I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
i Have gown, will travel
In its 2016 decision in Endean v. British Columbia,2 the Supreme Court of Canada (SCC or the Supreme Court) ruled that superior court judges can sit outside their home provinces. This decision will facilitate the management of national class actions, including private antitrust class actions.
The issue arose in connection with a national settlement in a class action related to tainted blood that was approved in 1999. Class counsel wanted to extend the time for filing claims for benefits from the settlement funds, which required that superior courts supervising the settlement in three provinces, British Columbia, Ontario and Quebec, hear the motion and agree on the outcome for the decision to take effect. Class counsel proposed that the three judges should hear the motion sitting together in one location. The Attorneys General from each of the three provinces opposed this, however, claiming that superior court judges cannot sit outside their home province. Ultimately, the Ontario Court of Appeal held that judges can sit outside Ontario, but that there must be a videolink back to Ontario. The British Columbia Court of Appeal disagreed, citing pre-Confederation common law principles of territoriality.
The Supreme Court held that the broad, general power to manage class proceedings found in the Class Proceedings Act in both Ontario and British Columbia gave the courts the authority to sit outside of their home provinces. The common law does not prevent this, nor does the Constitution or any statute, the Court added. While there is a ‘deep-seated sense’ in the common law that courts conduct their business within their geographical boundaries, the type of hearing at issue did not engage concerns relating to extra-provincial exercise of a judge’s coercive power, since the hearing was on a paper record.
Superior court judges also have an inherent jurisdiction to sit outside their home provinces, the Court added, unless there is a statutory limitation prohibiting this.
ii Parasitic causes of action under review
Plaintiffs in class actions based on violations of the Competition Act typically plead a number of common law and equitable causes of action in addition to a claim based on the statutory cause of action provided for in Section 36 of the Competition Act. They do so because these causes of action hold out the potential for greater recovery than Section 36. For example, Section 36 requires that the plaintiffs prove loss. Waiver of tort, however, potentially does not require any showing of loss at all. Similarly, Section 36 is expressly limited to damages that can be proven, thus ruling out punitive damages. Common law and equitable claims are not so limited.
The causes of action typically pleaded are unlawful interference with economic relations, tort of conspiracy, and waiver of tort. They are parasitic because all (except for one branch of the tort of conspiracy) depend on a showing of a breach of the Competition Act as a necessary unlawful element.
Recently, courts have begun to consider whether such parasitic claims should be allowed at all. The Competition Act itself provides for a cause of action for breaches of some of its provisions, and other remedies for beaches of other provisions. The general rule is that breach of a statute does not give rise to a cause of action at common law. The question naturally arises: is the recovery provided for in the Competition Act a complete code, such that these other causes of action are not needed, and not permissible?
In Wakelam v. Wyeth Consumer Healthcare,3 the British Columbia Court of Appeal held that Parliament intended the Competition Act to be a complete code, thus excluding remedies apart from those provided in the Competition Act.
Following this decision, the British Columbia Supreme Court struck claims of unlawful conspiracy, unlawful interference with economic interests, and constructive trust in Watson v. Bank of America Corp.,4 but certified a class action against Visa and MasterCard, major Canadian banks, and other financial institutions, alleging that the credit card interchange fees and rules breach the Competition Act. Claims based on breaches of the criminal price maintenance provisions were statute-barred, since these provisions were repealed more than two years before the action was launched, the court held.
However, less than four months later, another British Columbia Supreme Court judge refused to strike similar claims in a case alleging that Microsoft conspired with various computer manufacturers to gain a monopoly over PC operating systems.5 The judge said that Wakelam conflicted with the recent SCC decision on the tort of unlawful interference with economic relations in A.I. Enterprises Ltd v. Bram Enterprises Ltd,6 because that case referred to an earlier case holding that a breach of a predecessor to the Competition Act could support the tort of conspiracy. A third British Columbia judge took the same view in Fairhurst v. Anglo American PLC,7 and certified a class action alleging that De Beers and diamond companies conspired to fix prices for diamonds.
In August 2015, the British Columbia Court of Appeal issued its decision in Watson.8 The Court held that claims in restitution (such as waiver of tort) are not available for breaches of the Competition Act, but that a breach of the Act could establish claims for unlawful means conspiracy or unlawful interference with economic relations (now simply called ‘unlawful means’).
Whether common law claims based on breaches of the Competition Act are possible is a question of statutory interpretation, the Court held: did Parliament intend that ‘the tools of common law and equity could form a basis for recovery for breach of statute’?
The Court stated the test to be applied as ‘whether the Competition Act provides “a new and superior” method of remedying a breach of the statute’. But the Court then applied a slightly different test. The tort of unlawful means conspiracy is not identical to a claim under Section 36, the Court noted. The tort is narrower in scope than the statutory cause of action, but broader in its available remedies. Consequently, Section 36 was not intended to replace the tort, the Court held.
Then, in October 2015, an Ontario judge held, in Shah v. LG Chem, Ltd,9 that the Competition Act is a complete code that precludes parasitic claims. Justice Perell advanced three reasons for this conclusion.
First, through the ‘comprehensive scheme of civil and administrative law regulation’ introduced into the Competition Act, Parliament indicated its intention that remedies under the Act, including the statutory cause of action, were to be comprehensive; it ‘intended to preclude a redundant and inefficient common law cause of action for conspiracy’.
Second, Parliament was not depriving a person of a civil cause of action in enacting this comprehensive scheme. Rather, ‘it was Parliament that provided the predicate wrongdoing for a price-fixing conspiracy tort in the first place’; thus ‘Parliament was introducing a statutory cause of action and not taking away very much from plaintiffs’.
Third, ‘there is no lacuna to be filled by the common law in the amalgam that is competition law; the statutory cause of action is adequate for Parliament’s regulation of competition law’.
Perell J expressly disagreed with the British Columbia Court of Appeal’s conclusion in Watson. That Court’s statement in Wakelam that there is ‘nothing in the Competition Act to indicate that Parliament intended that the statutory right of action should be augmented by a general right in consumers to sue in tort or to seek restitutionary remedies’ may be obiter dicta, but it is the ‘binding sort of obiter’, Perell J observed.
