Canada: Ontario Court Substantially Dismisses Franchise Class Action Regarding Passing On Of Volume Rebates

A recent decision of the Ontario Superior Court, which resolved numerous common issues in a franchise class action on summary judgment, provides practical guidance to franchisors on how to reduce legal risk relating to the sharing of volume discounts or other pricing benefits with franchisees.

In 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2014 ONSC 6056, Justice Belobaba decided five of seven common issues certified in a class proceeding brought by about 150 former franchisees against Pet Valu, a franchisor. The decision includes three helpful lessons for franchisors:

  1. Similar to the well-known Tim Horton's case from 2012 (Fairview Donut Inc. v. The TDL Group Corp., 2012 ONSC 1252), a class proceeding brought by franchisees can be resolved, or at least substantially narrowed, on a summary judgment motion. Numerous common issues in this case could be disposed of through the Court interpreting key documents, eliminating the need for a long and expensive trial to decide these questions.
  2. Franchise agreements conferring discretion upon the franchisor regarding how rebates and volume discounts will be shared with franchisees can provide flexibility in determining the amount and the method by which these benefits will be shared with franchisees, although this discretion should be exercised reasonably to minimize legal risk. The Court noted that the franchise agreement in this case provided wide-ranging discretion on the franchisor in deciding how volume rebates will be shared with franchisees, but that both franchise legislation and the common law principles require a franchisor to exercise its discretion "reasonably and with proper motive, and ... not... arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties."
  3. Franchisors can assist themselves in litigation regarding rebate issues by tracking and demonstrating (on a representative basis) prices paid, volume and other discounts obtained, mark-ups added, and wholesale prices to franchisees compared to other suppliers. The franchisor in this case marshaled clear evidence of these elements, and the representative franchisee had no contrary evidence to support its allegation that the sharing of rebates was unreasonable. After reviewing and assessing the franchisor's transparent disclosure of how its pricing is arrived upon, the Court held in its favour, concluding that there were no "phantom rebates".

The core issue in Pet Valu was whether the franchisor failed to share volume-related pricing benefits with franchisees. This involved an interpretation of the franchise agreement to determine whether the franchisor was contractually obliged to share volume rebates with franchisees, as well as a factual assessment of whether the franchisor did, in fact, share such volume rebates.

The Court answered both questions in the affirmative.  Although it agreed that the franchise agreement required the franchisor to share volume rebates, Justice Belobaba held that the franchisor met this requirement. This conclusion was reached upon review of the franchisor's comprehensive evidence, which (a) demonstrated that its prices were 6-14% lower than competitors' prices available to the franchisees, and (b) set out in detail for its top 100 products: list price, applicable volume or other discounts, mark-up applied, and franchisees' net costs. The product pricing evidence demonstrated that pricing discounts to the franchisor were passed along to franchisees, even after the franchisor added a reasonable mark-up.

The Court's analysis on this issue was determinative of several other common issues certified for the class, including whether the franchisor breached the duty of fair dealing or was unjustly enriched.

The remaining two common issues raised the question of whether the duty of good faith and fair dealing imposed by s. 3 of the Arthur Wishart Act can be used to compel ongoing disclosure from a franchisor. Justice Belobaba noted that Spina v Shoppers Drug Mart suggests the answer is likely "no", but deferred the determination of these issues to a later date. During the summary judgment motion, the plaintiff class decided to move to add a new common issue on the basis of sworn statements made by the franchisor on the motion. As the decision on the motion for the addition of the new common issue could be determinative of the remaining common issues, Justice Belobaba deferred his answers on those issues until the motion was decided.

To view original article, please click here

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
Related Video
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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.