Canada: Competition Class Action Update

In our December issue of the Business Law Quarterly, we reported on developments in competition class actions in Canada.

Competition class actions — especially those involving allegations of price-fixing — are on the upswing in Canada. Two recent decisions from British Columbia and Ontario, in which the courts certified classes of combined direct and indirect purchasers, may encourage a continuation of this trend.

Until recently, plaintiffs (i.e., classes of purchasers of the allegedly price-fixed products) had limited success in contested certification applications; this was largely because price-fixing allegations raise difficult issues related to the pass-through of overcharges through the distribution chain and demonstrating loss on a class-wide basis. Two recent decisions go against that trend.

Pro-Sys Consultants Ltd. v.Infineon Technologies AG

As reported in Volume 3, Issue 3 of the Litigation Co-Counsel, in November 2009, the British Columbia Court of Appeal certified a class of direct and indirect purchasers of DRAM (Dynamic Random Access Memory) products, which are memory chips used in personal computers and other high tech products. The British Columbia Supreme Court had previously refused to certify the class on the basis that the plaintiffs had failed to establish that liability to class members was a common issue. Without a methodology to identify harm on a class-wide basis, the case would dissolve "into a series of individual inquiries that would overwhelm the common aspects of the case." The Court of Appeal overturned the lower court's decision, finding that only a minimum evidentiary basis is necessary for each of the certification requirements, and that plaintiffs need only show a "credible or plausible methodology" for establishing harm on a class-wide basis.

In June 2010, the Supreme Court of Canada dismissed the DRAM manufacturers' application for leave to appeal, leaving issues surrounding the methodology of determining class-wide harm for trial. In dismissing the application for leave to appeal, the Supreme Court did not take the opportunity to clarify the law on certification in class actions.

Irving Paper Ltd. v. Atofina Chemicals Inc.

In June 2010, the Ontario Superior Court of Justice dismissed a motion for leave to appeal from a decision to certify a class of direct and indirect purchasers of hydrogen peroxide in Canada between January 1, 1994 and January 5, 2005. As reported in the December issue of the Business Law Quarterly, Justice Rady of the Superior Court of Ontario had granted certification in September 2009, on the bases that (i) it is not necessary for plaintiffs to demonstrate that loss is a common issue for all members of the class, and (ii) with respect to pass-through, at the certification stage, the court only needs to be satisfied that a "methodology may exist for the calculation of damages." Dismissing the motion for leave to appeal, Justice Leitch disagreed with the certification judge in finding that loss must be provable on a class-wide basis, but still concluded that there was no reason to doubt the correctness of the certification order. With respect to proving loss, Justice Leitch stated that the certification court must decide whether the evidence demonstrates the "existence of a viable methodology for proving loss on a class-wide basis," but that the certification judge is not required to engage in a determination of the merits of the evidence — exacting scrutiny of the evidence can be left to trial.

McCarthy Tétrault Notes

The latest decisions in Pro-Sys Consultants Ltd. v. Infineon Technologies AG and Irving Paper Ltd. v. Atofina Chemicals Inc. may encourage more price-fixing cases. The trend to lowering the threshold for certification is also apparent in a number of other recent class action certification decisions involving alleged breaches of the Competition Act (examples include Pro-Sys v. Microsoft, a March 2010 decision of the Supreme Court of British Columbia, Quizno's Canada Restaurant Corporation v. 2038724 Ontario Ltd., a June 2010 decision of the Court of Appeal for Ontario, and Sun-Rype Products Ltd. v. Archer Daniels Midland Company, a June 2010 decision of the Supreme Court of British Columbia).

These decisions do not resolve the difficult pass-through issues that exist in these cases; they simply defer them to trial.

The potential increase in price-fixing cases may also be amplified by recent (March 12, 2010) amendments to the conspiracy provisions of the Competition Act that make hard-core cartel activity (i.e., price-fixing, market allocation or supply restriction) a per se offence (for more information, see the December issue of Business Law Quarterly). Although plaintiffs will still have to prove damages and address pass-through issues, they no longer have to demonstrate that an alleged conspiracy was likely to have anti-competitive effects. This may make it easier for class action plaintiffs to prove liability, and may spur more class actions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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