Canada: An Open Book: Canadian Courts Favor Disclosure In Antitrust Cases

Last Updated: December 1 2015
Article by Nikiforos Iatrou, Bronwyn Roe and Jeff Scorgie

In recent years, Canadian competition class-action jurisprudence has tilted in plaintiffs' favor. Canadian courts have recognized low thresholds for certification and allowed certification of indirect purchaser class-action lawsuits. This trend in Canadian jurisprudence has continued with two disclosure-related decisions within the past year. 

These decisions have important implications for US parties defending claims in Canada and US parties that are subject to Canadian antitrust investigations. The decisions are particularly notable in that documents and evidence that might not typically be disclosed in the US are indeed disclosable in Canadian class actions or to defendants in criminal proceedings. 

R. v. Nestlé Canada Inc. - In February 2015, the Ontario Superior Court released its decision in R. v. Nestlé Canada Inc., 2015 ONSC 810 (Nestlé). The court held that information voluntarily provided to the Canadian Competition Bureau (Bureau) under its Immunity and Leniency Programs is not protected by settlement privilege and must be disclosed to the accused in related criminal proceedings. Moreover, the inapplicability of settlement privilege to these communications would imply that they could similarly be the subject of disclosure in a private action.

As is the case in the US, Canada's Immunity and Leniency Programs have proven to be rich sources of information for Bureau investigations into anti-competitive conduct. Through the Immunity Program, participants in cartel-like activity trade information in exchange for immunity from prosecution. Similarly, the Leniency Program allows persons not eligible for immunity to obtain lenient sentencing in exchange for cooperating with the Bureau's investigation. Typically, the initial tranche of information that is provided to the Bureau is in the form of a "proffer," and it is on the basis of the proffer that the Bureau and the Immunity or Leniency applicant negotiate the terms of their deal. 

The Nestlé decision puts those contemplating the Immunity and Leniency Programs on notice that information provided to the Bureau during proffer meetings - that is, before any sort of agreement with the Bureau has been reached - can be subject to disclosure in subsequent criminal proceedings. By extension, this means that the possibility also exists for the communications to be discoverable in civil litigation.

Background - In July 2007, the Bureau was informed by Cadbury Canada Inc., through the Immunity Program, of the existence of a price-fixing cartel between chocolate producers in the Canadian market. Cadbury provided information to the Bureau during a proffer meeting in August 2007 and a formal immunity agreement was reached in May 2008 (Nestlé at paras 6‒11). 

The Bureau used Cadbury's information to obtain and execute search warrants against Nestlé Canada Inc. and Hershey Canada Inc. Hershey subsequently approached the Bureau under the Leniency Program and for several years provided information about the price-fixing cartel to the Bureau. A plea agreement between the Bureau and Hershey was ultimately reached in February 2011, with Hershey pleading guilty to one count of price-fixing and paying a C$4-million fine (Nestlé at paras 15‒16). 

As a result of its investigation and the information provided by Cadbury and Hershey, the Bureau charged Nestlé with price-fixing contrary to s. 45 of the Competition Act, RSC 1985, c C-34. During the Crown's disclosure to the accused, the Crown realized that it had mistakenly disclosed documents received from Cadbury and Hershey during the proffer stage of negotiations over which it ought to have claimed settlement privilege. The Crown requested that Nestlé return the documents in question, but Nestlé refused. The Crown accordingly brought an application to determine whether that information had to be disclosed to the accused (Nestlé at paras 19‒20). 

The court, at the outset of its analysis, rejected the argument put forward by Hershey that solicitor-client privilege attaches to information provided to the Bureau during proffer meetings. The court noted that Hershey, as an applicant to the Leniency Program, knew that the fundamental purpose of the program was to provide information that the Crown would use to prosecute the accused. In these circumstances, the court found that Hershey therefore either did not view the information as privileged or waived privilege in order to receive lenient treatment. The court consequently held that if solicitor-client privilege did apply, it was waived once a party instructed its counsel to disclose the information to the Bureau for the purposes of entering into a plea agreement (Nestlé at para 38).

The court also held that settlement privilege did not apply to the proffered information. The evidence was likely relevant to the accused and the parties who were seeking to claim privilege would suffer no prejudice from the information being disclosed to the defendant (Nestlé at para 64). 

The court emphasized the fact that Cadbury and Hershey knew from the outset that obtaining and retaining immunity or leniency would require them to provide evidence that could be used against others in the price-fixing cartel. 

The court concluded that Cadbury and Hershey should have known that their evidence would necessarily be relevant to the prosecution of Nestlé (Nestlé at para 66). In the court's view, there was no distinction between information provided after the immunity and plea agreements were executed and information provided during the proffer meetings (Nestlé at para 67).

