In an expansion of section 36 of the Competition Act, an eight member majority of the Supreme Court has ruled that "umbrella purchasers" can be class members in price-fixing class actions. Umbrella purchasers are consumers who purchased products neither manufactured nor supplied by any conspirator in the price fixing, but who were nonetheless subjected to higher prices due to the price "umbrella" created by that price-fixing. This decision could have a significant impact on the potential damages payable by price-fixing conspirators.
Background
Pioneer Corp v. Godfrey dealt with a
class action brought on behalf of all persons in British Columbia
who purchased "optical disc drives" or products
containing such drives (such as video game consoles). The
defendants comprise a relatively large group, four of whom are
alleged to account for approximately 94% of the optical disc drives
sold in British Columbia during the relevant time. At the heart of
the claim is an allegation that the defendants conspired to fix the
prices they charged for the disc drives. The plaintiff claims
damages under the Competition Act (the
"Act") as well as for common law
conspiracy.
The claim was certified as a class action by the British Columbia
Supreme Court, and that order was upheld by the British Columbia
Court of Appeal. The claim was brought not only on behalf of
persons who purchased products manufactured by the defendants, but
also on behalf of persons who purchased disc drives (or products
containing disc drives) that were manufactured by companies other
than the defendants (referred to as "umbrella
purchasers"). The plaintiff seeks damages in respect of those
allegedly excessive prices as well as in respect of the prices
charged on goods manufactured by the defendants. The Supreme Court
had confirmed inPro-Sys Consultants v. Microsoft
Corporation ("Pro-Sys") that
"indirect purchasers" of products manufactured by the
defendants could claim under section 36 for allegedly inflated
prices, but had never before ruled on whether such prices paid by
umbrella purchasers could also be the subject of a claim under the
Act.
Umbrella Purchasers
The Supreme Court determined that umbrella purchasers could
indeed advance claims under section 36 of the Act. The
theory behind holding price-fixers liable to these purchasers is
that a competitor, outside the cartel, might raise the price for
their products in order to meet the market – as the Court
described it, "[I]n short, a rising tide lifts all
boats." The Court found that the words of the Act,
which provide a cause of action to any person who has
"suffered loss or damage as a result of" the
defendant's illegal conduct, did not narrow the class of
claimants to those who purchased products directly from the
defendants or who were indirectly supplied by the defendants.
Moreover, the Court focused on the purpose of the Act
– to provide consumers with "competitive prices and
product choices" – as supporting claims by umbrella
purchasers. The Court also focused on the ability of these claims
to promote deterrence, an aspect of private enforcement under
Canadian law that has lagged the law in the US, where treble
damages are recoverable by plaintiffs in civil suits to deter
criminal conduct.
Finally, the Court determined that barring a class of purchasers
who were intended by the defendants to pay higher prices as a
result of their price-fixing is inconsistent with the compensatory
goal of the Act. This same focus on the umbrella effects
as the "intended consequence" of the defendants'
anti-competitive behaviour influenced the Court's ruling that
permitting umbrella claims would not lead to "indeterminate
liability".
It is premature to predict the impact of this ruling on the case
before the Court or in any other civil action for price-fixing, and
the Court acknowledged that "this is not to say that umbrella
purchasers' actions will not be complex or otherwise difficult
to pursue" from the perspective of leading evidence that shows
a causal link between loss suffered and the defendant's
conduct.
Additional Findings
In addition to its ruling extending section 36 claims to
umbrella purchasers, the Court's decision also touched upon two
important matters in class action law. First, the Court held that
aggregate damage provisions in class action regimes are purely
remedial and cannot be used to establish liability. Regardless of
whether aggregate damages are certified as a common issue, the
trial judge must be satisfied that any individuals who participate
in a damage award actually suffered a loss. Second, the Court
reiterated its decision in Pro-Sys, finding that for
loss-related questions to be certified as common issues, plaintiffs
need only demonstrate an expert methodology sufficiently credible
or plausible to show that the loss reached the requisite purchaser
level. It is not necessary that the methodology be able to show
that each and every class member at that level suffered damage or
identify those who did or did not.
To discuss the Court's decision or competition or class action
matters more generally, please contact the authors or any member of
our
Class Action or
Competition Law Groups.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
