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

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.

(LINK TO PART I)

Some Arguments Regarding Cartel Criminal Sanctions

Whelan identifies “at least four different theoretical justifications for the imposition of individual criminal sanctions, namely: deterrence; retribution; rehabilitation; and incapacitation. … Deterrence seeks to prevent future activity … Retribution posits that individuals should face a criminal charge due to the fact that they have committed a moral wrong. Rehabilitation attempts to treat an individual engaging in unlawful behaviour in order to prevent habitual reoffending. Incapacitation refers to the prevention of activity through the direct deprivation of the ability or capacity to engage in such activity.”^[1] He outlines that rehabilitation is of little relevance and that incapacitation is inappropriate.^[2]

This leaves us with deterrence and retribution, however deterrence “seems to have gained more traction”^[3]; it is “the dominant general justification for criminal enforcement”.^[4] Let us clarify here that “[t]here are two variants of deterrence: special and general. Special deterrence relates to the act of preventing the offender himself from reoffending, while general deterrence refers to the preventive effect of punishment on the wider public. … It is acknowledged that, in the context of cartel law, the specific deterrence of convicted cartelists is secondary to the general deterrence of potential cartelists.”^[5]

In addition, as Stephan explains, “[t]he justification for cartel criminalization lies principally with the harm caused by practices such as price-fixing and the need to effectively deter individuals from engaging in those practice.”^[6] In that context, criminal penalties for cartel conduct would provide “more effective general deterrence than civil penalties for first time offenders”^[7], and “sanctions imposed upon individuals constitute a stronger deterrent than corporate fines”^[8]. This, because, for example, “[t]he perspective of imprisonment adds a dimension of risk to individuals that is unfathomable for companies”^[9], and also because the individuals involved in the commission of a cartel offence may “pay a personal price”^[10] for their involvement. Practically speaking, a corporation cannot (obviously) physically be sent to jail^[11], which is an undeniable advantage compared to individuals in the great scheme of things.

Also, Whelan writes generally, “One way of signaling the need for custodial sentences is through the creation of a relatively high maximum custodial sentence that can be imposed for cartel activity. A maximum sentence of, say, five or seven years might perform this particular function”.^[12] Therefore, it is fair to submit that such ‘signal’ was sent in Canada by the amendments made in 2009 to the Competition Act regarding the maximum term of imprisonment that was increased from 5 years to 14 years for cartel offences.

Some Arguments Regarding Cartel Civil/Administrative Procedures and Sanctions

Like India, “there are jurisdictions that rely exclusively on administrative/civil enforcement”.^[13] Some of these jurisdictions are of the view that, among other things, “criminalisation of cartels may over-deter”^[14] In addition, supporters of civil/administrative sanctions could argue that these sanctions could still meet punishment goals because, on one hand, “cartel offences are still largely subject to monetary penalties in the form of fines”, and on the other hand – at least from a Canadian perspective –, “actual”^[15] “custodial sentences for cartel offences have been exceptionally rare [under the criminal regime of competition acts], and the circumstances under which they are imposed, unusual”^[16], not forgetting that “in systems which allow … the imposition of a custodial sanction in relation to individuals there has been a reluctance to use prison terms in general^[17].

However, this may eventually change, again at least in Canada. In R. v. Fedele, a decision of the Quebec Court of Appeal, it was decided that some big-rigging offences would warrant mandatory prison sentences to be imposed on individuals rather than conditional sentences which were invalidated.^[18] This led the OECD Working Party No. 3 on Co‑operation and Enforcement to contend that this is “an indication that cartelists may (also) face imprisonment in the future.”^[19]

Besides, “civil enforcement has its limitations”^[20] in the context of cartels. In addition to the fact that we mentioned above that monetary penalties are “unlikely to be felt by the individuals at fault”^[21], it could also suffer from another factual “serious weakness”, i.e. “a potential violator of competition law would calculate tentatively the amount of financial profit he would make from his anti-competitive practice and also calculate approximately the amount of monetary penalty he may incur if caught by law.”^[22] In short, by doing that the potential violator would do a cost/benefit analysis and advise accordingly as to whether it is profitable or not to infringe the law.

One author claims that “[i]t is doubtful whether India can follow the international trend to make participation in a cartel a criminal offence” because “[a]lmost all the cartel cases decided so far have been based on circumstantial evidence, which would not have met the standard of proof of ‘beyond a reasonable doubt’.”^[23] This argument appears to be flawed summarily for two main reasons. First, criminal cases in India based on circumstantial evidence have been proven beyond a reasonable doubt.^[24] Second, so it is also in Canadian criminal law.^[25] Increasing the standard of proof to the criminal standard of ‘beyond a reasonable doubt’, because “[c]riminal antitrust sanctions are likely to raise the standard of proof”^[26], makes it more difficult to secure convictions^[27], but being more difficult is far from meaning that it is impossible, and not preferable. Otherwise, no prosecution would have ever succeeded.^[28] The impact of increasing the standard of proof would be legal but also practical since “[t]his may increase evidentiary requirements and extend the length of investigations.”^[29], but this should not be detrimental in and of itself for a case.

