2012 FC 1117, 2012 FC 1117

T-798-12 2012 FC 1117 Her Majesty the Queen v. Maxzone Auto Parts (Canada) Corp. ( Accused ) Indexed as: Canada v. Maxzone Auto Parts (Canada) Corp. Federal Court, Crampton C.J.—Vancouver, May 3; Ottawa, September 24, 2012.

Competition — Price-fixing agreements — Sentencing — Accused, affiliate of Taiwan-based manufacturer, guilty of violating Competition Act, s. 46 , involved in price-fixing agreement — Court imposing fine as recommended in joint submission on sentencing — Purpose of reasons herein to alter future expectations so as to ensure jointly recommended sentences not contrary to public interest, not bringing administration of justice into disrepute — Not apparent herein that sentencing principles, objectives in Criminal Code, ss. 718 – 718.21 taken into account — Jointly proposed fine calculation based on Competition Bureau’s Leniency Program — Whether evidentiary record, submissions sufficient to satisfy Court that jointly recommended sentence not contrary to public interest, not bringing administration of justice into disrepute — Leniency Program framework consistent with sentencing principles set out in Criminal Code , case law — Jointly proposed fine determined exclusively in arithmetical manner not consistent with letter or spirit of Leniency Program, Criminal Code or case law — Cooperation cannot so dominate approach to sentencing as to leave no meaningful role for aggravating, mitigating factors, principles of sentencing — Serious concerns herein as to Court’s ability to be satisfied that sentence not contrary to public interest, not bringing administration of justice into disrepute — Record not providing sufficient information to conclude fine meeting sentencing principles — Effective deterrence achieved by rendering gain from cartel overcharge negative — Joint sentencing submissions having to explain why fine sufficient to achieve deterrence, reflect sentencing principles, show magnitude of economic harm — Canadian subsidiaries of foreign companies should not benefit from sentences imposed on parent companies committed in other jurisdictions — Advisable for Crown, offender to explain why jointly recommended sentence excluding imprisonment not contrary to public interest, not bringing administration of justice into disrepute — Jointly recommended fine of $1.5 million imposed but only because past practice giving rise to understandable expectations that jointly recommended sentence would be accepted .

These were sentencing reasons following a guilty plea by the accused to one count under

section 46 of the Competition Act . The accused, an affiliate of a Taiwan-based manufacturer and supplier of aftermarket automotive replacement lighting parts, was involved in a price-fixing agreement with other companies from Taiwan and the United States that, if it had been entered into in Canada, would have been in contravention of

section 45 of the Act . During the period in question, the accused carried out directives and instructions that gave effect to the price-fixing agreement in Canada. Upon conviction, the Court imposed a fine of $1.5 million on the accused, as recommended by the parties in a joint submission on sentencing.

The purpose of these reasons was to alter future expectations by noting that, going forward, the Court may require a more fulsome evidentiary record, or a modified approach to the determination of a jointly recommended sentence, as well as more detailed submissions, to become satisfied that such a sentence would not be contrary to the public interest and would not bring the administration of justice into disrepute.

Apart from the objectives of specific and general deterrence, it was not immediately apparent that any of the principles and objectives of sentencing set forth in sections 718 to 718.21 of the Criminal Code , or the aggravating and mitigating factors that were briefly addressed in the Crown’s sentencing submissions, were taken into account in determining the proposed sentence.

The jointly proposed fine represented approximately 10 percent of the relevant volume of commerce of the accused in Canada, based on a 50% discount of the 20% volume of commerce that typically represents the starting point in the determination of fines sought under the Competition Bureau’s Leniency Program. At issue was whether the evidentiary record and submissions were sufficient to permit the Court to become satisfied that acceptance of the jointly recommended sentence would not be both contrary to the public interest and such as to bring the administration of justice into disrepute.

Held , the jointly recommended fine of $1.5 million is imposed but only because past practice gave rise to understandable expectations that the jointly recommended sentence would be accepted. The framework described in the Leniency Program is consistent with the sentencing principles set out in the Criminal Code and the case law. If followed in letter and spirit, that framework is sufficiently comprehensive and flexible to permit the Court to satisfy itself that a jointly recommended sentence would not be contrary to the public interest and would not bring the administration of justice into disrepute.

However, a jointly proposed fine that is determined exclusively by multiplying an accused corporation’s volume of commerce by a particular percentage is not consistent with the letter or spirit of the Leniency Program, the Criminal Code or the case law. Cooperation cannot so dominate the approach to sentencing as to leave virtually no meaningful role for relevant aggravating factors, other mitigating factors, and the principles of sentencing.

In the present instance, the Court had serious concerns as to its ability to be satisfied, on the basis of an evidentiary record such as that which was submitted in these proceedings, and the cursory submissions that were made, that a sentence calculated in the arithmetical manner that was followed in this case would not be contrary to the public interest and would not bring the administration of justice into disrepute.

Such a record did not provide the Court with sufficient information to be satisfied that a fine equivalent to approximately 10 percent of the accused corporation’s volume of affected commerce would meet the sentencing objectives listed in the sentencing principles set out in the Criminal Code and the case law.

An evidentiary record and submissions such as those made in this case do not provide any sense that a recommended fine determined in this manner would appropriately denounce the conduct in question, achieve general or specific deterrence, be proportionate to the gravity of the offence, or ensure that crime does not pay.

What is required at a minimum is either some sense of the illegal profits contemplated by the prohibited agreement, or evidence that the accused paid restitution to the ultimate victims of that agreement; a good sense of any relevant aggravating and mitigating factors and how they influenced the jointly recommended fine; and sufficient information to determine

whether the recommended sentence appropriately reflects the fundamental objectives and purpose of sentencing. There are certain offences, such as the offences set forth in sections 45 and 46 of the Act, in respect of which an appropriate degree ofdenunciation can only be achieved through a sentence that communicates society’s “abhorrence” of the crime in question. At a minimum,price-fixing agreements such as the one in the case at bar require the imposition of a fine that (

i) ensures that the accused corporationdoes not profit from its illegal conduct, and (ii) includes an additional significant amount to communicate the Court’s recognition of thevery serious nature of such illegal conduct, its substantial adverse impact on the economy, and society’s abhorrence of the crime. To achieve effective deterrence, it is the expected gain from the agreed upon cartel overcharge that is most relevant, together with thelevel of the multiple required to render negative that gain. Where a jointly recommended sentence for a contravention of

section 45 or 46of the Act does not include a term of imprisonment, the parties’ sentencing submissions should explain why a fine alone would suffice toachieve general and specific deterrence, to appropriately denunciate the crime, and to reflect the other sentencing objectives andprinciples set forth in the Criminal Code. Paragraph 718(

e) of the Criminal Code lists providing reparations for harm done to victims or to the community as one of the objectivesof sentencing. Where restitution has not been paid prior to the sentencing hearing, it may be more difficult to ensure that a recommendedsentence will achieve the purposes set forth in

section 718 of the Criminal Code. Another objective of sentencing, as set forth in paragraph 718(

f) of the Criminal Code, is promoting a sense of responsibility inoffenders, and acknowledgment of the harm done to victims and to the community. As with the objectives of denunciation anddeterrence, this objective may well require at least some term of imprisonment, particularly for parties who were not the first to begincooperating under the Competition Bureau’s Leniency Program. As to the factors set forth in

section 718.21 of the Criminal Code, where present, aggravating and mitigating factors should be explicitlyaddressed in any sentencing submissions that may be made on behalf of the Crown or the offender, in a manner that enables the Court tounderstand how those factors influenced the recommended sentence. Also, parties should jointly recommend sentences that allow abetter appreciation of the magnitude of the economic harm caused by any contravention to

section 45 or 46 of the Act, and how theeconomic harm influenced the determination of a jointly recommended sentence. The market share of an offender overlaps with theeconomic harm caused by the offence, and would not ordinarily merit additional weight as a distinct factor in sentencing. That said,evidence with respect to an offender’s market share can help in assessing other matters, such as the economic harm caused by theoffence. When Canadian subsidiaries of foreign companies commit distinct offences under

section 45 or 46 of the Act, they should notbenefit from the sentences imposed on their parent companies in respect of offences committed in other jurisdictions, whether as part ofthe same international conspiracy or otherwise. In conclusion, despite several very fundamental problems with the evidentiary record, the recommended fine of $1.5 million wasimposed given that past practice gave rise to understandable expectations that the jointly recommended sentence would be accepted.

Forsubsequent individuals who seek leniency, it will be advisable for the Crown and the offender to explain why any jointly recommendedsentence that does not include a period of imprisonment would not be contrary to the public interest and would not bring theadministration of justice into disrepute. STATUTES AND REGULATIONS CITED Competition Act, R.C.S., 1985, c. C-34, ss. 1, 45 (as am. by R.S.C., 1985 (2nd Supp.), s. 30), 46. Criminal Code, R.S.C., 1985, c.

