Canada: Court Of Appeal For British Columbia Bars Indirect Purchaser Suits

On April 15, 2011, the Court of Appeal for British Columbia released judgments in two competition class actions which concluded for the first time in Canada that indirect purchasers of allegedly price-fixed products "have no cause of action recognized in law." Pro-Sys Consultants Ltd. v. Microsoft (Microsoft) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company (Sun-Rype) were appeals heard one after the other by the same panel of three judges. Both cases were decided by a two to one majority and overturned chambers judgments certifying class actions (see Microsoft and Sun-Rype respectively) .

The majority judgments found that the issue of whether indirect purchasers could sue to recover a price-fixing overcharge passed on to them by the defendants' customers (or other intermediaries in the product distribution chain) was a "pure question of law" capable of being resolved at the pleadings or class certification stage of the case, and that it was "plain and obvious" that indirect purchasers had no such claims.

The judgments in Microsoft and Sun-Rype depart from a clear recent trend in favour of certifying competition class actions in Canada, exemplified by the B.C. appeal court's late-2009 decision in Pro-Sys Consultants Ltd. v. Infineon Technologies AG , in which large and diverse classes of direct and indirect purchasers have been certified and courts have generally held that questions of the legal sufficiency of claims should be left for the "laboratory of the trial court" and decided on a full factual record rather than on the certification motion.

The judgments significantly alter the competition class action landscape in British Columbia, and potentially throughout Canada.

The Microsoft and Sun-Rype Cases

Microsoft was brought on behalf of a proposed class of all B.C. residents who on or after January 1, 1994 purchased, indirectly, certain Microsoft applications software or operating systems software as part of their computers. The plaintiffs alleged that Microsoft conspired with original equipment manufacturers (OEMs) (among others) to raise the price of the Microsoft operating systems and applications software installed by the OEMs, and that such overcharges were passed on to the plaintiffs as purchasers of the computers. The plaintiffs sought to recover damages for breach of the Competition Act and common law tort, or in the alternative sought disgorgement/restitution of Microsoft's unlawful gains on behalf of the proposed class. The chambers judge granted the plaintiffs' motion for class certification in March 2010.

Sun-Rype was brought on behalf of a proposed class of all B.C. residents who purchased high fructose corn syrup (HFCS) or products which contained HFCS from January 1, 1988 to June 30, 1995. The proposed class consisted of direct purchasers such as Sun-Rype, which purchased HFCS from defendants for use in soft drinks it manufactured, and of indirect purchasers who bought various food and beverage products containing HFCS as a sweetener. The plaintiffs alleged that the defendant manufacturers had conspired to fix the prices of HFCS during the proposed class period and that direct and indirect purchasers had paid an unlawful overcharge as a result of the alleged conspiracy. The chambers judge granted the plaintiffs' motion for class certification in June 2010.

The defendants' appeals from the certification orders in Microsoft and Sun-Rype were heard consecutively by the Court of Appeal for British Columbia in the fall of 2010.

The Majority Judgments

Writing the majority judgments in Microsoft and Sun-Rype, Lowry J.A. found that there was no basis for the certification orders insofar as they related to indirect purchasers of the allegedly price-fixed products, because the indirect purchasers had no cause of action as a matter of law.

The majority began its analysis with the decision of the Supreme Court of Canada in Kingstreet Investment Ltd. v. New Brunswick (Finance). In Kingstreet, a nightclub sought the return of user taxes on alcohol purchases it had paid to the province of New Brunswick, on the grounds that the taxes were constitutionally invalid. The government defended the claim in part on the basis that the nightclub had suffered no loss from the tax, because it had passed on the charges to its own customers. The Supreme Court in Kingstreet rejected "the passing on defence in its entirety", finding that it was inconsistent with the premise of restitution law, economically misconceived, and that it created serious difficulties of proof of damages.

Turning to the allegations of unlawful price-fixing in Microsoft and Sun-Rype, Lowry J.A. found that Kingstreet made it "clear beyond question" that "[i]n responding to a claim brought by a [direct purchaser] alone, it would be no answer for the defendants to say the [direct purchasers] suffered less than they were overcharged because they passed some of the overcharge on to the [indirect purchasers]. Rather, the direct purchasers' "loss was complete at the time the overcharge" was paid, and the direct purchasers "are in law entitled to recover the whole of the amount of the overcharge for which they may establish the defendants are liable to them, regardless of how much of it had been passed on".

With respect to the potential claims of indirect purchasers, the majority reasoned that if there is no recognized defence of passing on, it must "follow that even though an overcharge may in fact have been passed on ... the law does not recognize it: as a matter of law the overcharge or the loss for which the wrongdoer is liable is sustained when the overcharge is paid at first instance". Accordingly, indirect purchasers "who would seek to recover an overcharge that has been passed on are effectively claiming a loss that in law is not recognized", and "[f]or that, there can be no cause of action."

Lowry J.A. noted that if defendants were precluded from raising the passing on defence against direct purchasers, but indirect purchasers were permitted to sue to recover the amount of an overcharge paid by them, the defendants would face the prospect of paying the same loss twice to different plaintiffs. The majority found that "our law will not sanction" such double recovery. It stated that its position was consistent with "American federal law" after the U.S. Supreme Court decision in Illinois Brick Co. v. Illinois, which held that "passing on cannot be used offensively to recover overcharges in an anti-trust action where it cannot also be relied on as a defence."

