Criminalisation of Cartels: A Comparison Between India and Canada (PART-I)

Disclaimer: This work was prepared separately from this author’s employment responsibilities at the Public Prosecution Service of Canada. The views, opinions and conclusions expressed herein are personal to this author and should not be construed as those of the Public Prosecution Service of Canada or the Canadian federal Crown.

Introduction

In 2020, several countries gathered to discuss criminalization of cartels and bid-rigging conspiracies.^[1] Cartel activities have been under the radar of competition law in every jurisdiction.^[2] Gupta recalls that “[t]he basic purpose of any antitrust law is to prevent practices having adverse effect on competition thereby protecting consumer interests.”^[3] As the Raghavan Committee also notes, “The ultimate raison d’être of competition is the interest of the consumer”^[4], which means, said in prosaic terms, that competition law is relevant for over 1 billion Indians and 37 million Canadians!

Definition(s) of Cartel

How do we define ‘cartel’? It is important to first define it – and an author even says that defining it is “of paramount importance”^[5] – because “definitions are used for two basic purposes in law”, one of these purposes being the attribution of “a specific meaning to a word”^[6], and also because “there is no consistent definition of what constitutes a cartel”^[7] between different jurisdictions. It is important, even more so, since “[t]he definition [of cartel] may be framed so strictly that it would materially hinder any prospects of successful criminal prosecution” or “if the ‘cartel offence’ is defined too broadly or vaguely, it may lead to over-deterrence.”^[8] For instance, the unanimous decision of the Supreme Court of Canada in R. v. Nova Scotia Pharmaceutical Society^[9] provided “considerable guidance as to what type of agreements will be considered to lessen competition ‘unduly’”^[10] in the context where the provision^[11] of the then-Combines Investigation Act (now the Competition Act^[12]) pertaining to cartels was challenged on the ground, among other things, that the term ‘unduly’ was unconstitutionally vague. In 2009, the Canadian Parliament amended^[13] the said provision^[14] of the Competition Act to finally remove the term ‘unduly’ from it, then solving the issue of the ‘vagueness’ argument at the core for cartel offences. Coincidentally, the same year, “India started enforcing its [own] Competition Act”^[15] passed by the Indian Parliament in 2002.

The definition of cartel that is retained for the purpose of this paper is the general one that follows, mostly because the possible challenges that may be raised about this or that term of the Indian and Canadian relevant sections would go beyond the scope of this paper, and also because our main focus is on cartels as a whole rather than on its components: “[b]y ‘cartel’ what is typically meant is two or more competitors operating under an agreement to restrict competition which manifests itself in price fixing, output restrictions, market allocation, and/or bid rigging.”^[16]

Roadmap

This paper summarily examines some of the reasons raised in favor or against the criminalization of cartels, choosing India as an example of the civil/administrative legal scheme and Canada as an example of the criminal legal scheme “for ‘hard-core’ cartel-like conspiracies between competitors [that is] reserved for conspiracies, agreements or arrangements between competitors to fix prices, to allocate markets or to restrict output”^[17], which echoes the general definition provided above; and so does Section 3(3) of the Indian Competition Act, 2002 that also applies to ‘hard-core’ cartels.^[18] However, the fact that some legal regimes decided to take the civil or administrative route in terms of procedures and sanctions whereas others went the criminal way made Mausam write that “[t]his is high time for India to give more teeth, such as criminal sanction, to its cartel enforcement mechanism”^[19] since at this juncture India does “not consider anti-competitive cartel activities to merit criminalization”^[20]. Because “[c]artel criminalization raises a host of issues and has generated a large body of commentary and research”^[21], it will not be possible to address all of them here in this short piece. Most of our attention will be paid to the “interesting divergence [that exists] between [India and Canada] with respect to civil versus criminal procedures and sanctions for competition offences”^[22], while keeping in the back of our mind at the same time the “two key and recurring themes in the debate about justifications or rationales for criminal cartel sanctions”, i.e. first, the “criminalization as a measure to enhance the achievement of enforcement objectives”, and second, the “criminalization as a measure to appropriately label and punish conduct that is inherently criminal”^[23].

