Law Times

Law times • OctOber 20, 2008 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On BUSINESS/COMPETITION LAW Compliance perceived as onerous, costly L New bulletin needs teeth BY DARYL-LYNN CARLSON For Law Times lowing its draft corporate compliance bulletin that was released last spring for public comment. awyers are mixed in their recep- tion to anticipated changes by the Competition Bureau fol- new Competition Bureau publications on hold until after the vote, Tony Bal- danza at Fasken Martineau DuMoulin LLP and chairman of its antitrust/com- petition group, says he understands from the Competition Bureau that the final bulletin will be released soon. Primarily the bulletin is intended While the federal election put all to provide businesses with guidance to prevent or minimize their risk of con- travening the Competition Act and it includes tools to encourage businesses to develop their own in-house programs. "It is remarkable how many corpora- tions and trade associations do not have competition compliance programs," says Baldanza, who was part of a Ca- nadian Bar Association task force that consulted with the Bureau during its drafting of the bulletin. "I imagine that part of the problem is that business con- siders a program to involve a substantial investment of time, energy and money and that the return on investment isn't visible until there's a problem. "However, there are a wide range of pro- grams and most businesses can manage with a scaled-down program that covers the basics and does not involve a lot of manage- ment time or lawyer expense," he says. Baldanza says the return on invest- ment "can be very substantial. Not only do you avoid dumb violations of the law, but the program can also help a compa- ny recognize anti-competitive conduct by its competitors, customers or suppli- ers, and can help a company compete to the limits of the law." He suggests that, when it is issued, the James Musgrove says the auditing requirement is 'unrealistic . . . hugely disruptive, expensive and it's politically very difficult in organizations.' shy away from doing anything." Another issue is that the bulletin rec- ommends discipline or even dismissal for employees found to be culpable of a breach, which may undermine pol- icies that provide immunity for those employees who come forward early in an investigation. "The bureau and other antitrust agen- PAGE 9 cies around the world have programs where people can come and report their bad behavior and get immunity or a less- er consequence if they're early in," says Musgrove. "So you really don't want to dismiss culpable employees because they're the people who know the story. You need their co-operation to under- stand what happened and have them, if necessary, go to trial and testify. So I think the policy should be just tweaked to note the importance of that aspect." He notes also that the bureau is compliance program may result in lighter sentences and softer civil remedies should there be an inadvertent transgression. "If you're a public company and in a high risk industry dealing in commodity products where there are high entry bar- riers and few competitors, you would be quite foolish not to have a compliance program," he says. He adds however that one area in the draft bulletin which probably won't be ad- dressed by business, is the suggestion that companies include regular audits within their compliance programs. "In all the years I've been doing this, new bulletin, which updates the bureau's bulletin from 1997, should help simpli- fy the process of establishing an in-house program for some companies. "I expect that in some ways the new bul- letin will make it easier for a corporation to establish a compliance program because there is a framework document with prec- edents attached. On the other hand, the consultation draft was arguably too long and technical, hopefully the final bulletin will simplify things somewhat, and focus on core principles," he says. Baldanza says however that the new bulletin has emphasized that instituting a I've conducted and overseen only a handful of audits outside actual Bureau investigations or litigation, and most of those have been only selective reviews of a single division or department," he says. James Musgrove, chair of the compe- tition and marketing law group at Lang Michener LLP, commends the Bureau for its transparent program of guidance insight into its enforcement approach, and for solic- iting comments on that guidance. While he supports the goals of the bulletin, he offers some suggestions on areas of improvement. Musgrove agrees that the auditing require- ment is "unrealistic." "It's hugely disruptive, expensive and it's politically very difficult in organizations," says Musgrove. "Imagine I'm sitting at my desk and someone walks in and says 'Excuse me I'm looking at your files.' If you've got some- thing that's come to light that you need to look into, then it becomes realistic," he says, adding jokingly, "I'd love to get a retainer to do an audit out of the blue, but I'm not holding my breath." Musgrove says that generally the pro- visions of the bulletin are more tailored to large market players rather than small- er and medium sized organizations that probably should consider implementing a program. "It just looks intimidating. The bulletin does not say one size fits all, but if they went further and said, in some detail, that for smaller businesses there may be less formal ways to achieve this, it would be more practical," he says. As well, he says a company that pur- policy review panel consisting of five legal and business representatives in Canada released a report, Compete to Win, that proposes what it describes as a "sweep- ing national competitiveness agenda based on the proposition that Canada's standard of living and economic performance will be raised through more competition in Canada and from abroad." Primarily the report looks at ways to encourage international investments by Canadians and position Canada to be a world leader for talent, capital, and innovation. In a paper authored by John Bodrug, proceeding with similar guidelines for trade associations, which are expected to be released in draft form sometime later this year. In a separate initiative, a competition ports to have a compliance program in place that is deemed to be inadequate or a sham, there could be penalties attached in the event of a breach. "The policy says if you've got a policy you're hiding behind that's a sham, that might be an aggravating factor in a penalty you may receive if you do something wrong — and that scares people," he says. "I understand in theory why they want to say that, but it's a highly unlikely scenario and in fact the result — which I have seen — is that people then say 'We're better off not doing it,' and that's counterproductive. So including that language in the policy for such an un- likely and rare situation and makes people Mark Katz, and Christopher Margi- son at Davies Ward Phillips & Vineberg LLP, the lawyers conclude "the panel's recommendations with respect to the In- vestment Canada Act would significantly reduce the scope of mergers and acquisi- tions subject to review under the ICA and greatly facilitate the review process where a review is required." They note that Canada has more re- strictions on foreign investment than most member countries of the Organi- zation for Economic Co-operation and Development while recent foreign take- overs of Canadian business icons such as Hudson's Bay Company has fueled re- newed debate on the topic. The eight-page analysis by the three lawyers examines related legislation and even specific industry sectors that stand to be affected, and is available on the firm's web site. LT Advocate_LT_Oct20_08.indd 1 www.lawtimesnews.com 10/14/08 8:48:42 AM

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