Canada: Cartels

Hard-core cartels are subject to criminal prohibitions in Canada under the Competition Act (the Act), a federal statute that applies across Canada and, with very few exceptions, across all industries. The core prohibition is contained in section 45 (the general conspiracy provision), which was amended effective 12 March 2010. In addition, section 46 (implementing foreign conspiracy) and section 47 (bid rigging) may also be applicable depending on the circumstances.¹

Section 45: conspiracy

Section 45 provides that:

• every person who conspires with a competitor, with respect to a product, commits an offence if they agree or arrange to:
• fix, maintain, increase or control the price for the supply of the product;
• allocate sales, territories, customers or markets for the production or supply of the product; or
• fix, maintain, control, prevent, lessen or eliminate the production or supply of the product; and
• every person who comm
• its an offence under the above-mentioned subsection is guilty of an indictable offence and liable on conviction to imprisonment for a term not exceeding 14 years or a fine not exceeding C$25 million, or both.

Section 45 is a criminal offence, so to obtain a conviction the prosecution has the burden of proof to establish the offence ‘beyond a reasonable doubt’.

Unlike its predecessor, the amended section 45 is:

• a per se offence – it no longer contains a requirement that the agreement or arrangement has prevented or lessened or is likely to prevent or lessen competition ‘unduly’;
• applicable only to horizontal agreements or arrangements (eg, agreements or arrangements among actual or potential competitors); and
• prima facie, only applicable to horizontal agreements among sellers of products and services (ie, it does not apply to buying agreements).²

Recognising that the criminal prohibition in subsection 45(1) may have the unintended consequence of capturing competitor agreements that should not be condemned as per se illegal (eg, legitimate competitor collaborations and joint ventures that may have pro-competitive effects), the Act provides for an ancillary restraint defence (ARD). The ARD applies as a defence to a charge of conspiracy under subsection 45(1), where it can be established by an accused, on a balance of probabilities that:

• the competitor agreement is ancillary to a broader or separate agreement or arrangement between the parties;
• the competitor agreement is directly related to, and reasonably necessary for giving effect to, the objective of that broader or separate agreement or arrangement; and
• the broader or separate agreement or arrangement, considered alone, does not contravene subsection 45(1).

Section 46: implementing foreign conspiracy

Section 46 makes it a criminal offence for a corporation carrying on business in Canada to implement any foreign directive intended to give effect to a conspiracy entered into outside of Canada that would contravene section 45 of the Act if such conspiracy had been entered into in Canada.³ Corporations convicted under section 46 are subject to criminal fines that are at the discretion of the court.

Note that only corporations may be found liable under section 46. In contrast to the position under section 45, directors and officers of a corporation may not be found liable under section 46, although they may be liable under the aiding and abetting, and counselling provisions of the Criminal Code.⁴

Section 46 is targeted specifically at international cartel activities affecting Canada and permits the application of the Act even in situations where the actual conspirators are not located in Canada. The Canadian corporation is not required to have actual knowledge of the foreign conspiracy. While there have been convictions by way of guilty pleas under section 46, there is serious debate as to whether section 46 would survive constitutional scrutiny insofar as it can result in the conviction of a Canadian subsidiary for a criminal offence where the directors and officers of such subsidiary may not have had a guilty mind.

Section 47: bid rigging

Bid rigging⁵ is a criminal offence defined by section 47 of the Act and will be found to exist where each of the following four elements is satisfied:

• there was a call for tenders;
• there was an agreement between two or more bidders where:
• one or more agreed to not submit a bid or to withdraw a bid; or
• two or more submitted bids were arrived at by agreement or arrangement;
• bids were submitted in response to the call for tenders; and
• the person who called for the tenders was not made aware of any agreement or arrangement, at or before the time when bids were submitted.

Conviction for bid rigging under section 47 carries penalties of imprisonment for up to 14 years or a fine, or both, at the discretion of the court.

Note that there are certain exceptions and defences to the above provisions. For example, there is a regulated conduct defence that may be available where conduct under investigation has been prescribed (or in some cases merely authorised) under lawful legislation. Also, there is a limited export cartel defence to prosecution under section 45.

Further, the competition commissioner (the Commissioner) may have to resort to section 90.1 of the Act where he or she determines that the conduct under review does not merit the imposition of criminal sanctions, or where the criminal sanctions are not available. In December 2009, the Competition Bureau (the Bureau) issued detailed Competitor Collaboration Guidelines that discuss the Bureau’s approach to assessing collaborations between competitors.⁶ The guidelines provide detailed guidance as to when the Bureau is likely to take enforcement action under section 45 (or other criminal provisions of the Act) versus section 90.1 or other civil provisions of the Act.