In Microsoft the Court of Appeal set aside the certification order and dismissed the action altogether because the case had been brought only on behalf of indirect purchasers.

In Sun-Rype, the class consisted of both direct and indirect purchasers of HFCS. The Court of Appeal set aside the certification order and remitted the certification application back to the chambers judge for further consideration.

The Dissent

Donald J.A. dissented in Microsoft and Sun-Rype, disagreeing with the majority's conclusion that it was "plain and obvious" indirect purchasers had no cause of action. The dissent agreed with the majority's view that "the pass-through defence is dead". However, Donald J.A. found that the "corollary proposition barring a pass-through claim is by no means a logical or legal necessity."

While recognizing the validity of the "bedrock principle" against double recovery, the dissenting judge wrote that "the double recovery rule should not in the abstract bar a claim in real life cases where double recovery can be avoided." Donald J.A. noted that in Sun-Rype "the remedies sought are either aggregate damages or a constructive trust in restitution – one amount for the entire class" of direct and indirect purchasers, and that there was "no realistic possibility of double recovery with a single all-encompassing assessment." The dissent also noted that "class proceedings are flexible enough to create ways and means of avoiding overrecovery."

Donald J.A. found that denying indirect purchasers a cause of action could undermine the goals of class proceedings legislation, which include increasing access to justice and behaviour modification. He reasoned that without the participation of indirect purchasers, the "case may not be economically viable and the alleged wrongdoers will retain most of their ill-gotten gains with the result that the class action goals of deterrence and behaviour modification will be lost". The dissent further noted that in Microsoft, the direct purchasers were alleged co-conspirators with the defendants who would be unlikely to sue in their own right.

The dissent found that the U.S. federal rule barring indirect purchaser antitrust suits has been the subject of considerable public policy debate in the U.S. and that many states have enacted "Illinois Brick repealer" statutes which give indirect purchasers the right to bring claims in state courts. Donald J.A. found that courts in the U.S. "repealer" states have expressed the view that the "complexity" of proving damages in indirect purchaser cases, relied upon by the U.S. Supreme Court to bar such suits, was in fact manageable and the damages issues capable of resolution.

Donald J.A. identified the prior "judicial reluctance in Canada to strike [indirect purchaser] claims prior to a full trial on the issue" as a reason favouring the rejection of "the defendants' attack on the pleading" at the certification stage of the case.

Implications of the Judgments

The judgments can be expected to have a significant impact on the competition class action landscape in Canada. For example, it would appear open to defendants in certified class actions involving claims by indirect purchaser plaintiffs to seek summary dismissal of the indirect purchaser claims and modification of the certification order on the basis of the Microsoft and Sun-Rype judgments. (The judgments would not be expected to have much impact on certified cases involving only direct purchaser classes, such as Steele v. Toyota Canada Inc.)

While not binding in Ontario, the judgments may lead to judicial reconsideration of the view that indirect purchasers may plead a cause of action predicated on price-fixing. More than a decade ago, the certification judge in Chadha v. Bayer found that it was not "plain and obvious" that indirect purchasers had no cause of action, and rejected the Illinois Brick rule as inapplicable in Ontario. Although the order granting certification in Chadha was reversed on appeal, the Ontario appellate courts reversed the decision on the basis that the indirect purchaser plaintiffs had not presented a sufficient evidentiary record to support certification. The Court of Appeal for Ontario expressly left open the possibility that a sufficient showing could be made by indirect purchaser plaintiffs in future cases. However, Chadha predates the Supreme Court's decision in Kingstreet, and the judgments in Microsoft and Sun-Rype provide a basis on which defendants may renew arguments that indirect purchaser claims are barred as a matter of law.

The exclusion of indirect purchaser plaintiffs could cause fundamental changes to the nature of competition class actions in Canada. The proposed classes in most competition class actions consist largely (if not overwhelmingly) of indirect purchasers. In many price-fixing class actions, the direct sales of defendants into Canada are miniscule in comparison to their sales in foreign jurisdictions, and the vast majority of direct purchasers of the allegedly price-fixed product are located outside of Canada (and thus are not members of the proposed class). The exclusion of indirect purchasers from the proposed class would thereby result in significantly smaller classes and claims in these actions.

On the other hand, one of the principal arguments against class certification raised by defendants in many competition class actions in Canada is that proving proposed class members have paid an overcharge raises individual rather than common issues for class members, and that the need to resolve those "proof of loss" issues to establish the defendants' liability to the class renders the proposed class proceeding unmanageable. The difficulties proving loss are particularly acute where the proposed class is large and consists primarily of indirect purchasers who may be multiple steps down multiple product distribution chains from the defendants. Removing the "pass-on defence" and indirect purchaser plaintiffs from these cases as a matter of law would eliminate the need to consider the layers of distribution below the direct purchasers, and make proof of loss for the proposed class a less complex inquiry. In a direct-purchaser only regime, class certification might well become easier to achieve.

The plaintiffs have stated that they will seek leave to appeal to the Supreme Court of Canada

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions