Supreme Court Of Canada To Consider Indirect Purchaser Rights In Price-Fixing Class Actions

On December 1, 2011, the Supreme Court of Canada granted leave to appeal from a pair of British Columbia Court of Appeal decisions that overturned orders certifying price-fixing claims as class actions. The two BC cases relate to allegations of conspiracies to increase the prices of high-fructose corn syrup (HFCS) and computer software. The BC appeals were argued consecutively before the same panel of judges and the decisions were released concurrently. In both instances, the majority of the BC Court of Appeal held that persons who did not purchase products directly from a defendant, and instead purchased such products indirectly from a non-defendant further down the product distribution chain, do not have a cause of action against the defendants in relation to an alleged unlawful conspiracy to fix the price of the product.

The case of Sun-Rype Products Ltd. v Archer Daniels Midland Company (Sun-Rype)1 is a proposed class proceeding brought on behalf of direct and indirect purchasers of HFCS, a sweetener used in various food products, but primarily soft drinks. The claim alleges that the defendants unlawfully conspired to fix the price of HFCS sold to direct purchasers and that some of the overcharge was passed through to indirect purchasers, including end consumers.

The proposed class proceeding of Pro-Sys Consultants Ltd. v Microsoft Corporation (Microsoft)2 was commenced on behalf of retail purchasers of computers installed with Microsoft operating systems and applications software. The action alleges that Microsoft engaged in unlawful anti-competitive behaviour in order to overcharge for its products.

Decision of the BC Court of Appeal

Reasons of the majority

Mr. Justice Lowry, for the majority in both cases, relied on recent Supreme Court of Canada jurisprudence in concluding that indirect purchasers of products alleged to be the subject of an unlawful overcharge do not have a cause of action for price-fixing. In Kingstreet,3 a case concerning an unlawful tax, the Supreme Court of Canada had determined that a defendant cannot reduce its liability to those who paid an unlawful charge by establishing that some or all of it was "passed through" to others. In other words, and if applied to the price-fixing context, the defendant is liable to the direct payor of the unlawful charge (the direct purchaser) for 100% of that charge, regardless of any passing through to others (the indirect purchasers). Lowry J.A. reasoned that if the law does...