Canada: Private Antitrust Litigation
Two different venues provide opportunity for private antitrust litigation in Canada. Most commonly used is the civil court system for the pursuit of damages following criminal anti-competitive behaviour – usually pursued by means of class actions. Less common are administrative proceedings before the Canadian Competition Tribunal, which are available to private parties under certain circumstances. This article will describe recent activity in both forums with a focus on civil litigation as it is currently characterised by two important legal issues: who is properly situated as a plaintiff in Canadian competition class actions; and the navigation of multiple and overlapping parallel class actions. It will include a case study of competition class actions in Quebec in recognition of the significant differences between Quebec and the rest of Canada’s class action procedures.
Civil antitrust litigation in Canada
Section 36 of Canada’s Competition Act (the Act) allows private parties to bring an action for losses suffered as a result of conduct that is contrary to the criminal offences in part VI of the Act.1 Actionable criminal offences under section 36 include conspiracy, bid rigging, misleading advertising, deceptive telemarketing and pyramid schemes.2 A prior conviction for those criminal offences is, in the absence of evidence to the contrary, proof that the person engaged in the conduct and any evidence given in the criminal proceedings as to the effect of those acts is available for civil litigants to use.3 In practice, most criminal convictions result from negotiations rather than a trial, meaning the agreed statement of facts will be an important piece of evidence in subsequent civil proceedings. In the absence of a conviction, the usual ‘balance of probabilities’ civil standard of proof applies. Only losses actually suffered, as well as the cost of the resulting investigation and proceedings, may be claimed. Neither punitive nor treble damages are available for actions brought under section 36. The limitation period for proceedings brought under section 36 is two years after the criminal conduct occurred or the criminal proceedings related to that conduct were disposed of, whichever is later.4
Plaintiffs often also frame these actions in common law conspiracy, unlawful interference with economic interests, or similar economic torts. These claims in tort are not limited by the Act and may, as a result, give rise to punitive damages, differing limitation periods, interlocutory injunctions and equitable disgorgements.
In practice, many private antitrust actions in Canada arise out of international conspiracies that are initially investigated, prosecuted and litigated in other countries, particularly the US. As long as the conspiracy has a ‘real and substantial connection’ to Canada, in that the conspiracy, even if formed elsewhere, caused losses that were sustained in Canada, Canadian courts will have jurisdiction over related civil actions.5 Canadian plaintiffs typically attempt to benefit from prior or parallel actions in other countries, particularly from the evidence presented at such actions.
Some of the most recent developments in Canadian antitrust class actions include the commencement in early 2013 of a number of class actions in Ontario against a variety of predominantly foreign auto-parts manufacturers. The cases relate to numerous alleged cospiracies to fix the prices of auto-parts in North America and worldwide. The plaintiffs have indicated that they may seek to have certain elements of the cases heard together, including certification motions. This could set a precedent which eases the prosecution of price-fixing class actions in Ontario. The Ontario Superior Court of Justice will likely rule on this request in late 2013.
Requirements for class actions
Civil antitrust litigation in Canada largely proceeds by means of class actions. With the exception of Quebec, class actions filed in any province in Canada must generally satisfy the following five criteria to be granted certification (criteria usually set out in provincial legislation):
- the pleadings disclose a cause of action;
- there is an identifiable class of two or more persons;
- the claims of the class members raise common issues;
- a class proceeding would be the preferable procedure for the resolution of the common issues; and
- there is a representative who would fairly and adequately represent the interests of the class, has produced a workable plan for advancing the proceeding and notifying class members, and does not have, on the common issues for the class, an interest in conflict with the interests of other class members.6
Although the criteria are to be construed generously in light of the three goals of class actions – judicial economy, access to justice and behaviour modification – plaintiffs do need to show some basis for each criterion.7 Extensive evidence is now commonplace at the certification stage, including economic expert reports. Notwithstanding the large evidentiary records, courts have shown an increased propensity to certify actions. Whereas a decade ago the inability to demonstrate a common basis for tracing the alleged overcharge to the various class members may have been a sufficient obstacle to certification,8 more recent judgments have simply looked for a credible or plausible methodology to trace damages as amongst class members in order to certify an action for trial.9
Note that a different standard is applied for certification applications presented solely for the purpose of approving a proposed settlement because the courts are focused on whether the settlement is fair to the class. Such certification for settlement purposes is typically expressly done with no prejudicial effect on the non-settling defendants.