C-46, ss. 655, 718, 718.01, 718.02, 718.1, 718.2 (as enacted by S.C. 1995, c. 22, s. 6; 1997, c. 23, s. 17;2001, c. 32, s. 44(F); c. 41, s. 20; 2005, c. 32, s. 25), 718.21. Sherman Act, 15 U.S.C. § 1–7 (2006). CASES CITED considered: R. v. Cerasuolo, , 151 C.C.C. (3d) 445 (Ont. C.A.); R. v. Ipeelee, 2012 SCC 13, [2012] 1 S.C.R. 433; R. v.Nasogaluak, 2010 SCC 6, [2010] 1 S.C.R. 206; R. v. Nova Scotia Pharmaceutical Society, (SCC), [1992] 2 S.C.R. 606,(1992), 114 N.S.R. (2d) 91; R. v. McNamara et al. (No. 2) (1981), (ON CA), 56 C.C.C. (2d) 516 (Ont. C.A.); Papaliav.

The Queen, (SCC), [1979] 2 S.C.R. 256, (1979), 93 D.L.R. (3d) 161; Thomson Newspapers Ltd. v. Canada (Directorof Investigation and Research, Restrictive Trade Practices Commission), (SCC), [1990] 1 S.C.R. 425, (1990), 67D.L.R. (4th) 161; R. v. Benlolo, , 81 O.R. (3d) 440 (C.A.). referred to: Steeves v. R., 2010 NBCA 57, 360 N.B.R. (2d) 88; R. v. Downey, (Ont. C.A.); R. v. Haufe, 2007 ONCA 515;Douglas c. R., , 162 C.C.C. (3d) 37 (Que. C.A.); R. v. Sinclair, 2004 MBCA 48 , [2005] 4 W.W.R. 662; R.v. Sargeant (1974), 60 Cr. App. R. 74 (C.A.); R. v.

M. (C.A.), (SCC), [1996] 1 S.C.R. 500, (1996), 73 B.C.A.C. 81;Canada v. Kason Industries Inc., 2011 FC 281, 385 F.T.R. 296; Canada v. Canada Pipe Co. (1995), 64 C.P.R. (3d) 182, 101 F.T.R. 211(F.C.T.D.); Canada v. Kanzaki Specialty Papers, Inc. (1994), 56 C.P.R. (3d) 467, 82 F.T.R. 63 (F.C.T.D.); R. v. Albany Felt Co. ofCanada Ltd. et al. (No. 2) (1980), 52 C.P.R. (2d) 204 (Que. Sup. Ct.); R. v. Browning Arms Co. of Canada Ltd. (1974), (ON CA), 18 C.C.C. (2d) 298, 15 C.P.R. (2d) 97 (Ont. C.A.); R. v. Dominion Steel & Coal Corp. Ltd. et al. (1956), (ON SC), 27 C.P.R. 57, 25 C.R. 48 (Ont. H.C.); Reg. v.

Firestone Tire & Rubber Co. of Can. et al. (1953), (ONSC), 107 C.C.C. 286, 20 C.P.R. 8 (Ont. H.C.); R. v. Mitsubishi Corp., , 40 C.P.R. (4th) 333 (Ont. S.C.); Canada v.UCAR Inc., , 164 F.T.R. 85 (F.C.T.D.); R. v. Hoffmann-LaRoche Limited (No. 2) (1980), (ON SC),30 O.R. (2d) 461, 119 D.L.R. (3d) 279 (Ont. H.C.); R. v. Can. Gen. Elec. Co. (1977), 2 B.L.R. 230, 35 C.P.R. (2d) 210 (Ont. H.C.); R. v.Armco Canada Ltd. and 9 other Corporations (No. 2) (1975), (ON SC), 8 O.R. (2d) 573, 24 C.C.C. (2d) 147 (H.C.),

varied on other grounds (1976), (ON CA), 13 O.R. (2d) 32, 70 D.L.R. (3d) 287 (C.A.), leave to appeal to S.C.C.refused [1976] 1 S.C.R. vii; R. v. Aetna Insurance Co. et al. (1975), (NS CA), 13 N.S.R. (2d) 693, 69 D.L.R. (3d) 720(S.C. (A.D.)), revd on other grounds (SCC), [1978] 1 S.C.R. 731, (1977), 20 N.S.R. (2d) 565; R. v. St. Lawrence Corp.Ltd. (and nineteen other corporations) (1966), 51 C.P.R. 170 (Ont. H.C.), affd (ON CA), [1969] 2 O.R. 305, 5 D.L.R.(3d) 263 (C.A.); R. v. Davis Wire Industries Ltd. (1992), 47 C.P.R. (3d) 394 (B.C.S.C.); R. v.

Ocean Construction Supplies Ltd. et al.(1974), 15 C.P.R. (2d) 224 (B.C.S.C.); R. v. Shell Canada Products Ltd. (1990), (MB CA), 63 Man. R. (2d) 1, 45B.L.R. 231 (C.A.); R. v. Rolex Watch Co. of Canada Ltd. (1980), 50 C.P.R. (2d) 222 (Ont. C.A.); R. v. A & M Records of Canada Ltd.(1980), 51 C.P.R. (2d) 225 (Ont. Co. Ct.); Regina v. Kito Can. Ltd., (MB CA), [1976] 4 W.W.R. 189, 30 C.C.C. (2d)531 (Man. C.A.); R. v. Superior Electronics Inc. (1979), 45 C.P.R. (2d) 234 (B.C.C.A.); R. v. Northern Electric Co. et al., (1956), (ON SC), 6 D.L.R. (2d) 435, [1956] O.W.N. 633 (Ont.

H.C.); Goodyear Tire and Rubber Company of Canada Limited v.The Queen, (SCC), [1956] S.C.R. 303, (1956), 2 D.L.R. (2d) 11; R. c. Ciment Québec Inc., [1996] J.Q. No. 2580 (Que.Sup. Ct.) (QL); R. v. Cominco Ltd. (1980), (AB KB), 25 A.R. 479, [1980] 2 W.W.R. 693 (S.C. (T.D.)). AUTHORS CITED Competition Bureau Canada. Bulletin: Immunity Program under the Competition Act, June 7, 2010, online:<http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Immunity-Program-2010.pdf/$FILE/Immunity-Program-2010.pdf>. Competition Bureau Canada.

Bulletin: Leniency Program, September 29, 2010, online: <http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/LeniencyProgram-sept-2010-e.pdf/$FILE/LeniencyProgram-sept-2010-e.pdf>. Competition Bureau Canada. Leniency Program – FAQ’s, online: <http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03289.html>. Consumer and Corporate Affairs Canada. Competition Law Amendments: A Guide. Ottawa: Supply and Services Canada, 1985. International Competition Network. Cartels Working Group.

Setting of Fines for Cartels in ICN Jurisdictions, Kyoto, April 2008, online:<http://www.internationalcompetitionnetwork.org/uploads/library/doc351.pdf>. Organisation for Economic Co-operation and Development. Fighting Hard-Core Cartels: Harm, Effective Sanctions and LeniencyProgrammes, Paris, 2002, online: <http://www.oecd.org/competition/cartels/1841891.pdf>. Organisation for Economic Co-operation and Development. Hard Core Cartels: Recent Progress and Challenges Ahead, Paris, 2003,online: <http://www.oecd-ilibrary.org/governance/hard-core-cartels_9789264101258-en>.

Organisation for Economic Co-operation and Development. Hard Core Cartels: Third Report on the Implementation of the 1998Council Recommendation, Paris, 2005, online: <http://www.oecd.org/competition/cartels/35863307.pdf>. Ruby, Clayton C. et al. Sentencing, 7th ed. Markham, Ont.: LexisNexis Canada, 2008. sentencing reasons following a guilty plea to one count under

section 46 of the Competition Act. Jointly recommended fine imposed. APPEARANCES Gary Caracciolo and Nicola Pfeifer for Her Majesty the Queen. D. Martin Low, Q.C. and Casey W. Halladay for accused. SOLICITORS OF RECORD Deputy Attorney General of Canada for Her Majesty the Queen. McMillan LLP, Vancouver, for accused. The following are the reasons for sentencing rendered in English by [1] Crampton C.J.: On May 3, 2012, Maxzone Auto Parts (Canada) Corp. (Maxzone Canada) pleaded guilty to the single count withwhich it was charged under

section 46 of the Competition Act, R.S.C., 1985, c. C-34 (the Act). [2] Upon convicting Maxzone Canada and entering into the Court record a statement of admissions and agreed facts (SAAF) thatwas executed on behalf of the parties, I proceeded to hear their joint submission on sentencing.

