Competition Bureau/Korean FTC Cooperation Arrangement: Bureau Continues to Expand International Network 

publication 

August 2006 - (Lang Michener Competition & Antitrust Brief, Special Edition electronic version)

Lang Michener Competition & Antitrust Brief, Special Edition electronic version

I. Introduction

The Canadian Competition Bureau (the "Bureau") recently signed a Cooperation Arrangement with the Korean Fair Trade Commission (the "Arrangement").1 In the Bureau's Information Notice, the Bureau states that the Arrangement provides "an additional tool to effectively address anticompetitive activities with cross-border implications."

The Arrangement, which contains provisions on notification, cooperation and coordination between the two competition authorities, as well as the exchange of information in relation to the two countries' competition and consumer protection laws, is a further step by the Bureau to expand its international enforcement network, particularly in relation to the detection and investigation of cartels.

This article discusses the framework for the enforcement of conspiracies (i.e. cartels) in Canada, highlights of the recent Bureau/Korean FTC Arrangement and some of the Bureau's other recent international enforcement initiatives.

II. Conspiracy Under the Competition Act

In Canada, criminal conspiracies are prohibited under section 45 of the Competition Act (Canada) (the "Act").  Section 45 makes it a criminal offence for any person to enter into an agreement that prevents or lessens competition "unduly" in the provision of goods or services in Canada (which includes "hard core" cartel activity such as price fixing, market allocation and group boycott agreements).2

While questions sometimes arise regarding the territorial jurisdiction of section 45, it is not limited to domestic Canadian conspiracies and parties have plead guilty to violating section 45 where it was alleged that they entered into an agreement outside Canada.

The Act also contains provisions relating to foreign-directed conspiracies (e.g. where a Canadian subsidiary carries out the directives of its international parent), which has been applied by the Bureau on a number of occasions (e.g., in the graphite electrodes, carbon brushes and bulk vitamins cartel cases).

III. Bureau/Korean FTC Arrangement

The Arrangement provides for cooperation and coordination between the Bureau and the Korean FTC in the enforcement of each country's competition and consumer laws, including the Act and the Korean Monopoly Regulation and Fair Trade Act.

The following are some of the highlights of the Arrangement:

  • Notification.  The agencies are required to notify each other with respect to enforcement activities that may "affect the other's interests in the application of its competition and consumer laws" (e.g. cartel activity in the other agency's territory that may be subject to enforcement or penalties in the first agency's territory).  Notification must include the nature of the activities being investigated and the competition or consumer laws involved, with sufficient detail to allow the notified agency to evaluate the application of its competition laws.
  • Cooperation and Coordination.  When pursuing enforcement activities in relation to the same or related matters, the agencies will attempt to coordinate their enforcement efforts, while respecting each other's independence to make enforcement decisions.
  • Information Exchanges.  The agencies will periodically meet to exchange information on their enforcement efforts, priorities in relation to their competition laws, economic sectors of common interest and discuss proposed changes to competition and consumer laws.
  • Confidentiality.  The Arrangement also contains provisions relating to confidential information.  The agencies are not required to communicate information prohibited by the laws of the agency in possession of the information or if communication would be incompatible with the agency's interests in applying its competition laws.  The agencies are also required to maintain the confidentiality of information received, oppose third party requests for information to the "fullest extent possible" and may make disclosure subject to confidentiality assurances.

While the Arrangement, and similar cooperation arrangements the Bureau has entered into, has worthwhile consumer protection and market efficiency objectives, it also raises a number of jurisdictional and other issues.  These include the scope of protection of confidential information (e.g., information provided by parties to the Bureau during the course of an investigation).

For example, while the Arrangement contains some safeguards relating to confidential information, the extent of such protections (particularly as the Bureau continues to expand its international enforcement network) is unclear.  While the Act provides that information disclosed to the Bureau may only be communicated for the purpose of the "administration or enforcement of the Act" (or to Canadian law enforcement agencies), the Bureau's position has been that the scope of this provision includes communications to foreign competition agencies.  As such, it is not clear, for example, what safeguards there are over the wider disclosure of information (i.e. to multiple competition authorities), other than assurances that may be sought by the Bureau.

IV. Recent International Initiatives

With the proliferation of competition laws worldwide, and efforts by international organizations including the Organisation for Economic Co-operation and Development ("OECD") and International Competition Network ("ICN") to promote convergence and cooperation in cartel enforcement, it is not surprising that competition authorities are taking greater steps to coordinate their enforcement efforts.  This is also true of the Bureau, which continues to expand its international enforcement network, particularly in relation to the detection and investigation of cartels and other criminal competition conduct (i.e. fraudulent mass marketing).

