Canada's Supreme Court Opens The Door To Indirect Purchaser Class Actions

On October 31, 2013, the Supreme Court of Canada released three decisions which many commentators had predicted would be the most critical antitrust class action decisions in recent memory. The Supreme Court did not disappoint. In summary, the decisions permit indirect purchasers to claim for antitrust damage. But the Court held that indirect purchasers must be able to "self-identify" as members of the proposed class. If they cannot, because for example, none know whether they in fact purchased products containing the allegedly overpriced component, then the court cannot certify the indirect purchaser class.

Background

The Supreme Court's decisions in Pro-Sys Consultants Ltd. et al. v Microsoft Corporation et al., 2013 SCC 57, Sun-Rype Products Ltd. et al. v Archer Daniels Midland Company et al., 2013 SCC 58, and Infineon Technologies AG et autres c. Option Consommateurs et autres, 2013 SCC 59, arose from three appeals; Pro-Sys and Sun-Rype from decisions of the British Columbia Court of Appeal and Infineon from a decision of the Quebec Court of Appeal.

Plaintiffs in all three cases alleged that the defendants had engaged in anticompetitive behaviour which resulted in overcharges paid by consumers. In Sun-Rype and Infineon, the respective classes included both direct and indirect purchasers. In Pro-Sys, the class was comprised entirely of indirect purchasers. In the first instance, the lower courts certified both BC actions, but refused to certify the Quebec class action.

The outcome reversed on appeal. In both Pro-Sys and Sun-Rype, the BC Court of Appeal refused to certify the indirect purchaser claims. It relied on a recent Supreme Court decision, Kingstreet Investments Ltd. v New Brunswick (Finance), 2007 SCC 1. Kingstreet held that a defendant cannot reduce its liability to a plaintiff with evidence that the plaintiff had passed-on all or some of the cost of the harm to a third party. This is known as the passing-on defence. Relying on Kingstreet, the BC Court of Appeal reasoned that if defendants cannot use the passing-on defence as a shield, indirect purchaser plaintiffs cannot use it as a sword. To permit otherwise would subject defendants to double liability. They would have to pay 100 percent of the overcharge to direct purchasers and an additional amount to indirect purchasers. The Court of Appeal rejected the notion that combined classes of direct and indirect purchasers fixed the double liability problem. It reasoned that the...