Competition class action plaintiffs continue to struggle in Canada. In our Summer Competition & Marketing Law Brief we provided a note on the Pro-Sys case,1 in which plaintiffs in a proposed class action involving an international cartel with respect to Dynamic Random Access Memory Chips were denied certification, due in large part to difficulties in proving injury to indirect purchasers. In that note we reviewed a number of previous cases which had also dealt blows to plaintiffs. In this Brief we provide a report on two more such cases, each very different from the other and from the Pro-Sys case, but each denying class certification.
Toyota Drives a Winner
This summer the British Columbia Supreme Court declined Competition Act class action certification in the case of Steele v. Toyota Canada Inc.2 In the Toyota case the plaintiffs avoided the difficulties associated with indirect purchaser claims by suing not only Toyota Canada but a series of Toyota dealers in British Columbia from whom they had purchased cars directly. Nevertheless, the motion for certification was refused, on the basis of difficulty in showing injury on a class basis.
The factual basis of the action turned on the "Access Toyota" Program run by Toyota Canada from March 2000 through to March 2003 in various parts of Canada. The Access Toyota Program provided that, in various local markets throughout Canada or provinces of Canada, participating Toyota dealers submitted price "votes" as to the price that various Toyota models should be sold at within the relevant area. Toyota would then use a formula to average the price votes, and make available that average price on its website. It also put on its website the "Drive Away" (that is final price inclusive of tax, fees and the like) price for various models, based on the weighted average price on its website. Consumers throughout the area would check the Toyota website to see what the "Drive Away" price would be.
Toyota's position was that this Access Toyota Drive Away price would be a price above which dealers would not sell vehicles in the relevant market, but dealers were free to sell vehicles for less than the Drive Away price in the relevant market. Despite this position – that the Drive Away price was a ceiling price not a floor price – there were various complaints to the Competition Bureau, and the Bureau undertook an investigation. Ultimately, in March 2003 Toyota negotiated a consent prohibition order pursuant to Section 34 of the Competition Act with the Commissioner of Competition. The statement of facts filed in that proceeding indicated that sometimes Toyota dealers met to discuss the price votes that they would file in advance of filing them, and that at least some Toyota dealers understood that if they sold cars for less than the Access price they would face penalties.
Toyota did not face criminal penalty arising out of the Access Toyota Program, but it was ordered, pursuant to the consent prohibition order, to cease the program, and it did make a voluntary donation of $2.3 million to charity.
The evidence of a number of individuals given in support of the application for certification of the class action was that each of them went to a number of Toyota dealers in British Columbia looking to purchase a particular vehicle, and they were told by the dealers that the Access Toyota Drive Away price was the price and that they would not find the vehicle at a less expensive price at any dealer.
The Court noted that in order to found a civil cause of action under the Competition Act, the plaintiffs must be able to show loss or damage to them caused by the wrongful act of the defendants – that is a clear component of Section 36 of the Competition Act. The Court further noted that it is not sufficient to prove enrichment to the defendants without proof of loss to the plaintiffs. The plaintiffs argued that if enrichment to the defendants is proved then deprivation to the plaintiffs may be presumed. But the Court stated "I do not agree that such a proposition forms part of the law in Canada." The Court noted that the onus is on the plaintiffs to provide some evidence to show that proof of loss on a class-wide basis may be possible, and found that it had not succeeded in doing so in the Toyota case.
Kellogg Starts its Day Right
A very different kind of Competition Act civil damages case, Janine Bédard v. Kellogg Canada Inc.,3 was decided in May, 2007, and confirmed on appeal in April 2008.4 The Kellog case involved an allegation by a consumer that Kellogg, in advertising and packaging claims, asserted that both its Frosted Flakes and its Fruit Loops contained "1/3 less sugar than the original," and thereby engaged in a materially false or misleading claim contrary to Section 52 of the Competition Act. Ms. Bédard sought to bring a class action against Kellogg. Kellogg moved to strike out the claim as disclosing no clause of action.
It is apparent from the decision that the parties had very significant factual disagreements with one another as to whether the cereals actually did contain less sugar, how much less sugar, and whether that was misleading or not. The Court concluded that it could not determine these sorts of disputes at a preliminary stage. In addition to the factual disputes, it was also clear that Kellogg had significant prima facie evidence that the way it had marketed its product was consistent with, and indeed potentially required by, various food product marketing regulations. Again the Court ruled that these issues could not be determined on a preliminary basis. Ultimately, the Court concluded that it was not sufficiently clear that the plaintiff could not succeed and that the case should not be struck out as not disclosing a cause of action.5
On the motion for certification as a class action, however, Kellogg was successful. The certification was rejected primarily because there was no attempt to determine how individual purchasers' claims might be adjudicated. Rather, the class plaintiff proposed that the damage be paid to charity.
Paragraph 112 of the judgment provides:
"As the applicant recognized, the most important aspect of this action is not to provide access to justice for purchasers to compensate them, since there is no intention here of reimbursement. The purpose of the action is essentially to penalize and end the respondent's allegedly reprehensible conduct. The legislature has in fact provided specific machinery for this. Ms. Bédard need only file a complaint with the Canadian Food Inspection Agency or with the Competition Commissioner. They certainly have the expertise and authority to terminate the conduct of which Ms. Bédard complains. Moreover the Act provides for severe fines."
Thus, the action was not certified as a class action. This reluctance to certify a Competition Act class action, when it is not designed to compensate victims of alleged conduct, but rather to penalize the wrongdoer, and the recognition of the role of the Commissioner of Competition and criminal penalties under the Competition Act as an argument against class actions to penalize or to modify behaviour, is consistent with comments found in the Pro-Sys case. We may see more proposed Competition Act class action cases in which actual "victims" will not receive meaningful compensation being subject to very careful scrutiny before being certified.
The conclusion to be drawn from both of the Toyota and Kellogg cases, as well as the Pro-Sys case we detailed in our Summer 2008 Competition and Marketing Brief,6 is that Competition Act class actions are becoming at least somewhat more difficult to certify, and the primary stumbling block is typically the difficulty in showing injury on a class basis.