Although, as noted above, the law permits courts to impose substantial prison sentences where the law has been violated, to date, such sentences are only rarely imposed and have been relatively modest. Courts, however, have imposed significant criminal fines on those convicted of the cartel provisions of the Act.

Criminal investigations

The enforcers and enforcement structure

The Bureau, the head of which is the commissioner of competition, is the Canadian governmental agency that administers and, along with the Public Prosecution Service of Canada, enforces the Act. In the context of cartels, investigations are conducted by the Cartels and Deceptive Marketing Practices Branch (formerly Criminal Matters Branch) of the Bureau. Where the Commissioner concludes that a criminal offence under the Act has been committed, a recommendation is made to the director of public prosecutions (DPP) – the head of the Public Prosecution Service of Canada – that charges be laid.

The DPP fulfils the responsibilities of the attorney general of Canada in the discharge of his or her criminal law mandate by prosecuting criminal offences under federal jurisdiction. It is the DPP who is ultimately responsible for initiating and conducting prosecutions under the criminal provisions of the Act.⁷ Such criminal prosecutions can take place before the superior court of a province or the Federal Court of Canada, although the Federal Court of Canada cannot conduct jury trials.

Investigative tools

In the exercise of its investigative function, the Bureau has a variety of tools at its disposal, most notably section 11 orders, search warrants and wiretaps.

Section 11 orders

Orders made pursuant to section 11 of the Act can be sought ex parte by the Commissioner in the course of a formal inquiry commenced under section 10 of the Act. It is a powerful investigative tool that has been used by the Commissioner in the context of civil inquiries (eg, mergers and abuse of dominance), as well as criminal inquiries (eg, cartel investigations). Section 11 orders are essentially subpoenas, which are obtained and used by the Commissioner to obtain information in the possession of a person (including a corporation) that is likely to have information that is relevant to a matter under inquiry.

Information can be obtained upon the issuance of a section 11 order in the following ways:

• oral examinations, under oath, of individuals on any matter that is relevant to the inquiry;
• the production of records, including electronic records; and
• written returns requiring a person to create or prepare detailed information under oath and provide it to the Commissioner.

Subsection 11(2) also explicitly contemplates an order compelling a Canadian corporation to produce records in the possession of the corporation’s Canadian or foreign affiliates where the issuing judge is satisfied that such affiliate has records that are relevant to the inquiry. As such, under subsection 11(2), the Commissioner can seek a court order requiring a Canadian subsidiary to produce records of its foreign parent or sister companies.

Furthermore, subsection 11(3) states that persons are not excused from complying with an order on the grounds that their testimony, records or written returns may incriminate them; however, the section goes on to stipulate that any such testimony or return cannot be used against the individual that provided it in any criminal proceeding against that individual. It is noteworthy that subsection 11(3) does not explicitly state that a record produced by an individual cannot be used against that person in a criminal proceeding, nor does it provide such individual with derivative use immunity⁸ in relation to his or her testimony or written return. In addition, subsection 11(3) does not preclude the use of an individual’s testimony or written return against third parties, including, for example, that individual’s corporate employer.

The scope of the Commissioner’s inquiry pursuant to section 11 must not be excessive, disproportionate or unnecessarily burden­some. In making a section 11 inquiry, the Commissioner must provide full and frank disclosure and the information or records being sought must be relevant to the inquiry in question.

Section 19 of the Act sets out the procedure for dealing with records required to be produced, but that are subject to claims of solicitor–client privilege.

It should be noted, however, that the constitutionality of the use of section 11 (including subsection 11(2)) in a criminal cartel investigation has in the past been challenged and is likely to be challenged in the future.

Search warrants

The Act also authorises the Commissioner to apply ex parte to a judge for a warrant allowing officers of the Bureau to conduct searches and seizures, including searches of computer systems and seizure of electronic records. Prior to issuing a warrant, a judge has to be satisfied that there are ‘reasonable and probable grounds’ to believe that one of the Act’s provisions has been or is about to be breached and that there will be relevant evidence on the premises being searched.⁹

A search warrant issued to the Bureau will be very specific. If correctly issued, it will list the individuals who are permitted to conduct the search, the information that is being sought and the specific premises they are allowed to search. While a search warrant authorises the Bureau to enter and search premises, examine records or other things named in the warrant and copy or seize them, it does not entitle Bureau officers to interview company representatives.