The civil/administrative and criminal procedures and sanctions constitute the “two significant models of legal control” that “reflect important differences of underlying philosophy and policy in relation to economic competition”.^[24] An author claims that “criminal sanction for cartel activities has found place in more than 100 jurisdictions around the globe.”^[25] While there are currently 195 sovereign states in the world^[26], this would mean, if we were to accept the statement of that author, that a majority of states in the world would have such sanctions in their domestic national laws. Since a picture is (often) worth a thousand words, the map included above shows that it is more probable and accurate to say that there are “26 jurisdictions [that] can impose criminal sanctions on individuals for cartel infringements”^[27] – including countries such as Canada, but also the United States, the United Kingdom, etc.^[28] -, especially when acknowledging that the “most common” enforcement regime for cartels is “still the civil or administrative regime, where infringement decisions relate to undertakings and result in corporate fines.”^[29]

Glimpse of India’s and Canada’s Relevant Legal Schemes

In Canada, the legislator drew “a clear line between conduct subject to civil and criminal enforcement respectively. Criminal enforcement – against corporations and individuals – is reserved for concealed hardcore cartel activity. Other agreements are reviewed only in civil proceedings.”^[30] More specifically, section 90.1 of the Canadian Competition Act is “[t]he second ‘track’ applicable to competitor applicable to competitor agreements [as a] civil remedy”^[31], however this section applies solely to cases that “extend beyond the ambit of section 45”^[32] that applies to ‘hard‑core’ cartels, which are the types of cartels examined here.

In India, “all competition offences are civil”^[33], including hardcore cartel offences. ‘Cartel’ is defined under section 2(c) of the Competition Act, 2002.^[34] The Supreme Court of India in Union of India v. Hindustan Development Corporation also defined cartel as “an association of producers who by agreement among themselves attempt to control production, sale and prices of the product to obtain monopoly in particular, industry or commodity.”^[35]

Section 3 of the Indian Competition Act “prohibits two categories of agreements: horizontal agreements (between businesses at the same level in the supply chain such as two manufacturers); and vertical agreements (between businesses at different levels in the supply chain such as manufacturer and retailer).”^[36] More specifically, according to Kumar Chaudhuri, Rathi and Chand, “section 3(3) of the [Indian] Competition Act is exhaustive in nature. This implies that only those agreements which are provided in the provision qualify as cartels or horizontal anti-competitive agreements and no other agreements may be added to the list.”^[37] The exact same goes for Canada’s hard-core cartel offences that are limited to horizontal agreements.^[38]

By way of background, it must be mentioned that “[m]any of the provisions of the [most recent] Indian competition law are modelled on EU/UK competition law, albeit with local law specificities”^[39] As for Canada, it may come as a surprise for some of the readers to learn that “Canada’s Parliament enacted the world’s first antitrust statute”^[40] in 1889, a year before the American Sherman Act was adopted in the United States. Both the Canadian and the American acts “criminalized [cartel’s] anti-competitive activity”^[41] that “contradict the principles of the free market economy: the operators specifically conspire to eliminate the free play of competition between themselves.”^[42] Cartels “cost society billions”.^[43]

Pernicious Effects of Cartels

The pernicious effects of cartels on the market have been described in various ways. For example, they have been described as the “most egregious violation of competition law”^[44], a “veritable cancer in an open, modern market economy”^[45], and the “supreme evil of antitrust”^[46].

For those who may unfortunately suffer from hippopotomonstrosesquipedaliophobia^[47], which is a morbid fear of long words, let us just say that cartels are bad for the economy and the consumers, “unambiguously bad”^[48].