Perell J also held that the British Columbia Court of Appeal asked itself the wrong question. It should not have asked whether the Competition Act provides ‘a new and superior’ remedy, but rather, ‘Based on a reading of the whole statute what was Parliament’s intent in introducing the statutory cause of action?’
Parliament is not ‘constrained to replacing the existing common law means of enforcing competition law with a new and superior method’, Perell J noted; Parliament is not required to introduce only pro-plaintiff amendments to the Competition Act.
In August 2016, the Divisional Court granted leave to the plaintiffs in the Shah action on the issues of whether their claim for unlawful means conspiracy should have been certified, and whether the umbrella purchaser claims should have been part of the certified action.10
That same month, the Court of Appeal for Ontario in Fanshawe College of Applied Arts and Technology v. AU Optronics Corp.11 rejected Perell J’s analysis and agreed with the British Columbia Court of Appeal holding that the Competition Act is not a complete code, and that parasitic causes of action can be certified in a class action.
Ultimately, the complete code issue will likely come before the SCC for resolution, although the current weight of provincial appellate case law favours certifiability of parasitic causes of action.
iii The uncertainty of umbrella purchasers
Umbrella purchasers are purchasers that did not buy the price-fixed product from an alleged conspirator, either directly or indirectly (that is, as part of a vertical distribution chain); they bought it from firms that are not part of the conspiracy, or through distribution chains descending from those firms. Class counsel typically argue that umbrella purchasers have a claim against conspirators because the alleged conspiracy created an umbrella of supra-competitive prices, enabling non-cartel members to raise prices, causing their customers to pay an overcharge. Canadian courts have not taken a unified approach to the claims of umbrella purchasers.
In the 2015 decision of Shah v. LG Chem, Ltd,12 Perell J of the Ontario Superior Court held that it was plain and obvious even at the certification stage that so-called ‘umbrella purchasers’ do not have a cause of action under Section 36 of the Competition Act. He refused to certify the issue for trial.
Perell J held that umbrella purchasers do not have a cause of action, citing three reasons. First, it is inconsistent with restitutionary law, as the overcharge paid by the umbrella purchasers did not yield any gain to the defendants. Second, allowing claims by umbrella purchasers would result in indeterminate liability. Third, it would unfairly impose liability on the defendants for independent price-setting decisions of the non-defendants.
In the 2016 decision of Godfrey v. Sony Corporation,13 Supreme Court of British Columbia Justice Masuhara rejected the holding of Shah. He held that the right of recovery under the Competition Act is not restrained by the principles of resitutionary law. The right of recovery is made by reference to a claimant’s loss or damage, and not the offender’s gain. Also, such a claim would not result in indeterminate liability because liability would be constrained by principles of causation by reference to a market price distorted by the cartel. Finally, umbrella purchaser claims would further the objectives of the Competition Act, including compensation, deterrence, and behaviour modification.
In the 2016 decision of Fanshawe College of Applied Arts and Technology v. Hitachi Ltd.,14 Ontario Superior Court Justice Grace followed the British Columbia decision in Godfrey and rejected Perell J’s approach in Shah.
Since all three of these cases are under appeal, appellate guidance on umbrella purchaser claims will likely be forthcoming in the next year.
iv Worldwide class rejected
The Ontario courts do not have jurisdiction simpliciter over putative class members who live outside Canada, the Ontario Superior Court held in staying a class action in relation to foreign claimants.15 The class action alleged air cargo price fixing by a number of airlines. The defendants filed evidence indicating that foreign jurisdictions would be unlikely to recognise Ontario’s assumption of jurisdiction, and would not enforce or grant preclusive effect to an Ontario judgment. As a result, foreign class members would be able to relitigate the case in their own countries. The Court went further still, accepting that territorial limits in the Constitution prohibit the Court from assuming jurisdiction over absent foreign claimants who do not meet the traditional test of presence or consent.
v Application of discoverability as applied to Competition Act claims under review
Civil claims under Section 36 of the Competition Act are subject to a two-year limitation period running from the later of the last day on which the conduct was engaged in or the day on which any criminal proceedings relating thereto were finally disposed of. The limitation period provided in the Competition Act makes no reference to the common law principle of ‘discoverability’ – a delaying mechanism which provides that a limitation period does not begin to run until the material facts of a claim have been discovered or ought to have been discovered. Although the better interpretation of the Act is that discoverability should not apply, courts have recently taken the opposite view.
In the 2016 decision of Godfrey v. Sony Corporation,16 a defendant argued that a class action should not be certified against them because it was plain and obvious that the claim was barred by the state of limitations and that the principle of discoverability did not apply (the conspiracy period alleged by the plaintiffs ended more than two years before the claim was issued against that defendant). The court rejected this argument and held that it was not ‘plain and obvious’ that the discoverability principle did not apply to the limitations period contained in Section 36 of the Competition Act. The class action was certified against the defendant, with the limitation period argument to be resolved at trial.
The Court of Appeal for Ontario went one step further in the 2016 decision of Fanshawe College of Applied Arts and Technology v. AU Optronics Corp,17 holding that the principle of discoverability does apply to claims under Section 36 of the Competition Act. The Court of Appeal held that as a general interpretive principle, statutory limitation periods that run from the accrual of a cause of action are subject to the principle of discoverability, while statutory limitation periods that run from a fixed event unrelated to the injured party’s knowledge are not subject to the principle. The Court of Appeal held that the ‘conduct’ referenced in Section 36 is the conduct that gives rise to the right to damages under Section 36, therefore the triggering event for the limitations period is related to the actual accrual of the cause of action. As a result, the Court held, the discoverability principle applies.
The ‘conduct’ in Section 36 is conduct of the defendants, which is arguably ‘unrelated to the injured party’s knowledge’. The reasoning of the Court of Appeal is difficult to square with the general statement of law that discoverability does not apply in such circumstances. It is expected that the discoverability issue will receive further appellate consideration in British Columbia in the Godfrey case, and perhaps further consideration at the SCC.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
Like most competition regimes, Canada’s Competition Act18 deals with three broad areas: coordinated conduct among competitors, unilateral conduct by firms with market power, and mergers. Somewhat unusually, the Competition Act also deals with a variety of marketing practices, such as false advertising.