Before seizing the records, the Bureau officers must provide the party being searched with a reasonable opportunity to claim solicitor–client privilege in respect of any of the records to be seized. Section 19 of the Act (which is also applicable in the context of a section 11 order) sets out the procedure for dealing with records to which a claim of solicitor–client privilege is made.

Wiretaps

The Act also enables the Commissioner to utilise judicially authorised wiretaps in respect of certain criminal offences, including conspiracies and bid rigging. To obtain a wiretap authorisation, the Commissioner must submit a sworn affidavit in accordance with the requirements of subsection 185(1) of the Criminal Code. The affidavit must set out certain information, including:

• the facts relied on to justify the belief that the authorisation should be given, together with particulars of the alleged offence;
• the type of private communication proposed to be intercepted;
• particulars with respect to the individuals whose communications will be intercepted; and
• how and where the officers propose to accomplish the interception.

The issuing judge must be satisfied that granting the authorisation is in the best interests of the administration of justice, and that other investigative procedures have been tried and failed, other investigative procedures are unlikely to succeed, or the matter is of such urgency that it would be impractical for the officers to carry out the investigation without the assistance of the wiretap.

Immunity and leniency programmes

In the context of Canadian competition law, conceptually, ‘immunity’ and ‘leniency’ are treated differently. Immunity refers to complete immunity from prosecution (ie, no criminal charges are laid), whereas leniency refers to lenient or more favourable treatment (eg, reduced penalties) in return for a guilty plea and cooperation.

Immunity programme

The Bureau refers to the immunity programme, which was formally launched in September of 2002, as the ‘single most powerful means of detecting criminal activity’. Although it has evolved over time, the essence of the programme has remained the same.

Under the current immunity programme,¹⁰ a party implicated in activity in contravention of any of the criminal provisions of the Act may apply for immunity. While the application for immunity is made to the Bureau, the Bureau only makes a recommendation to the DPP that immunity be granted. Ultimately, it is the DPP who will make the grant of immunity upon the Bureau’s recommendation.

The Bureau may recommend a grant of immunity in the following two scenarios:

• where the Bureau is unaware of an offence in relation to a particular product or service, and the party is the first to disclose it; or
• where the Bureau is aware of an offence and the party is the first to come forward, before there is sufficient evidence to warrant a referral of the matter to the DPP.

In addition, generally speaking, in order to qualify for immunity, an applicant must:

• be the first to disclose the illegal activity to the Bureau;
• terminate its participation in the illegal activity;
• not have coerced others to be party to the illegal activity; and
• cooperate in a timely manner, at its own expense, with the Bureau’s investigation and any subsequent prosecution by the DPP of other cartel participants.

If a company qualifies for immunity, all current directors, officers and employees who admit their involvement in the illegal anticompetitive activity as part of the corporate admission, and who provide complete, timely and ongoing cooperation, will also typically qualify for the same recommendation for immunity. Former directors, officers and employees who offer to cooperate with the Bureau’s investigation may also qualify for immunity, although such determination is made on a case-by-case basis.

Leniency programme

The Bureau’s Bulletin on the Leniency Program (the Leniency Bulletin) and its accompanying FAQs articulate the Bureau’s policy and enforcement approach in respect of leniency and sentencing.¹¹ As with the case of immunity, the Bureau can only recommend that leniency be granted; the ultimate decision rests with the DPP.

Where the party under investigation cannot take advantage of the immunity programme (eg, because it is not the first to disclose the illegal conduct to the Bureau), it may be possible to seek leniency. To qualify for leniency, an applicant must:

• terminate its participation in the illegal conduct;
• agree to cooperate fully and in a timely manner, at its own expense, with the Bureau’s investigation and any subsequent prosecution by the DPP of other cartel participants; and
• agree to plead guilty.

According to the Leniency Bulletin, the first leniency applicant is eligible to receive:

• a reduction of 50 per cent of the fine that would have otherwise been recommended; and
• a recommendation that no separate charges be laid against the party’s current directors, officers or employees who agree to cooperate with the investigation in a full and timely fashion.

The second leniency applicant may receive a reduction of 30 per cent of the fine that would have otherwise been recommended.

Subsequent leniency applicants may also receive a reduction of the fine that would have otherwise been recommended. The actual amount of the reduction will depend on when the applicant sought leniency compared to the second-in applicant and the timeliness of its cooperation.

For the second and any subsequent leniency applicant, current and former directors, officers, employees and agents may be charged depending on their role in the offence. Directors, officers, employees and agents who are charged but who cooperate fully may be eligible to receive a lenient treatment recommendation from the Bureau.

