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Corporate
Compliance Programs
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Table of Contents
Preface
This Bulletin provides the Competition Bureau's views about
corporate programs designed to
ensure compliance with the Competition Act.
It is well recognized that most firms do comply with the law.
Nonetheless, all firms can benefit by implementing internal
mechanisms to assist them to remain in compliance
with the law. Equally, as prevention mechanisms may not ensure
perfect compliance, a corporate
compliance program can also facilitate detection
and remedial action by the firm in instances when anti-competitive
conduct occurs.
The Bulletin outlines the components of a credible and effective
program. To be credible, a compliance program must
demonstrate the company's commitment to conducting business in
conformity with the Act. To be effective, it needs to inform
employees, officers and directors about the content of the Act as it
affects the company's business.
It makes good business sense to implement an effective program
that addresses both the criminal and civil reviewable provisions of
the Act. A good corporate
compliance program can help to identify the
boundaries of permissible conduct, as well as identify situations
where it would be advisable to seek legal advice. A pre-emptive
identification of areas of potential risk can save time and money,
preserve goodwill, and set a company on a good track for the future.
Knowing the limits of illegal conduct can free a company and its
employees to pursue innovative and profitable business
practices.
Many firms have already developed comprehensive
compliance programs. Still others
have instituted some or all of the highlighted elements on an
informal or ad hoc basis and, for them, it may simply be a question
of supplementing or formalizing what already exists.
The decision to implement a compliance program
is, of course, voluntary and the contents of a program are at the
discretion of the firm implementing it.
The goal of the Competition Bureau's work in the area of in-house
compliance programs is to
contribute to a business culture of respect for, and
compliance with, the Competition Act.
Konrad von Finckenstein, Q.C.
Director of Investigation and
Research
Competition Act
Introduction
The Competition Bureau (the "Bureau") publishes bulletins,
guidelines and pamphlets to explain the Competition Act (the "Act")
[Competition Act, R.S.C. 1985, c.C-34] and Bureau enforcement
policies, all with a view to promoting compliance
with the Act. The purpose of this Bulletin is to provide guidance
about measures that all businesses can take, through the
implementation of internal corporate
compliance programs, to prevent or
minimize the risk of violations of the Act.
This Bulletin describes the elements that the Bureau considers to
be essential in any compliance program, if it is to
be effective in preventing and detecting anti-competitive conduct
falling under either the criminal or civil reviewable provisions of
the Act. They are also the evaluative criteria against which the
Director of Investigation and Research (the "Director") makes
assessments concerning the effectiveness of a particular
compliance program for the purpose of alternate
case resolutions and immunity and sentencing recommendations.
Because the Director often recommends the implementation of a
compliance program as part of a criminal consent
settlement or civil remedial order, it is also important that firms
[For the purposes of this Bulletin, the terms "firm" and "company"
are used interchangeably and include all forms of business
organizations, whether or not incorporated.] have an understanding
of the Director's expectations concerning the design of such
programs.
The compliance program components described in
this Bulletin are neither industry nor company specific. They are
recommended as the baseline for the development of any effective
in-house program. The Bureau also recognizes that
compliance programs must be
tailored to meet the specific needs of each firm, given the nature
of its business and its organizational structure. Accordingly, where
suggestions are included about the various ways in which the
individual components can be implemented, they are provided merely
as illustrations.
The views expressed herein are not a binding statement of the
Director's position in any particular case. Individual enforcement
decisions and alternate case resolutions are based upon the
circumstances of each case.
This Bulletin does not give legal advice. Readers should refer to
the Act when questions of law arise and, if a particular situation
gives rise to concerns, should obtain legal advice.
Elements of an Effective
Compliance Program
In the Bureau's view there are five elements that are fundamental
to the success of any corporate
compliance program and which should be incorporated
in every program, regardless of the particular model adopted or its
level of complexity. These five essential elements are:
- the involvement and support of senior management;
- the development of relevant policies and procedures;
- the ongoing education of management and employees;
- monitoring, auditing and reporting mechanisms; and
- disciplinary procedures.
Senior Management Support
Senior management's clear and unequivocal support is the
foundation of an effective compliance program.
The message that compliance with the law is a
fundamental part of company policy needs to be clearly promoted.
Senior management can establish a climate of respect within the
company towards the Act by playing an active and visible role in
relation to the compliance program. By
demonstrating its commitment and involvement, senior management will
send the message that violations of the Act are not accepted as a
legitimate business practice.
Subsequent periodic statements to sustain the initial message,
and management conduct that reinforces the message, will establish a
positive behavioural model for all employees.
