Canada: Antitrust Advisory: Class Actions – What U.S. Clients And Counsel Need To Know

Once a novelty in Canada, antitrust class actions have evolved in recent years to become a permanent feature of the Canadian antitrust enforcement landscape. In virtually every international cartel case that has been brought in recent years, plaintiffs have launched class proceedings on behalf of direct and indirect purchasers in Canada, often in close coordination with class plaintiffs that have launched similar proceedings in the United States.

Indeed, in a number of recent instances, domestic investigations and domestic class actions in Canada have resulted in the filing of similar proceedings in the United States (such as the recent Canadian and U.S. class actions relating to chocolate and polyurethane foam). In October 2013, the Supreme Court of Canada issued a trilogy of rulings that upheld the right of class plaintiffs to pursue indirect purchaser claims under the Competition Act and that provided critical guidance relating to the evidentiary standard for class certification. Since those rulings, the class action bar in Canada has been pushing forward to seek class certification in a range of international cases.  

In responding to a parallel class action that has been filed in Canada, U.S. clients and counsel need to be familiar with Canada's unique private remedies and distinct class action regime to ensure a seamless defence on both sides of the border.

The Private Remedy Distinction

The private remedy in Canada differs from the private right of action in the United States in a number of ways:

  • Single Damages, Not Treble Damages: A plaintiff in the United States may recover treble damages arising from anti-competitive conduct that contravenes the Sherman Act. By contrast, in Canada, a plaintiff may only recover single damages in respect of actual loss under section 36 of the Competition Act.
  • No Statutory Punitive Damages: Unlike in the United States, punitive damages – intended to punish the defendant for reprehensible, high-handed behaviour – are not recoverable under section 36. To circumvent this obstacle, a plaintiff in Canada will often seek to assert various parallel claims in tort (e.g., common law conspiracy) and in restitution (e.g., unjust enrichment, waiver of tort) in conjunction with claims under section 36. By asserting claims in restitution, plaintiffs will also seek a disgorgement of profits. However, there is a live debate in the recent certification jurisprudence as to whether these separate causes of action are viable/certifiable in light of the existence of an express statutory remedy that was adopted by Parliament.
  • "Loser Pays" Costs Rule: The parties to a civil suit in Canada, including a class action, are normally subject to traditional cost rules that generally render unsuccessful litigants liable for a portion of their opponent's costs. While this rule does not apply to certification motions in certain provinces (i.e., British Columbia), and while the courts have mitigated the harshness of this rule in several class actions, this "loser-pays" costs rule acts as a potent economic disincentive for potential antitrust plaintiffs in Canada in pursuing motions and claims with questionable merit.
  • Jury Trials Are Rare: In contrast to the practice in the United States, jury trials in commercial cases are exceptionally rare. As a result, litigants in Canada can confidently proceed on the assumption that if tried, the merits of an antitrust class action will likely be argued before a judge, not by a jury. However, in recent years, there has been no reported instance of a certified antitrust class action that has proceeded to a trial on the merits, since such cases either remain at the discovery phase or have been settled out of court. 

Differences in the Class Action Regime

The class action regime in Canada is fundamentally different than the class action regime in the United States.

  • Certification of Direct and Indirect Purchaser Claims: In 2013, the Supreme Court of Canada rejected the application of the rule of Illinois Brick in Canada, and held that indirect purchasers may assert a viable cause of action under the Competition Act. Moreover, the Court held that a class plaintiff may seek certification of a consolidated class of direct and indirect purchasers in spite of the potential conflicts. As a result, the formulation and constitution of classes in Canada is fundamentally different from the U.S. practice.
  • Multiplicity of Proceedings and Forums: In contrast to the U.S. practice, antitrust class actions are generally brought before the provincial superior courts across Canada rather than in the federal court system. Where the alleged anticompetitive conduct is potentially national in scope, a defendant will often face multiple and separate class actions in one (or more) province(s), sometimes with overlapping classes. Based on the current practice, a consortium of plaintiff firms will often seek to represent a de facto national class by filing parallel proceedings in Ontario, Québec and B.C. that propose interlocking classes that effectively cover all direct and indirect purchasers in Canada.    
  • No MDL Consolidation Mechanism: Since there is no consolidation regime in Canada similar to the U.S. MDL system, issues of competing actions and overlapping classes in Canada have generally been addressed either through contested motions or under a recent coordination protocol that has been adopted by the Canadian Bar Association. In large, cross-border cases, plaintiffs increasingly bring coordinated proceedings in Ontario, Québec and B.C. (often in parallel with U.S. proceedings), and identify a "lead jurisdiction" where pre-certification motions will be addressed in the first instance.
  • The Test for Certification: Under the certification statutes that exist in most of the provinces across Canada, there is no requirement for the plaintiff to demonstrate predominance, numerosity or typicality as is required under Federal Rule 23(b)(3). For example, in Ontario, a plaintiff need only demonstrate that there are common issues that constitute a "substantial ingredient" of each class member's claims, and that a class action is the "preferable procedure" under the circumstances. In Québec, a plaintiff need only demonstrate that the common issues of fact and/or law are important, and not simply an ancillary issue.
  • Certification in the Courts: In its trilogy of decisions in 2013, the Supreme Court of Canada certified two antitrust class actions in the Microsoft case (B.C.) and the DRAM case (Québec), but the Court refused to certify a class action in the high-fructose corn syrup case (B.C.). In its decision in the Microsoft case, the Court specifically rejected the "rigorous approach" to class certification that had been adopted by the U.S. federal courts, and held that at the commonality stage, a plaintiff need only demonstrate the existence of a "credible and plausible methodology" for establishing loss on a class-wide basis. However, the Court stressed that the plaintiff's proposed methodology must offer "a realistic prospect" for demonstrating that pass-through has occurred in a manner that has harmed all class members. Since then, there have been two antitrust class actions that have been certified by the lower courts, but it remains to be seen how the courts will apply the Supreme Court's direction in future cases.    
  • Limited Discovery: Under the Canadian practice, there is only limited discovery that occurs prior to the determination of class certification, and such discovery is generally limited to the evidentiary issues that relate to class certification. In other words, in contrast to U.S. practice, it is rare for the parties to conduct merits discovery before the court has ruled on the identity of the class and the proposed common issues. 

Bottom Line: Competition authorities on both sides of the border are working together to prosecute anti-competitive behaviour and distribution practices. Related investigations, prosecutions and litigation can result in potentially massive fines, expose corporate executives to personal liability (including prison) and force companies to change their core business practices.

By understanding Canada's private remedies and class action regime, U.S. counsel can ensure the best defence – on both sides of the border.

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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