Conclusion

We agree with Ezrachi and Kindl who write that the introduction of criminal cartel laws “ought to be considered in context, taking into account the legal, social and political dimensions.”^[30] For instance, as Stephan notes, “[a] failure to secure wider acceptance could result in political pressure to repeal criminal cartel laws”.^[31] This also makes sense because “an effective approach in one jurisdiction may be counterproductive elsewhere.”^[32] One thing that remains unexplained though and that would be worth to explore further is that in Canada, as Quaid observes, “the narrow legislative focus on cartels does not, on its own, tell us why cartels are criminally prohibited.”^[33] While keeping in mind everything that has been written in this paper so far, perhaps, according to Mausam, “the best available solution [would be] to criminalize some serious cartel activities.”^[34]

(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. Peter Whelan, The Criminalization of European Cartel Enforcement, Oxford University Press, 2014, at p. 26 (italics added). ↑

2. Ibid, pp. 27-28. ↑

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

4. Quaid, supra, at p. 173; see also Stephan, supra, at p. 337. ↑

5. Whelan (2014), supra, at pp. 28-29 (italics added). ↑

6. Stephan, supra, at p. 336. ↑

7. Marshall, supra, at p. 13; see also William Kolasky, ‘Criminalising cartel activity: Lessons from the US experience’, (2004) 12 Competition and Consumer Law Journal, at p. 211. ↑

8. O’Fiachain, supra, at p. 5. ↑

9. Barbara Rosenberg & Marcos Exposto, Criminalisation of Cartels and the Application of Imprisonment Penalties: Notes on the Challenges for Corporate and Individual Defendants, Directorate for Financial and Enterprise Affairs Competition Committee, Organisation for Economic Co-operation and Development, Working Party No. 3 on Co‑operation and Enforcement, 14 September 2020, at p. 7, para. 27 (italics added). ↑

10. Ezrachi & Kindl, supra, at p. 14. ↑

11. Celia Wells, Corporations and Criminal Responsibility, Second Edition, Oxford University Press, Oxford, 2001, at p. 20; see also O’Fiachain, supra, at p. 6; Sébastien Lafrance, ‘Trách nhiệm hình sự của doanh nghiệp ở Canada’ (Corporate Criminal Liability in Canada), Nhà xuất bản Chính trị quốc gia Sự thật (National Political Publishing House), Vietnam, 2019 [only published in Vietnamese]. ↑

12. Peter Whelan, ‘Beyond the Theoretical: Articulating Enforcement Strategies for Successful European Antitrust Criminalization’, (2016) 81 Antitrust L.J. 235, at p. 251 (italics added). ↑

13. OECD, Directorate for Financial and Enterprise Affairs Competition Committee, Executive Summary of the roundtable on Criminalisation of cartels and bid rigging conspiracies, Working Party No. 3 on Co-operation and Enforcement, Annex to the Summary Record of the 131st Meeting of Working Party No. 3 on Co-operation and Enforcement, Organisation for Economic Co-operation and Development, 9 June 2020, at p. 2 (hereinafter ‘Executive Summary of the roundtable on Criminalisation of cartels’). ↑

14. Ibid (italics added). ↑

15. Harding, supra, at p. 259, footnote 29; see also Summary of discussion of the roundtable on Criminalisation of cartels, supra, at p. 4. ↑

16. Quaid, supra, at pp. 177-178. ↑

17. Harding, supra, at p. 259. ↑

18. R. v. Fedele, 2018 QCCA 1901. ↑

19. Summary of discussion of the roundtable on Criminalisation of cartels, supra, at p. 5. ↑

20. O’Fiochain, supra, at p. 8; the same goes for administrative fines, see, e.g., Ezrachi & Kindl, supra, at pp. 12-13. ↑

21. O’Fiochain, ibid; Ezrachi & Kindl, ibid, at p. 13. ↑

22. Dr. Aneesh V. Pillai, ‘The Call for Criminal Sanctions for Enforcement of Competition Law and Its Practical Concerns’, (2014) Competition Law Cirque, Vol. 1, at p. 29. ↑

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

24. See, e.g., Sharad Birdhi Chand Sarda v. State of Maharahstra, AIR 1984 SC 1622, that discussed the requirements of circumstantial evidence in Indian criminal law. ↑

25. See seminal decision of the Supreme Court of Canada in R. v. Villaroman, [2016] 1 SCR 1000, that also discussed the use of circumstantial evidence in Canadian criminal law. ↑

26. Whelan, supra, at p. 256. ↑

27. O’Fiachain, supra, at p. 6. ↑

28. A prosecution being successful is only with respect to the case itself, because it must be noted here that, as stated by the Supreme Court of Canada in Boucher v. R., [1955] SCR 16, at p. 24, “The role of prosecutor excludes any notion of winning or losing”. ↑

29. Executive Summary of the roundtable on Criminalisation of cartels, supra, at p. 4. ↑

30. Ezrachi & Kindl, supra, at p. 18. ↑

31. Stephan, supra, at p. 339; see also Whelan (2016), supra, at p. 238. ↑

32. O’Fiachain, supra, at p. 33. ↑

33. Quaid, supra, at p. 169. ↑

34. Mausam, supra, at p. 178. ↑