After then hearing supplementarysubmissions on behalf of Maxzone Canada, and having reviewed the written sentencing submissions filed on behalf of the Crown, Iimposed on Maxzone Canada a fine of $1.5 million, as jointly recommended by the parties. [3] However, I expressed certain concerns and stated that I would elaborate upon those concerns in reasons to follow.

As explainedbelow, those concerns relate to whether the evidentiary record and submissions were sufficient to permit the Court to become satisfiedthat acceptance of the jointly recommended sentence would not be both contrary to the public interest and such as to bring theadministration of justice into disrepute. Notwithstanding those concerns, I ultimately agreed to impose the jointly proposed fine of $1.5million.

I did so primarily because of the significant weight I gave to the understandable expectations of the Crown and Maxzone Canadathat the manner in which the recommended sentence was determined in this case would be endorsed by the Court.

As noted by theparties, that approach has typically been endorsed in the past. [4] The purpose of these reasons is to alter future expectations by noting for the record that, going forward, the Court may very wellrequire a more fulsome evidentiary record, or a modified approach to the determination of a jointly recommended sentence, as well asmore detailed submissions, to become satisfied that such a sentence would not be contrary to the public interest and would not bring the

administration of justice into disrepute. I. Background [ 5 ] The following background facts were agreed upon in the SAAF. [ 6 ] Maxzone Canada is an affiliate of (

i) Depo Auto Parts Ind. Co., Ltd. (Depo), a Taiwan-based manufacturer and supplier of aftermarket automotive replacement lighting parts, and (ii) Maxzone Vehicle Lighting Corp. (Maxzone), a corporation incorporated in the United States that is engaged in the distribution, supply, marketing and sale of aftermarket automotive replacement lighting parts. [ 7 ] TYC Brother Industrial Co. Ltd. (TYC) is a Taiwan-based manufacturer of aftermarket automotive replacement lighting parts and the parent of its distributor and affiliate Genera Corporation (Genera), based in the United States. [ 8 ] Eagle Eyes Traffic Ind.

Co., Ltd. (Eagle Eyes) is a Taiwan-based manufacturer of aftermarket automotive replacement lighting parts and the parent of its distributor and affiliate E-Lite Automotive, Inc. (E-Lite), based in the United States. [ 9 ] The products (Products) described above as “aftermarket automotive replacement lighting parts” include, predominantly but not exclusively, headlights and tail-lights. They encompass the whole lighting unit, including the lens, casing, reflected back, and wiring, but exclude the bulb. The Products are made for the automotive aftermarket, and not for the original assembly of automobiles.

They are sold across Canada for replacement on a variety of automobile models. [ 10 ] Between January 1, 2004 and September 1, 2008 (the Relevant Period), Depo and Maxzone, through their employees and senior officers, communicated with representatives from TYC, Genera, Eagle Eyes, and E-Lite in a variety of ways, including attendances at meetings, resulting in an agreement (the Price-Fixing Agreement) to which each of them was a party that, if it had been entered into in Canada, would have been in contravention of

section 45 [as am. R.S.C., 1985 (2nd Supp.), c. 19, s. 30] of the Act . [ 11 ] The Price-Fixing Agreement included, but was not limited to, a coordinated pricing formula, maintenance of price discipline to avoid a price war, coordination of responses to new market entrants, maintenance of a common discount program, and the sharing of price data.

Over the course of the Relevant Period, Depo and Maxzone occasionally did not comply with that agreement. [ 12 ] During the Relevant Period, Maxzone Canada carried out directives, instructions, and other communications from Depo and Maxzone, who had the authority to give directions to Maxzone Canada as to prices and sales of the Products in Canada.

The directives, instructions and other communications were for the purpose of giving effect to the Price-Fixing Agreement in Canada. [ 13 ] Total sales of the products by Maxzone Canada during the Relevant Period amounted to approximately $15 000 000. [ 14 ] Subsequent to the Relevant Period, from late 2008 to date, Depo and its affiliates have suffered significant financial difficulty due to a major international market decline. [ 15 ] Maxzone Canada has agreed that, for the purposes of

section 655 of the Criminal Code , R.S.C., 1985, c. C-46 , its admissions set forth at paragraphs 11 and 12 above, establish all of the constituent elements of an offence under

section 46 of the Act. [ 16 ] During the sentencing hearing, counsel to Maxzone Canada noted that Maxzone, Mr. Polo Shu-Sheng Hsu (Polo), Maxzone’s former president and chief executive officer, and Mr. Shiu-Min Hsu (Shiu)—the former chairman of Depo, had each pleaded guilty to an offence under

section 1 of the Sherman Act , 15 USC §§1–7 (2006). Maxzone was fined US$43 million in respect of that offence, Polo was sentenced to serve 180 days in prison and to pay a fine of US$25 000, and Shui, a citizen and resident of Taiwan, voluntarily submitted himself to the jurisdiction of the United States to plead guilty and to serve a sentence of nine months of incarceration in the United States. II. Relevant Legislation [ 17 ] Pursuant to

section 46 of the Act, it is an offence for a corporation that is carrying on a business in Canada to implement a foreign directive intended to give effect to an agreement or arrangement that, if entered into in Canada, would have been in contravention of

section 45 of the Act . The full text of

section 46 is provided at Appendix A hereto. [ 18 ] For the purposes of these proceedings, the relevant provision in

section 45 is paragraph 45(1)( c ), which, during the Relevant Period, provided as follows: Conspiracy 45.

(1) Everyone who conspires, combines, agrees or arranges with another person … (

c) to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or … is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding 10 million dollars or to both. [ 19 ] The sentencing provisions in the Criminal Code that are related to these proceedings are discussed in

Part IV below, and are reproduced in full at Appendix A hereto. III. Joint Sentencing Submission

[20] The written submissions on sentencing submitted on behalf of the Crown contained two short paragraphs under the heading“Joint Submission,” in which it was submitted that a fine in the amount of $1.5 million would appropriately fit the crime andcircumstances of this case and serve the public interest by reflecting the relevant sentencing factors. [21] In addition, it was jointly submitted that a sentencing judge should only deviate from the recommendations of a joint submissionwhere accepting the recommendation would either be contrary to the public interest or would bring the administration of justice intodisrepute.

This language has been endorsed by the New Brunswick Court of Appeal (Steeves v. R., 2010 NBCA 57, 360 N.B.R. (2d) 88,at paragraph 31) and, in a slightly different form, by the Ontario Court of Appeal, which has “repeatedly held that trial judges should notreject joint submissions unless the joint submission is contrary to the public interest and the sentence would bring the administration ofjustice into disrepute” (R. v. Cerasuolo, , 151 C.C.C. (3d) 445 (Ont. C.A.), at paragraph 8 (emphasis added); R. v.Downey, (Ont. C.A.), at paragraph 3; R. v. Haufe, 2007 ONCA 515, at paragraph 4).

Although other appellate courtshave couched the test for rejecting joint sentencing submissions in somewhat different terms, there appears to be an increasing consensusthat the alternative formulations of the test do not differ materially in substance (Douglas c. R., , 162 C.C.C. (3d) 37(Que. C.A.), at paragraph 51; R. v. Sinclair, 2004 MBCA 48 , [2005] 4 W.W.R. 662, at paragraph 11). [22] Accordingly, before accepting a jointly recommended sentence, the Court must be satisfied that the sentence would not be bothcontrary to the public interest and such as to bring the administration of justice into disrepute. IV.

The Principles of Sentencing [23] The objectives and principles of sentencing are codified in sections 718 to 718.21 of the Criminal Code [section 718.2 (asenacted by S.C. 1995, c. 22, s. 6; 1997, c. 23, s. 17; 2001, c. 32, s. 44(F); c. 41, s. 20; 2005, c. 32, s. 25)], which have been reproduced infull in Appendix A hereto. According to

section 718, the “fundamental purpose of sentencing is to contribute, along with crimeprevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society”.

This is to be achieved by imposing“just sanctions” that reflect one or more of what the Supreme Court of Canada has recently characterized as being the traditionalsentencing objectives, namely, “denunciation, general and specific deterrence, separation of offenders, rehabilitation, reparation tovictims, and promoting a sense of responsibility in offenders and acknowledgment of the harm done to victims and to the community”(R. v. Ipeelee, 2012 SCC 13, [2012] 1 S.C.R. 433, at paragraph 35). [24] Pursuant to

section 718.1, a central principle of sentencing is that a sentence must be proportionate to the gravity of the offenceand the degree of responsibility of the offender. Accordingly, regardless of the “weight a judge may wish to accord to the objectiveslisted above, the resulting sentence must respect the fundamental principle of proportionality” (R. v. Nasogaluak, 2010 SCC 6, [2010] 1S.C.R. 206, at paragraph 40 [emphasis in original]; Ipeelee, above, at paragraph 37). [25] The requirement that a sentence be proportionate to the gravity of the offence “is closely tied to the objective of denunciation.