The court further held that in the alternative, if pre-agreement information was in fact prima facie protected by settlement privilege, an exception to settlement privilege should apply, based on the right of an accused to make full answer and defence — a right that should trump the public interest in encouraging settlement (Nestlé at para 70). Indeed, the court remarked that "[w]e ought not to allow for the possibility of a wrongful conviction just to reach the desirable goal of achieving resolution" (Nestlé at para 73). The court paid short shrift to the argument put forward by Cadbury and Hershey, namely that such a conclusion would have a cooling effect on the Immunity and Leniency Programs as parties would think twice before stepping forward to provide information to the Bureau. In the court's view, the disclosure of pre-agreement information should not materially affect a person's decision to come forward, since that person already knows they will have to disclose post-agreement information in order to maintain their status in the Immunity and Leniency Programs (Nestlé at para 75). 

Imperial Oil v. Jacques - In October 2014, the Supreme Court of Canada (SCC) ruled in Imperial Oil v. Jacques, [2014] 3 SCR 287 (Imperial Oil) that wiretap information obtained by the Bureau during antitrust investigations may be disclosed to parties in civil and class-action proceedings. This decision may add to concerns about how information in the hands of the Bureau will be treated by courts and the extent to which it will remain confidential. 

In the summer of 2004, the Bureau commenced an investigation into a conspiracy to fix gasoline pump prices in Québec. The Bureau intercepted and recorded over 220,000 private communications between some of the alleged price-fixers (Imperial Oil at para 2). A "follow-on" class action was initiated against some of the accused and others after 54 charges were laid. 

The class-action plaintiffs alleged that they suffered damages as a result of the alleged price-fixing conspiracy. Pursuant to Québec's Code of Civil Procedure, CQLR, c C-35, the class-action plaintiffs brought a motion for the disclosure of wiretap information the Bureau had obtained from its investigation (Imperial Oil at para 5). 

The court of first instance ordered disclosure of the wiretap information with the caveat that it be screened to protect the privacy rights of unrelated third parties (Imperial Oil at para 9). The Québec Court of Appeal dismissed a motion for leave to appeal and the matter was appealed to the SCC (Imperial Oil at para 13).

The SCC upheld the decisions of the lower courts. The SCC stated that "seeking truth" is a core principle of the trial process, which is facilitated by the disclosure of information during the pre-trial "exploratory" stage (Imperial Oil at para 24). 

Civil rules of procedure provide judges with wide discretion to order non-parties (such as the Bureau) to produce information to aid in this search for truth. However, the court did note that although the right to disclosure in civil proceedings granted to parties must be understood broadly, it is not unlimited. In exercising their discretion to order the disclosure of information, judges should consider factors such as privacy rights, the relevance of the information at issue, and the accused's right to a fair trial (Imperial Oil at paras 29‒31). 

The SCC held that in this case, there was no evidence suggesting that the wiretaps would not be relevant to the class action. The SCC also found that any privacy concerns were appropriately addressed by the Superior Court's order to screen the recordings to protect the privacy rights of unrelated third parties. 

The SCC rejected arguments that disclosure of the wiretaps was precluded by the Competition Act. The SCC specifically addressed s. 29 of the Competition Act, which provides for the confidential treatment of certain types of information related to Bureau investigations. The SCC ruled, however, that s. 29 does not apply to intercepted information gathered from wiretaps under Canada's Criminal Code, RSC 1985, c C-46. The SCC explicitly highlighted a portion of s. 29, which states that evidence obtained by the Bureau may be disclosed "for the purpose of the administration or enforcement" of the Competition Act (Imperial Oil at paras 36‒37).

The SCC similarly rejected arguments that disclosure of the wiretaps was precluded by Canada's Criminal Code. While it is an offense to disclose intercepted private communications under the Criminal Code, the SCC found that the exception contained in s. 193(2)(a) of the Criminal Code applied. Specifically, s. 193(2)(a) of the Criminal Code permits intercepted private communications to be used for the purpose of giving evidence in civil or criminal proceedings (Imperial Oil at para 48). The SCC held that the lower court's order that the information be produced was accordingly correct. 

Parties in and outside Canada should take note of this decision, as other jurisdictions - such as the US and UK - do not allow intercepted private communications to be disclosed as part of a civil litigation between private parties. This decision accordingly helps to advance Canada's reputation as a plaintiff-friendly jurisdiction, opening the door for plaintiffs in Canada to access valuable evidence obtained from criminal investigations. 

Conclusion - In light of these two decisions, it is important that parties involved in Bureau investigations, or those contemplating approaching the Bureau, know how their information will be treated by the courts once it is in the hands of the Bureau. 

Both Nestlé and Imperial Oil are indicative of a trend in Canadian jurisprudence towards disclosure. Canadian courts have made it clear that information in the hands of the Bureau is not subject to absolute confidentiality — whether the information is proffered to the Bureau in anticipation of immunity or lenient sentencing, or whether it is obtained in the course of a Bureau investigation.

Previously published by Lexpert

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