Gas price fixers convicted after trial

A Quebec Superior Court judge recently convicted three individuals of conspiring to fix gas prices in two Quebec cities, Sherbrooke and Magog (R. v. Gosselin, 2013 QCCS 717).

To date 33 individuals and seven companies have been convicted fixing gas prices in Quebec and eastern Ontario. Over $3 million in fines have been imposed, and six individuals have been sentenced to a total of 54 months imprisonment to be served in the community.

Two of the three accused, Michel Lagrandeur and Linda Proulx, own gas stations in Sherbrooke and Magog. The third, Yves Gosselin, is a supervisor with Irving.  All three admitted that others conspired to fix gas prices, but claimed they were not involved in the conspiracy.

What the Crown had to prove

Section 45 of the Competition Act as it stood at the time of the Quebec retail gasoline conspiracy required the Crown to prove:

1. A conspiracy, agreement, arrangement, or combination
2. To restrain or limit competition unduly

The provision expressly permitted the court to infer the existence of a conspiracy from circumstantial evidence, without evidence of direct communication between the parties, but nevertheless required that the conspiracy be proven beyond a reasonable doubt.

The provision also required proof of somewhat complicated mens rea (intention) elements:

1. Subjective mens rea: the accused must have intended to enter into the conspiracy.
2. Objective mens rea: the Crown must show that on an objective view of the evidence adduced the accused intended to lessen competition unduly. This is typically satisfied by showing that a reasonable business person would know that the effect of the agreement would be to lessen competition unduly.

Dial P for price fixing

Couche-Tard, a chain of convenience stores and gas stations, maintained a price centre that was, Justice François Toth found, at the centre of a conspiracy to fix prices for gasoline in Sherbrooke and Magog in 2005-2006. Competitors would call Couche-Tard to learn of planned price increases. The information was relayed through telephone trees. Wiretaps revealed that the conspirators knew they were breaking the law.

The conspirators maintained discipline, verified compliance with price increases, and took steps to bring those who were slow to follow prices into line. “All of these measures had as their goal to make price increases coordinated, uniform, and rapid”, the judge found. (¶152)

The conspiracy achieved its aims, reducing price volatility and raising prices in Sherbrooke and Magog as compared with reference markets.

The Crown relied extensively on wiretap evidence to prove that Messrs Gosselin and Lagrandeur, and Ms Proulx, were parties to the conspiracy.

For example, Pierre Bourassa, a Les Prétroles Globales sales agent, phoned the Couche-Tard price centre at 7:09 on February 22, 2006, and learned of a price increase to 96.4¢ planned for closing time. He phoned Magog gas station owner Micheline Cabana twelve minutes later to tell her about the price increase. Thirteen minutes later, Ms. Cabana telephoned Ms. Proulx with the news. She responded “Ben ça marche, OK? OK”.

Ms. Proulx’s cash register receipts, which were seized in the search, reveal that she raised her price to 96.4¢ early the next morning.

The prosecution relied on a number of similar series of telephone call chains followed by price increases.

Mr. Bourassa pleaded guilty to price fixing charges in 2008 and was sentenced to 12 months imprisonment to be served in the community. He testified for the Crown. Ms. Cabana pleaded guilty in 2011 and was fined $20,000.

Mere transmission of information defence rejected

Ms. Proulx’s defence lawyers pointed to complaints by the conspirators about Ms. Proulx’s failure always to follow price increases. But these complaints were only from 2005; there were none in 2006. The prosecution suggested that while Ms. Proulx had been recalcitrant in 2005, she played ball in 2006 after being pressured by the cartel members.

Ms. Proulx testified in her own defence. She said that her gas station mainly serves drivers on the freeway and tourists, and that she did not compete with other Magog gas stations. She claimed she set prices based on her own observations, which she made every morning and evening on the way to and from work and when running errands. Ms. Proulx claimed to have forgotten the telephone conversations intercepted by the Bureau.

