In its highly anticipated decision, the Supreme Court of Canada in Pioneer Corp. v. Godfrey, 2019 SCC 42 (Godfrey), a price fixing class action, settled a number of issues, including: whether umbrella purchasers have a cause of action; whether the discoverability principle can extend the statutory limitation period for private actions under the Competition Act; whether causes of action in tort and equitable remedies can be sought alongside the claims under the Competition Act; and, the appropriate standard to certify loss as a "common issue" as between class members.
The majority of the Court dismissed the defendants' appeal, leaving undisturbed the lower court's certification of the class action for the alleged cartel conspiracy between manufacturers of Optical Disc Drives (ODD).
The Godfrey decision is the Court's first major decision on class action certification of competition law claims since it decided the so-called "Trilogy" in 2013.1 In the Trilogy, the Court held that indirect purchasers had a cause of action,2 and that plaintiff expert methodologies to establish loss as a common issue must be, "sufficiently credible or plausible to establish some basis in fact" but need not meet a "robust or rigorous" evidentiary standard.3 In Godfrey, the Court extended a potential cause of action to umbrella purchasers and confirmed that the standard to be applied to plaintiff expert methodology is lower than is applied in other jurisdictions, including the United States, at least at the certification stage. Further, the Court held that discoverability can be applied to extend the limitation period for section 36 claims and that plaintiffs are not restricted to the statutory cause of action in section 36.
In addressing the four key issues on appeal, the Court held as follows:
- Umbrella purchasers have a cause of action under section 36 of the Competition Act.
- The discoverability principle can apply to extend the limitation period in subparagraph 36(4)(a)(i) of the Competition Act.
- The statutory cause of action under section 36 of the Competition Act is not a "complete code" and, as such, does not bar a plaintiff from advancing other common law and equitable claims, such as common law conspiracy, unjust enrichment and waiver of tort.
- To certify loss as a "common issue", the expert methodology must establish that the harm reached each level in the chain of commerce. The methodology, for the purposes of certification, does not need to establish that each member of the class would have suffered damages, or propose a way to differentiate between those who did and those who did not suffer harm. This confirms that the evidentiary burden on plaintiffs at certification is light in comparison to other jurisdictions, including the United States.
The representative plaintiff, Neil Godfrey, alleged that manufacturers of ODDs and associated products conspired to fix prices between 2004 and 2010. This proposed class action named multiple defendants, four of which, as the plaintiff alleged, controlled 94 percent of the global ODD market. Mr. Godfrey applied to certify this class proceeding, consisting of direct, indirect and umbrella purchasers, under the British Columbia Class Proceedings Act.
1. "Umbrella Purchasers" have a cause of action under section 36(1)(a) of the Competition Act.
The decision confirms that umbrella purchasers have a cause of action under section 36(1)(a) of the Competition Act.
Umbrella purchasers are persons who purchased a category of goods that are alleged to have been cartelized (price fixed, for example), but not from any of the alleged cartelists (the defendants). Instead, umbrella purchasers would have bought goods from non-defendants and non-cartelists. Their cause of action is grounded in the assertion that the alleged conspiracy raised the prices that they paid for their goods. The rationale for umbrella claims is that a conspiracy, if engaged in by cartelists with sufficient market power, will lead non-cartel manufacturers to raise their prices.
Section 36 of the Competition Act specifies that, "any person who has suffered loss or damage as a result of conduct that is contrary to any provision of Part VI" (for example, section 45 the Competition Act, which contains the criminal cartel conspiracy offence), may sue for damages. In using the term "any person", the Court accepted that Parliament intended a broad application of this section, such that anyone affected could bring a claim. To succeed in such a claim, the Court pointed out that umbrella purchasers will still have to overcome the hurdle of establishing proximity: that the loss or damage was incurred as a result of the defendants' alleged conduct. In other words, umbrella purchasers will be required to establish that the non-cartelists from whom they made purchases raised their prices as a result of the cartel.
The Court emphasized three elements that would ensure the defendants were not exposed to indeterminate liability as a result of extending potential liability to umbrella purchasers:
- The class was limited to damages incurred between 2004 and 2010;
- Section 36(1)(a) provides an internal safeguard for damages that are too remote by requiring that the plaintiff's alleged loss or damage is a result of the defendants' actions; and
- Section 45(1) has been interpreted to limit liability, "to those who, at a minimum, specifically intend to agree upon anti-competitive conduct" (emphasis added).4
2. Discoverability may apply to extend the two-year limitation period established by section 36(4)(a)(i) of the Competition Act.
The Court concluded that the discoverability principle, which can extend the limitation period beyond the accrual of the elements of the cause of action to the point in time when the plaintiff knew or reasonably ought to have known about his or her claims, applies to the two-year limitation period established by section 36. Section 36 establishes a cause of action for loss or damage caused by conduct contrary to Part VI of the Competition Act: for example, cartel conspiracies prohibited by section 45. Notwithstanding the lack of express language in section 36 to read in discoverability, the Court emphasized that price fixing conspiracies under section 45 are "invariably conducted through secrecy and deception" and are, therefore, by definition, unknown.5 As such, if discoverability were not applied to the section 36 limitation period, the Court concluded, "[it] would create perverse incentives, encouraging continued concealment of anti-competitive behaviour ..."6
The Court goes a step further in its analysis, concluding that fraudulent concealment, a form of equitable fraud that deems it unconscionable for a defendant to be advantaged by concealing the existence of a cause of action, can also apply to extend limitation periods under the Competition Act.7
3. Section 36 does not prevent a claimant from pleading other common law or equitable claims.
The Court confirmed that the statutory cause of action established by section 36 "does not oust common law and equitable actions by its express terms or by necessary implication."8 The Court found that section 36 was not duplicative to the tort of civil conspiracy, "nor does it provide a 'new and superior' remedy."9 Legislation can oust the common law but, according to the Court, the "presumption [is] that Parliament does not intend to abrogate common law rights".10
Further, the Court noted that section 62 of the Competition Act clearly contemplates that claims under the Act should not deprive a litigant from a civil (common or equitable) right of action and that a contravention of section 45 satisfies the "unlawful means" element of the tort of civil conspiracy.