Two issues are currently at the forefront of antitrust class actions in Canada. The first issue is whether indirect purchasers are proper members of a plaintiff class. The second issue is the developing response to Canada’s lack of a procedure analogous to the US’s multidistrict litigation system. Both are described below.
Indirect purchaser claims
Canadian courts have been inconsistent in their treatment of indirect purchaser claims. The Ontario Court of Appeal in Chadha v Bayer refused certification for an indirect purchaser case due to insufficient evidence that there was a common basis to the plaintiffs’ loss and that it was the defendants’ actions that caused the indirect purchasers’ loss.10 However, the court in Chadha did not go as far as the Supreme Court of the United States in Illinois Brick11 by holding that no indirect purchaser claim would be possible and indeed, many subsequent claims have been brought in Canada comprising classes of direct and indirect purchasers. The BC Court of Appeal then certified an indirect purchaser class in Pro-Sys Consultants Inc v Infineon Technologies AG,12 holding that the class need only demonstrate an aggregate liability rather than liability to each individual class member. The Ontario Superior Court similarly certified indirect purchaser claims, including one against the alleged Hydrogen Peroxide cartel in a judgment which held that losses need only be proven at the class level.13
In 2011, however, the BC Court of Appeal, in a split decision, rejected two indirect purchaser claims in Pro-Sys Consultants Ltd v Microsoft Corporation (Microsoft) and Sun-Rype Products Ltd v Archer Daniels Midland Company (Sun-Rype).14 The court found that, because a previous Supreme Court decision had rejected the passing-on defence against direct purchaser claims, indirect purchaser claims should not be permitted as it would give rise to problems such as the possibility of double recovery.15In reviewing previous indirect purchaser claims that were certified, the court noted that the certification was either pursuant to a settlement, not opposed, or granted because it was not clear the action would fail and thus the issue would be better ‘addressed on a trial with the benefit of a full evidentiary record.’16
Shortly thereafter, the Quebec Court of Appeal came to the opposite conclusion in a decision cited as Option Consommateurs v Infineon Technologies (Option Consommateurs),17 which arose out of the alleged DRAM cartel.18 Initially at trial, certification of this proceeding was denied because the judge ruled, among other things, that the facts alleged did not support the conclusion that the indirect purchasers suffered harm. The Quebec Court of Appeal disagreed in a judgment that approved of the dissenting judgment in the BC indirect purchaser actions. With respect to the indirect purchaser issues, the court noted that there was no danger of double recovery because the case would deal with the entirety of the loss to both direct and indirect purchasers.19 Any problems regarding how to divide the damages between direct and indirect purchasers should be dealt with at trial and should not result in the action failing at the certification stage. Similarly, potential future conflicts between class members should not be fatal to the action; at this stage, all class members share the goal of obtaining the greatest amount of damages possible.
The Supreme Court of Canada granted leave to appeal to Microsoft and Sun-Rype, along with the Quebec case that reached the opposite conclusion and heard the appeal from the three cases in October 2012. Its decision has not yet been released, but the court appeared receptive to the defendants’ concern of double recovery should indirect purchasers continue to bring actions. However, it also indicated some question as to the practical versus theoretical nature of this concern. The court was also concerned about the evidentiary complexity involved in proving harm to indirect purchasers, and how any awarded damages would be distributed. Until a decision is released, which is expected at any time, the issue as to who is properly situated to be a class member in antitrust litigation is in a state of uncertainty and confusion.20 A number of current class action proceedings have been stayed until the Supreme Court’s decision is released, which why the majority of the activity that has happened in the area of competition class action proceedings over the past year has related to pre-certification issues.
Multiple parallel class actions
It is typical for various plaintiffs’ counsel to file parallel proceedings in a number of Canadian provincial jurisdictions. Unlike the US, which has a procedure to consolidate multiple parallel class actions, there is no equivalent procedure in Canada. There is a growing recognition that national classes, or some form of inter-provincial cooperation, is desirable. The current practice of having multiple parallel proceedings gives rise to inefficiencies and inconsistent outcomes. Although the informal practice is to designate proceedings in one province as the lead case and stay other proceedings, such practices are ad hoc and are not legally binding for defendants. Again, at times, Quebec proves to be a differing factor. In certain cases, Quebec courts have recognised similar proceedings in other provinces,21 but have also held that separate Quebec class actions are not necessarily barred by national class action settlements.22 Where overlapping class actions cannot be informally coordinated between counsel, motions may be required which can become costly.
