Supreme Court Certifies Price-Fixing Class Actions Brought By Indirect Purchasers; Confirms Low Evidentiary Threshold For Certification

On October 31, 2013, the Supreme Court of Canada (the "Court") released its decisions in Pro Sys Consultants Ltd. v. Microsoft Corporation1 ("Pro-Sys"), Sun Rype Products Ltd. v. Archer Daniels Midland Company2 ("Sun-Rype"), and Infineon Technologies AG v. Option consommateurs3 ("Infineon"), (the "Trilogy"). In these long awaited decisions, the Court certified indirect purchaser classes in two cases4 and recognized that indirect purchasers of cartelized products (including Canadian consumers) have the right to pursue damages in private antitrust cases under the Canadian Competition Act.

The Court also confirmed the evidentiary standard on certification hearings under provincial class action legislation. However, the Court left key issues regarding how such class actions are to be managed unanswered. As trial courts wrestle with issues left open by the Court, much remains unanswered in how antitrust price-fixing cases will be managed in Canada.

By way of background, in split decisions in Pro-Sys and Sun-Rype, the British Columbia Court of Appeal held that indirect purchasers of cartelized goods did not have a right to sue under the Competition Act. The British Columbia Court of Appeal adopted the United States Supreme Court decisions in Hanover Shoe v. United Shoe Machinery5 which rejected the "passing-on" defence and Illinois Brick Co. v. Illinois6 where the court held, as a corollary to Hanover Shoe, that indirect purchasers had no cause of action to recover overcharges on cartelized goods which may have been passed on to them through the distribution chain. It dismissed the indirect purchaser claims and found that only direct purchasers had a cause of action.

In contrast, the Québec Court of Appeal reversed a decision of the Québec Superior Court and certified indirect purchaser claims in Infineon, rejecting the approach in Illinois Brick and the majority decision of the British Columbia Court of Appeal in Sun-Rype and Pro-Sys.

The Trilogy is significant to both the antitrust law bar, in finally determining whether indirect purchasers have a cause of action in Canada, as well as the class action bar, in reaffirming the certification test in Quebec and the common law provinces.

Indirect purchasers can participate in price-fixing class actions

In the Trilogy, the Court has clearly and definitively rejected the "passing-on defence" in Canadian law. The "passing-on defence" is typically raised by defendants that seek to limit their liability to direct purchasers who managed to pass on any overcharge to others in the distribution chain. The "passing-on defence" would allow defendants to argue that direct...