Canada: Illinois Brick Rejected In Canada

Last Updated: May 22 2014
Article by Davit D. Akman, Scott Kugler, Alex Zavaglia, Mylène Lemieux and Corry Lomer

Most Read Contributor in Canada, October 2018

On October 31, 2013, the Supreme Court of Canada released long-awaited decisions in three high profile antitrust class action cases involving alleged price-fixing conspiracies: Pro-Sys Consultants Ltd. v. Microsoft Corporation;1 Sun-Rype Products Ltd. v. Archer Daniel Midland Company;2 and Infineon Technologies AG v. Option consommateurs3 (collectively, the "Antitrust Trilogy"). All three appeals were from certification motions. At stake, the fate of indirect purchaser antitrust class actions in Canada.

Specifically, the Court in all three appeals considered the threshold question of whether indirect purchasers can, as a matter of law, recover losses that were "passed on" to them by someone else.  Expressly rejecting the U.S. Supreme Court's decision in Illinois Brick, the Canada's highest court concluded unanimously that indirect purchasers do have antitrust standing. The Supreme Court also considered the applicable standard of proof on a certification motion, and on a motion for authorization as it is called in Quebec.

Background

In Sun-Rype, the plaintiffs commenced a class action in British Columbia to recover alleged overcharges related to high-fructose corn syrup (HFCS), a food additive found in many snacks and beverages. In Pro-Sys, the plaintiffs commenced a class action claim in British Columbia against Microsoft for allegedly overcharging for its PC operating systems and PC applications software. The Sun-Rype class included both direct and indirect purchasers, while the Pro-Sys class was made up entirely of indirect purchasers. Both cases were certified at first instance but the certification decisions reversed by a majority of the British Columbia Court of Appeal, which concluded that indirect purchasers could not, as a matter of law, recover losses resulting from alleged overcharges.

In Infineon, the plaintiff applied for authorization to institute a class action in Quebec to recover alleged losses from overcharges for Dynamic Random Access Memory (DRAM) chips that are found in various electronic devices. The motion judge declined to authorize the proposed class action on the ground that the Quebec courts lacked jurisdiction. The Quebec Court of Appeal reversed and authorized the class action, also affirming that indirect purchasers have standing to bring claims to recover losses from alleged overcharges.

Illinois Brick Rejected

Most of the Supreme Court's analysis of the "indirect purchaser" issue is found in the Pro-Sys decision. Repeatedly referring to and quoting with approval from the dissenting opinion of Justice Brennan in Illinois Brick and criticism of the U.S. federal bar on indirect purchaser antitrust claims, the Court concluded that indirect purchasers have a right of action.  In so doing, it addressed (and rejected) the various arguments raised by the defendants and relied on by the majority of the BC Court of Appeal, including: (1) denying indirect purchaser claims is a necessary corollary to the rejection of the "passing on" defence because otherwise defendants will be exposed to the risk of double or multiple recovery; and (2) indirect purchaser actions are not viable because of the complexity associated with proof of damages for overcharges allegedly passed on to indirect purchasers.

The Court began by clarifying the scope of its decision in a case called (a case that did not involve a price fixing conspiracy), in which it rejected "passing on" as a defence. The Court confirmed that its rejection of the "passing on" defence was not limited to the narrow circumstances of that particular case but instead was generally applicable to restitutionary law.

The Court then rejected the notion that the unavailability of "passing on" as a defence necessarily meant that "passing on" could not be used offensively by indirect purchasers to ground their claims. The respondents/defendants in all three cases argued that in the absence of a passing on defence, defendants would be vulnerable to multiple overlapping claims from direct and indirect purchasers, each seeking to recover 100% of the alleged overcharge. The Court acknowledged that the potential for double or multiple recovery could not be lightly dismissed. However, the Court suggested that in cases like Sun-Rype where the class is made up of both direct and indirect purchasers, an aggregate damages award that reflects the entirety of the overcharge will preclude double recovery. Further, in the Court's view, in cases where there are parallel proceedings with direct and indirect claims pending, trial courts will be able to manage the various suits to ensure that defendants are not subjected to multiple recovery.

