Competition, Cartels and Canada

Antitrust agencies in the U.S. and Canada have programs designed to encourage cartel participants to alert authorities about the existence of a cartel and cooperate in the ensuing investigation and prosecution. In exchange, cooperating parties receive immunity, or leniency in the form of lower recommended sentences.

A recent case of the Federal Court of Canada, R. v. Maxzone Auto Parts (Canada) Corp., indicates that court approval of sentences determined under Canada’s leniency program is less certain than antitrust lawyers had thought.

Maxzone came before the Federal Court as a joint sentencing submission, arrived at through the leniency program. Citing the impacts of “hard core” cartel agreements on the economy, the court asserted such offences “ought to be treated at least as severely as fraud and theft, if not more severely than those offences,” and to be an effective deterrent, the fine should effectively disgorge all expected profit. While it recognized the public interest in refraining from handing down prison sentences to the “first-in” leniency applicant, beyond that the court made it clear that it will require submissions to explain why a fine alone suffices to meet sentencing objectives.

The court’s concern is that sentences risk becoming simply “the cost of doing business” and fail to deter white collar crime. While it was always possible for the court to decline approval of an agreed upon sentence, traditionally these agreements received deference. Maxzone indicates this may not continue to be the case.