Competition Class Actions In Canada: The Supreme Court Resets The Ground Rules

In a landmark decision that was released this morning, the Supreme Court has revisited and reset the ground rules governing the availability of collective relief for consumers in Canada, particularly in respect of class actions that seek damages for anti-competitive harm. In its decision involving a twin set of appeals in Pioneer Corp. v Godfrey, the Supreme Court has provided critical new guidance and resolved appellate conflict on four fundamental issues relating to class certification and the scope of relief under the Competition Act, including the evidentiary standard of class certification, the ability of umbrella purchasers to assert a claim for damages, the ability of class members to pursue parallel claims in tort or restitution that fall outside the statutory remedy under the Competition Act (the Act) and finally, the operation of the statutory limitation period under the Act. Given the large number of pending class actions that have been filed in Canada on the heels of enforcement action by the Competition Bureau and other international competition regulators, the Court's decisions are likely to have a significant impact on the availability of collective relief for Canadian consumers. The Court's decision may also impact the certification of other types of class actions in Canada, particularly in circumstances where class plaintiffs are required to prove loss as a component of liability.

In summary, the Court dismissed the two appeals, and upheld the certification of a class action in British Columbia that included direct, indirect and umbrella purchasers of optical disk drives and products containing such drives (an optical disk drive is a form of storage media contained in a range of consumer and business electronic products, or an “ODD”). In an 8-1 ruling authored by Justice Brown, the majority Court held that the class plaintiffs had satisfied the evidentiary threshold for certification of an indirect purchaser class by adducing an expert methodology that could demonstrate the existence of some loss to some purchasers at the “indirect purchaser level” - a standard far lower relative to the standard of certification that exists in other areas of law in Canada or in U.S. courts. In addition, the Court found that umbrella purchasers had a right to assert a claim for anti-competitive harm under the Act, and that class members could assert parallel claims in tort and restitution for violations of the Act - even in respect of damages that went beyond the limits of the statutory remedy under the Act. Finally, the Court held that the special two-year limitation period under the Competition Act was subject to a principle of discoverability and declined to strike a claim against a defendant that had been commenced outside this window.

On the face of its decision, the Court appears to have reinterpreted some parts of its earlier ruling in Microsoft and relaxed the rules for pursuing collective relief for anti-competitive harm in Canada, particularly relative to the prevailing rules that exist in the United States, the UK and Europe. The Court also appears to have increased the potential exposure to defendants, by opening the door to larger classes and additional claims for damages. Indeed, in a spirited dissent, Justice Côté questioned whether competition class actions were now being treated differently from other class actions, and expressed concern that the majority had upset “the balance struck by Parliament in Canada's competition law.”

However, the Court did not overrule Microsoft, and did not disturb the Court's prior guidance that the certification stage of a class action must serve as ameaningful screening device. Moreover, the majority of the Court reiterated that there were no shortcuts to proving class-wide liability at trial - namely, the class plaintiff must demonstrate that each class member has actually suffered a loss as an essential component of establishing liability to the class at trial. The Court also clarified that a class plaintiff may only seek an award of aggregate damages at trial once liability has been proven on a class-wide basis. For the purpose of class certification, the class plaintiff still bears the onus of proving all the requirements of the Class Proceedings Act, and the class plaintiff must still adduce a plausible and workable expert methodology as part of that onus that addresses the distribution and pricing dynamics of a particular product . But the Court's decision appears to create new risks and new uncertainties for defendants in competition and consumer class actions. The significance and meaning of...