‘Shall Presume’ Rule versus ‘Per Se’ Rule

In Canada, the amendments to the Competition Act enacted in 2009 created “a per se criminal prohibition”.^[49] This practically means that the prosecution “must only establish evidence of a cartel agreement, without going into its anti-competitive effect”.^[50]

Some authors contend that “[m]ost antitrust systems now clearly prohibit cartel activity, treating it as an ‘automatic’ violation of the rules”^[51], i.e. “they are indifferent to whether cartel practices were implemented or actually succeeded in raising prices.”^[52]

However, this may not hold true for India: “One clear finding is that under the Indian Competition Act, even hard‑core cartels will be assessed on the basis of their effects, with the possibility of an efficiency defence.”^[53] Thus, “[d]oes this amount”, as Bhattacharjea asks, “to a per se prohibition? There are divergent views on this, even amongst those responsible for the Act.”^[54] Nevertheless, this author notes that section “3(3) of the [Indian Competition] Act singles out the so-called hard-core cartel agreements for special treatment, but stops short of making them offences per se. It only makes them presumptively anti-competitive, with the presumption being rebuttable”^[55] In addition, “if a per se prohibition was intended, [section] 3(3) would have stated that such agreements were deemed to have an anticompetitive effect.”^[56] Further, Mausam observes the following distinction: “One of the prominent features of the Section 3(3) [Indian Competition Act] is that it made cartel behaviour subject to ‘shall presume rule’, which is different from ‘per se rule’.”^[57] The Supreme Court of India explains in Sodhi Transport Co. v. State of U.P, “the word ‘shall presume’ have been used in the Indian judicial lore … to convey that they lay down a rebuttable presumption”.^[58] In its seminal decision Rajasthan Cylinders and Containers Ltd v. Union of India & Anr.^[59], the Supreme Court of India also stated that “the standard of proof required in establishing a cartel is that of balance of probabilities”, and “reiterated that this presumption is rebuttable in nature”.^[60]

Why Compare India’s and Canada’s Cartel Offences?

As Bhattacharjea comments, “A comparison between the competition laws of countries as dissimilar as India and Canada might appear to be an exercise in futility.”^[61] However, a few papers have already been published comparing Indian and Canadian competition laws.^[62] These authors, as the author of this paper also previously wrote in Should Canadian Law Matter to Indian Jurists? Advocating for More Substantial Legal Discussion Between the ‘Long Lost Siblings’^[63] in this journal, “highlighted the importance of studying the experience of another country” with such “important similarities in law”^[64]. For example, “[i]n neither country were the early competition laws effective in meeting their objectives [which] led in due course to sweeping amendments and ultimately new legislation in both countries.”^[65] Indeed, “Canada has become more active in prosecuting cartel participants […] from 1998 to 2008, Canada convicted eleven individuals of cartel offenses, nine were required to pay fines”.^[66]

(LINK TO PART II)

(This post has been authored by Sébastien Lafrance. Sébastien is a Crown Counsel (Prosecutor) at the Public Prosecution Service of Canada in the Competition Law Section. He is a former part-time professor of law at University of Ottawa (2010-2013). He is a former clerk for the Honourable Marie Deschamps of the Supreme Court of Canada (2010-2011) and former clerk for the Honourable Michel Robert, Chief Judge of the Quebec Court of Appeal )

References

1. OECD, Directorate for Financial and Enterprise Affairs Competition Committee, Summary of discussion of the roundtable on Criminalisation of cartels and bid rigging conspiracies, Annex to the Summary Record of the 131^st Meeting of Working Party No. 3 on Co‑operation and Enforcement, 17 November 2020, at p. 2 (hereinafter ‘Summary of discussion of the roundtable on Criminalisation of cartels’). ↑

2. Mausam, ‘Deterring Cartel in India: A Half (Un)Done Job’, (2016) 7 Indian J.L. & Just. 167, at p. 167. ↑

3. Karn Gupta, ‘Cartel Regulation: A Critical Study with Special Reference to India’, (2014) 1 Indian Competition Law Review 57, at p. 58. ↑

4. Report of High-Level Committee on Competition Policy and Law (also known as the ‘Raghavan Committee’), India, 2000, at para. 1.1.9. ↑

5. Ariel Ezrachi & Jiøi Kindl, ‘Criminalization of Cartel Activity – A Desirable Goal for India’s Competition Regime’, (2011) 23 Nat’l L. Sch. India Rev. 9, at p. 20. ↑

6. Fabrizio Macagno, ‘Definitions in Law’, (2010) 2 Bulletin Suisse de Linguistique Appliquée 199, at p. 201 (italics added). ↑

7. Barry O’Fiachain, ‘The Criminal Cartel Offence: Considerations for Effective Enforcement’, (2017) 17 U. C. Dublin L. Rev. 1, at p. 2. ↑

