Canadian Competition Authority’s Reach for Foreign Affiliates in its Cartel Investigations

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John Clifford, Hayane Dahmen, Nov 12, 2009

The Competition Act (“the Act”) governs all aspects of competition law in Canada. Section 45 forms the core of Canadian cartel law, and once recent amendments to that section come into force in March 2010, section 45 will make it a per se offense for a person to conspire, agree, or arrange with a competitor to enter into certain types of agreements with respect to a “product.” Generally, agreements to fix prices, allocate markets or customers, or restrict the supply of a product are caught under this section. Investigations and prosecutions (and guilty pleas) under section 45 in respect of international cartels have occurred often, including several in which some of the co-conspirators were never present in Canada. In most cases, however, there was specific evidence that the parties had targeted Canadian customers and markets as part of their cartel. In general, Canadian courts and the Competition Bureau will not pierce the corporate veil to impose liability or find guilty foreign parents for the anticompetitive practices of their Canadian affiliates in the absence of evidence that the parent was also a cartel participant. However, the Act contains two sections that permit the Commissioner of Competition (the “Commissioner”) to use Canadian companies to reach international cartels. Specifically, subsection 11(2) requires Canadian targets of an order for production of records to produce evidence in the hands of foreign affiliates and section 46 creates an offense for a Canadian corporation to implement a foreign-directed conspiracy.