Itpromotes justice for victims and ensures public confidence in the justice system” (Ipeelee, above, at paragraph 37). However,proportionality also ensures that a sentence does not exceed what is appropriate, given the moral blameworthiness of the offender.

InNasogaluak, above, at paragraph 42, the Supreme Court described these dimensions of proportionality as follows: …the rights-based, protective angle of proportionality is counter-balanced by its alignment with the “just deserts” philosophy ofsentencing, which seeks to ensure that offenders are held responsible for their actions and that the sentence properly reflects andcondemns their role in the offence and the harm they caused. Understood in this latter sense, sentencing is a form of judicial and socialcensure.

Whatever the rationale for proportionality, however, the degree of censure required to express society’s condemnation of theoffence is always limited by the principle that an offender’s sentence must be equivalent to his or her moral culpability, and not greaterthan it.

The two perspectives on proportionality thus converge in a sentence that both speaks out against the offence and punishes theoffender no more than is necessary. [References omitted.] [26] Subject to constraints imposed by the principle of proportionality, sections 718, 718.2 and 718.21, together with certain otherstatutory provisions and the jurisprudence, preserve a broad range of discretion for trial judges in the sentencing process (Nasogaluak,above, at paragraphs 43–45). For example, paragraph 718.2(

a) requires sentencing courts to take account of any relevant aggravating ormitigating circumstances relating to the offence or the offender. In short (Nasogaluak, above, at paragraph 43): No one sentencing objective trumps the others and it falls to the sentencing judge to determine which objective or objectives merit thegreatest weight, given the particulars of the case. The relative importance of any mitigating or aggravating factors will then push thesentence up or down the scale of appropriate sentences for similar offences.

The judge’s discretion to decide on the particular blend ofsentencing goals and the relevant aggravating or mitigating factors ensures that each case is decided on its facts, subject to theoverarching guidelines and principles in the Code and in the case law. [27] That said, paragraphs 718.2(b), (

d) and (

e) enunciate additional principles that place certain parameters on the discretion ofsentencing courts. Specifically, paragraph 718.2(

b) requires that a sentence should be similar to sentences imposed on similar offendersfor similar offences committed in similar circumstances. Paragraph 718.2(

d) requires that an offender should not be deprived of liberty, ifless restrictive sanctions may be appropriate in the circumstances. Paragraph 718.2(

e) requires courts to consider all available sanctionsother than imprisonment that are reasonable in the circumstances, with particular attention required to be paid to the circumstances ofAboriginal offenders. [28] Finally,

section 718.21 contains a list of factors to be taken into consideration by a court in imposing a sentence on anorganization. Among other things, those factors include:

Additional factors 718.21 … (

a) any advantage realized by the organization as a result of the offence; (

b) the degree of planning involved in carrying out the offence and the duration and complexity of the offence; and … (

i) any restitution that the organization is ordered to make or any amount that the organization has paid to a victim of the offence; … V. The Basis for the Proposed Sentence [ 29 ] In its written submissions on sentencing, the Crown began by (

i) reproducing the text of

section 718 , (ii) briefly noting that specific and general deterrence are key factors in determining an appropriate sentence, and (iii) briefly addressing each of the specific sentencing factors set forth in

section 718.21. It then briefly addressed various additional aggravating and mitigating sentencing factors that have been identified in previous price fixing cases under the Act . [ 30 ] Apart from the objectives of specific and general deterrence, it is not immediately apparent that any of the principles and objectives of sentencing set forth in

section 718, the factors set forth in

section 718.21, or the aggravating and mitigating factors that were briefly addressed in the Crown’s sentencing submissions, were taken into account in determining the proposed sentence. The same is true with respect to the proportionality principle in

section 718.1 . [ 31 ] Indeed, it is fairly clear from the concluding paragraphs of those submissions that the jointly recommended sentence was arithmetically determined by reference to the volume of Maxzone Canada’s total sales, or volume of commerce, in Canada during the Relevant Period, i.e., the $15 000 000 mentioned at paragraph 13 above.

Specifically, it was observed that, under the Competition Bureau’s 2010 Bulletin (Leniency Bulletin) entitled “Leniency Program”, “absent compelling evidence to the contrary, the starting point for a recommended fine is 20 percent of the cartel participant’s affected volume of commerce in Canada throughout the duration of the offence.” It was then noted that, “[a] reduction of 50 percent of the otherwise applicable fine may be recommended by the Bureau for the first party to seek leniency under the Leniency Program (such as Maxzone in this case).” It was subsequently reiterated that the jointly proposed fine of $1 500 000 “reflects approximately 10 percent of Maxzone Canada’s relevant volume of commerce in Canada during the period of the offence”, and “is based on a 50 percent discount of the 20 percent volume of commerce” that typically represents the starting point in the determination of fines that the Bureau will seek under its Leniency Program.

In its oral submissions, the Crown confirmed that this is how the jointly proposed fine was calculated. [ 32 ] The link between the 20% “starting point” for the determination of a recommended sentence under the Leniency Program and the objectives of ensuring that a sentence will serve as a general and specific deterrent is briefly addressed at paragraph 72 of these reasons below. VI.

The Bureau’s Leniency Program [ 33 ] The Bureau’s Leniency Bulletin sets out the factors and principles that the Bureau considers in making a recommendation to the Public Prosecution Service of Canada (PPSC) for lenient treatment in the sentencing of individuals and business organizations accused of criminal cartel offences under the Act . Collectively, these factors and principles constitute the Bureau’s Leniency Program. That Program was designed to complement the Bureau’s Immunity Program, as set forth in its 2010 Bulletin entitled “Immunity Program under the Competition Act ”.

Under the Immunity Program, the Bureau recommends complete immunity from prosecution only for the first business organization or individual to apply under the Immunity Program.

Parties who begin to cooperate subsequent to the point in time at which another party begins to cooperate under the Immunity Program are treated under the Leniency Program. [ 34 ] The Preface to the Leniency Bulletin suggests that the Leniency Program is premised on the view that “[i]ndividuals and business organizations are more likely to come forward, cooperate, and plead guilty (rather than litigate) when they are aware of the relevant leniency considerations and when they are confident that the Bureau will follow them in its leniency recommendations to the PPSC.” [ 35 ] After clarifying that the PPSC has independent discretion to accept or to reject the Bureau’s recommendations with respect to sentencing, the Leniency Bulletin states, at paragraph 5, that the Federal Prosecution Service Deskbook provides that the PPSC should consult with the Bureau and give due consideration to its recommendations.

At paragraph 6, it is then noted that it “is in the public interest to avoid unnecessary litigation with its attendant costs and uncertainties while, at the same time, ensuring that parties are held responsible for their criminal activities.” That said, the Leniency Bulletin recognizes that the “determination of the sentence to be imposed is at the sole discretion of the court, and a judge is not bound by a joint sentencing submission” (at paragraph 7). [ 36 ] After describing the conditions for eligibility under the Leniency Program, the Leniency Bulletin states, at paragraph 12, that the Bureau “generally uses a proxy of 20 percent of the cartel participant’s affected volume of commerce in Canada” as the base level of a fine recommendation.

That document proceeds [at paragraph 13] to state that the “first leniency applicant is eligible for a reduction of 50 percent of the fine that would otherwise have been recommended, provided that the applicant meets the requirements of the Leniency Program, including providing full, frank, timely and truthful cooperation.” The Leniency Bulletin then notes that the second leniency applicant is eligible for a reduction of 30 percent of the fine that would otherwise have been recommended by the Bureau to the PPSC, and that the amount of reduction that a subsequent applicant is eligible to receive will depend on when the applicant sought leniency compared to the “second in” applicant, and on the timeliness of its cooperation. [ 37 ] At paragraph 17, the Leniency Bulletin states that the “20% proxy associated with the applicant’s cartel conduct will be increased or reduced based on the presence of aggravating or mitigating factors”, and that the appropriate sentencing reduction will be applied only after the 20% proxy has been increased or decreased to reflect those factors.

[ 38 ] At paragraph 21, it is stipulated that “[a]t the request of the first-in leniency applicant that is a business organization, the Bureau will recommend that no separate charges be laid against the applicant’s current directors, officers or employees, provided that such individuals cooperate with the Bureau's investigation in a full, frank, timely and truthful fashion.” At paragraph 22, it is noted that the same policy applies with respect to the first applicant who is a natural person applying independently for leniency.

However, it is then made clear that current and former directors, officers, employees and agents of subsequent leniency applicants may be charged depending on their role in the offence. In a document entitled “Leniency Program – FAQ’s” that appears on the Bureau’s website and was reproduced in the Crown’s book of authorities, it is stated (at question No. 22) that “[t]he Bureau is increasingly recommending imprisonment for cartel violations so as to secure sufficient specific and general deterrence and denunciation of the cartel conduct.” VII. Analysis A.