8. Ezrachi & Kindl, supra (italics added). ↑

9. [1992] 2 SCR 606, at para.↑

10. Harry Chandler, ‘Competition Law Issues in the Upstream Oil and Gas Industry’, (1993) 31(1) Alberta Law Review 72, at p. 76. ↑

11. Section 32(1)(c). ↑

12. R.S.C., 1985, c. C-34. ↑

13. This was amended by the Budget Implementation Act, 2009, S.C. 2009, c. 2. ↑

14. Now section 45. ↑

15. Aditya Bhattacharjea, ‘Trade, Development and Competition Law: India and Canada Compared’, (2013) 5 Trade L. & Dev. 43, at p. 45. ↑

16. Bruce Wardhaugh, ‘A Normative Approach to the Criminalisation of Cartel Activity’, (2012) 32 Legal Stud. 369, at p. 370. ↑

17. The Commissioner of Competition v HarperCollins Publishers LLC and HarperCollins Canada Limited, 2017 CACT 10, at para. 59 [hereinafter ‘HarperCollins Publishers LLC and HarperCollins Canada Limited’].↑

18. Aditya Bhattacharjea, ‘India’s New Competition Law: A Comparative Assessment’, (2008) Journal of Competition Law & Economics, 4(3), at pp. 627-628. ↑

19. Mausam, supra, at p. 167. ↑

20. Ezrachi & Kindl, supra, at pp. 23-24. ↑

21. Caron Beaton-Wells, ‘Criminal Sanctions for Cartel Conduct: The Leniency Conundrum’, (2017) 13 Journal of Competition Law & Economics 1, at p. 127. ↑

22. Bhattacharjea (2013), supra, at p. 61. ↑

23. Beaton-Wells, supra, at p. 127. ↑

24. Christopher Harding, ‘The relationship between EU criminal law and competition law’ in Valsamis Mitsilegas, Maria Bergström & Theodore Konstadinides (eds), Research Handbook on EU Criminal Law, Edward Elgar Publishing, 2016, at p. 252. ↑

25. Mausam, supra, at p. 177. ↑

26. ‘How Many Countries Are There in the World in 2021?’, Political Geography Now – Updates on the world’s countries and borders, see online: https://www.polgeonow.com/2011/04/how-many-countries-are-there-in-world.html. ↑

27. Summary of discussion of the roundtable on Criminalisation of cartels, supra, at p. 2 ↑

28. Brenda Marshall, ‘Criminalisation of Cartel Conduct: Compelling Compliance with Anti-Collusion Laws’, (2010) 3 Journal of the Australasian Law Teachers Association 11, at p. 14. ↑

29. Andreas Stephan, ‘Four key challenges to the successful criminalization of cartel laws’, (2014) 2 Journal of Antitrust Enforcement 2, at p. 334. ↑

30. Alison Jones & Rebecca Williams, ‘The UK response to the global effort against cartels: is criminalization really the solution?’, (2014) Journal of Antitrust Enforcement, Vol. 2, No. 1 (2014), at p. 118. ↑

31. Frank Alexander & Erik Arnold, ‘Area of Mutual Interest Agreements and Canadian Competition Law Considerations’, (2016) 54(2) Alberta Law Review 279, at p. 305 (italics added). ↑

32. HarperCollins Publishers LLC and HarperCollins Canada Limited, supra, at para. 58 (italics added). ↑

33. Bhattacharjea (2013), supra, at p. 61 (italics added). ↑

34. “‘cartel’ includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services” ↑

35. (1993) 3 SCC 499, at para. 2.1. ↑

36. Suzanne Rab, ‘Indian Competition Law: 10 Years On An International Perspective’, Competition Law Reports, vol. 2, August 2012, at p. 101 (italics and emphasis added). ↑

37. Manas Kumar Chaudhuri, Sagardeep Rathi & Anisha Chand, ‘The genesis and ailments of cartel regime in India: a critical analysis’, (2020) 4 Indian Law Review 3, at p. 363 (italics and emphasis added). ↑

