Bulletin on Corporate Compliance Programs

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Part II -Importance of Compliance

A) Why Is Compliance Important?
B) The Benefits of a Credible and Effective Corporate Compliance Program

A) Why Is Compliance Important?

Every business and individual has a duty to act lawfully. The Bureau operates on the assumption that all businesses and their senior management wish to comply with the law rather than to become involved in proceedings arising from contravention to the Acts. Compliance is important for all businesses, regardless of their size, for both legal and practical reasons.

The legal, economic and reputational risks of non-compliance to companies and their directors and officers outweigh any advantages that may be gained. For example, contravention of the Competition Act, whether civil or criminal, can expose a business to significant fines or administrative monetary penalties and recovery of damages by private parties under section 36 of the Competition Act⁸. In addition, most provinces have procedures in place to certify class action proceedings and it is common to see such actions being filed when an offence has been committed under the Competition Act.

Non-compliance can also result in negative publicity, loss of management time, significant legal costs and a prohibition from participating in government bidding processes. In addition to, or in lieu of, fines, individuals convicted of criminal offences may be sentenced to a period of imprisonment.

B) The Benefits of a Credible and Effective Corporate Compliance Program

A credible and effective program is one that is designed to prevent contravention of the Acts, to detect at an early stage inadvertent or unauthorized actions, and identify contravention committed by other companies which are affecting the business. Such programs can also serve a risk-management function by promoting self-reporting, both of which may be viewed favorably by the courts or the Director of Public Prosecutions ("DPP")⁹ when seeking immunity from prosecution or lenient treatment.

Having a credible and effective program in place also helps to ensure that a business is aware of the formal powers available to the Commissioner. Under the Competition Act, the Commissioner can apply to a judge to obtain court orders that allow Bureau staff to search and seize records, compel oral examinations and to produce records. In these circumstances, a business that fails to comply with a court order could face criminal sanctions. It is thus essential that a business respond to a court order obtained by the Commissioner under the Competition Act. In addition, it is important to note that under the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act, Bureau employees are authorized to enter the business premises of a dealer without a warrant to inspect and ensure compliance with these Acts¹⁰. A program should therefore provide tips for responding properly to court orders and inspections¹¹ and for protecting businesses from charges of obstruction of justice¹².

A program also plays a crucial role for trade associations because the law applies to them in the same way as it applies to any business. However, trade associations face unique compliance issues. Given that an association provides a forum where competitors are present during association activities, trade associations are exposed to even greater risks. A number of past Bureau cases have involved trade associations to coordinate the goals of a cartel. It is therefore critical that trade associations implement credible and effective programs with strict codes of ethics and conduct. Such programs may allow trade associations and its members to avoid improper actions and to protect themselves from being used as a conduit for illegal activities. They may also allow trade association members to fully benefit from the association’s activities while reducing the potential for inadvertent contraventions of the Acts¹³.

Some of the specific benefits of a credible and effective program may include the following:

Protection of business interests

• Reduce the risk of non-compliance.
• Contribute to maintaining a good reputation.
• Give early warnings of potentially illegal conduct.
• Reduce the exposure of employees, senior management and the corporation to criminal, civil or penal liability.
• Assist a company and its staff in their dealings with the Bureau, for example, by identifying contraventions of the Acts early enough to request immunity or lenient treatment.
• Assist a company and its employees in assessing the competition risks they may face.
• Reduce costs related to litigation, fines, adverse publicity and the disruption to operations resulting from Bureau investigation and proceedings before the court.
• Increase awareness of possible conduct in breach of the Acts among competitors, suppliers and customers in the market.
• Improve a business’ ability to recruit and retain staff - an ethical company is likely to attract high-quality employees and have successful retention rates; and
• Improve a business’ ability to attract and retain customers and suppliers who value companies that operate ethically.
• Assist a business to qualify, in certain circumstances, for a reduced sentence or other lenient treatment where a contravention of any of the Acts has occurred¹⁴.

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⁸Pursuant to section 36, any person who has suffered loss or damage as a result of any offence under Part VI of the Competition Act (such as conspiracy, bid-rigging, illegal trade practices, false or misleading representations, deceptive telemarketing, and price maintenance) or as a result of a failure to comply with a court order may initiate legal proceedings for the recovery of damages.

⁹On December 12, 2006, the Office of the Director of Public Prosecutions was created as part of the Federal Accountability Act. This Act gives the Director of Public Prosecutions jurisdiction to conduct prosecutions for offences under federal jurisdiction. This office is independent of the Department of Justice and has assumed the duties of the former Federal Prosecution Service.

¹⁰Bureau officers can enter and inspect the business premises of a dealer of prepackaged products, consumer textile articles and precious metal articles without a search warrant. For more information, see the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act.

¹¹See Appendix A - Corporate Compliance Program Framework.

¹²Obstruction of justice under the Acts amounts to any intentional action aimed at negatively affecting the Commissioner’s functions. It includes any attempt to interfere with the work of Bureau officers, legal counsel, inspectors or other authorized representatives of the Commissioner. The most common types of obstruction in the competition law context are: (1) making false statements; (2) destroying, falsifying, concealing or withholding documents or information; (3) witness tampering (an act that attempts to influence a potential witness); and (4) removing records from premises without permission during the execution of a search warrant or when in the process of complying with a court order issued under section 11 of the Competition Act.

¹³For more information on trade associations, visit the Bureau’s Website at www.competitionbureau.gc.ca.

¹⁴See Part V - Consideration Given to Corporate Compliance Programs.