Introduction [ 39 ] At the sentencing hearing, counsel to Maxzone Canada observed that it would be “important to the bar and to the business community for the Court to provide an acknowledgment or recognition of the manner in which the Leniency Bulletin suggests that fine calculations should be carried out in these cases” arising under sections 45 and 46 of the Act .

More specifically, it was observed that it would be very helpful if the Court were to conclude that the approach to sentencing described in the Leniency Bulletin is effective, fair and legally sound. [ 40 ] Generally speaking, the framework described in the Leniency Bulletin is consistent with the sentencing principles set out in the Criminal Code and developed in the jurisprudence.

If followed in letter and spirit , that framework is sufficiently comprehensive and flexible to permit the Court to satisfy itself that a jointly recommended sentence would not be contrary to the public interest and would not bring the administration of justice into disrepute, having regard to: i. the fundamental purpose of sentencing and the objectives set forth in

section 718 of the Criminal Code ; ii. the principle of proportionality set forth in

section 718.1; iii. the aggravating and mitigating factors set forth in sections 718.2 and 718.21 and in the jurisprudence; and iv. the other principles set forth in

section 718.2 and in the jurisprudence. [ 41 ] However, a jointly proposed fine that is determined exclusively by multiplying an accused corporation’s volume of commerce by a particular percentage is not consistent with the letter or spirit of the Leniency Bulletin, the aforementioned provisions in the Criminal Code or the jurisprudence.

The same is true with respect to a jointly proposed fine that was initially calculated in this manner, and then adjusted by further multiplying the amount so reached by a second percentage, to reflect the fact that the offender sought leniency in a particular sequence, relative to the other participants in the prohibited agreement. [ 42 ] I accept that there are very good reasons why the sequence in which co-conspirators have sought leniency and have offered to cooperate with the Competition Bureau’s investigation should be given significant weight in the determination of the appropriate sentence to be imposed.

Among other things, and as noted in the Crown’s sentencing submissions, a transparent and predictable approach to the sentencing of those who may wish to cooperate with the Bureau and the Crown supports the effective and efficient enforcement of the Act .

This is because, generally speaking, individuals and business organizations are more likely to come forward, cooperate and plead guilty, rather than litigate, when they have a high degree of certainty regarding the quid pro quo for such cooperation. [ 43 ] However, cooperation cannot so dominate the approach to sentencing as to leave virtually no meaningful role for relevant aggravating factors, other mitigating factors, and the principles of sentencing discussed at

part IV of these reasons above. [ 44 ] I have serious concerns as to the Court’s ability to become satisfied, on the basis of an evidentiary record such as that which was submitted in these proceedings, and the cursory submissions that were made, that a sentence calculated in the arithmetical manner that was followed in this case would not be contrary to the public interest and would not bring the administration of justice into disrepute. [ 45 ] In brief, such a record does not provide the Court with sufficient information to be satisfied that a fine equivalent to approximately 10 percent of the accused corporation’s volume of affected commerce during the Relevant Period will promote respect for the law, assist in achieving a just society, or constitute a “just sanction,” having regard to the sentencing objectives listed in

section 718 of the Criminal Code , the provisions in sections 718.1 , 718.2 and 718.21, and the jurisprudence on sentencing.

The same would be true even if the offender did not benefit from a 50% reduction in the fine that would otherwise be recommended, to reflect the fact that it was the first to seek leniency under the Competition Bureau’s Leniency Program in respect of the illegal conduct in question. [ 46 ] This is primarily because such an evidentiary record and submissions such as those that were made in this case do not provide the Court with any sense, let alone comfort, that a recommended fine determined in this manner would appropriately denounce the conduct in question, achieve general or specific deterrence, be proportionate to the gravity of the offence, or even ensure that crime does not pay.

Such a record and such submissions also do not materially assist the Court to understand why the relevant aggravating and mitigating factors have been weighted in a manner such as to effectively cancel each other out. [ 47 ] Without having a general “ballpark” sense of the illegal gains contemplated by, and ultimately derived from, an agreement prohibited by

section 45 or 46 of the Act , it is difficult to understand how the Court could become satisfied that a fine determined in this manner would likely lead a would-be cartel participant to refrain from becoming a party to such an agreement, having regard to the low combined risk of detection, investigation and successful prosecution. Indeed, it is difficult to see how the Court could even be satisfied that a fine so determined would likely disgorge, in an approximate way, the ill-gotten gains from the conduct prohibited by sections 45 and 46 of the Act, and contemplated by

section 718.21 of the Criminal Code . In turn, this raises serious questions as to whether such a fine would appropriately denounce the prohibited conduct, promote a sense of responsibility in offenders, or represent an acknowledgement of the harm done to victims and the community, as contemplated by paragraphs 718 (

a) and (

f) of the Criminal Code .

[48] In my view, to enable the Court to make the determination that it needs to make in these types of cases involving jointlyrecommended sentences for contraventions of

section 45 or 46 of the Act, the evidentiary record and the submissions of counsel ought tobe more fulsome than they were in these proceedings. In short, at a minimum, the Court requires either (

i) some sense, even if only ingeneral “ballpark” terms, of the illegal profits contemplated by, and ultimately attributable to, the prohibited agreement; or (ii) evidencethat the accused has paid restitution to the ultimate victims of that agreement. The Court also requires a good sense of any relevantaggravating and mitigating factors and how they influenced the jointly recommended fine.

Where no adjustment to the recommendedfine has been made to reflect such factors, it will be necessary for the Court to understand the basis for such an approach. [49] In addition, the Court will require sufficient information to determine whether the recommended sentence appropriately reflects: i. the fundamental purpose of sentencing and the objectives set forth in

section 718 of the Criminal Code; ii. the principle of proportionality set forth in

section 718.1; and iii. the principles set forth in

section 718.2 and in the jurisprudence. [50] These things can easily be accommodated within the existing framework of the letter and spirit of the Leniency Bulletin. B. Denunciation [51] There are certain offences in respect of which an appropriate degree of denunciation can only be achieved through a sentence thatcommunicates society’s “abhorrence” of the crime in question (R. v. Sargeant (1974), 60 Cr. App. R. 74 (C.A.), at page 77, quoted in R.v. M. (C.A.), (SCC), [1996] 1 S.C.R. 500, at paragraph 81). The offences set forth in sections 45 and 46 of the Act areclearly among such crimes. [52] In R. v.

Nova Scotia Pharmaceutical Society, (SCC), [1992] 2 S.C.R. 606, at pages 648 and 649, it was notedthat what is now

section 45 “is one of the pillars of the Act” and “remains at the core of the criminal part of the Act.” The Court addedthat

section 45 “definitely rests on a substratum of values”. Lower courts have also recognized the seriousness of the offence created setforth in

section 45 (and referred to in

section 46). (See, for example, Canada v. Kason Industries Inc., 2011 FC 281, 385 F.T.R. 296, atparagraph 6; Canada v. Canada Pipe Co. (1995), 64 C.P.R. (3d) 182, at paragraph 6; Canada v. Kanzaki Specialty Papers, Inc. (1994),56 C.P.R. (3d) 467 (F.C.T.D.), at paragraph 6; R. v. Albany Felt Co. of Canada Ltd. et al. (No. 2) (1980), 52 C.P.R. (2d) 204 (Que. Sup.Ct.), at pages 205‒206; R. v. Browning Arms Co. of Canada Ltd. (1974), (ON CA), 18 C.C.C. (2d) 298 (Ont. C.A.), atpage 299; R. v. Dominion Steel & Coal Corp. Ltd. et al. (1956), (ON SC), 27 C.P.R. 57 (Ont. H.C.), at page 76; andReg. v.

Firestone Tire & Rubber Co. of Can.et al. (1953), (ON SC), 107 C.C.C. 286 (Ont. H.C.), at page 293.) [53] In 1986, the maximum fine set forth in what is now

section 45 of the Act was increased from $1 million to $10 million, to “send aclear signal to the courts that Parliament considers conspiracy to be a very serious criminal offence and that offenders should be dealtwith by a firm hand” (Consumer and Corporate Affairs Canada, Competition Law Amendments: A Guide (Ottawa: December 1985), atpage 27). In 2009, subsequent to the Relevant Period in these proceedings, Parliament sent a further unambiguous signal in this regard byfurther increasing the maximum fine set forth in

section 45 from $10 million to $25 million, and by increasing the maximum term ofimprisonment from five years to fourteen years. As for

section 46, during the Relevant Period there was no limit on the maximum finethat could be imposed in respect of that offence. The same remains true today. [54] Price-fixing agreements, like other forms of hard-core cartel agreements, are analogous to fraud and theft. They represent nothingless than an assault on our open market economy. Buyers in free market societies are entitled to assume that the prices of the goods andservices they purchase have been determined by the forces of competition.