International cooperation

Enforcement of Canadian competition law, particularly in relation to cartel enforcement, continues to benefit from a high degree of international cooperation. Indeed, such cooperation appears to have strengthened over the past several years, particularly through the auspices of the International Competition Network. There is an especially close working relationship between the Bureau and antitrust authorities in the US and the EU.

Canada has signed 36 mutual legal assistance treaties (MLATs) with other governments, including the US, the UK, Germany, France, Italy, Australia and South Korea. The MLATs provide that either signatory to the treaty can request certain assistance of the other party. This assistance can include executing searches and seizures, taking evidence, locating or identifying persons and serving documents.

In addition, Canada has entered into 11 agreements with other jurisdictions in relation to cooperation in respect of the enforcement of competition laws, including agreements with the US, the EU, the UK, Brazil, Korea and Japan. The Hong Kong Competition Commission also enjoyed the benefit of seconding one of its senior staff persons to the Competition Bureau’s cartels and deceptive marketing practices branch.

Recent enforcement activities

Cartel enforcement has been, and remains, a high priority for the Commissioner and the Bureau. The Bureau’s cartel investi­gations have resulted in numerous guilty pleas that have brought significant fines and, in some cases, imprisonment to those accused. These investigations relate to both domestic and international cartel activity.

On the domestic front, in March 2012, a series of Ontario gasoline retailers pleaded guilty to fixing the price of gasoline in Brockville and Kingston, Ontario. The companies that pleaded guilty were fined a total of more than C$2 million. These pleas were followed by another company pleading guilty of fixing gas prices in Belleville, Ontario, less than a month later, and receiving a fine of C$500,000. In a similar case, from 2008 to 2012, 33 individuals and seven companies were either found guilty or pleaded guilty to charges that stem from the Bureau’s investigation into a price-fixing cartel in relation to retail gasoline in Quebec. Fines from this investigation now total over C$4 million and six of the 33 individuals have been sentenced to terms of imprisonment totalling 54 months, with the latest fine secured in April 2015. In another domestic case, in January 2012, Domfoam International Inc and its affiliate Valle Foam Industries (1995) Inc pleaded guilty to conspiracy and were fined a total of C$12.5 million for partici­pating in a price-fixing cartel in the polyurethane foam market over an 11-year period. This was the first conviction under the March 2010 amendments to the conspiracy provision of the Competition Act. More recently, the Public Prosecution Service of Canada stayed all remaining charges in one of Canada’s longest price-fixing investigations to date. On two occasions in autumn 2015, the Competition Bureau announced that criminal charges against individual and corporate accuseds in its investigation of the alleged price fixing of candy bars would be stayed. This action, taken by the Public Prosecution Service of Canada, has raised many questions about the utility of the immunity and leniency programmes, given that one party had agreed to plead guilty in exchange for lenient treatment. Hershey Canada Inc pleaded guilty in June 2013 and agreed to pay a C$4 million fine. Of note, in 2015, a jury in one of Canada’s largest bid-rigging cases to date rendered 60 not-guilty verdicts as against seven individuals and three companies charged with rigging bids for government information technology (IT) contracts worth approximately C$67 million.

In 2016, Quebec courts fined three companies and one senior officer more than C$350,000 for their roles in bid-rigging schemes in respect of municipal construction and maintenance contracts. One former director of an Ottawa, Ontario-based IT company pleaded guilty for conspiring to rig bids relating to the supply of IT services for the federal government. In addition to paying a fine and performing community service, the former director agreed to speak out against bid-rigging during Bureau-organised outreach seminars. This part of the former director’s sentence fits comfortably with the Bureau’s 2016–2017 Annual Plan and the Commissioner’s commitment to competition compliance.

On the international cartel front, in June 2013 Cathay Pacific Airways Limited pleaded guilty to conspiracy for participating in a cartel that fixed air cargo fuel surcharges over a four-year period, and was fined C$1.5 million. Cathay Pacific Airways Limited was the eighth international air carrier fined under this investigation, joining Korean Air, Cargolux, Air France, KLM, Martinair, Qantas and British Airways, who have also pleaded guilty to charges stemming from this investigation. The Bureau’s air cargo investigation has resulted in fines of over C$24 million. In September 2012, Maxzone Auto Parts (Canada) Corp pleaded guilty to fixing the price of aftermarket automotive replacement lights in Canada, and was fined C$1.5 million.

The Bureau has also demonstrated a commitment to the enforcement of the bid-rigging provisions under the Act, on both international and domestic fronts. In April 2013, the largest fines ever by a court in Canada for bid rigging were ordered against Yazaki Corporation (C$30 million) and Furukawa Electric Co Ltd (C$5 million) in separate cases arising from participation in international bid-rigging conspiracies. In July 2013, JTEKT Corporation was fined C$5 million for its participation in an international cartel.