Canada’s Competition Act applies a mix of criminal and civil (administrative) approaches to the areas it covers, as well as both public and private remedies.
Private actions for damages are only available for breaches of the Competition Act’s criminal provisions. The key criminal provisions are conspiracies to fix prices, allocate markets, or reduce output,19 bid rigging20 and false advertising.21
Importantly, unilateral conduct by firms with market power, such as abuse of dominance,22 exclusive dealing,23 tied selling24 and refusal to deal25 are not subject to criminal sanction. In fact, they are not even prohibited, unless they cause a substantial lessening or prevention of harm, in which case, the Competition Tribunal can prohibit the conduct. Agreements between competitors that are not hard-core cartels and price maintenance are subject to the same treatment.
Section 36 of the Competition Act creates a civil cause of action for damages caused by breaches of the criminal provisions of the Competition Act.26 To succeed, the plaintiff must prove (1) that the defendant committed a criminal offence under the Competition Act and (2) that he or she suffered damage caused by the criminal offence. The standard of proof is on a balance of probabilities.
A conviction is, in the absence of proof to the contrary, sufficient to prove that the defendant committed the offence.27 The plaintiff must show actual damages, and that these damages were caused by the offence.28
Section 36 itself specifies two remedies: damages and costs. The amount of damages is limited to the actual loss suffered by the plaintiff, plus the costs of investigation and of the proceeding.
Actions under Section 36 are subject to a two-year limitation period that commences on the last day on which the offence was engaged in,29 or from the day on which criminal proceedings were finally disposed of.30 Whether discoverability applies to extend this limitation period is an issue currently before the courts. The Ontario Court of Appeal has ruled that it can,31 and the British Columbia Court of Appeal will consider the issue later this year.
Both direct and indirect purchasers can sue and recover damages for price fixing.32
Section 36 actions can be brought in the superior courts of any province, as well as the Federal Court of Canada.33 They can be structured as class actions under the class proceedings statutes or rules in most Canadian provinces, as well as the Federal Court. In Ontario, for example, the Class Proceedings Act, 1992 (CPA)34 provides for certification of class actions, and several other provinces have similar legislation.35 Plaintiffs typically start at least three class actions for each case: one in Quebec, for a class of consumers and small businesses; one in British Columbia, for British Columbia consumers and businesses; and a national class in Ontario covering Ontario and the rest of the country.36
Ontario’s class action legislation is similar to (and indeed, modelled on) Rule 23 of the US Federal Rules of Civil Procedure. In contrast to Rule 23’s requirement that the common issues predominate over individual issues, however, the CPA sets a lower threshold, requiring that a class proceeding be ‘the preferable procedure for the resolution of the common issues’.37 The court considers the proposed class action in light of the three goals of class actions: judicial economy, access to justice, and behaviour modification. The importance of the common issues in relation to the claim as a whole is a factor in this analysis.38 If resolution of the common issues would not significantly advance the litigation, and individual trials for each class member would be required, the action will not be certified.39
Courts in most Canadian provinces will take jurisdiction over matters that have a ‘real and substantial connection’ with that province. The party asserting that the court should assume jurisdiction has the burden of identifying the connecting factors that link the subject matter of the action to the jurisdiction. Certain connecting factors are considered presumptive, that is, if they exist, the court will have jurisdiction.40 These presumptive factors are:
- a the defendant is domiciled or resident in the province;
- b the defendant carries on business in the province;
- c the tort was committed in the province; and
d a contract connected with the dispute was made in the province.
However, these factors are merely presumptive, and do not preclude an action against a foreign defendant that never had any business presence in the jurisdiction if the defendant allegedly participated in a conspiracy that impacted the jurisdiction, a British Columbia court recently confirmed.41
Because of the presumptive factors, and the court’s consideration of the impact of the conduct, it is generally difficult for defendants to be successful on a jurisdictional challenge. However, in an April 2015 decision, two defendants successfully had a price-fixing claim dismissed against them for lack of jurisdiction. The judge found insufficient evidence showing a connection to Ontario, including insufficient evidence that the defendants did business in Ontario, were parties to the conspiracy, or that the product at issue would have made its way through the normal channels of trade to Ontario.42
With respect to the class members, the Ontario Superior Court held that courts do not have jurisdiction simpliciter over putative class members who live outside Canada.43
Quebec has codified a similar set of connecting factors that allow its courts to assume jurisdiction.44
Price-fixing class actions potentially raise two different jurisdictional issues. The first is whether the court has jurisdiction over the claim. Courts have generally held that if an international price-fixing conspiracy has caused losses in Canada, Canadian courts have jurisdiction.45
The second question goes to the criminal offence under the Competition Act that serves as the basis for the claim. The offence of conspiracy under Section 45 is complete as soon as a prohibited agreement is reached. Implementation of the agreement is not one of the elements of the offence, nor are the effects of the agreement on competition. Where a price-fixing conspiracy is entered into outside Canada, it is at least arguable that the offence took place outside Canada, and thus outside of the reach of Canada’s criminal law jurisdiction, which is territorial in nature.46 The presence of Section 47 of the Competition Act, which makes it an absolute liability offence for Canadian subsidiaries to implement conspiracies entered into by their foreign parents, reinforces this argument. Against this, Canadian courts now take an expansive approach to criminal jurisdiction.47 The question of whether a price-fixing conspiracy entered into outside Canada by foreign entities is an offence in Canada under Section 45 has yet to be determined.
Parties wishing to contest jurisdiction are required to bring their jurisdiction motions promptly, as their participation in any further steps in the proceeding (such as responding to the certification motion) will constitute attornment.48
Because class actions have a preclusive effect against potential plaintiffs, the question of whether a court validly assumes jurisdiction over the entire plaintiff class also arises. It is well established that a class in, say, Ontario, can include plaintiffs from other Canadian provinces, even on an opt-out basis. Ontario’s Class Proceedings Act expressly allows this, and other Canadian provinces will enforce any judgment arising out of the Ontario proceedings. Where a plaintiff class is proposed that includes members from outside Canada, the question becomes more difficult. While classes that include foreign members have been certified, the Ontario Superior Court has recently suggested that foreigners cannot be included unless they opt in.49
i Standing with respect to criminal practices or breach of orders
Canada has an expansive concept of standing in private actions for damages in instances where there is an alleged violation of the criminal provisions of the Competition Act or breach of an order of the Tribunal or other court made under the Act. Section 36 of the Competition Act provides that ‘any person’ who has suffered loss or damage as a result of such conduct may commence a private action to seek redress.