In response to the legal lacuna regarding national classes, the Canadian Bar Association (CBA) launched a National Task Force on Class Actions in 2010. The CBA approved the resulting Canadian Judicial Protocol for the Management of Multi-Jurisdictional Class Actions as best practice, and endorsed two of the American Bar Association’s protocols regarding cross-border and multijurisdictional class actions. The Canadian Judicial Protocol aims to facilitate communications regarding developments and settlements by creating a Notification List of all counsel involved in all related actions. The CBA has also created a National Class Action Database to provide class action information and documents, including pleadings, to the public.23 The Superior Court of Quebec became the first Canadian court to render a judgment ordering the application of the Judicial Protocol in 2012.24 Despite the growing trend to accept the practical advantages of the Judicial Protocol, it remains optional.
Class actions in Quebec
The indirect purchaser issue is not the only issue in class actions on which the province of Quebec has taken a different approach. Differences in that jurisdiction are important to note given their potential impact on litigation precedents nationally and, as discussed further below, Canada’s ability to organise and consolidate multiple parallel proceedings.
Class action proceedings in Quebec are governed by a distinct set of rules found in the Code of Civil Procedure. Individual or non-profit organisation plaintiffs have the option of receiving funding from the Fonds d’aide aux recours collectifs.25 Only individuals, non-profit organisations and private-interest entities with fewer than 50 employees can be plaintiffs in a class action. In order to be certified,26 proposed class proceedings must meet criteria similar to those for class certification in the rest of Canada.27 However, unlike the common law provinces, Quebec judges do not have broad discretionary power. Instead, they have more limited discretion to determine whether each of the criteria are fulfilled;28 and if those criteria are fulfilled, judges must certify the action. Plaintiffs need only demonstrate a prima facie case, and any doubt must be resolved in favour of the plaintiffs.29 Judges may play a more active role, with the ability but not the obligation to redefine the class so that it can be certified.30 Written arguments are not permitted at the certification stage, and parties must apply for leave to conduct examinations or file evidence.31 Judgments granting certification cannot be appealed by defendants.32 Quebec also has a ‘first to file’ rule, where motions for authorisation filed subsequent to the first motion can be suspended. However, this rule has recently come under judicial scrutiny. The recent decision of Schmidt v Johnson & Johnson Inc may signal a significant departure from the ‘first to file’ rule.33 While the court in this decision maintained that the first motion filed is to be given priority while subsequent motions are suspended, the court also allowed lawyers involved in subsequent motions to challenge the priority of the initial motion on the grounds that the initial motion was not pursued in the best interests of the putative members and constituted an abuse of the rule.
Other recent Quebec antitrust class actions reveal some of the above-noted differences in practice. Harmegnies v Toyota Canada, a series of judgments that ended in 2008 at the Quebec Court of Appeal, was an attempt to certify a class action alleging Toyota’s ‘Access Toyota’ programme maintained the resale prices of new Toyota vehicles. The Quebec Court of Appeal denied certification because, inter alia, the liability of Toyota and the dealers could not be established without individualised analysis of each class member. More to the point here, the Quebec Court of Appeal noted that, although prior cases in other provinces and the US were valuable, they should be used with care in Quebec due to differences in the law, particularly at the certification stage.
One year later the Jacques v Petro-Canada action was certified despite significant differences between the proposed class members.34 The action was against gas companies in four geographic areas, alleging a conspiracy to fix gas prices. The judgment acknowledged that wide price fluctuations meant that not all of the proposed class members actually suffered damages, and that it would be difficult to quantify the damages suffered by each individual. Nevertheless, it concluded that there was, in contrast with Toyota, a collective injury, and any difficulty regarding how to quantify damages does not negate its existence or its calculation in the aggregate. The trial judge also used her discretion to redefine the class as the original description was insufficiently precise to be certified.