Relevant Policies and Procedures
The substantive content of a compliance
program should be described in a company publication.
The development and documentation of compliance
policies and procedures tailored to the firm's business operations
are critical to the success of the program, as is the need to
regularly update such policies and procedures to reflect changes in
company operations and developments in competition law and policy.
While the required detail and form may vary from firm to firm, some
typical items include:
- a statement by the chief executive officer stressing the
company's commitment to the policies and procedures contained
therein, and its uncompromising adherence to the Act;
- a reference to the purpose of the Act;
- a general description of the Act and its enforcement, penalty
and remedy provisions, with emphasis on those provisions of the
Act that are most relevant to the company;
- clear examples to illustrate the specific practices that are
prohibited, so that managers and staff at all levels can easily
understand the potential application of the Act to their own
duties;
- a practical code of conduct that identifies activities that
are illegal or open to question;
- a statement outlining the consequences of breaching
corporate policies;
- procedures that detail exactly what an employee should do when
concerns arise out of certain situations, or when possible
violations of the Act are suspected;
- an acknowledgement, signed by each employee, indicating they
have read, understood, and will adhere to the policy.
Training and Education
An effective compliance program will include
a training component that targets personnel at all levels who are in
a position to engage in, or be exposed to, anti-competitive
conduct.
Senior management and staff alike need to understand the limits
of acceptable behaviour, both within the firm and on the part of
other players in the industry and the marketplace.
The Bureau has a variety of publications that can be used in the
training and education component of a firm's
compliance program. Appendix 1 lists various of
these publications, including a series of plain language pamphlets
explaining various provisions of the Act, and some detailed
guidelines which address both technical details of the Act and
Bureau enforcement policy concerning various provisions. In
addition, there are periodical publications such as the Misleading
Advertising Bulletin, Competition Communiqu? CompAct and the Annual
Report, and speeches, news releases and other occasional papers
which deal with current issues. The Bureau can also provide speakers
on various topics. [Companies are encouraged to contact the Bureau's
Information Centre to obtain information about Bureau publications,
mailing lists, and the Fax-on-Demand and other services. The
Centre's address and phone number are listed in Appendix 2.]Selected
publications are available at the Bureau's website. Readers can also
obtain copies of any Bureau publications by contacting the Bureau
directly. The Bureau's postal address, telephone number, and website
are listed in Appendix 2.
Monitoring, Auditing and Reporting Mechanisms
Monitoring, auditing and reporting mechanisms are vital to the
success of any compliance program.
A credible review and assessment component is fundamental to an
effective compliance program. Monitoring, auditing
and reporting mechanisms function to prevent and detect
anti-competitive conduct. They provide both employees and managers
with tangible evidence that there is indeed a check on their
activities. They can also be a means to measure how well the
compliance program is being observed and to
identify whether adjustments are needed in the program.
The format of this component will depend on the company's
particular needs, given its line of business and the extent of its
exposure to potential violations of the Act. The Bureau does not
endorse any particular procedure or combination of procedures;
rather, a company should be satisfied that the measures it
implements are generally effective to prevent anti-competitive
conduct, and to detect and address it if it does occur.
Monitoring is preventive in nature, being a continuous,
systematic procedure implemented to check against potential
violations of the Act. Monitoring can be valuable to support a due
diligence defence. Advertising is an example of one area where
continual monitoring could benefit many companies. For example,
prior to being signed off, a company could require that all its
advertisements, regardless of their form, be checked against a
predetermined list of requirements for compliance
with the Act.
Audits are designed to identify whether a violation of the Act
has occurred and, if one has, that it is dealt with appropriately.
Whether companies institute periodic, ad hoc, or event-triggered
audits, or a combination of them, the aim is the same -- to ensure
that problems are identified and resolved and that the company and
its employees are in compliance with the law. The
choice of audit approach likely will be determined according to what
activities the individual firm considers will raise the greatest
risk of violation of the Act. The company should also consider
whether any of its internal activities, or external practices in the
industry in which it operates, give rise to uncertainty about the
law.
An internal reporting procedure -- that is, an unfettered ability
to report conduct that is reasonably believed to be a contravention
of the Act -- encourages employees to provide timely, reliable
information that can be the basis for further investigation by the
company. If the steps to be followed and the information required
are clearly defined, the reporting procedure can identify existing
or potential problems in order that timely remedial action can be
taken.
Disciplinary Procedures
Disciplinary measures demonstrate the seriousness with which
the company views anti-competitive conduct.