The SCC has recently made clear that indirect purchasers have standing to sue and seek damages in price-fixing cases, subject to the caveat that indirect purchasers must be able to prove that they have actually suffered loss or damage as a result of the complained-about conduct.50 A class member cannot recover merely based on the fact that there has been a price-fixing conspiracy, and that somewhere down the distribution chain the class member purchased a good that contained the price-fixed component.51 Proof of loss is required for each member of the class. This is typically done by way of expert economic evidence, as discussed below.
ii Standing with respect to non-criminal restrictive trade practices
Canada has a very limited scope for the private enforcement of non-criminal restrictive trade practices. Private party prosecution of such trade practices is limited to instances of refusal to deal (Section 75 of the Competition Act), price maintenance (Section 76 of the Act), and exclusive dealing, tied selling, and market restriction (collectively Section 77 of the Act). In order to commence a private prosecution before the Competition Tribunal, a party must first obtain leave of the Tribunal, which pursuant to Section 103.1 of the Competition Act will only be granted where the Tribunal has reason to believe that the party is directly and substantially affected in its business by the trade practice in question.
Leave to commence a private prosecution under Section 103.1 is rarely sought and even more rarely granted.
V THE PROCESS OF DISCOVERY
In Canadian class actions, the discovery process occurs after the class action has been certified. The certification motion is procedural in nature and there is no thorough probing of the merits at the certification hearing, and no right to pre-certification discovery.
The discovery process occurs in two stages. The first stage is documentary discovery, wherein parties must disclose and produce all non-privileged relevant documents that are in their power, possession, and control. ‘Documents’ is very broadly defined; it includes all relevant electronic data. As a general principle, the obligation to produce documents is tempered by the principle of proportionality which is directed by the size and complexity of the case at hand. Since price-fixing class actions are typically factually complex with plaintiffs seeking a large quantum of damages, documentary production is usually extensive.
Recently, in Imperial Oil v. Jacques,52 the SCC held that plaintiffs in a price-fixing class action were permitted to obtain as part of the production process wiretap evidence obtained by the Competition Bureau in the course of the Bureau’s criminal price-fixing investigation. This decision will make it easier for plaintiffs to obtain evidence in follow-on price-fixing class actions.
A British Columbia court held that information provided to the Bureau by third parties uninvolved in the litigation was protected from disclosure in a civil action by way of public interest privilege.53
Oral discovery follows the production of documents. In some jurisdictions, such as Ontario, a party is limited to having to produce one representative to be discovered, who must take steps to inform him or herself about matters within the collective corporate knowledge in advance of being examined. Even with such preparation, there are generally questions at discovery that go beyond the knowledge of the corporate representative, necessitating the need for the examinee to give undertakings to seek information and documentation from other sources within the corporation. Other Canadian jurisdictions, such as Alberta, have a more expansive right of discovery covering multiple corporate representatives, which is more in line with the American deposition process.
Oral discovery of non-parties is typically available only with leave of the court. The SCC will consider this year whether Competition Bureau officers can be ordered to attend for discovery and be ordered to disclose certain documents and recordings obtained during an investigation after an appellate court held that they were not.54
The process of discovery is similar for matters before the Competition Tribunal. Parties in proceedings before the Tribunal are required to make documentary production and participate in oral discovery.55
VI USE OF EXPERTS
The use of experts is commonplace in Canadian competition proceedings, both in class actions in the civil courts and in reviewable matters before the Competition Tribunal. The most common types of experts put forward in competition proceedings are expert economists, and industry-specific experts.
In class actions, experts are used at the certification stage, and would also be used at trial (all price-fixing class actions in Canada to date have settled prior to trial). On the certification motion, the plaintiff bears the burden of demonstrating some basis in fact to show that all members of the class have suffered harm as a result of the alleged criminal conduct.56 This is typically done by way of economic modelling and proposed methodologies by an expert economist.
On the certification motion, the plaintiff’s expert does not need to actually quantify the overcharge paid by indirect purchasers – the quantification of the overcharge is done at trial with a full evidentiary record. Rather, on certification the expert must present a methodology that establishes that the overcharge has been passed down through the distribution chain to the indirect purchaser level.57 On the certification motion, the expert’s methodology must only offer a realistic prospect of establishing loss on a class-wide basis.
Defendants on a certification motion have a high hurdle in refuting a plaintiff expert’s methodology, and will only succeed if they are able to show that the plaintiff expert’s methodology is implausible. The SCC has held that on the certification motion, it is not the role of the certification judge to resolve conflicts between experts, which makes it difficult (although not impossible) for defendants to succeed in an ‘economist versus economist’ battle at certification.58
One strategy employed by defendants in responding to a certification motion is to put forward evidence from an industry expert to demonstrate that, contrary to the theoretical approach of the plaintiff’s economic expert, based on how the industry actually works (including the mechanics of the distribution chain) any overcharge would not have been uniformly or consistently passed on through various points of the distribution chain, or would not have made it to the ultimate end purchaser of a price-fixed good. The strategy here (as well as with an economics expert) is to demonstrate that there are complexities in pass-on that the plaintiff expert has not, and indeed cannot, consider or capture such that the class would include those who have suffered no harm.
