On September 20, 2019, the Supreme Court of Canada (SCC) clarified several procedural questions regarding class-action certification in the case of Pioneer v. Godfrey. This ruling, which followed a trilogy of landmark decisions six years ago that allowed indirect purchasers to bring price-fixing cases under the Competition Act, confirmed the availability of a class-action procedure where the plaintiff can potentially show damage to those purchasers, even if the methodology presented at certification cannot establish that each class member suffered damage.

KEY TAKEAWAYS:

  • The SCC’s decision confirms the relatively low evidentiary standard to obtain certification of a competition class action in Canada because the plaintiff and its expert do not need to establish a methodology for showing that any class members suffered loss or damage at the certification stage.
  • However, the onus to establish liability at trial, including that each class member suffered damage, continues to rest with the plaintiff. Only once the plaintiffs can establish that each class member (or a subset of class members) suffered damage can the court order an aggregate damages award against the defendants.
  • The SCC confirmed that a class may include indirect purchasers of products sold by manufacturers that did not engage in price-fixing (so-called “umbrella” purchasers).
  • The SCC also confirmed that, unless the defendants are convicted criminally, the limitation period to commence a class action only begins to run when the plaintiff discovered or ought to have discovered the conspiracy, potentially exposing companies to lengthy periods of liability.
  • Finally, the SCC did not disturb the availability of common law or equitable causes of action because the same conduct could give rise to liability under the Competition Act.

BACKGROUND TO THE DECISION

Competition class actions typically follow convictions for price-fixing in Canada or the U.S. In 2009, the U.S. Department of Justice publicly acknowledged an investigation into price-fixing conduct by several manufacturers of optical disc drives (ODD) and obtained its first conviction two years later. The plaintiffs commenced a class action in British Columbia in November 2010 seeking damages arising from the sale of ODDs or products that contained ODDs in B.C. for the period between 2004 and 2010.

The proposed B.C. class included all direct purchasers of ODDs, such as desktop computer manufacturers, indirect purchasers of ODDs, including end-users, and umbrella purchasers who purchased products containing ODDs but not from one of the parties alleged to have participated in the conspiracy.

The case proceeded to a certification hearing in 2016 with the court agreeing to grant certification, including to the umbrella purchasers.

SUPREME COURT OF CANADA DECISION

The SCC upheld the lower court’s decision.

On the issue of class-wide harm, the SCC determined that, at the certification stage, plaintiffs are only required to have a methodology to show that direct purchasers and indirect purchasers experienced higher prices (or “overcharges”) without having to show loss to each and every class member. Proof of loss to individual class members is a matter for trial. If, after obtaining discovery and proceeding through trial, the plaintiffs ultimately cannot prove that a portion or all members of the class suffered losses, the trial judge can dismiss the claim.

As for the other grounds of appeal, the SCC confirmed that the language of the Competition Act did not preclude the inclusion of umbrella purchasers in the class definition, notwithstanding that the suppliers to those purchasers were not engaged in the alleged conspiracy. However, the SCC acknowledged the significant evidentiary burden of demonstrating the causal connection between the defendants’ conduct and any losses suffered by the umbrella purchasers due to inflated practices in the market. As with other class members, the plaintiffs bear the onus of proving loss to each member of the class (or subset) at trial.

The SCC also confirmed that the limitation period to commence a class action only begins to run when the plaintiff discovered or ought to have discovered the conspiracy unless the defendants are convicted, at which point the limitation period restarts. Finally, the SCC indicated that the specific cause of action to recover damages for criminal violations of the Competition Act did not negate the availability of common law or equitable causes of action, including the tort of civil conspiracy, that can avail plaintiffs of longer limitation periods and additional remedies such as punitive damages.