When they purchase products that have been the subject ofsuch an agreement, they are effectively defrauded. [55] Indeed, such agreements have a greater adverse economic impact on society than do theft and fraud. This is because, in additionto leading to a transfer of wealth from victims of the agreement to the participants in the agreement, they also generally result in furtherdetrimental effects on the economy.

Such further effects include what is often referred to as the “deadweight loss” to the economy thatresults when higher prices lead buyers at the margin to switch to less valued substitutes, thereby bringing about a misallocation ofresources.

This misallocation of resources typically reduces aggregate wealth in the economy by an amount that is equivalent to asignificant percentage of the wealth transfer mentioned above. [56] Price fixing and other hard-core cartel agreements therefore ought to be treated at least as severely as fraud and theft, if not evenmore severely than those offences. [57] When, as in the case at bar, a price-fixing agreement affects a market that comprises sales in the tens of millions, it should betreated as a major fraud, and denounced accordingly. At a minimum, this requires the imposition of a fine that (

i) ensures that the accusedcorporation does not profit from its illegal conduct, and (ii) includes an additional significant amount to communicate the Court’srecognition of the very serious nature of such illegal conduct, its substantial adverse impact on the economy, and society’s abhorrence ofthe crime. [58] Unfortunately, an evidentiary record such as that which was before me in these proceedings is not sufficient to enable the Courtto be satisfied that a sentence determined in the manner that was embraced in this case would reflect either of these principles. The Courtwill expect more in the future. C.

Deterrence [59] Courts in Canada have consistently identified general and specific deterrence as an important objective in sentencing for offencesunder the Act. (See, for example, Kason, above, at paragraph 8; R. v. Mitsubishi Corp., , 40 C.P.R. (4th) 333 (Ont.S.C.), at paragraph 22; Canada v. UCAR Inc., , 164 F.T.R. 85 (F.C.T.D.), at paragraph 21; Kanzaki, above, atparagraph 5; R. v. McNamara et al. (No. 2) (1981), (ON CA), 56 C.C.C. (2d) 516 (Ont. C.A.), at page 525; Albany

Felt, above, at pages 206‒207; R. v. Hoffmann-LaRoche Limited (No. 2) (1980), (ON SC), 30 O.R. (2d) 461 (Ont.H.C.), at pages 462–463; R. v. Can. Gen. Elec. Co. (1977), 2 B.L.R. 230 (Ont. H.C.) (Large Lamps), at page 231; R. v. Armco CanadaLtd. and 9 other Corporations (No. 2) (1975), (ON SC), 8 O.R. (2d) 573 (H.C.), at page 575, varied on differentgrounds (1976), (ON CA), 13 O.R. (2d) 32 (C.A.), leave to appeal refused [1976] 1 S.C.R. vii; R. v.

Aetna InsuranceCo. et al. (1975), (NS CA), 13 N.S.R. (2d) 693 (S.C. (A.D.)), at page 695, revd on other grounds (SCC), [1978] 1S.C.R. 731; Browning Arms, above, at page 303; and R. v. St. Lawrence Corp. Ltd. (and nineteen other corporations)(1966), 51 C.P.R. 170 (Ont.

H.C.), at pages 190–191; affd (ON CA), [1969] 2 O.R. 305 (C.A.).) [60] As noted in Mitsubishi, above, at paragraph 20, and in the Crown’s sentencing submissions, the courts have also repeatedlyemphasized that fines in criminal price-fixing cases must be set sufficiently high to ensure that they are more than a mere licence fee or acost of doing business. (See, for example, Kanzaki, above, at paragraph 5; R. v. Davis Wire Industries Ltd. (1992), 47 C.P.R. (3d) 394(B.C.S.C.), at page 397; Albany Felt, above, at page 206; Armco, above, at page 576; Browning Arms, above, at pages 300–301, 303; andR. v.

Ocean Construction Supplies Ltd. et al. (1974), 15 C.P.R. (2d) 224 (B.C.S.C.), at page 229. See also R. v. Shell Canada ProductsLtd. (1990), 63 Man. L.R. (2d) 1 (C.A.), at paragraphs 46–48; R. v. Rolex Watch Co. of Canada Ltd. (1980), 50 C.P.R. (2d) 222 (Ont.C.A.), at page 228; R. v. A & M Records of Canada Ltd. (1980), 51 C.P.R. (2d) 225 (Ont. Co. Ct.), at page 230; Regina v. Kito Can. Ltd., (MB CA), [1976] 4 W.W.R. 189 (Man. C.A.), at pages 190‒191; R. v. Superior Electronics Inc. (1979), 45 C.P.R.(2d) 234 (B.C.C.A.), at page 236; R. v. Northern Electric Co. et al. (1956), (ON SC), 6 D.L.R. (2d) 435 (Ont.

H.C.), atpages 436–437; Goodyear Tire and Rubber Company of Canada Limited v. The Queen, (SCC), [1956] S.C.R. 303, atpage 311; and R. v. Dominion Steel & Coal Corp. Ltd. et al. (1956), (ON SC), 27 C.P.R. 57 (Ont.

H.C.), at page 76[cited above].) To be sufficient to achieve effective general deterrence, fines imposed in respect of criminal anti-competitive agreementsmust be substantial and exemplary, but not crippling or vindictive (McNamara, above, at pages 526–527). [61] As is increasingly recognized in international competition law circles, fines are unlikely to deter persons contemplating becominga party to a price fixing or other hard-core cartel agreement unless they are set at a level that is likely to render the expected value ofsuch action negative.

This means that fines must take account of the low probability of detection, prosecution and conviction. To give asimple example, if the expected additional profits from a cartel overcharge (overcharge) were estimated to be $1 million, and thecombined probability of detection, prosecution and conviction was 50 percent, the fine would need to exceed $2 million to render theexpected value of joining the prospective cartel negative.

In other words, to be an effective deterrent in this example, the fine would needto be more than double the expected gain from the overcharge. [62] As counsel to the Crown observed during the sentencing hearing in this case, and has been recognized in the jurisprudence (see,for example, Mitsubishi, above, at paragraph 9; R. c. Ciment Québec Inc., [1996] J.Q. No. 2580 (Que. Sup. Ct.) (QL), at paragraph 22,and McNamara, above, at pages 526‒527), “cartels are very hard to detect”.

Common sense suggests that the combined probability ofdetection, prosecution and conviction for participating in a price fixing or other hard-core cartel agreement is much less than 50 percent.If this uncontroversial proposition is accepted, it follows that fines for engaging in such conduct should be a multiple of more thandouble the expected gain from the overcharge to be an effective deterrent. [63] I am not aware of any studies that have estimated the combined probability of detection, prosecution and conviction for pricefixing in Canada.

Accordingly, it is not possible for me to comment upon the level of the multiple that would achieve the optimaldeterrent. The Competition Committee of the Organisation for Economic Co-operation and Development (OECD), which is comprisedof the heads of the competition enforcement agencies in the OECD’s 34-member countries, has noted that “[s]ome believe that as few asone in six or seven cartels are detected and prosecuted, implying a multiple of at least six” and that a “multiple of three is morecommonly cited” (OECD, Hard Core Cartels: Recent Progress and Challenges Ahead, Paris, 2003 [OECD 2003], at page 27).

Inanother report, the Competition Committee noted that studies supporting multiples of larger than three exist (OECD, Fighting Hard-CoreCartels: Harm, Effective Sanctions and Leniency Programmes, Paris, 2002 [OECD 2002], at page 91). [64] A multiple of three implies that the combined probability of detection, prosecution and conviction is 33.3 percent.

Once again,common sense suggests that the true figure is likely less than this, and that therefore a multiple of three would be a very conservative ruleof thumb to adopt in attempting to calculate the level at which a fine would have to be set to be an effective deterrent for those who maybe tempted to consider participating in a price fixing or other hard-core cartel agreement. [65] Unfortunately, accurately calculating the true overcharge, in order to then apply a conservative multiple in an attempt to establisha fine that will serve as an effective deterrent, is notoriously difficult.

Among other things, it is generally very difficult to establish whatthe price of the cartelized product(

s) would have been in the absence of an impugned price-fixing agreement (OECD 2002, above, atpage 77; International Competition Network, Cartels Working Group, Setting of Fines for Cartels in ICN Jurisdictions (Kyoto: April2008), at page 7). In addition, cartel agreements often do not work out as well as expected. [66] That said, in establishing a fine that is likely to serve as an effective deterrent, the fact that a proposed price fixing agreement“did not work out as well as the conspirators expected is … of little consequence” (McNamara, above, at page 523).

As with other formsof conspiracy, the “gist of the offence” of price fixing is the entering into the prohibited agreement itself (Papalia v. The Queen, (SCC), [1979] 2 S.C.R. 256, at page 276; R. v.