In proceedings before the Competition Tribunal, complex economic evidence is tendered by both sides geared at demonstrating the effect on competition (or lack thereof) concerning the reviewable practice at issue in a given proceeding. The Tribunal itself is also empowered to appoint independent experts in order to assist it regarding ‘any question of fact or opinion relevant to an issue in a proceeding’.59
VII CLASS ACTIONS
In Canada, class action legislation has been enacted by all provinces except Prince Edward Island, though not in the territories.60 In 2002, the Federal Court also created specific class proceeding provisions; however, this was not done through independent legislation but rather through the amendment of the Federal Court Rules.
i Requirements for certification
While there are some differences in the precise language used in the class action legislation enacted in the various jurisdictions, generally speaking a class action will be certified if the following criteria are met:
- a the pleadings disclose a cause of action;
- b there is an identifiable class of two or more persons;
- c the claims of the class members raise common issues;
- d a class proceeding is the preferable procedure for the resolution of the common issues; and
- e there is a representative plaintiff who can fairly and adequately represent the interests of the class, and a workable plan for advancing the proceeding.
In Quebec, which is a civil law jurisdiction, there are two primary distinctions: (1) a numerosity requirement, and (2) no specific requirement that the proposed class action meet the preferable procedure test.
Notice to class members is an important component of the class proceeding process. Because individual class members are not active participants in the conduct of the action, notice provides the only real mechanism to inform class members of decisions made by the court in respect of major steps in the litigation. Notice is typically provided through publication in national media, industry magazines, distribution to industry associations, direct mailings to persons involved in the industry, and on class counsel websites. The extent and types of notice will vary depending on the nature, scope and value of the claims. While not an exhaustive list, notice is given in the context of certification, settlement, and in respect of the claims process.
Notice of certification is particularly important in jurisdictions that have an ‘opt-in’ process. In these jurisdictions, class members who fall within the defined class of persons have to take steps to become part of the action. This is distinct from ‘opt-out’ jurisdictions where, once a class has been certified, any member of the defined class is presumed to be part of the proceeding unless they takes steps to ‘opt out’ of the proceeding.
When one or more defendants in an action settle with the plaintiff, a notice of settlement will be published in advance of the settlement approval hearing to permit people to consider the settlement and allow a class member to object the settlement. Objectors may make submissions in writing or at the hearing. While objectors may make submissions, they do not gain party status with accompanying rights of appeal. Settlements must be approved by the court, satisfying itself that the settlement is fair, reasonable, and in the best interests of the class.
iii Settlements in class proceedings
Settlements before trial are the norm in competition class actions. Settlements are negotiated between the parties, often using settlements of related proceedings in the United States as benchmarks for settlement quantum. Where the settlement amount owed to each individual class member is quite small, distribution of the settlement funds may be made cy-près to organisations such as charities.
Unlike the United States, there is no procedure similar to a multi-district litigation process. The effect of this is that where class actions are commenced in various provinces (often with plaintiff counsel working cooperatively in the different jurisdictions), settlements must be approved in each jurisdiction. There is a growing trend to conduct these hearings via video conference with the different jurisdictions participating at the same time. In these circumstances, each judge sits within his or her own jurisdiction, with all participants linked by video (or telephone) conference. On 15 November 2015, the SCC granted leave in two related cases, Edean v. British Columbia, 2014 BCCA 61, and Parsons v. Ontario, 2015 ONCA 158. At issue is whether provincial judges who oversee the conduct of a class action in their provinces have the jurisdiction to sit outside their own territorial boundaries when supervising a settlement in a national class action. There are conflicting authorities as to whether this is permissible; the Court of Appeal for Ontario held it was permissible, the Court of Appeal for British Columbia held otherwise. The Supreme Court decision will shape the scope of inter-jurisdictional coordination of national class actions.
VIII CALCULATING DAMAGES
Section 36 of the Competition Act provides for the recovery of damages, by individuals or companies, incurred as the result of a violation of the Act’s criminal provisions.61 The damage recovery permitted by this section is compensatory in nature only; class members must have suffered actual loss or harm as a result of the alleged breach of the Act by the defendant. This means that it is not sufficient for the private defendant to simply point to anticompetitive conduct that did not affect it. This section also permits the plaintiff to recover the costs of any investigation into the matter.
Plaintiffs’ claims for damages under Section 36 of the Competition Act are often accompanied by claims grounded in tort based on breaches of the Act. These claims permit, in principle, the recovery of punitive damages as well as damages through restitutionary principles. The ability of plaintiffs to rely on these avenues of recovery has been called into question. In Watson, the British Columbia Supreme Court held that the Competition Act is a complete code that was intended by Parliament to provide exhaustively the remedies available to plaintiffs for breaches of the Competition Act.62 However, the British Columbia Court of Appeal held that while claims in restitution (such as waiver of tort) are not available for breaches of the Competition Act, claims for unlawful means conspiracy or unlawful interference with economic relations (now simply called ‘unlawful means’) are available, and Section 36 was not intended to replace the tort.63
To date, none of the contested actions based on Section 36 have made it to trial. Consequently, there are no decisions providing judicial guidance on the appropriate methodology for damages calculations or other damages-related issues. Most judicial commentary in respect of damages has been in the context of class certification and settlements.
The most common approach used for damages calculations is based on an analysis of the difference in price between the alleged cartel pricing and a ‘competitive’ price that would have been in play but for the cartel. That price differential is used to estimate the amount of the ‘overcharge’. Typically, expert evidence, including regression analysis (or, in the case of an expert’s report at certification, regression modelling), is relied upon to estimate the quantum of overcharge as well as to address pass-through (or pass-on) issues.
IX PASS-ON DEFENCES
The SCC, in 2013, heard a trilogy64 of cases that addressed, among other things, the availability of indirect purchasers to maintain a cause of gain against alleged cartel members particularly given that the pass-on defence had earlier been rejected by the Supreme Court.65 Until the trilogy, lower courts had generally avoided dealing with the problems associated with indirect purchaser claims. The Court held that the rejection of the defensive use of pass-on did not entail, as a necessary corollary, the rejection of the offensive use of pass-on. Both direct and indirect purchasers can make a claim and, unlike in the United States, for example, such claims can be joined in one action.
X FOLLOW-ON LITIGATION
The Competition Act creates a statutory cause of action for anyone who has suffered loss as a result of a criminal breach of the Act.66 Damages under this provision are limited to actual damages suffered, plus costs.