A disciplinary code or policy relating to individuals who
initiate or participate in anti-competitive conduct is important not
only for its deterrent effect, but also as a reflection of the
firm's policy against such conduct. A compliance
program should ensure that employees involved in anti-competitive
activity are made aware of the consequences of their behaviour, and
that disciplinary measures (e.g. suspension, fines, dismissal) are
consistently applied.
Compliance Program Benefits
An effective program will:
- educate employees, directors and officers about the
requirements of the Act and the current enforcement policies of
the Bureau and reduce uncertainty about what is or is not legal
conduct;
- give early warnings of potentially illegal conduct;
- reduce the exposure of corporate officers,
directors and employees, and the corporation itself, to criminal
and civil liability;
- reduce costs related to litigation, fines, adverse publicity,
and the disruption to operations resulting from investigations and
prosecutions before the Court or hearings before the Competition
Tribunal;
- encourage innovative and pro-competitive marketplace behaviour
as a means to effective participation in changing markets;
- increase the awareness of possible anti-competitive conduct by
competitors, suppliers, or customers and thereby increase the
likelihood of achieving an appropriate remedy, either in the
market or by appropriate legal recourse, possibly under section 36
of the Act; and
- assist a company in its dealings with the Bureau, for example,
by identifying violations of the Act early enough to allow the
firm the opportunity to make a request for immunity in a criminal
matter.
Bureau's Consideration of
Compliance Programs
This Bulletin does not alter existing Bureau policies concerning
enforcement, alternate case resolution, or immunity and sentencing
recommendations. [Bureau enforcement policies are outlines in the
guidelines listed in Appendix 1. For the Bureau's policy on
immunity, see H. Chandler, Deputy Director of Investigation and
Research, Getting Down to Business: The Strategic Dimension of
Criminal Competition Law Enforcement in Canada, March 10, 1994
(speech). Bureau policy relating to matters touching upon
prosecutorial discretion should be read in the broader context of
the policies of the Attorney General of Canada and, in this regard,
readers are referred to the Crown Counsel Policy Manual,
Department of Justice, January 1993.]
The existence of a corporate
compliance program does not immunize firms or
individuals from enforcement action by the Director or from
prosecution by the Attorney General of Canada. Whether or not a
company has a compliance program will, of itself,
play a limited role in any decisions by the Director to bring
applications to the Competition Tribunal or to recommend to the
Attorney General that charges be laid. Neither the Director nor the
Attorney General can fetter their responsibilities when there is
evidence of an offence.
However, an effective compliance program may
better situate a company which has violated the Act to receive
consideration for alternate case resolutions or favourable
treatment. In determining the most appropriate means to resolve
cases, the Director's position about alternate case resolution,
immunity and sentencing recommendations may be influenced by the
existence of an effective corporate
compliance program if it causes the company to take
remedial action.
For the Director to take account of a corporate
compliance program in deliberations on a particular
matter, there must be an affirmative answer to the question "Is this
program effective and appropriate for this particular business?"
Exception for Senior Management Involvement
The existence of a compliance program will not
influence the Director's deliberations about immunity or alternate
case resolution if senior personnel -- the "directing minds" of the
corporation -- either participated in or condoned the
anti-competitive conduct. In this situation, it will be apparent
that management's commitment to compliance was not
serious and the program was neither effective nor meaningful.
Moreover, if a compliance program is a sham used
to conceal or deflect liability, it could be considered an
aggravating factor in any sentence that the Director suggests the
Attorney General recommend to the Court.
Due Diligence Defence
For certain misleading advertising offences under the Act it is
open to the accused to raise the fact that it exercised due
diligence to prevent the offence. Although an in-house
compliance program is not, of itself, a defence to
conduct that contravenes the Act, an effective program may enable a
company to demonstrate that it took reasonable steps to avoid the
commission of the offence. In this way, a
compliance program can be beneficial to a claim of
due diligence.
Alternative Case Resolution
Depending on the circumstances, both criminal conduct and
reviewable practices may be resolved by something less than fully
contested proceedings. Available measures include information visits
and orders on consent. The Director will be more willing to consider
an alternate form of resolution to that of contested proceedings if
the company can demonstrate that:
- it terminated the anti-competitive conduct as soon as it came
to light;
- it attempted to remedy the adverse effects of the conduct; and
- the conduct was not in keeping with corporate
policy.
Although an in-house compliance program is not a
prerequisite for alternative case resolution in either civil or
criminal matters, the existence of an effective program may enable a
company to satisfy these requirements and to demonstrate that it has
done so. Other criteria will also be taken into account.[For a more
detailed discussion of the Bureau's policy on alternative case
resolution, see the Director of Investigation and Research's
Program of Compliance, Information Bulletin
No. 3 (Revised), March 1993.]