For example, the Arrangement reflects OECD recommendations that OECD member countries coordinate efforts in relation to hard core cartels, including cooperating in enforcing cartel laws and entering into bilateral or multilateral agreements.3 The Bureau has also actively participated in the ICN since its inception in 2001, whose recent cartel enforcement initiatives have included reviews of cartel investigation techniques, inter-agency cooperation, digital evidence gathering and the drafting and enforcement of leniency programs.

With respect to the Bureau's international enforcement network, the Bureau currently has cooperation arrangements with competition authorities in Australia, New Zealand, Chile and the United Kingdom.4 In addition to such "agency-to-agency" arrangements, Canada has entered into a number of "state-to-state" agreements with the United States, the European Union, Mexico and, most recently, Japan.

Like the Bureau's recent Arrangement with the Korean FTC, the Canada/Japan agreement is meant to improve competition law enforcement, particularly with respect to cartels.  Also like the Arrangement, the agreement provides for notification, information exchanges and enforcement coordination between the respective competition agencies.

The Bureau has also entered into a number of cross-border partnerships with foreign enforcement agencies to more effectively investigate fraudulent marketing activities, including the U.S. Federal Trade Commission (the "FTC") and the UK Office of Fair Trading.  In a recent statement, one Bureau official noted that the "close working relationship" between the Bureau and the FTC, as well as other law enforcement agencies, has been "very effective in combating the many deceptive scams that transcend borders." The Bureau's efforts have been reflected in a number of recent cases, including those relating to deceptive telemarketing, false ordinary selling price and performance claims, deceptive prize notices and multi-level marketing.

The Bureau's recent enforcement initiatives are part of a more comprehensive international effort, that includes work relating to merger remedies (i.e. the Bureau is currently developing a policy for its approach to international merger remedies).5 In a recent speech, the Commissioner stated that the Bureau's close working relationships with foreign competition authorities are "important elements in [the Bureau's] efforts to improve the global effectiveness and efficiency of competition policy" and that it was "actively seeking to increase its cooperation, coordination, and communication" with other agencies to achieve better results.  

The Commissioner has also recently confirmed that the detection and investigation of cartels, as well as other criminal conduct such as fraudulent marketing, continues to be an enforcement priority.

With respect to penalties, parties in recent international cartels, including the graphite electrodes, nucleotides, sorbates and bulk vitamins cases, have paid fines totaling more than CDN $185 million under the conspiracy and foreign-directed conspiracy provisions of the Act.  In the bulk vitamins case, the parties have paid fines totaling more than CDN $88 million.

V. Conclusion

As the world's economies grow increasingly interrelated, it is easier for companies to market and distribute their products worldwide.  A corollary of this increasing global convergence is that international cartels, with parties and potential anti-competitive effects in multiple jurisdictions, may also be formed with greater ease.

As a result, the Bureau and other competition authorities are taking greater steps to coordinate their enforcement efforts, particularly with reference to the detection and investigation of cartels and other criminal competition activities.  The Bureau's recent Arrangement with the Korean FTC and Canada's cooperation agreement with Japan are examples of such efforts.

While increased coordination among competition agencies has worthwhile consumer protection and market efficiency objectives, it also raises a number of issues relating to jurisdiction, potential conflicts and the protection of confidential information.  As a practical matter, increased coordination may result in increased exposure for parties involved in cartel activities, as well as an enhanced risk that parties may face penalties in multiple jurisdictions.  Innocent parties may also be forced, in some cases, to engage in more time consuming and expensive efforts to defend themselves as a result of multiple enforcement agencies being involved in an investigation.

______________________________

[1]  Cooperation Arrangement Between the Commissioner of Competition, Competition Bureau of the Government of Canada and the Fair Trade Commission of the Government of the Republic of Korea Regarding the Application of their Competition and Consumer Laws (May 4, 2006).

[2]  Act, section 45.

[3]  Organisation for Economic Co-operation and Development, Recommendation of the Council Concerning Effective Action Against Hard Core Cartels (March 25, 1998).

[4]  See Competition Bureau website (http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/home)

[5]  See e.g. Competition Bureau, draft Information Bulletin on Merger Remedies in Canada (October, 2005).