Canada: Supreme Court To Reconsider Fundamental Elements Of Antitrust Class Actions

Antitrust class actions have proliferated in Canada following the Supreme Court's 2013 "trilogy" of competition law decisions headlined by Pro-Sys Consultants Ltd. v. Microsoft Corp. Those decisions held that "indirect purchasers" of price-fixed goods do have a cause of action under section 36 of the federal Competition Act, but they left a number of follow-on issues not clearly decided, or unaddressed.

The Supreme Court of Canada will soon hear a case that may settle some of the resulting controversies. On June 7, 2018, the Supreme Court granted leave to appeal the decision of the British Columbia Court of Appeal in Godfrey v. Sony Corporation. The issues raised in the ensuing appeal will include:

  • What is the nature of the harm that must be suffered by indirect purchasers to permit their recovery as a class?
  • Does the existence of a statutory cause of action in section 36 of the Competition Act for persons harmed by anti-competitive conduct preclude overlapping and inconsistent common law claims?
  • Does liability under section 36 extend to any consequences of prohibited conduct, no matter how remote?

The first issue goes to the very heart of class proceedings: whether the procedure grants the class a legal identity separate from its individual class members. Despite the accepted view of class proceedings legislation as merely procedural, lower courts have interpreted specific statements in Pro-Sys about indirect purchasers to permit them to prove their case based on harm to the group as a whole, rather than harm to its individual members. As a result, a group of indirect purchasers is currently permitted to establish liability and proceed straight to aggregate damages for the entire group upon proof that merely one indirect purchaser was harmed.

The second issue addresses the conflict between the statutory civil damages remedy in section 36 and the tort of unlawful means conspiracy. To date, lower courts have permitted both claims to proceed concurrently despite several inconsistencies in the scope of the relief they afford. Yet the stated rationale for permitting the overlap is questionable: it has been incorrectly assumed that unlawful means conspiracy based on a breach of the Competition Act existed at common law before Parliament enacted the statutory remedy, which would otherwise occupy the field.

The third issue addresses whether claimants who have no connection to any defendant can recover for economic harm suffered only as a result of market effects. The relevant claimants in the case under appeal are so-called "umbrella purchasers", who bought a product from a manufacturer that is not alleged to have been involved in any price-fixing conspiracy, but who claim that the effect of supply and demand increased its price as well. Canadian appellate courts are currently divided on this issue, leaving umbrella purchasers in British Columbia and Québec able to advance claims, while those in Ontario cannot.

The Supreme Court's guidance on these issues will be welcome. A resolution of the controversies left undecided by the 2013 trilogy will engage principles that are not only fundamental for antitrust cases but are also applicable more generally, including the underlying philosophy of class proceedings and the principle of Parliamentary supremacy.

The appeal is likely to be heard in late 2018, with a decision to follow in 2019.

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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Authors
Emrys C. Davis
Christiaan A. Jordaan
 
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