The Court also rejected the argument that indirect purchaser claims should be barred as a matter of law because of the complexity associated with proving damages for overcharges that may be passed down through numerous levels of a distribution chain. The Court observed that plaintiffs willingly take on the burden of proving their damages at trial, which may require "expert testimony and complex economic evidence," and whether plaintiffs are ultimately able to discharge their burden of proof at trial will have to be determined on a case-by-case basis.

U.S. "Rigorous Analysis" Standard Also Rejected

The Supreme Court also addressed, for the first time in more than a decade, the standard of proof on a certification motion.  It also addressed the standard in Quebec on a motion for authorization.

In particular, the Court considered the standard of proof to be applied to plaintiffs' proposed methodologies for establishing at the certification stage that harm can be proved on a common basis in indirect purchaser class actions. The Court confirmed that the standard to be applied outside of the province of Quebec is "some basis in fact."

In discussing that standard, the Court rejected the "rigorous analysis" standard mandated by the U.S. Supreme Court for certification under Rule 23,5 but arguably gave potentially conflicting signals as to the appropriate level of scrutiny required to be applied by Canadian courts.  On the one hand, the Court emphasized the importance of the courts' gatekeeper function at the certification stage, expressly "reaffirming the importance of certification as a meaningful screening device".6 In Pro-Sys, the Court was clear that more than "symbolic scrutiny" is required.7 Rather, the certification motion judge must find that "[t]here [are] sufficient facts to satisfy [her] that the conditions for certification have been met to a degree that should allow the matter to proceed on a class basis without foundering at the merits stage".8 Applied to expert evidence put forward by plaintiffs to satisfy the court that a methodology exists by which loss can be proved on class-wide basis, this standard requires that the proposed methodology "must offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (i.e., that passing on has occurred).9 Further, "[t]he methodology cannot be purely theoretical or hypothetical but must be grounded in the facts of the particular case in question" and "[t]here must be some evidence of the availability of the data to which the methodology is to be applied".10 On the other hand, the Court said that a certification motion judge is not required to resolve conflicting facts or weigh evidence on a balance of probabilities because at the certification stage courts are "ill-equipped" to handle that level of evidentiary analysis.11

In Infineon, the Court found that the standard of proof for authorization of a class action pursuant to art. 1003 of Quebec Civil Code of Procedure (CCP) is that of establishing an "arguable case", which is "less demanding than the ["some basis in fact" standard] that applies in other parts of Canada".12 The Court explained that, applying that standard at the authorization stage, the motion judge plays the role of filter, dismissing frivolous motions and authorizing only those proposed class actions that meet the low legal threshold requirements of art. 1003 CCP.13

Comment

The long-term impact of the Supreme Court's Antitrust Trilogy remains to be seen.  Class actions on behalf of indirect purchasers were already common in Canada; indeed, indirect purchasers frequently comprise the whole or a significant part of proposed antitrust class actions in this country.  In this regard, the trilogy merely confirms the status quo ante.  The more important and interesting question is how lower courts will interpret and apply the Court's comments regarding the standard of proof at certification (and authorization) in subsequent cases.  Interpreted (incorrectly in the authors' view) as authorizing a "wait and see"/"take it on faith" (i.e., leave it to the trial judge) approach to certification, the trilogy could invite significant unfairness to defendants (who will be denied the opportunity to meaningfully contest certification) and mischief (particularly in those Canadian provinces with no-costs class action regimes) by incenting frivolous class action litigation and, to use the phrase coined by Judge Posner, "blackmail settlements", raising the twin specters of over-deterrence and over-compensation. The coming jurisprudence on this issue should be closely watched.

This article appears in the May 2014 edition of the American Bar Association, Section of Antitrust Law's International Antitrust Bulletin.

Footnotes

1 2013 SCC 57 [Pro-Sys].

2 2013 SCC 58 [Sun-Rype].

3 2013 SCC 59 [Infineon].

4 2007 SCC 1. 

5 See, e.g., Wal-Mart Stores, Inc. v. Dukes,131 S Ct 2551 (2011); Comcast Corp. v. Behrend, 569 U.S. __ (2013).

6 Pro-Sys, supra at para 103.

7 See ibid.

8 Ibid. at para 104.

9 Ibid. at para 118.

10 Ibid.

11 See ibid. at para 102.

12 Infineon, supra at para 128.

13 See ibid. at paras 59 and 61.

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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