Illinois Brick Comes To Canada

On April 15, 2011, the British Columbia Court of Appeal released companion reasons for judgment in Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2011 BCCA 186 (Microsoft) and Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2011 BCCA 187 (Sun-Rype). The decisions are of great significance because the Court refused to certify the claims of the indirect purchaser classes on the basis that indirect purchasers do not have a cause of action. These are the first decisions of a Canadian appellate court to decide this issue and, while the plaintiffs are likely to seek leave to appeal to the Supreme Court of Canada, they represent the most significant judicial development in Canadian antitrust class actions in recent memory.

The plaintiffs in Microsoft and Sun-Rype alleged that the defendants engaged in anticompetitive behaviour resulting in overcharges paid by consumers. In Microsoft, a class comprised entirely of indirect purchasers alleged that Microsoft and computer manufacturers had conspired to reduce competition for Microsoft's products. The plaintiff alleged that indirect purchasers had paid higher prices for Microsoft's software as a result. In Sun-Rype, both direct and indirect purchasers claimed that the defendants had conspired to fix the price of high fructose corn syrup. The plaintiffs in both actions alleged that direct purchasers had passed on some of the initial overcharge causing indirect purchasers to pay higher prices. Lower courts had certified both actions.

On appeal, the defendants argued that indirect purchasers have no cause of action. Since the law precludes defendants from relying on the passing-on defence in an action brought by direct purchasers, defendants cannot be liable to both direct and indirect purchasers or they would face double-liability.

The majority of the Court of Appeal agreed. Justice Lowry, writing for the majority, began with the Supreme Court's decision in Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1 (Kingstreet), in which the defence of passing-on had been rejected. In Kingstreet, the plaintiff restaurant had sued to recover a user charge tax that was said to have been unconstitutional. The government claimed that the restaurant had suffered no damage because it had passed on the tax charge to its customers. The Supreme Court rejected the government's defence of passing-on because it was inconsistent with restitution law, economically misconceived, and created...