In February 2012, Construction GTRL (1990) Inc Acoustique JCG Inc and Entreprises de Construction OPC Inc pleaded guilty to bid rigging related to the 2003 expansion of the Chicoutimi Hospital in Quebec. The Competition Bureau found that the companies entered into an agreement to predetermine the winner of the bidding process. Because of the bid rigging that occurred prior to the amendment of the bid-rigging provision of the Competition Act in March 2009, the companies were charged under the previous bid-rigging regime. They were fined a total of C$100,000 and are subject to a court order for 10 years. In June 2012, Colmatec Inc and its operations director pleaded guilty to participating in a bid-rigging scheme to obtain municipal contracts for special sewer services in Quebec. Colmatec Inc was fined C$50,000 and is subject to a court order, and the operations director was sentenced to 100 hours of community service and two years’ probation. In July 2012, Corporate Research Group Ltd pleaded guilty to bid rigging in relation to real estate advisory service contracts with the Canadian federal government.

In 2014, the Bureau’s ongoing investigation into the motor vehicle components industry continued. NSK Ltd, Panasonic Corporation and DENSO Corporation all pleaded guilty to participation in bid-rigging conspiracies and were fined C$4.5 million, C$4.7 million and C$2.45 million, respectively. In April 2016, the Bureau announced the ninth guilty plea in its autoparts investigation. The C$13 million fine against the Showa Corporation represents the second largest fine for a bid-rigging offence in Canada. Showa was found to have engaged in bid-rigging with another supplier of electric power steering gears sold to Honda Motor Co, Ltd for cars manufactured in Canada.

The Bureau’s autoparts investigation also made history in other ways. On 20 July 2016, the Bureau announced its decision to defer charges of a criminal conspiracy, in which it had an interest, to a foreign antitrust agency. From January 2000 through to September 2012, Nishikawa Rubber Co, Ltd (Nishikawa), a Japanese manufacturer of automobile body-sealing products, engaged in illegal agreements to fix the prices of, and rig the bids for, Toyota and Honda-manufactured cars. Although US$236 million of Nishikawa’s sales relate to body-sealing products that were sold in Canada, the Bureau deferred criminal charges to the United States Department of Justice, citing the high percentage of vehicles that were later exported to the United States.

Another focus for the Bureau has been the pharmaceutical industry. In September 2014, the Bureau released a White Paper stating it may use its criminal enforcement powers to prosecute patent litigation settlement agreements between brand and generic drug manufacturers under certain circumstances. The White Paper states that section 45 of the Act may apply to settlements resulting in the delay of generic entry where the generic agrees not to enter the market before a certain date and there is compensation. The Bureau further elaborated that a patent settlement agreement between competitors would likely be pursued under section 45 if:

• such agreement also includes conduct with respect to markets or products that are not the focus of the patent litigation or the conduct is beyond the scope of the patent (eg, fixing a generic entry date beyond the term of the patent); or
• the Bureau finds evidence that such a settlement agreement is a vehicle for a ‘naked restraint’ on competition that is not implemented in furtherance of a legitimate collaboration or motivated by factors beyond the issues associated with the litigation.

In March 2016, the Bureau released its updated Intellectual Property Enforcement Guidelines (IPEGs). The IPEGs clarify the Bureau’s 2014 position, providing that section 45 focuses on settlements that restrict competition beyond the exclusionary potential of the patent or are shams. In such circumstances, the Bureau may review a settlement under section 45 of the Act and where the constituent elements of an offence under that section are satisfied, the Bureau will consider whether the ARD or another defence applies.

Civil actions for damages

Section 36 of the Act

Consideration should also be given to the availability to plaintiffs of private enforcement in respect of alleged cartel activity. Subsection 36(1) of the Act provides for a civil remedy to ‘any person who has suffered loss or damages’ as a result of a breach of certain enumerated sections of the Act, including sections 45, 46 and 47, referenced above. If liability is proven, an amount equal to the loss suffered is payable together with an amount in respect of costs of investi­gation. Notably, the Act only provides for single damages, rather than the treble damages available in the US.¹² It is common practice for cases brought pursuant to subsection 36(1) to also include claims for common law damages based on civil conspiracy, restitutionary relief and punitive damages.

Sections 45 and 36(1) have been relied on in numerous class actions that seek recovery for alleged cartel activity. In many instances, such proceedings are commenced after convictions or similar class actions in the US. To date, there has not been a trial in Canada in respect of a cartel class action. However, there have been numerous settlements, often entered into following a settlement in similar class-action proceedings in the US.