If it is determined that an alternative form of resolution is
appropriate to settle a matter, and an effective
corporate compliance program is
not already in place, the Director may require the implementation of
such a program as part of the resolution. Corporate
compliance programs could be
integrated into the settlement of matters in the following
manner:
- The Director may resolve both civil and criminal cases
following an information visit if it is found that no further
inquiry is warranted due to the company's voluntary corrective
action. Such corrective action may include the implementation of a
compliance program that is appropriate for the
particular company, given the circumstances of the alleged
contravention.
- In respect of consent orders negotiated in reviewable matters
or prohibition orders negotiated on consent in criminal matters,
the Director will assess whether a compliance
program would help to prevent future repetitions of the conduct in
question, with a view to including a program as part of the
resolution of the case.
When implementation of a compliance program
forms part of the resolution of a matter, the company may be
required to demonstrate that its program is likely to prevent
anti-competitive conduct. Parties may wish to refer to the five
compliance program components outlined earlier to
evaluate whether their proposed program is likely to be
effective.
Immunity from Prosecution
Those involved in activities that may violate the criminal law
provisions of the Act can approach the Bureau for immunity
consideration. Pursuant to the Bureau's policy on immunity, in some
instances the Director will recommend that the Attorney General of
Canada grant immunity in exchange for a party's disclosure of
information and its co-operation during any investigation,
prosecution or other legal proceedings.
Amongst other things, the Bureau's policy on immunity requires
evidence confirming that, upon its discovery, the company took
immediate steps to terminate the activity and report it to the
Director. [A more complete discussion about the Bureau's criteria
for immunity recommendations is contained in Chandler, supra,
note 4. For the Attorney General of Canada's policy on immunity, se
"Witness Immunity" in Crown Counsel Policy Manual, supra,
note 4.] An effective compliance program will
improve the company's ability to demonstrate that it satisfies this
particular criterion.
An effective compliance program that identifies
possible violations of the Act can also create an opportunity to
take advantage of the Director's program of immunity which otherwise
might not be available. Although a compliance
program is not a prerequisite to a request for immunity, without it
the impugned conduct might not be detected early enough to enable
the company to report it to the Bureau for the purpose of making the
request. Because the timeliness of the provision of evidence is
relevant to the Director's deliberations concerning immunity
recommendations, the absence of a quick response capacity may
compromise a firm's request.
Sentencing and Remedial Orders
Immunity from prosecution is but one form of favourable
treatment. Favourable treatment means any penalty or obligation that
is less severe than that which would be sought in the absence of
disclosure and co-operation from the party who may be in
contravention of a criminal provision of the Act.
When a guilty plea is entered, an effective
compliance program may lend support to a reduction
in the sentence that the Director would otherwise suggest to the
Attorney General for recommendation to the Court. The existence of
an effective program may enable a firm to demonstrate mitigating
conduct for sentencing purposes, including evidence that the
activity for which it was convicted was contrary to company policy
and to the actions and statements of management, and was terminated
as soon as it became known to the company.
In reviewable matters involving abuse of dominant position,
exclusive dealing, and tied selling, the Director may apply to the
Competition Tribunal for a remedial order. These orders can
encompass any term necessary to overcome the effects of the conduct
in the market. The Director will seek a term requiring the
implementation of a compliance program, or
modifications to an existing program, if the circumstances of the
case suggest it could prevent future recurrence.
Conclusion
The importance of a compliance program in
avoiding anti-competitive conduct under the Act, and in detecting
and dealing with such behaviour, should not be underestimated. The
procedures put in place as the result of a
compliance program serve not only to identify
unlawful or questionable conduct, but also to promote awareness that
will result in ethical standards of conduct.
Implementing an effective compliance program
which addresses both criminal behaviour and civil reviewable conduct
is good business. It can help a company avoid the adverse publicity
and financial costs associated with contraventions of the Act. A
compliance program will also enhance understanding
of what is acceptable behaviour so that legitimate competitive
practices can be vigorously pursued without unwarranted concerns of
contravening the Act.
Appendix 1: Selected Competition Bureau
Publications
Appendix 2: How To Contact the Competition
Bureau
You may contact the Director or a member of the Bureau at the
address and telephone numbers below to obtain general information,
make a complaint under the provisions of the Competition
Act , or request an advisory opinion:
Information
Centre
Competition Bureau
Industry Canada
50 Victoria Street
Hull, Qubec
K1A OC9
Telephone:
National Capital Region: (819) 997-4282
Long
distance (toll free): 1-800-348-5358
TDD service: 1-800-642-3844
Facsimile: (819) 997-0324
FAX-on-demand: (819) 997-2869
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