as possible when a potential Competition Act offence is discovered and, where unavailable, to apply for leniency and co-operate with the bureau to secure a recommended fine reduction.

In general, the bureau’s updated programs, as well as its former immunity and leniency program frequently asked questions, are now consolidated into a single bulletin.

Some of the key changes to the programs include:

• Introducing a grant of interim immunity step under the immunity program. This new step, which follows the proffer stage of an immunity application, will require applicants to provide full disclosure and co-operation earlier, will lengthen the application process and impose an additional burden on immunity applicants. In essence, the introduction of this new step has imposed more significant disclosure obligations on applicants at an earlier stage and pushed the execution of an immunity agreement to the end of the process when an applicant’s co-operation is no longer required by the bureau.
• Eliminating automatic coverage under corporate immunity agreements for directors, officers and employees. Now, current directors, officers and employees are required to demonstrate knowledge of or participation in an offence and their willingness to co-operate with the bureau.
• Making it clear that individuals that cannot or will not admit knowledge of or participation in an offence, as well as individuals who have demonstrated an unwillingness to co-operate in an investigation, are ineligible for immunity and may be removed from the immunity program.
• Requiring immunity program applicants to provide more evidence of an offence.  Under the new immunity program, a recommendation for immunity will only be made “when the disclosed conduct constitutes an offence under the Competition Act and is supported by credible and reliable evidence that demonstrates all elements of the offence.” Under the former program, there was only an obligation to disclose “any and all conduct . . . that may constitute an offence” under the Competition Act).
• Introducing a leniency co-operation credit (a reduction of up to 50 per cent of the recommended base fine) under the leniency program. Previously, immunity applicants were generally eligible to receive fine discounts of 50 per cent (first in), 30 per cent (second in) and on a case-by-case basis (for subsequent applicants). Under the bureau’s new leniency program, the ability of applicants to obtain fine discounts will now turn on the value of their co-operation to the bureau’s investigation, with factors including the timing of an application, timelines of disclosure and the relevance of evidence provided.
• Adding the existence of a credible and effective competition compliance program as a potential mitigating factor when calculating a recommended base fine.

While the bureau, in announcing its two new programs, said that the updates would enhance its ability to detect, investigate and prosecute Competition Act offences, it is not clear whether the changes will increase the incentive for immunity and leniency applicants to come forward and co-operate with bureau investigations.

In general, the changes to the programs increase the obligations on both applicants and their personnel and impose additional steps in order to obtain immunity or leniency.

More specifically, both programs introduce additional uncertainty relating to, among other things, the ability of directors and officers to obtain immunity, whether personnel that do not sufficiently comply will be expelled and the fine reduction that may be obtained under the leniency program. In this regard, several relatively bright-line elements of the former programs have been eliminated and replaced with case-by-case tests for evaluating compliance. 

While such changes may well be in the bureau’s interest to obtain more fulsome and valuable evidence from immunity and leniency applicants, it remains unclear whether they will adversely impact the incentive for applicants to co-operate with bureau investigations.

Having said that, the bureau’s immunity and leniency programs remain important potential safe harbours for companies or individuals that may have committed criminal offences under the Competition Act.