Private proceedings must be brought within two years of either the day on which the conduct was engaged in (paragraph 36(4)(a)(i) of the Act) or the day on which any criminal proceedings are ‘finally disposed of’ (paragraph 36(4)(a)(ii) of the Act), whichever is later.¹³ With respect to paragraph 36(4)(a)(i), the Ontario Court of Appeal in Fanshawe College of Applied Arts and Technology v HannStar Display Corporation et al¹⁴ concluded that this element is subject to the common law discoverability principle, namely that the cause of action arises for the purposes of a limitation period when the material facts on which it is based has been discovered or ought to have been discovered by the plaintiff in the exercise of reasonable diligence.¹⁵ With respect to paragraph 36(4)(a)(ii), it is often not known if or when criminal proceedings will be commenced. As a result, this element can arguably provide for an expansive limitation period. For example, if a criminal proceeding were commenced more than two years after the day conduct was engaged in, the civil limitation period could arguably be refreshed. Further, the Ontario Court of Appeal in HannStar noted that paragraph 36(4)(a)(ii) is arguably not connected to a plaintiff’s cause of action or knowledge, and is, accordingly, probably not subject to the discoverability principle.¹⁶

The current Canadian landscape

Key developments and issues in Canadian class actions involving cartel allegations include:

• the Supreme Court of Canada’s rejection of the ‘passing on’ defence and confirmation that indirect purchasers have a cause of action;
• the extent to which the Act constitutes a complete code, such that it precludes common law causes of action that are predicated on breaches of the Act;
• whether ‘umbrella purchasers’ have a cause of action in the context of cartel class actions;
• whether Canadian plaintiffs can represent a global class; and
• access to the Competition Bureau’s investigative file by civil plaintiffs.

Pursuant to the Ontario Class Proceedings Act,¹⁷ an Ontario Court shall certify a class proceeding where:

   (a)   the pleadings or the notice of application discloses a cause of action;

   (b)   there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;

   (c)   the claims or defences of the class members raise common issues;

   (d)   a class proceeding would be the preferable procedure for the resolution of the common issues; and

   (e)   there is a representative plaintiff or defendant who,

       (i)    would fairly and adequately represent the interests of the class,

      (ii)  has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and       

    (iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

All common law Canadian provinces impose similar requirements to certify a class proceeding.

Canadian courts have confirmed that there is a low bar for a plaintiff to meet the cause-of-action requirement at the certification stage, and a plaintiff will succeed unless it is ‘plain and obvious’ that the plaintiff’s claim, as pleaded, will fail. Canadian courts will consider evidence when assessing the remaining certification requirements, however, the plaintiff is only required to provide ‘some basis in fact’ for each of the remaining certification requirements. There has been significant debate in Canadian class actions over the interpretation and application of the ‘some basis in fact’ evidentiary standard.

In a trilogy¹⁸ of decisions released on 31 October 2013 involving allegations of cartel conduct, the Supreme Court of Canada confirmed that the ‘some basis in fact’ standard remains the test to assess the other certification requirements. Although the Supreme Court of Canada held that this test did not rise to the standard of proof on a balance of probabilities, it did not provide additional guidance on the interpretation of the ‘some basis in fact’ standard. This issue continues to be fiercely litigated at the certification stage in cartel class actions, particularly when assessing the plaintiff’s proposed common issues and the plaintiff’s requirement to propose a methodology that is capable of establishing harm on a class-wide basis.

In the trilogy, the Supreme Court of Canada also rejected the passing on defence, holding that it is ‘inconsistent with the basic premise of restitution law’, ‘economically misconceived’, and ‘would force a difficult burden of proof on the plaintiff to demonstrate not only that it had suffered a loss, but that it did not engage in any other transactions that would have offset the loss’. Further, the Supreme Court of Canada permitted indirect purchasers to pursue class actions and held that classes may be composed of both direct and indirect purchasers, and that a conflict between those two groups as to how aggregate damages are to be distributed among them should not bar indirect purchasers from becoming members of a proposed combined class. The Supreme Court of Canada concluded that under Quebec civil law, the Quebec Superior Court has jurisdiction over price-fixing arrangements entered into outside Canada if there is some evidence of injury or economic damage to a Quebec consumer. Several price-fixing cases that were on hold, pending the decisions of the Supreme Court of Canada, and have been working their way through Canada’s courts, are expected to provide further guidance to how these principles will be applied.