The Competition Act provides that proof of a criminal conviction can be used as proof of the offence in a subsequent private action.67 Moreover, the SCC recently ruled that evidence from a Bureau’s criminal investigation must be disclosed to plaintiffs in a parallel class action.68
When there is no prior criminal conviction, a plaintiff can still bring a civil claim against the defendant, but must prove all elements of the case on a civil standard (i.e., on a balance of probabilities). Plaintiffs typically also plead various ancillary common law and equitable causes of action in bringing private actions under the Competition Act. Since these other causes of action are not available in the Federal Court, private actions are almost always commenced in provincial superior courts.
Private actions are commonly structured as a class action under provincial class proceedings statutes. Private actions can be structured as class actions in any of Canada’s 14 legal jurisdictions (10 provinces, three territories, and the Federal Court), although each jurisdiction has its own particular rules.
Some of the Competition Act’s civil provisions, notably refusal to deal, tied selling, exclusive dealing and market restriction, allow for private enforcement by affected firms; however, before commencing an application, the injured party must obtain leave (permission) from the Competition Tribunal. One of the requirements for obtaining leave is a certification by the Commissioner of Competition that the matter is not the subject of an inquiry or application by the Commissioner to the Tribunal.
There is no right of private action under the abuse of dominance, anticompetitive agreements or merger provisions of the Competition Act.
i Solicitor–client privilege
Solicitor–client privilege protects communications between solicitor and client that are made in confidence for the purpose of giving or receiving legal advice. This privilege belongs to the client and is a permanent right; it survives the retainer and even past the client’s death. Communications with in-house counsel containing legal advice or for the purpose of obtaining legal advice are subject to solicitor–client privilege, so long as the communications are made in the context of performing the function of legal counsel to the company. This privilege does not apply when the communications are made while in house counsel is acting in some other non-legal capacity.
ii Litigation privilege
Litigation privilege applies to work product and communications that are made specifically in contemplation of existing or anticipated litigation. Litigation privilege also applies to communications with third parties where the dominant purpose of the communication is to assist with existing or anticipated litigation. This privilege, and the protections flowing therefrom, ends with the resolution of the action.
iii Settlement privilege
Settlement privilege attaches to communications between the parties made on a ‘without prejudice’ basis that relate to settlement or were made for the purpose of attempting to resolve the dispute. In these circumstances, the communications will be protected from disclosure to the court by settlement privilege, subject to certain exceptions.69
iv Case-by-case privilege (the Wigmore test)
Communications or documents that do not fall within one of the class privileges discussed above can be nonetheless subject to privilege if the party claiming privilege can demonstrate that the communication or document should remain confidential based on four criteria, known as the Wigmore test:
- a the communications must originate in a confidence that they will not be disclosed;
- b this element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;
- c the relation must be one which in the opinion of the community ought to be sedulously fostered; and
- d the injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation.70
The onus is on the party seeking to prevent disclosure to demonstrate on a balance of probabilities that each criterion has been met.
XII SETTLEMENT PROCEDURES
Settlements are actively encouraged by Canadian courts and many jurisdictions have mandatory mediation requirements in their civil procedure rules. Most class actions commenced to date have not proceeded to trial and are settled before and after class certification. Moreover, due to the multi-jurisdictional nature of class actions in Canada, we are seeing an increased frequency in the use of global settlement agreements, which serve to resolve the actions in each of the jurisdictions by way of one settlement agreement.
Settlements of class actions require court approval (with some exceptions).71 With respect to class actions, the settlement process usually occurs in two stages: (1) certification as against a party for the purpose of settlement and notice to class members regarding the settlement hearing, and (2) approval of the settlement agreement itself. Objectors, including non-settling defendants and class members, can make submissions at each stage, and voice their concerns about the fairness or reasonableness of the agreement, or to ensure that certain protections are included within the order to appropriately protect their interests.
There is generally close judicial scrutiny of class action settlement agreements in Canada, and Canadian courts have not hesitated to refuse to provide their approval if they deem the agreement to be unfair.72 While provincial legislation does not specify criteria for approving a settlement, the test at common law is whether the settlement is ‘fair, reasonable and in the interests of all those affected by it’.73
In determining whether to approve a class action settlement, the court will consider a number of criteria, including:
- a the likelihood of recovery or success if the case were litigated;
- b the amount and nature of discovery or investigation;
- c the terms and conditions of the settlement;
- d recommendations of counsel;
- e future expense and likely duration of litigation;
- f recommendations of neutral parties or experts;
- g the number and nature of objections from class members;
- h the presence of good-faith bargaining; and
- i the absence of collusion.74
So long as all litigants consent – or at least those who are willing to have their portions of a litigated case determined – parties may submit a matter to a private arbitrator or panel of arbitrators.
Submitting a matter to arbitration would afford litigants the latitude to select the arbitrator(s), maintain confidentiality, and tailor evidentiary and procedural rules, although not all of these options are mandatory or provided for at law. The key, however, is that the process must be a voluntary one. Most provincial consumer protection statutes forbid terms in ‘consumer contracts’ that require disputes to be submitted to arbitration.
A note about class actions: a private antitrust claim has never been submitted to or attempted to be submitted to arbitration. Much as would be the case with class settlements, the courts would have to approve any request to submit a matter to arbitration as being in the interests of the class members. Instead of arbitration, lawyers have been engaging mediators in an attempt to resolve class actions during the early stages, such as before a class certification motion or prior to certification, but before further substantive steps are undertaken, such as discovery.
XIV INDEMNIFICATION AND CONTRIBUTION
Generally, rules of court, or the Rules of Civil Procedure in Canadian provinces that govern the administration of justice, specifically permit claims for cross- and third-party claims for contribution and indemnity. Limitation statutes sometimes prevent such claims from being advanced after the expiry of the applicable limitation period, such as two years, but parties are usually permitted to extend, or toll, limitation periods by agreement. Tolling a limitation period in Quebec, to the extent that such a notion is permissible under Quebec’s Civil Code, is not so straightforward.