Ms. Proulx’s gas station does compete with other Magog gas stations, Toth J. found. Ms. Proulx’s argument confused markets and customers, he held.  Even though Ms. Proulx’s customers may be different from customers in downtown Magog, she was in the same (geographic) market. The judge pointed to Ms. Proulx’s own evidence that she relied on price surveys of gas stations in downtown Magog.

Toth J. also rejected Ms. Proulx’s explanation that she set prices on her own. The three telephone conversations were clear: Ms. Cabana told Ms. Proulx about a price increase, and Ms. Proulx assented in an unequivocal way, without hesitation or objection: “OK? OK; Ben ça marche, OK. Merci”. This was not a simple transmission of information, as the defence argued. There was an agreement between Ms. Cabana and Ms. Proulx for a concerted rise in prices in Magog on at least four occasions, Toth J. concluded.

Turning to the subjective mens rea (intention) requirement, Toth J. held that Ms. Proulx knew the nature of the conspiracy, its scope, and its implementation through a concerted price rise in Magog. She intended to participate, did participate, and did implement the conspiracy.

The objective mens rea element was also satisfied, Toth J. ruled, since it is logical to presume that a businesswoman who knows her business as Ms. Proulx did would know that the price fixing agreement would lessen competition unduly.

The evidence against Lagrandeur and Gosselin was similar.

In testifying, Lagrandeur claimed that his gasoline sales were only marginally profitable. Toth J. did not believe this, as Lagrandeur had three employees dedicated to gasoline sales, and gross revenues of $10,000 a month. Telephone intercepts clearly indicated an agreement to fix prices, that Lagrandeur “clearly manifested his desire to participate in price fixing with his competitor”, and that on the objective evidence, he intended to lessen competition unduly.

Gosselin also testified. He offered various explanations for his telephone calls to Couche-Tard’s price centre, including for instancethat he was speaking only with “Couche-Tard Irving” (Couche-Tard operated stations under a number of banners, including Irving), and was only verifying prices. Toth J. dismissed these as obvious fabrications.

As with Ms. Proulx, the telephone intercepts proved that Mr. Lagrandeur and Mr. Gosselin were participants in the conspiracy, and intentionally so. They both also had the requisite objective intention to lessen competition unduly.

“Ok” means agreement

This case is a textbook example of how participation in a conspiracy can be proven from telephone calls that might, taken on their own, be equivocal.

Ms. Proulx said “Ok” after learning of price increases. When is “Ok” an acknowledgment of information received, and when does it amount to an agreement to participate in a price fixing conspiracy? The answer appears to be: when the rest of the circumstances, particularly steps taken to implement price increases, are consistent with participation in a conspiracy.

This should serve as a warning to Canadian business owners and managers. Unlike the defendants in Gosselin, most Canadian businesses avoid blatant price fixing. But what about information exchanges? Strictly speaking, it is not unlawful to exchange even competitively sensitive information with a competitor in Canada, but it is risky: information exchanges, particularly advance notice of a price increase, can be evidence of participation in a conspiracy, particularly when allied with behaviour consistent with an agreement to fix prices.

(It should be noted that some jurisdictions, such as the European Union, do prohibit the exchange of competitively sensitive information between competitors.)

Couche-Tard

In August 2012, Tardif J. stayed price charges against Couche-Tard after the Director of Public Prosecutions resiled from a plea agreement (see article). This decision is under appeal.

The decision in Gosselin perhaps sheds some light on why the DPP refused to approve a plea agreement that would have immunized Couche-Tard from prosecution: the judge in Gosselin found that Couche-Tard’s price centre was at the centre of the gas price fixing conspiracy.

Sentence and appeal

The accused have not yet been sentenced, but they have already launched an appeal of their conviction.

The Crown has asked for fines of $20,000 from Mr. Gosselin and $15,000 from Ms. Proulx, and the Crown and defence have made a joint submission of a fine of $15,000 from Mr. Lagrandeur.