Recent cases have also considered whether the Act is a ‘complete code’ that precludes a plaintiff from asserting common law and equitable causes of action that are predicated on a breach of the Act. As the private right of action for damages under section 36 of the Act limits damages that can be claimed to actual damages proven to be suffered by the plaintiff plus costs of investigation and legal costs, plaintiffs in cartel class actions frequently assert common law and equitable causes of action that are predicated upon a breach of the Act.

Courts across Canada have released conflicting decisions on the ‘complete code’ argument. In Wakelam v Wyeth Consumer Healthcare,¹⁹ the British Columbia Court of Appeal accepted the ‘complete code’ argument and struck out a plaintiff’s claim for restitutionary remedies that were predicated on breaches of the Act. Shortly thereafter, in Watson v Bank of America et al,²⁰ the British Columbia Court of Appeal came to a different conclusion and permitted common law claims predicated upon a breach of the Act. In another British Columbia case, Godfrey v Sony Corporation et al,²¹ the defendants argued that Watson was decided on the erroneous basis that unlawful-means conspiracy based on a breach of the Combines Investigation Act was a recognised cause of action when the statutory predecessor to section 36 of the Competition Act was enacted. The defendants argued that the history of the recognition of the cause of action was not considered by the Watson court, leading it to apply to wrong interpretative principle from the Supreme Court of Canada jurisprudence. The BC Supreme Court held that it was bound to follow Watson. An appeal from that decision is currently pending before the British Columbia Court of Appeal. In Shah v LG Chem et al,²² the Ontario Superior Court held that the Act was a ‘complete code’ that precluded common law and equitable claims predicated upon a breach of the Act. The plaintiff in Shah was granted leave to appeal this ruling. In HannStar, the Ontario Court of Appeal permitted common law claims predicated upon a breach of the Act, and in so doing, doubted the application of Wakelam and Shah. Further appellate court decisions should help clarify the state of the law in Ontario and Canada.

Another issue that arose in Shah and Godfrey, and will likely become the subject of further litigation in Canada, is whether a proposed class in a Canadian cartel class action can include umbrella purchasers or unconnected purchasers (ie, persons who purchased the allegedly price-fixed product from a non-defendant manufacturer who was not a party to the alleged cartel). In Shah, the plaintiff sought to include umbrella purchasers in its proposed class, on the basis that the defendants had the market power to impact the conduct and pricing of non-defendant manufacturers. However, the Ontario Superior Court rejected the claims of umbrella purchasers on the basis that, inter alia, these claims are inconsistent with restitutionary law principles and would impose indeterminate liability on the defendants. The plaintiff in Shah was granted leave to appeal this aspect of the decision. Conversely, in Godfrey, the BC Supreme Court allowed some of the umbrella purchaser claims. The Court certified the claim on behalf of umbrella purchasers based on section 36 of the Competition Act, holding that it is not plain and obvious that umbrella purchasers do not have such a cause of action, and disagreed with the reasons given in Shah. However, the Court concluded that umbrella purchasers do not have claims in unjust enrichment or waiver of tort and declined to certify those claims.  The issues have been appealed and will be addressed by the British Columbia Court of Appeal in 2017.

As a result of a growing trend by Canadian class counsel to seek to represent a global class, another prevalent issue in Canadian cartel class actions is whether Canadian courts will certify global classes. The issue has been litigated in different contexts in Canada and was most recently considered in the antitrust context in Airia Brands Inc v Air Canada,²³ a class action alleging cartel conduct in the airfreight cargo shipping industry. In Airia Brands, the plaintiffs sought to certify a global class of consumers from more than 30 countries on six continents. The Ontario Superior Court of Justice refused to certify the global class and held, among other things, that to do so would offend the principles of order, fairness and comity. This case is proceeding to the Court of Appeal.

In terms of access by private plaintiffs to the Bureau’s investigative files, a recent court decision held that wiretaps are accessible to litigants in a civil case in certain circumstances. In Imperial Oil v Jacques,²⁴ the Supreme Court of Canada permitted the disclosure of wiretaps collected in previous investigations. Recently, the Supreme Court of Canada granted leave to appeal in Attorney General of Canada v Daniel Thouin et al.²⁵ The appeal, which is expected to be heard in 2017, will determine whether the Bureau’s chief investigator may be examined in subsequent civil litigation arising from the Bureau’s criminal investigation.