38. See, e.g., Competition Bureau, Competitor Collaboration Guidelines, July 29, 2020, see online: https://www.ic.gc.ca/eic/site/cb-bc.nsf/eng/04543.html: “Purely vertical agreements between suppliers and customers will generally be assessed under the reviewable matters provisions found in sections 75 through 84 of the Act, and not under the conspiracy provision in section 45” (italics added) that is the provision for hardcore cartels; see also Antonio Di Domenico, Competition Enforcement and Litigation in Canada, Emond Publishing, 2018, at p. 104; Randal T. Hughes & Jeanne L. Pratt, ‘Criminal Conspiracy’ in James B. Musgrove (ed.), Fundamentals of Competition Law, 3^rd edition, Carswell, 2015, at p. 55. ↑

39. Rab, supra, at p. 100 (italics added). ↑

40. Bhattacharjea, supra, at p. 48 (italics added). ↑

41. Harding, supra, at p. 232, footnote 7. ↑

42. Jones & Williams, supra, at p. 102. ↑

43. Ibid. ↑

44. OECD, ‘Recommendation of the OECD Council concerning Effective Action against Hard Core Cartels’, 1998, at p. 1, see online: http://www.oecd.org/daf/competition/2350130.pdf; see also Ministry of Corporate Affairs, Government of India, Report of Competition Law Review Committee, July 2019, at p. 93, para. 10.2. ↑

45. Monti, M., ‘Forward by Mario Monti’, European Commission, XXXIst Report on Competition Policy 2001, European Communities, 2002, at p. 4. ↑

46. Verizon Communications v. Law Offices of Curtis v. Trinko 540 US 398 (2004). ↑

47. “The morbid fear of long words”, see ‘Medical Dictionary – The Free Dictionary’ online: https://medical-dictionary.thefreedictionary.com/hippopotomonstrosesquippedaliophobia. ↑

48. Organisation for Economic Co-operation and Development, Hardcore Cartels: Recent Progress and Challenges Ahead, 2003. ↑

49. Ibid; see also Jennifer A. Quaid, ‘Making Sense of the Shift in Paradigm on Cartel Enforcement: The Case for Applying a Desert Perspective’, (2012) 58 McGill L. J. 149, at p. 170. ↑

50. Bhattacharjea (2013), supra, at p. 46. ↑

51. Jones & Williams, supra, at pp. 100-101 (italics added). ↑

52. Stephan, supra, at p. 338. ↑

53. Aditya Bhattacharjea & Oindrila De, ‘Anti-cartel enforcement in India’, (2017) 5 Journal of Antitrust Enforcement, at p. 194. ↑

54. Aditya Bhattacharjea, ‘India’s New competition Law: A Comparative Assessment’, (2008) 4 Journal of Competition Law & Economics 3, at p. 628. ↑

55. Bhattacharjea (2013), at p. 60 (italics added). ↑

56. Bhattacharjea (2008), supra, at p. 628 (italics added); see also Mausam, supra, at p. 177. ↑

57. Mausam, ibid, at p. 170. ↑

58. AIR 1986 SC 1099. ↑

59. Civil Appeal 3546 of 2014, Order dated 1 October 2018. ↑

60. Kumar Chaudhuri, Rathi & Chand, supra, at p. 373. ↑

61. Bhattacharjea (2013), supra, at p. 44. ↑

62. Ibid. ↑

63. Sébastien Lafrance, ‘Should Canadian Law Matter to Indian Jurists? Advocating for More Substantial Legal Discussion Between ‘Long Lost Siblings’’, (2020) The Contemporary Law Forum; see also Khagesh Gautam & Sébastien Lafrance, ‘A Comparative Survey of The Law of Bail in India and Canada’ in Taking Bail Seriously, LexisNexis India, 2020. ↑

64. Bhattacharjea (2013), supra, at p. 44. ↑

65. Ibid, at p. 51. ↑

66. Gregory C. Shaffer, Nathaniel H. Nesbitt & Spencer Weber Waller, ‘Criminalizing cartels: a global trend?’ in Arlen Duke, John Duns & Brendan Sweeney (eds), Research Handbook on Comparative Competition Law, Edgar Elgar, 2015, at p. 18. ↑