Cominco Ltd. (1980), (AB KB), 25 A.R. 479 (S.C. (T.D.)),at paragraph 20). [67] For the purposes of achieving effective deterrence, it is the expected gain from the agreed upon overcharge that is most relevant,together with the level of the multiple required to render negative, in approximate terms and on average, that gain. [68] Among other things, the Leniency Bulletin states that the Competition Bureau “will make its leniency recommendation to thePPSC only after an applicant has completed its proffer and provided all relevant information pertinent to leniency and sentencing”(paragraph 26).

It also states that plea agreements entered into with the PPSC “will require the leniency applicant to provide full, frank,timely and truthful disclosure of all non-privileged information, records or other materials in its possession, under its control or availableto it, wherever located, that in any manner relate to the anti-competitive conduct for which leniency is sought” (paragraph 28). The“Interpretation”

section of that document adds that it “should be read in conjunction with the Leniency Program’s Frequently AskedQuestions” (FAQs). In turn, at question No.17, the FAQs state that, at the proffer stage, the Bureau “will not accept a bare outline of the

conduct”, but rather will require applicants for leniency to “report [the details of the offence and their role] as completely and accuratelyas possible with candour and in a spirit of cooperation.” The FAQs then proceed to identify the general topics that may be covered in aproffer, “depend[ing] on the facts surrounding the specific offence.” Among other things, the list of topics identified in the FAQsincludes the “Impact of the Conduct”, including “the volume of commerce in Canada involved,” and “pricing and other effects”. [69] Where evidence regarding the impact of the conduct is disclosed to the Competition Bureau, the Court will expect to be providedwith some sense of that evidence, so that it can determine whether the fine jointly proposed by the Crown and the accused is sufficientlyhigh to be an effective specific and general deterrent.

Unfortunately, an evidentiary record such as that which was adduced in theseproceedings does not permit the Court to make these determinations. [70] I recognize that the disclosure of such evidence at the time of a guilty plea or in a sentencing hearing may well increase theexposure that a convicted party may face in any subsequent civil action that may be brought by victims of the impugned agreement.

Thisis a good reason why applicants for leniency should make every effort to provide restitution to, or otherwise settle with, such victimsprior to making their guilty plea. [71] In any event, it bears emphasizing that a failure to adduce evidence that will provide the Court with at least some sense of themagnitude of any agreed upon or contemplated overcharge and the overall economic impact of the illegal agreement may make it verydifficult for the Court to be satisfied that the proposed fine (

i) will achieve the objectives of general and specific deterrence, and (ii) willnot be contrary to the public interest and such as to bring the administration of justice into disrepute. Indeed, it is not immediatelyapparent how a failure to disclose such evidence to the Court is consistent with the public interest. [72] I also recognize that there are good reasons why, in determining a fine to be jointly proposed by the Crown and an applicant forleniency, it may make sense to start with a base level of 20 percent of the cartel participant’s affected volume of commerce in Canada. Asexplained at question No.19 of the FAQs, that 20% figure includes two components, namely, (

i) a proxy of 10 percent of the affectedvolume of commerce in Canada, to account for the overcharge resulting from the typical cartel agreement and for other types of harm,presumably including the deadweight loss mentioned earlier in these reasons, and (ii) an additional 10 percent, to ensure that the fine issufficiently large that it does not represent a mere licensing fee or cost of doing business.

Of course, as recognized at question No. 21 ofthe FAQs, where there is relevant and compelling evidence that demonstrates that a lower overcharge was contemplated by the illegalagreement and imposed pursuant to the agreement, it may be appropriate to set the base level of the fine at a level that is lower than 20percent. [73] However, where there is reliable evidence that the agreed upon overcharge or other economic harm contemplated by theimpugned agreement likely exceeded the 10% proxy for the typical cartel agreement, this will be an important aggravating factor thatshould be brought to the Court’s attention.

A failure to disclose this evidence to the Court may well place the Court in the position ofbeing asked to accept a jointly proposed fine that not only is unlikely to specifically deter similar conduct in the future, but also allowsthe convicted party to profit from its illegal activity. [74] A practice of consistently failing to disclose such information to the Court also would undermine the important objective ofachieving general deterrence.

This is because, once it became known that the 20% base level would rarely be altered, would-be cartelparticipants would have little disincentive to entering into agreements to raise prices by more than 10 percent. [75] In this regard, the Court notes the existence of studies that have estimated the average cartel overcharge to be “somewhere in the20 percent – 30 percent range, with higher overcharges for international cartels than for domestic cartels” (OECD, Hard Core Cartels:Third Report on the Implementation of the 1998 Council Recommendation, Paris, 2005, at page 25). [76] Particularly given the foregoing, it is incumbent upon parties to joint sentencing submissions to provide the Court with sufficientevidence to enable it to determine whether the jointly recommended fine (

i) will serve as an effective general and specific deterrent, and(ii) will not be contrary to the public interest and such as to bring the administration of justice into disrepute. [77] To the extent that substantial fines also serve to increase the incentive for participants to seek immunity or a reduced sentence bydisclosing the existence of a price-fixing agreement and by cooperating with the investigation and prosecution of that agreement, theyserve to further increase the deterrent effect of the fine, by increasing the probability of successful detection, prosecution and detection. [78] Achieving effective general and specific deterrence may be difficult through substantial fines alone.

Justice La Forest explainedwhy this may be the case in the following passage of his judgment in Thomson Newspapers Ltd. v. Canada (Director of Investigationand Research, Restrictive Trade Practices Commission), (SCC), [1990] 1 S.C.R. 425, at pages 514‒515: In the vast majority of cases, fines will not be sufficient to the task. Regardless of whether they are imposed on the corporation or itsofficers, they will usually be paid by the former.

Unless they were to be set at so high a level as to be capable of putting violators out ofbusiness (a result that would in most cases be politically and economically indefensible), such fines would simply be treated as part of thecost of doing business. When measured against the relatively low probability of detection, the possibility of suffering a loss by way of afine may seem inconsequential as compared to the likelihood of making or increasing profits through anti-competitive practices.

For these reasons, fines are unlikely to encourage the kind of compliance that is necessary if the objectives of combines legislation are tobe realized. This is the ultimate rationale for the imprisonment of those responsible for the operation of the company or unincorporatedbusiness which engages in anti-competitive conduct. Obviously, there is no way in which the cost of such a penalty can be passed on tothe employing company or business. It can only be paid by the officers of the company or business.

This introduces an element ofpersonal vulnerability into business decision-making, in so far at least as it relates to the type of conduct and practices proscribed by the[Competition Act]. The result is that the provisions of the Act are much more likely to be a part of the process by which the company orbusiness decides between alternative courses of conduct.

It goes without saying that it also increases the probability that conduct thatviolates the Act will not be engaged in. [79] The powerful deterring effect of a potential prison sentence for cartel offences is increasingly being recognized internationally(see, e.g., OECD 2003, above, at page 29; International Competition Network, above, at page 11). Among other things, this increased

recognition is reflected in the enactment of laws providing for the possibility of prison sentences for cartel offences in an increasingnumber of countries, including the United States, the United Kingdom, Ireland, Australia, Israel, Hungary, Brazil, Japan and Korea. [80] In the absence of a serious and very realistic threat of at least some imprisonment in a penal institution, directors, officers andemployees who may otherwise contemplate participating in an agreement proscribed by

section 45 of the Act, or who may have beendirected to implement such an agreement in Canada in contravention of

section 46 of the Act, are unlikely to be sufficiently deterred fromentering into or implementing such agreements by mere fines. In brief, achieving effective general and specific deterrence requires thatindividuals face a very real prospect of serving time in prison if they are convicted for having engaged in such conduct. As the OntarioCourt of Appeal has observed: “The reality of the threat of jail sentences for general deterrence of individuals and corporate executiveswho commit ‘white-collar’ crimes has become an effective and apparently necessary tool in the arsenal of law enforcement agencies” (R.v.

Benlolo, , 81 O.R. (3d) 440 (C.A.), at paragraph 32). Accordingly, “in appropriate cases, significant jail sentenceswill not only be warranted, but required in order to meet the objectives of general deterrence and denunciation for this type of crime thatsome may still mistakenly view as relatively harmless” (Benlolo, above, at paragraph 35). [81] When imprisonment is a serious and very realistic possibility it also provides a powerful incentive for those who havecontravened the Act to disclose the existence of illegal conduct and cooperate in the prosecution of co-offenders.

This further increasesthe risk associated with engaging in such conduct, and exercises an additional deterrent effect on would-be price fixers. [82] The Court recognizes that it may be in the public interest for the Crown to agree to refrain from seeking a term of imprisonmentfor a leniency applicant’s directors, officers or employees, in the limited circumstances described at paragraphs 21 and 22 of theLeniency Bulletin. In all other circumstances where a jointly recommended sentence for a contravention of

section 45 or 46 of the Actdoes not include a term of imprisonment for one or more directors, officers or employees of an accused corporation, the Court will expectthe parties’ sentencing submissions to explain why a fine alone would suffice to achieve general and specific deterrence, to appropriatelydenunciate the crime, and to reflect the other objectives and principles set forth in sections 718, 718.1, 718.2 and 718.21 of the CriminalCode.