The finding that the statutory remedy in section 36 of the Competition Act is not a "complete code" also means, as the Court pointed out, that the "broader range of remedies" available under common law conspiracy, such as punitive damages, are available to plaintiffs.11
4. Commonality of loss can be a "common issue" for the purpose of certifying a class action.
To certify a loss as a common issue, the Court held that:
[I]t is not necessary, in order to support certifying loss as a common question, that a plaintiff's expert's methodology establish that each and every class member suffered a loss. Nor is it necessary that [the expert]'s methodology be able to identify those class members who suffered no loss so as to distinguish them from those who did. Rather, in order for loss-related questions to be certified as common issues, a plaintiff's expert's methodology need only be sufficiently credible or plausible to establish loss reached the requisite purchaser level.12
The Court, however, ultimately agreed with the defendants' arguments on the expert standard, but left that assessment to trial. Because loss is a prerequisite element of the cause of action, at trial, the Court held that the plaintiff would have to establish that each individual class member actually suffered a loss, and the aggregate damages provisions of the Class Proceedings Act are not a substitute for proof of such common loss.13 In so deciding, the Court appears to have bifurcated the assessment of the plaintiff's methodology in the context of common loss to: (i) what must be established to certify loss as a common issue, which is subject to a lower bar; and (ii) what must be established to prove liability and damages at trial, which is subject to the evidentiary bar advocated by the defendants:
"At this stage, it therefore remains possible that issues will arise, once it is determined that loss reached the indirect purchaser level, that affect individual class members' claims (Microsoft, at para. 140). In other words, while it was sufficient for the purposes of certifying loss as a common issue for Dr. Reutter's methodology to show merely that loss reached the indirect purchaser level, whether this methodology is sufficient for the purposes of establishing Toshiba's liability to all class members will depend on the findings of the trial judge. ." [...]
It should be borne in mind that the trial judge, following the common issues trial, might reach any one of numerous possible conclusions on the question of whether the class members suffered loss.14 (emphasis in original).
Therefore, although loss may be certified as a common issue and the expert methodology may be subject to a lighter touch at certification, this methodology would be subject to a significantly higher standard at trial when determining the associated damages. At trial, the Court has confirmed that the plaintiff's methodology must establish that each individual class member actually suffered a loss and separate those members who did not.
For companies doing business in Canada, this decision offers three major takeaways:
First, Godfrey confirms that certification of a price fixing class action in Canada bears little resemblance to certification in other jurisdictions, including the United States. The standard that plaintiffs must meet to certify a class action is lower in comparison. The Supreme Court of Canada has confirmed that significant scrutiny of the plaintiff's claim will be applied at trial. It remains to be seen whether defendants will be more willing, in light of Godfrey, to take their price fixing cases further to trial. To date, there has been only one competition class action that has gone to trial, and it settled prior to judgment.
Second, because umbrella purchasers have a cause of action in Canada, liability can now be extended beyond the purchasers of a particular company's products, to buyers of similar goods made by competing purchasers. Even though this liability may not meet the threshold of indeterminate liability, as the Court suggests, it expands the scope of potential liability for defendants in competition law class actions.
Third, as Madam Justice Coté points out in her dissent, "permitting umbrella purchaser claims under s. 36(1) opens up the possibility of recovery for overcharges that result from "conscious parallelism"— a phenomenon that occurs when parties not involved in a price-fixing conspiracy deliberately choose to adjust their prices in order to match those of their competitors, in the absence of any actual collusion between them.15
This Dentons Insight was authored by Adam S. Goodman, Marina Sampson and Susan Fridlyand. For more information, please contact one of the authors, or another member of Dentons' Competition and Foreign Investment Review group.
1. Pro-Sys Consultants Ltd. v. Microsoft Corporation,  3 S.C.R. 477; Sun-Rype Products Ltd. v. Archer Daniels Midland Company,  3 S.C.R. 545; Infineon Technologies AG v. Option consommateurs,  3 S.C.R. 600. ↩
2. Pro-Sys Consultants Ltd. v. Microsoft Corporation,  3 S.C.R. 477 at paras. 60-61. ↩
3. Pro-Sys Consultants Ltd. v. Microsoft Corporation,  3 S.C.R. 477 at paras. 117-118. #
4. At para 75 citing Shah v. LG Chem. Ltd., 2018 ONCA 819at para 51.#
5. Pioneer Corp. v. Godfrey, 2019 SCC 42, at para 46 [Godfrey].↩
6. Ibid at para 49.↩
7. Ibid at para 54.↩
8. Ibid at paras 85-87.↩
9. Ibid at para 87.↩
10. Ibid at para 85 citing R. Sullivan, Sullivan on the Construction of Statutes (6th ed. 2014) at p.538. ↩
11. Godfrey, supra note 2 at para 87.↩
12. Ibid at para 102.↩
13. Ibid at para 117.↩
14. Ibid at para 119.↩
15. Ibid at para 190.↩
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