The Canadian competition class action landscape is definitely changing. Recent decisions of courts in Ontario and British Columbia appear to be signalling a more plaintiff-friendly approach at the certification stage of competition class actions.
With the gradual adoption of provincial class proceedings legislation across Canada, the volume of class action litigation has grown significantly over the past two decades. However, while several competition class actions have also been launched during that same period, they have met with little success since plaintiffs have often been unable to adduce sufficient expert evidence to establish that there is a viable and workable economic methodology for ascertaining the core issues of loss and liability on a class-wide basis. Until now, most experts were of the view that the Canadian test for certification had been far more demanding than the U.S. approach, and thus competition class actions would rarely proceed to a hearing on the merits. Nevertheless, recent decisions in Irving Paper and DRAM appear to have changed this traditionally held view.
In Irving Paper Ltd. v. Atofina Chemicals Inc., the Ontario Superior Court of Justice granted certification of a price-fixing class action involving both direct and indirect purchasers. The plaintiffs alleged that the defendants had conspired to and did in fact allocate markets, restrict supply and increase the price of hydrogen peroxide. Significantly, the alleged conspiracy has been the subject of litigation in the U.S. Similarly, in the course of its investigation into the alleged conspiracy, the European Commission also found that the defendants had been involved and accordingly issued fines.
The defendants argued before the Ontario Superior Court of Justice that the proposed class proceeding was unmanageable due to the enormity of a class that would necessarily include both direct and indirect purchasers. Due to the multiplicity of industrial and commercial applications of hydrogen peroxide (e.g., cosmetics, electronics, laundry detergent, etc.), the defendants argued that the class could potentially include all residents of Canada. Another argument raised by the defendants was the alleged near-impossibility of the plaintiffs being able to establish harm or damage on a class-wide basis. Ultimately, the defendants relied on the difficulty the plaintiffs would have in establishing that pass-on, when direct purchasers pass on some or all of any price increase to indirect purchasers, did in fact occur.
The Court rejected the defendants' arguments and granted certification essentially for two reasons. First, the Court concluded that it is not necessary for plaintiffs to demonstrate that liability is a common issue for all members of the class. In fact, the Court found that the proposed class should consist of "all persons in Canada ... who purchased hydrogen peroxide, products containing hydrogen peroxide, or products produced using hydrogen peroxide in Canada." Second, with respect to pass-on, at the certification stage, it was found that the Court needs only be satisfied that a methodology may exist for the calculation of damages. In essence, the issue of pass-on, along with its complexities, was deferred to the trial judge.
The defendants have sought leave to appeal the decision from the Ontario Divisional Court.
A few months after Irving Paper was decided, the B.C. Court of Appeal rendered a unanimous decision reversing a previous decision by the B.C. Supreme Court denying certification.
In 2002, the U.S. Department of Justice began investigations and proceedings with respect to the alleged price-fixing in the U.S market of dynamic random access memory (DRAM) chips, essential input components to many electronic products, including computer servers and networks, laptops, cellular phones, digital cameras, and video gaming consoles. As a result, several defendants in these proceedings reached a plea agreement and paid significant fines (approximately $731-million) for participating in an alleged international conspiracy to fix prices in the DRAM market. In Canada, Pro-Sys Consultants Ltd. brought class proceedings in an attempt to certify a consolidated class of direct and indirect purchasers of DRAM chips in B.C. for a period covering April 1, 1999, to June 30, 2002 (Pro-Sys Consultants Ltd. v. Infineon Technologies AG).
At first instance, the B.C. Supreme Court denied certification on the basis that the plaintiff had failed to establish a viable methodology for dealing with loss and liability on a class-wide basis. This conclusion was based on, at least in part, the complex nature of the distribution channels for DRAM chips.
The B.C. Court of Appeal reversed the B.C. Supreme Court's decision for essentially three reasons. First, the Court stated that, at the class certification stage, a plaintiff's expert evidence should not be subjected to rigorous scrutiny as it would be at trial. A lower threshold should be applied which requires a minimum evidentiary basis. Second, the Court found that a class proceeding was the preferable procedure in this case. Despite the complexities associated with the case, the Court noted that the Class Proceedings Act is flexible and provides judges tools to manage complex cases. Lastly, the Court relied on the admission inherent in the guilty pleas and plea agreements in the U.S. to establish that the defendants' class-wide liability could reasonably be found.
More Competition Class Actions in Canada
Irving Paper and DRAM mark a clear departure from the existing body of Canadian certification decisions in competition class actions. Irving Paper and, in particular, DRAM appear to have lowered the applicable threshold used in the assessment of a plaintiff's proposed expert evidence and essentially deferred many of the complex issues to the trial judge. We expect to see an increase in the number of Canadian competition class actions that are commenced in the future, especially in light of the B.C. Court of Appeal's decision which, until the Supreme Court of Canada reviews the issue, represents the most authoritative pronouncement by a Canadian appellate court on the issue.
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