For the reasons explained at paragraphs 107 and 108 below, this includes situations in which one or more individuals associatedwith an affiliated entity have been sentenced to prison in the U.S. or another jurisdiction in respect of separate offences committed in thatjurisdiction. [83] In addition to the foregoing, and as contemplated by paragraph 718.2(

b) of the Criminal Code, the Court will want to understandhow a sentence that is jointly recommended compares to sentences that have been imposed on similar offenders for similar offencescommitted under similar circumstances, including sentences imposed for theft and fraud of a magnitude similar to that which wascontemplated by the illegal agreement.

In addition, the Court will want to have at least some sense that the recommended fine disgorgesany financial gain that the director, officer or employee may have received as a result of the illegal agreement, for example by way ofcompensation linked to the financial performance of the company. [84] The Court will also want to be satisfied that a fine alone would be consistent with Parliament’s intent in recently amendingsection 45 to increase the maximum term of imprisonment from five years to fourteen years [see S.C. 2009, c. 2, s. 410].

More broadly,the Court will want to be satisfied that a fine alone would not be both contrary to the public interest and such as to bring theadministration of justice into disrepute. D. Reparations for Harm Done to Victims or to the Community [85] Paragraph 718(

e) of the Criminal Code lists providing reparations for harm done to victims or to the community as one of theobjectives of sentencing. [86] For the reasons explained at paragraph 55 of these reasons, the harm resulting from price fixing and other agreements proscribedby

section 45 and referred to in

section 46 of the Act includes the wealth transfer from victims to the perpetrators of the offence, as wellas the deadweight loss that such agreements bring about for the Canadian economy. As noted at paragraph 65 above, it is often verydifficult to accurately estimate both of these effects of such agreements.

Nevertheless, it remains incumbent upon the Court to ensure thata sentence imposed is sufficient, even if only approximately so, to appropriately reflect this sentencing objective. [87] In the Crown’s sentencing submissions, it was observed that there was no evidence that Maxzone Canada had paid anyrestitution in relation to the offence for which it was charged. [88] I recognize that there may be legitimate reasons why a party to a joint sentencing recommendation may wish to plead guilty andreceive its sentence before having dealt with the matter of restitution.

However, the Court cannot assume that full restitution, or indeedany restitution, ultimately will be paid by a party who has pleaded guilty and has been convicted for contravening

section 45 or section46 of the Act. Indeed, the Court must be alive to the possibility that a failure to have provided restitution to victims reflects an absence ofremorse and implies an intention to profit from wrongdoing (Clayton C. Ruby et al., Sentencing, 7th ed. (Markham, Ont.: LexisNexisCanada, 2008), at §19.53). [89] Where restitution has not been paid prior to the sentencing hearing, the Court will be in a much more difficult position thanwould otherwise be the case. Among other things, this may make it more difficult for the Court to ensure that a recommended sentencewill, on balance, achieve the purposes set forth in

section 718 of the Criminal Code. In addition, the Court will have little alternative butto recognize that the overcharge remains an advantage realized as a result of the offence, as contemplated by

section 718.21, even if theprecise extent of the overcharge cannot be accurately determined. E. Promoting a Sense of Responsibility in Offenders, and Acknowledgement of the Harm Done to Victims and to the Community [90] Another objective of sentencing, as set forth in paragraph 718(

f) of the Criminal Code, is promoting a sense of responsibility inoffenders, and acknowledgment of the harm done to victims and to the community. [91] This objective was not specifically addressed in the Crown’s sentencing submissions in the case at bar.

[ 92 ] In my view, this objective reinforces the objectives of denunciation, deterring the offender and other persons from committing similar offences, and providing reparations for harm done to victims and to the community. At a minimum, in the context of sections 45 and 46 of the Act , this objective contemplates that a sentence should (

i) ensure that a convicted party does not profit from the anti- competitive agreement in question, and (ii) include an additional substantial component to promote a sense of responsibility in the offender, and an acknowledgement of the harm done to the victims and to the community. As with the objectives of denunciation and deterrence, this objective may well require at least some term of imprisonment, particularly for parties who were not the first to begin cooperating under the Competition Bureau’s Leniency Program. F. Factors Set Forth in

section 718.21 of the Criminal Code [ 93 ] As noted at paragraph 28 of these reasons,

section 718.21 contains a list of 10 factors to be taken into consideration by a court in imposing a sentence on an organization. [ 94 ] The first of those factors is “any advantage realized by the organization as a result of the offence”, which has already been discussed above. Another of those factors is restitution, which has also been discussed above. [ 95 ] A third factor in the list is “the degree of planning involved in carrying out the offence and the duration and complexity of the offence”.

In its sentencing submissions, the Crown submitted that the offence involved a great degree of planning and covertness. In addition, it was noted that the parties to the Price-Fixing Agreement carried out a complex series of coordinated price changes involving thousands of products.

Moreover, the Crown stated that the co-conspirators’ pricing was based on an agreed upon tiered pricing formula designed to avoid detection by purchasers and thwart competition throughout the Relevant Period. [ 96 ] In my view, facts such as these should be treated as an aggravating factor in sentencing, warranting a significant upward adjustment to the sentence that would otherwise be imposed.

In cases where the evidence demonstrates that an offender was a “ring leader”, coerced others to participate in the offence or engaged in other conduct that reflects serious moral turpitude, the upward adjustment should be substantial. The same is true where the victim of the offence was particularly vulnerable. [ 97 ] Two other potentially aggravating factors in the list were not relevant in this particular case. These are (

i) whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay a fine or make restitution; and (ii) whether the organization, or any of its representatives who were involved in the commission of the offence, has previously been convicted of a similar offence or sanctioned by a regulatory body for similar conduct. In my view, in cases where these factors are present, they should warrant a significant upward adjustment to the sentence that would otherwise be imposed. [ 98 ] The remaining five factors in the list set forth in

section 718.21 are potential mitigating factors. In case at bar, the only one of those factors that was relevant was “the cost to public authorities of the investigation and prosecution of the offence”. In its submissions, the Crown submitted that Maxzone Canada’s guilty plea had reduced the Competition Bureau’s investigation costs and the Crown’s prosecution costs, particularly given Maxzone Canada’s agreement to cooperate with any Bureau investigation of other parties to the offence. In my view, this factor merits significant weight.

However, given that the Bureau’s Leniency Program is entirely premised on cooperation, it can be assumed that the cooperation described in the Leniency Bulletin has already been built into the “starting point” for determining the appropriate fine. Accordingly, absent an extraordinarily high degree of cooperation, no additional downward adjustment to that starting point should be made in recognition of a degree of cooperation that would typically be required under the Leniency Program.

The same is true with respect to the other conditions for eligibility under the Leniency Program, such as termination of participation in the cartel agreement and agreeing to plead guilty. These last two observations are based on the assumption that a jointly recommended sentence has been based on the approach set forth in the Leniency Bulletin, and therefore implicitly incorporated into the “starting point” for the calculation of any jointly recommended fine.

Where that is not the case, it will be incumbent upon the parties to draw that fact to the Court’s attention. [ 99 ] The remaining four factors set forth in

section 718.21 appear in paragraphs ( d ), ( f ), (

h) and (

j) of that provision. They are reproduced together with the rest of that

section in Appendix A hereto. [ 100 ] It bears emphasizing that, where present, aggravating and mitigating factors should be explicitly addressed in any sentencing submissions that may be made on behalf of the Crown or the offender, in a manner that enables the Court to understand how those factors influenced the recommended sentence. G. Additional Aggravating and Mitigating Factors [ 101 ] In its written submissions on sentencing, the Crown listed a number of aggravating and mitigating factors that have been considered in the jurisprudence. For the most part, those factors are reflected in the list set forth in

section 718.21 of the Criminal Code , discussed immediately above. (See, for example, Mitsubishi , above, at paragraphs 9–18; UCAR , above; Canada Pipe , above; Davis Wire , above; Armco , above, at page 577; Large Lamps , above, at pages 232‒233; Ocean Construction , above; McNamara , above, at pages 525–527; and St. Lawrence Corp. (Ont. C.A.), above, at pages 526‒527.) [ 102 ] One factor addressed in the Crown’s submissions that is not addressed in

section 718.21 is the economic harm caused by the offence. The Crown submitted that this factor was “deemed to be significant”. However, it is not clear how, if at all, this factor influenced the determination of the jointly recommended sentence, other than by virtue of the fact that the fine seems to have been reached

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