In Option Consommateurs, the court commented on the fact that parties cannot, in the absence of leave, adduce evidence at the certification stage. In the words of the court, ‘the presentation of expert evidence is not the norm at the [certification] stage in Quebec [...] and, where rules applicable elsewhere might require a sophisticated methodology of proof of loss to be advanced before certification of a class action, the absence of such a methodology is not fatal here.’35 In a demonstration of the rule regarding evidence at certification, the court also upheld the trial judge’s refusal to postpone the proceedings in order to allow the defendant to adduce evidence, noting that the trial judge had previously refused permission to the plaintiffs to adduce evidence.36 Although the Supreme Court will soon rule on the indirect purchaser claims in Option Consommateurs, its decision will not likely provide any guidance on the issue of multiple parallel class actions.
Private administrative proceedings
In addition to criminal offences, the Competition Act prohibits certain trade practices such as abuse of dominance, exclusive dealing, tied selling and refusal to deal. These practices are reviewable by the Competition Tribunal. Most of the proceedings that come before the Tribunal are brought by the commissioner of competition. Indeed for certain provisions – such as abuse of dominance – the commissioner is the only party entitled to initiate a proceeding.37However, amendments passed in 2009 granted the right to private individuals to bring applications before the Tribunal, subject to obtaining leave.38 This right is available for conduct constituting price maintenance, refusal to deal and exclusive dealing, tied selling and market restrictions. Remedies for actions brought before the Tribunal by private parties are limited to behaviour modification orders; damages are not available.
Leave to bring a private proceeding before the Tribunal under any of these provisions will not be granted if the matter is already being handled by the commissioner or was previously settled by the commissioner. The applicant must also demonstrate that he is ‘directly and substantially affected’ by the alleged conduct. Although the standard for this requirement is lower than the balance of probabilities, few private litigants have been able to demonstrate that they were substantially affected by the conduct. Since the first application for leave was brought and denied in 2002, most leave applications have been denied.
A private party was granted leave in Used Car Dealers Association of Ontario v Insurance Bureau of Canada. The Used Car Dealers Association (UCDA) is a not-for-profit organisation that provides a number of services to its members (motor vehicle dealers), such as Autocheck, which provides dealers with information about the accident history of vehicles they sell. The Tribunal gave leave to an application by the UCDA claiming that the Insurance Bureau of Canada’s (IBC) refusal to provide them with claims data regarding the accident history of cars constituted a refusal to deal.39 According to the application, the IBC is the sole source of comprehensive claims data. The UCDA sought interim relief, which resulted in an interim supply order on consent. In March 2012, the UCDA won a motion when the IBC unsuccessfully sought permission to rescind the negotiated interim supply order granting UCDA access to the data during the proceedings. The case has since been withdrawn.
An example of a private action that was granted leave, but which failed on the merits, is Nadeau Poultry Farm Ltd v Groupe Westco Inc, another refusal to deal claim. Nadeau accused Westco, a competitor, of refusing to sell them live chickens to be processed at their plant, contrary to the Act. Nadeau was granted leave and interim relief, namely that Westco was to supply Nadeau with live chickens on usual trade terms. However, the Competition Tribunal ruled against Nadeau on the merits, finding that Nadeau’s inability to access adequate supplies of live chickens was not the result of insufficient competition, and that the refusal to deal was not likely to have an adverse effect on competition in the market. The decision was upheld by the Federal Court of Appeal, and the Supreme Court declined to consider Nadeau’s appeal.40
Although there are two venues for private antitrust litigation, most activity in Canada is found in the class actions brought before the regular courts, under the Act and through actions in tort. The most pressing issues remain indirect purchaser claims and multiple parallel class actions, though the former issue will likely be settled by the Supreme Court within the next year. Differences between provinces, changing caselaw and trends regarding cross-border issues will remain important and require practitioners to keep a sharp eye on this area of the law.
- Competition Act, RSC 1985, cC-34, § 36. Plaintiffs may also sue for losses resulting from non-compliance with a Tribunal or court order made under the Act.
- Ibid, §§ 45, 47, 52, 52.1, 55.1. Recent amendments to the Act made conspiracy a per se offence. Now, subject to very limited defences, any agreement between competitors or potential competitors to fix prices, allocate markets or limit supply will violate the conspiracy provision, regardless of the conspiracy’s impact on competition. The same amendments also removed price discrimination, advertising allowances and price maintenance from the list of criminal offences in the Act (former ss50, 51, 61).
- Competition Act, § 36(2).
