In the recent decision of Murphy v. Amway, the Federal Court of Appeal upheld the lower court's determination that claims under the Competition Act are arbitrable. The appellant's proposed class action regarding claims under the Competition Act was stayed, as the appellant was party to a contract with an arbitration clause and a limited class action waiver.
Two competing imperatives are bound up in the question of whether or not arbitration clauses and class action waivers should be enforced. On the one hand, arbitration clauses and class action waivers can cause access to justice issues. Arbitration lacks the openness, transparency, and precedential value of open court and, as such, may be less successful than a class action at deterring wrongful behavior. On the other hand, giving effect to arbitration clauses and class action waivers recognizes the value in promoting freedom of contract and allowing parties to choose how best to order their affairs.
Over the last several decades, the Supreme Court has consistently prioritized the latter consideration. The appellant in Amway argued that the Supreme Court's recent decision in Seidel v. Telus Communications Inc., which held that certain claims under the British Columbia Business Practices and Consumer Protection Act ("BPCPA") are not arbitrable, supported his argument that claims under the Competition Act are not arbitrable. In rejecting this argument, the Court affirmed that Seidel is consistent with a long line of cases that have held that arbitration clauses must be enforced absent clear statutory language to the contrary.
The appellant, Ken Murphy, was registered as an Independent Business Owner ("IBO") in British Columbia under the umbrella of the respondent, Amway Canada. The appellant, like all IBOs, was required to sign an agreement that included an arbitration clause and a limited class actions waiver.
The appellant commenced proceedings in the Federal Court in October, 2009 alleging various breaches of the Competition Act. The appellant sought damages of $15,000 and filed a motion for certification of a proposed class action. In response, the respondent filed a motion for an order dismissing or permanently staying the action and compelling arbitration on the grounds that the Federal Court lacked jurisdiction due to the Arbitration Agreement.
The Court Finds that Claims under the Competition Act are Arbitrable
Both parties relied on Seidel to advance their arguments. In Seidel, the Supreme Court, in a 5-4 split decision, held that claims under s. 172 of the BPCPA are not arbitrable. Section 172 of the BPCPA provides a statutory right for a person to bring an action in the British Columbia Supreme Court whether or not the person bringing the action is affected by the consumer transaction that gives rise to the action under the BPCPA. Section 3 of the BPCPA provides that a person's waiver or release of his rights, benefits or protections under the BPCPA is invalid unless the waiver or release is expressly permitted by the BPCPA.
Justice Binnie for the majority in Seidel held that ss. 172 and 3 of the BPCPA in combination demonstrate a clear legislative intention to prohibit arbitration clauses for claims made under s. 172. The majority held that the fact that a person can bring a claim under s. 172 of the BPCPA without having any personal interest in the claim emphasizes the public interest nature of the s. 172 remedy, which would be undermined by private and confidential arbitrations. The majority further found that the statutory purpose of the BPCPA is all about consumer protection, and as such, its terms should be interpreted to the benefit of consumers.
The appellant argued that like the BPCPA in Seidel, the Competition Act has a public purpose; namely, creating a regime of public order that governs the conduct of companies in Canada with an aim to prevent anti-competitive behavior. He submitted that enforcement of the arbitration clause and class action waiver would be against the public interest.
The Court rejected the appellant's expansive interpretation of Seidel. The Court held that Seidel is consistent with other Supreme Court jurisprudence which has held that arbitration clauses must be enforced in the absence of clear statutory language. The Court disagreed with the appellant's assertion that competition law disputes should never be the subject of arbitration because arbitration is not compatible with the public interest goals of the Competition Act. Instead, the Court affirmed that absent a clear legislative intention to prohibit arbitration clauses, they should be upheld. The Court found that the Competition Act does not contain provisions analogous to ss. 172 and 3 of the BPCPA; therefore, the Competition Act claims were arbitrable.
Consistent with previous Supreme Court jurisprudence, Amway stands for the proposition that courts will not find arbitration clauses and class action waivers unenforceable in the absence of clear statutory language. This approach can be contrasted with the approach adopted by a number of American courts, which have found that in the context of consumer contracts, arbitration clauses, particularly when combined with class action waivers, are void by virtue of the unconscionability doctrine. Amway affirms that in Canada, the enforceability of arbitration clauses and class action waivers is a matter that will ultimately be left to the discretion of the legislature.