Notes

1. In addition, section 49 of the Act contains a specific per se prohibition against certain types of agreements between federal financial institutions, although it has rarely been used.
2. Agreements or arrangements among competitors that do not fall within the ambit of section 45 (eg, legitimate competitor collaborations and joint ventures), may nevertheless be subject to civil administrative review by the Competition Tribunal under section 90.1 of the Act. In such circumstances, however, such an agreement can only be subject to a remedial order by the Competition Tribunal if it results in, or is likely to result in, a substantial prevention or lessening of competition.
3. Section 46 provides as follows:
       (1) Any corporation, wherever incorporated, that carries on business in Canada and that implements, in whole or in part in Canada, a directive, instruction, intimation of policy or other communication to the corporation or any person from a person in a country other than Canada who is in a position to direct or influence the policies of the corporation, which communication is for the purpose of giving effect to a conspiracy, combination, agreement or arrangement entered into outside Canada that, if entered into in Canada, would have been in contravention of section 45, is, whether or not any director or officer of the corporation in Canada has knowledge of the conspiracy, combination, agreement or arrangement, guilty of an indictable offence and liable on conviction to a fine in the discretion of the court.
4. Criminal Code, sections 21 and 22.
5. Section 47 provides:
       (1) In this section, ‘bid-rigging’ means:
           (a) an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid or tender in response to a call or request for bids or tenders, or agrees or undertakes to withdraw a bid or tender submitted in response to such a call or request, or
          (b) the submission, in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers, where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is submitted or withdrawn, as the case may be, by any person who is a party to the agreement or arrangement.
6. The Competitor Collaboration Guidelines can be found online at: www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03177.html.
7. In May 2010, the DPP and the commissioner entered into a memorandum of understanding with respect to the investigation and prosecution of offences under the Act, among other statutes.
8. Derivative use immunity would exclude evidence that is discovered as a result of the immunised testimony and that would not have been discovered but for that immunised testimony.
9. Warrantless searches are also authorised by the Act where, by reason of exigent circumstances (eg, where delay would result in the loss or destruction of evidence), it would not be practical to seek judicial authorisation.
10. The immunity programme is set out in the Bureau’s Immunity Program Bulletin (7 June 2010) and ‘Immunity Program: Frequently Asked Questions’, both of which can be found online at  www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03248.html and www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03250.html.
11. The Leniency Bulletin (29 September 2010) and the FAQs can be found online at: www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02816.html.  
12. Section 36 provides:
        (1) Any person who has suffered loss or damage as a result of:
            (a) conduct that is contrary to any provision of Part VI; or
            (b) the failure of any person to comply with an order of the Tribunal or another court under this Act, may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.
        (2) In any action under subsection (1) against a person, the record of proceedings in any court in which that person was convicted of an offence under Part VI or convicted of or punished for failure to comply with an order of the Tribunal or another court under this Act is, in the absence of any evidence to the contrary, proof that the person against whom the action is brought engaged in conduct that was contrary to a provision of Part VI or failed to comply with an order of the Tribunal or another court under this Act, as the case may be, and any evidence given in those proceedings as to the effect of those acts or omissions on the person bringing the action is evidence thereof in the action.
        (3) For the purposes of any action under subsection (1), the Federal Court is a court of competent jurisdiction.
        (4) No action may be brought under subsection (1):
            (a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from:
                (i) a day on which the conduct was engaged in, or
                (ii) the day on which any criminal proceedings relating thereto were finally disposed of, whichever is the later; and
            (b) in the case of an action based on the failure of any person to comply with an order of the Tribunal or another court, after two years from
               (i) a day on which the order of the Tribunal or court was contravened, or  
              (ii) the day on which any criminal proceedings relating thereto were finally disposed of, whichever is the later.
13. Subsection 36 (4) of the Act.
14. The Fanshawe College of Applied Arts and Technology v AU Optronics Corporation, Chi Mei Corporation, Chi Mei Optpelectronics Corporation, Nexgen Mediatech Inc and HannStar Display Corporation, 2016 ONCA 621.
15. Ibid, at paragraphs 32-46.
16. Ibid, at paragraphs 47.
17. SO 1992, c6.
18. Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57; Infineon Technologies AG v Option consommateurs, 2013 SCC 59; Sun-Rype Products Ltd v Archer Daniels Midland, 2013 SCC 58. [collectively, the ‘Trilogy’].
19. 2014 BCCA 36 [Wakelam].
20. 2015 BCCA 362 [Watson].
21. 2016 BCSC 844.
22. Shah v LG Chem et al, 2015 ONSC 6148 [Shah].
23. 2015 ONSC 5332 [Airia Brands].
24. Imperial Oil v Jacques 2014 SCC 66.
25. Attorney General of Canada v Daniel Thouin and Automobile Protection Association No. 36869.