In the case of private antitrust cases, plaintiffs’ counsel have argued that civil defendants should not be permitted to make claims for contribution and indemnity. While no court has specifically dealt with this issue, and despite the provisions specifically permitting such claims in the various rules of court, the argument for denying contribution and indemnity is premised on the fact that where conduct complained of is covered by the criminal provisions of the Competition Act, and because in the criminal context defendants are not permitted to claim contribution and indemnity among themselves, then the same rule should apply in civil courts. Differing burdens of proof between civil and criminal acts will have to be considered by the courts if this issue is decided, along with the fact that private competition claims also allege various common law torts, such as the tort of civil conspiracy, which obviously does not rise to the level of criminal conduct in and of itself.
Further complicating the issue is that defendants who settle competition class actions usually, as part of their settlement, require and obtain an order from the court barring any future proceedings against them, including any cross-claims or claims for contribution and indemnity. The trade-off that is usually satisfactory to the courts is that the plaintiffs will be precluded from seeking from any non-settling defendants, the proportionate share of the settling defendants’ liability. If the non-settling defendants are precluded by way of a court order from seeking contribution and indemnity, the logic holds, then they should not be burdened with the liability of the settling defendants.
XV FUTURE DEVELOPMENTS AND OUTLOOK
Despite the growing numbers of private antitrust class actions in Canada, none of them have proceeded to a trial on the merits. Many Canadian competition class actions are commenced in tandem with or very closely related to other global or United States-based antitrust matters. Very few cases proceed before the Competition Tribunal. Many lawyers in Canada expect the Competition Bureau to take a more aggressive stance on enforcement of the Competition Act given amendments that have now been in effect for over five years that deem certain conduct, conspiracy for example, a per se criminal offence with the follow-on effect of more private antitrust actions.
1 W Michael G Osborne, Michael Binetti and David Vaillancourt are partners and Fiona Campbell is an associate at Affleck Greene McMurtry LLP.
2 2016 SCC 42.
3 2014 BCCA 36.
4 2014 BCSC 532.
5 Pro-Sys Consultants Ltd. v. Microsoft Corp., 2014 BCSC 1280.
6 2014 SCC 12.
7 2014 BCSC 2270.
8 2015 BCCA 362.
9 2015 ONSC 6148.
10 2016 ONSC 4670.
11 2016 ONCA 621.
12 2015 ONSC 6148.
13 2016 BCSC 844.
14 2016 ONSC 5118.
15 Airia Brands Inc. v. Air Canada, 2015 ONSC 5332.
16 2016 BCSC 844.
17 2016 ONCA 621.
18 RSC 1985, c C-34.
19 Section 45.
20 Section 47.
21 Section 52.
22 Section 79.
23 Section 77.
24 Section 77.
25 Section 75.
26 Section 36 is also available to recover damages caused by violations of orders made under the Competition Act by the Competition Tribunal or a court. Indirect purchaser class actions under this branch are unlikely. Section 36 provides in part as follows:
Recovery of damages
36. (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.
27 Moreover, rules against collateral attacks on the result of proceedings that are concluded would likely bar any attempt by a person convicted of a criminal offence under the Competition Act to establish that no offence was, in fact, committed.
28 Chadha v. Bayer Inc.,  OJ No. 1844 (Div Ct) at paragraph 69.
29 Eli Lily and Company v. Apotex Inc., 2009 FC 991, at paragraph 728.
30 Section 36(4). There is currently a debate in the jurisprudence over whether discoverability applies to this limitation period. The better view is that it does not, because the limitation period commences based on events that are not dependent on the knowledge of the plaintiff. The SCC stated the general rule in Peixeiro v. Haberman,  3 SCR 549 and Ryan v. Moore, 2005 SCC 38. Several decisions have applied this principle to find that the discoverability requirement does not apply: Garford Pty Ltd. v. Dywidag Systems International, Canada, Ltd., 2010 FC 996 at paragraphs 31–33; Fairview Donut Inc. v. The TDL Group Corp., 2012 ONSC 1252, at paragraph 646; Les Laboratoires Servier v. Apotex Inc., 2008 FC 825 at paragraph 488. See also Watson, where the Court applied the two-year limitation period without any consideration of discoverability. Other decisions have left the matter open. Only one decision has found that discoverability applies: Fanshawe College of Applied Arts and Technology v. AU Optronics Corp., 2015 ONSC 2046.
31 2016 ONCA 621.
32 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57.
33 Section 36(3) grants jurisdiction to the Federal Court of Canada to hear Section 36 actions. The superior courts in each province are courts of inherent jurisdiction. They hear virtually all civil and important criminal matters, whether they are local, interprovincial or even international, and whether they involve provincial or federal law. The Federal Court of Canada has only limited statutory jurisdiction, mainly involving federal statutes, income tax, immigration, and the like. It does not have jurisdiction over common law claims between private parties. The only significant private law jurisdiction of the Federal Court is over intellectual property, admiralty law, and actions under Section 36 of the Competition Act. Because the Federal Court does not have jurisdiction over the common law claims typically associated with Section 36 private actions, such claims are only rarely advanced in the Federal Court.
34 S.O. 1992, c. 6.
35 The following provinces have class proceedings legislation similar to Ontario’s: British Columbia (Class Proceedings Act, R.S.B.C. 1996, c. 50), Alberta (Class Proceedings Act, SA 2003, c. C-16.5), Saskatchewan (The Class Actions Act, S.S. 2001, c. C-12.01), Manitoba (The Class Proceedings Act, C.C.S.M. c. C130), Quebec (Code of Civil Procedure, R.S.Q., c. C-25, Book IX), New Brunswick (Class Proceedings Act, RSNB 2011, c. 125), Nova Scotia (Class Proceedings Act, SNS 2007, c 28), and Newfoundland and Labrador (Class Actions Act, S.N.L. 2001, c. C-18). The Federal Court rules allow class actions within the court’s limited jurisdiction. In Western Canadian Shopping Centres v. Bennett Jones Verchere,  2 S.C.R. 534, the Supreme Court ruled that a class action could be brought even in the absence of class action legislation. Although Quebec was the first province to enact class action legislation, in 1978, its legislation limits the plaintiff classes to individuals and small corporations or associations (fewer than 50 employees).