- Competition Act, § 36(4).
- Vitapharm v F Hoffman-La Roche Ltd (2002), 20 CPC (5th) 351 (Ont Sup Ct).
- See, eg, Ontario’s Class Proceedings Act, 1992, SO 1992, c6, § 5. Prince Edward Island is the only province without class action legislation, relying instead on common law class actions.
- Hollick v Toronto (City), 2001 SCC 68.
- Chadha v Bayer (2003), 63 OR (3d) 22 (CA).
- See, for example, Irving Paper Ltd v Autofina Chemicals (2009) OJ 4021 (Ont SCJ).
- (2003), 63 OR (3d) 22 (CA).
- Illinois Brick v Illinois, 431 US 720 (1977).
- 2009 BCCA 503 (part of the alleged DRAM price-fixing cartel).
- Irving Paper Ltd v Atofina Chemicals, (2009) OJ 4021 (Ont SCJ).
- 2011 BCCA 186 and 2011 BCCA 187 respectively.
- The rejection of the passing on defence meant that defendants could not argue that direct purchasers did not suffer the full loss because they were able to pass on the higher cost to indirect purchasers.
- 2011 BCCA 187 at para 89.
- 2011 QCCA 2116 (Option Consommateurs).
- The § 36 limitation period had expired before this proceeding was commenced so the action was based in ‘extracontractual liability’, which is a concept of fault in Quebec civil law. It is governed by the broad principle that everyone is liable to compensate any injury – physical, moral or material – that is caused to another as a result of fault (article 1457 CCQ). It requires proving fault, causation and damage.
- The court does note, however, the possibility that legal persons with more than 50 employees who are direct purchasers might be able to claim losses already claimed by indirect purchasers or vice versa (2011 QCCA 2116 at para 116).
- Subject to change, depending on the Supreme Court’s schedule.
- See 9085-4886 Québec Inc v Visa Canada Corporation, 2012 QCCS 2572, where the Superior Court suspended the Quebec proceedings due to the rapid progression of the British Columbian proceedings, the outcome of which would have a significant impact on the Quebec proceedings.
- See Canada Post Corp v Lépine, 2009 SCC 16, which denied its applicability to Quebec plaintiffs due to inadequate notice; see also Hocking v Haziza, 2008 QCCA 800.
- National Class Actions Database, online: Canadian Bar Association.
- St-Marseille v Proctor & Gamble Inc. CSM, 2012 QCCS 1527.
- An Act respecting the class action, RSQ cR-2.1.
- Typically called ‘authorised’ in Quebec.
- See article 1003 Code of Civil Procedure (CPP).
- Marcotte v Longueuil, 2009 SCC 43 in a 5–4 split; see also Lallier v Volkswagen Canada Inc, 2007 QCCA 920.
- Malhab v Métromédia CMR Montréal Inc, (2003) RJQ 1011 (CA).
- Article 1005 CCP; Nault v Canadian Consumer Co Ltd, (1981) 1 SCR 553; Lallier v Volkswagen Canada Inc, 2007 QCCA 920.
- Article 1002 CCP. The constitutionality of this article was unsuccessfully challenged in Pharmascience Inc v Option Consommateurs, 2005 QCCA 437, which held that the authorisation stage was merely a procedural prerequisite to bringing the main action, that an oral hearing still permitted a ‘real, vigorous and unconstrained’ defence, and that the financial consequences to the defendant of granting certification are irrelevant in Quebec law (at paras 31, 35).
- Article 1010 CCP. The constitutionality of this article was unsuccessfully challenged in New York Life Insurance Company v Vaughan, 2003 CanLII 47914 (QC CA).
- 2012 QCCA 2132.
- Jacques v Petro-Canada, 2009 QCCS 5603.
- Option Consommateurs, supra note 20 at para 100.
- Ibid at paras 122–23.
- Amendments to the Competition Act provide the Tribunal with the power to award administrative monetary penalties against a person found to have engaged in conduct which constitutes an abuse of dominance. These penalties can be up to C$10 million for a first offence.
- See s103.1 of the Act, ss75–77, which concern refusal to deal, price maintenance, refusal to supply, exclusive dealing, tied selling and market restriction.
- 2011 Comp Trib 10.
- 2011 FCA 188, leave to appeal to the Supreme Court denied 22 December 2011.