The Usual Suspects? The Scope of Corporate Criminal Liability Under Canadian Antitrust Law

This article appears in the October 2013 edition of the American Bar Association, Section of Antitrust Law's International Antitrust Bulletin.

On August 9, 2013, Les Pétroles Global Inc ("Global"), a Canadian retail gasoline operator, was convicted by the Quebec Superior Court of conspiring to fix gasoline prices in two markets in the province of Quebec based on the criminal conduct of its managing director, who also pleaded guilty to the same offence. The decision represents the first contested application of provisions in the Canadian Criminal Code, enacted almost a decade ago, defining the criminal liability of corporations and other organizations for conduct engaged in by their employees (and others). The authors suggest that while the decision is likely to embolden the Competition Bureau and Department of Justice in their enforcement of Canadian criminal antitrust law, it fails to address important questions concerning the scope and limits of corporate criminal antitrust liability in Canada.

Background

Historically, corporate criminal liability in Canada was based on the common law identification doctrine. Under that doctrine, a corporation faces criminal liability only for the criminal acts of a "directing mind" - being any person exercising "the governing executive authority of the corporation" - where those acts were committed within the field of operation assigned to him or her and had the purpose or effect, whether in whole or in part, of benefitting the company.¹ The concept of "governing executive authority" was interpreted in the relevant jurisprudence as requiring "an express or implied delegation of executive authority to design and supervise the implementation of corporate policy [in a relevant sphere of corporate activity] rather than simply to carry out such policy".²

In 2004, section 22.2 of the Criminal Code came into force.³ For fault-based offences (including criminal conspiracy under section 45 of the Canadian Competition Act), that provision now prescribes three circumstances in which corporations and other "organizations" may be held criminally responsible as a party to such an offence. For a corporation to attract criminal liability, section 22.2 requires that a "senior officer" must have had the intent at least in part to benefit the corporation, and that: (i) the senior officer, acting within the scope of his or her authority, was himself a party to the offence (section 22.2(1)(a)); (ii) the senior officer had the required mens rea for the offence, was acting within the scope of his authority, and directed the work of other "representatives" (including employees, agents or contractors) of the corporation to perform the actus reus of the offence (section 22.2(1)(b)); or (iii) knowing that a representative of the corporation is or is about to be a party to the offence, the senior officer fails to take "all reasonable measures to stop them from being a party to the offence" (section 22.2(1)(c)). Section 2 of the Criminal Code defines "senior officer" broadly and is not limited to individuals appointed by the board of directors. Specifically, a senior officer is defined as a director, chief executive officer, chief financial officer, partner, employee, member, agent or contractor "who plays an important role in the establishment of a corporation's policies or is responsible for managing an important aspect of the corporation's activities".

R v Les Pétroles Global Inc.⁴

A. The Conspiracy

Global operates retail gasoline stations in Eastern Canada (i.e., Ontario, Quebec and the Maritime provinces). In 2008, Global and three of its employees - the company's managing director for Quebec and the Maritime provinces, Christian Payette, and two of its territorial managers, Pierre Bourassa and Daniel Leblond - were charged under the criminal conspiracy provision in section 45(1)(c) of the Competition Act with conspiring to prevent or lessen unduly competition in the sale of retail gasoline in two Quebec markets. All three employees pled guilty as charged. At Global's trial, the only issue before the Court was whether the corporation should be held criminally liable pursuant to section 22.2 of the Criminal Code for the conduct of its employees, Payette, Bourassa and Leblond.

B. The Decision

In its reasons for decision, the Court addressed (and ultimately rejected) Global's contention that rather than expanding corporate criminal liability, section 22.2 was intended merely to clarify the application of the common law identification doctrine, and was not otherwise intended to alter, much less enlarge, the traditional scope of corporate criminal liability under Canadian law. To the contrary, in the Court's view, in tying corporate liability to the conduct of "senior officers", including employees "responsible for managing an important aspect of the corporation's activities", the enactment of section 22.2 made a significant change to the common law. Specifically, the Court concluded that the provision discards the judge-made dichotomy between those who "design and supervise the implementation of corporate policy" and those who "simply carry out such policy",⁵ thereby extending criminal corporate liability beyond the boardroom and down to those on the "plant floor", as the Court put it, who operationalize and implement corporate policies set by others.⁶

On the question of whether the essential elements of section 22.2 had been proven against Global, the Court considered only the conduct of the company's managing director, Payette, and whether he was a "senior officer". The issue of whether the two lower-level employees convicted of conspiracy - the territorial managers Bourassa and Leblond - were also "senior officers" for the purpose of triggering liability for Global under section 22.2 was not addressed.

Based on a careful review of the evidence regarding Payette's roles and responsibilities at Global, the Court concluded that he was "responsible for managing an important aspect of the corporation's activities" and was, indeed, a "senior officer".⁷ Among other things, the Court found that as Global's only managing director, Payette was the third most senior employee, after the company's President and Vice-President, and that he was solely responsible for overseeing the day-to-day operations of, and operationalizing and implementing corporate policy at, two thirds of Global's retail gas outlets, including supervising Bourassa, Leblond and the four other territorial managers who set gas prices for Global's stations in Quebec and the Maritime provinces.⁸ Payette also participated in the design and supervision of the implementation of Global's corporate policy with respect to the formulation and approval of the business plans for each of the company's gas stations in Quebec and the Maritimes.

The Court also concluded that Payette had participated in the conspiracy, that he was aware that his territorial managers were engaging in price fixing but took no steps to stop them and that the conspiracy benefitted Global, thereby triggering liability on the company's part under section 45(1)(c) of the Competition Act by virtue of sections 22.2(1)(a) and (c) of the Criminal Code.⁹

Implications and Unanswered Questions

The importance and implications of Les Pétroles Global in defining (or expanding) the scope of corporate criminal antitrust liability in Canada should not be overstated. Pointing to the parallels between the facts of the case before it and those of a nearly quarter century old decision in which Shell Canada was convicted of price maintenance in respect of the retail gas prices by reason of its employees' conduct,¹⁰ the Court itself suggests that Payette could properly have been found to be a "directing mind" of Global under the common law identification doctrine and that it is unlikely that the company would have fared any better prior to the enactment of section 22.2.¹¹ The scope and limits of section 22.2 were therefore not tested and important questions remain unanswered. For example, the decision does not address (or shed light on) the interesting and more difficult questions of whether the territorial managers, Bourassa and Leblond, were "senior officers", such that Global could properly have been held criminally liable for their actions,¹² or, more generally, whether, and, if so, in what circumstances, corporate criminal antitrust liability in Canada extends, by virtue of the enactment of section 22.2, to the actions of middle managers and other lower-level employees.

Further, given that Payette was clearly a party to the offence, acting within the scope of his authority (thereby triggering Global's liability pursuant to section 22.2(1)(a)), took no steps to stop Bourassa and Leblond from price fixing and, in fact, both permitted and facilitated their criminal conduct, several questions concerning the scope of liability under section 22.2(1)(c) will have to be addressed in future cases. Those questions include the meaning of the phrase "all reasonable measures" and, in particular, the nature and the extent of the burden that that provision may (as a matter of statutory construction and constitutional law) impose on corporations, through their "senior officers", to stop or prevent fault-based criminal conduct in order to avoid liability in circumstances where such officers are not themselves parties to the offence.

As a practical matter, the decision in Les Pétroles Global is (at least) a good reminder of the importance of implementing effective antitrust compliance measures and programs, including internal audit systems and regular courses and training. As the Court noted in Les Pétroles Global, the company had no directive or policy in place relating to compliance with the Competition Act.