36 Ontario has been the jurisdiction of choice for national class actions because it has an opt-out regime for national classes, whereas British Columbia requires out-of-province members to opt-in. Manitoba may become the forum of choice for plaintiffs in national class actions because its legislation adopts an opt-out regime for national classes, and, unlike Ontario’s, prohibits awards of costs at any stage of a class proceeding: C.C.S.M. c. C-130, Section 37(1). Alberta, Saskatchewan and Newfoundland and Labrador have adopted an opt-in regime.
37 CPA Section 5 contains the test for certification. It reads in part as follows:
5. (1) The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,
(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. 1992, c. 6, s. 5 (1).
The test in Manitoba (Section 4), Alberta (Section 5), Saskatchewan (Section 6) and Newfoundland & Labrador (Section 5) is almost identical to CPA Section 5, except that these three statutes add ‘whether or not the common issue predominates over issues affecting only individual prospective class members’ (or similar) after the equivalent of CPA Section 5(1)(c). The impact of this additional language has yet to be considered judicially but it is unlikely to have much effect on the test. The British Columbia Class Proceedings Act expressly makes whether the common issues predominate over individual issues a factor in determining whether a class proceeding would be preferable (Section 4(2)(a)). The test in Quebec has the lowest threshold of all: there is no preferable procedure or predominance requirement; it is enough that there are common issues: Code of Civil Procedure, Article 1003(a). In one case, Quebec certified a case rejected by Ontario: contrast MacLeod v. Viacom Entertainment Canada Inc. (2003), 28 C.P.C. (5th) 160 (S.C.J.) with Yadid v. Blockbuster Canada Co.  J.Q. No. 2278 (S.C.).
38 Hollick v. The City of Toronto  3 S.C.R. 158. See also Western Canadian Shopping Centres v. Bennett Jones Verchere  2 S.C.R. 534, Rumley v. British Columbia  3 S.C.R. 184.
39 Mouhteros v. DeVry Canada Inc. (1998), 41 O.R. (3d) 63 at 73 (Gen. Div.); Bywater v. Toronto Transit Commission (1998) 27 C.P.C. (4th) 172 at 181–82 (Ont. Gen. Div.).
40 Club Resorts Ltd v. Van Breda, 2012 SCC 17. This rule applies in Canada’s common law provinces and territories.
41 Ewart v. Nippon Yusen Kabushiki Kaisha, 2016 BCSC 2179.
42 2015 ONSC 2628.
43 Airia Brands Inc. v. Air Canada, 2015 ONSC 5332.
44 Civil Code of Quebec, CQLR c C-1991, Article 3148.
45 Vitapharm Canada Ltd v. F. Hoffmann-La Roche Ltd  OJ No. 298 (SCJ); Sun-Rype Products Limited v. Archer Daniels Midland Company, 2013 SCC 58 at para. 46; Fairhurst v. Anglo American PLC, 2012 BCCA 257; but see Bouchard v. Ventes de véhicules Mitsubishi du Canada Inc, 2008 QCCS 6033, where the Quebec Superior Court held that an overcharge suffered in Quebec as a result of price fixing is a pure economic loss that is not damage suffered in Quebec for purposes of Article 3148(3) CCQ. Also, in Shah v. LG Chem, Ltd, 2015 ONSC 2628, the fact that damage was suffered in Ontario was insufficient to establish jurisdiction where the plaintiffs failed to show a ‘good arguable case’ that the defendant was a party to that conspiracy.
46 Criminal Code, RSC 1985 c C-46, Section 6(2) provides that no one shall be convicted of an offence outside Canada.
47 R v. Karigar, 2013 ONSC 5199.
48 Momentous.ca Corp v. Canadian American Assn. of Professional Baseball Ltd, 2010 ONCA 722,  OJ No. 4595 at paragraph 34.
49 Airia Brands Inc. v. Air Canada, 2015 ONSC 5332.
50 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, at para. 131.
52 2014 SCC 66.
53 Pro-Sys Consultants Ltd. v. Microsoft Corp., 2016 BCSC 97.
54 Canada (Attorney General) v. Thouin, 2015 QCCA 2159, leave to the Supreme Court granted, 2016 SCCA No. 71.
55 Competition Tribunal Rules, SOR/2008-141, Sections 60–64.
56 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, at para. 114.
57 Ibid. at paragraph 115.
58 Ibid. at paragraph 126.
59 Competition Tribunal Rules, SOR/2008-141, Section 80.
60 Class actions are permitted to proceed in jurisdictions without class action legislation under local rules of court.
61 Part VI, Sections 45–62.
62 Watson v. Bank of America Corporation, 2014 BCSC 532.
63 2015 BCCA 362.
64 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57; Sun-Rype Products Limited v. Archer Daniels Midland Company, 2013 SCC 58; Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.
65 See British Columbia v. Canadian Forest Products Ltd.,  2 SCR 74 and Kingstreet Investments v. New Brunswick (Department of Finance), 2007 SCC1.
66 Section 36(1).
67 Section 36(2).
68 Imperial Oil v. Jacques, 2014 SCC 66: Specifically, the court ruled that wiretap evidence from the Bureau’s criminal price-fixing investigation of gas stations in Quebec must be disclosed to civil plaintiffs in a parallel class action.
69 For example, if there is a dispute about the existence, interpretation or enforceability of a settlement agreement, the privilege will not apply, and the relevant documents, including settlement communications, will be producible before the court.
70 Slavutych v. Baker  1 S.C.R. 254.
71 In Ontario and Quebec, prior court approval, even prior to certification, is required for a proposed class action to be settled or discontinued. The same is true for actions commenced in Federal Court. In the other statutory jurisdictions, court approval is required only after certification has been granted.
72 For example, the Ontario Superior Court recently refused to approve a settlement agreement between Quiznos franchisees, the defendant franchisors and food supplier, Good Food Service Inc., finding the scope of the release was too broad given the nominal amount of damages.
73 Dabbs v. Sun Life Assurance Co of Canada,  OJ No. 1598 (Gen. Div.) at paragraph 9.
74 Dabbs at paragraph 13, and see also Haney v. Iron Works Ltd. v. Manufacturers Life Insurance Co. (1998), 169 D.L.R (4th) 565 (B.C.S.C.) at paragraph 23.