The Private Competition Enforcement Review 2012 - Canadian Chapter

I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY

Private antitrust litigation in Canada takes place either in the civil courts of the various provinces of Canada or before the federal Competition Tribunal ('the Tribunal'), depending on the nature of the matter. Most of the litigation activity to date has occurred in the civil courts. Of those cases, most are class proceedings that allege the existence of price-fixing cartels among groups of defendants and seek damages in respect of the 'overcharge' (or inflated price) for the product.

In most of these class proceedings, the alleged price-fixed product is an input into another product (e.g., a microchip) that passes through a chain of distribution to end users or consumers (e.g., a computer). Given the requirement, discussed below, that a plaintiff must have suffered harm to have a private antitrust claim, important questions may arise as to whether direct purchasers of the price-fixed product passed on some or all of the overcharge down the chain of distribution to indirect purchasers, and if so, whether the indirect purchasers passed on some or all of the overcharge even further down the chain.

Until 2011, to the extent that Canadian courts had considered the 'pass-on' issue, they had ruled that both direct and indirect purchasers have standing to bring price-fixing conspiracy claims, and that defendants can use 'pass-on' to raise issues to challenge the benefit of certification of the class or to otherwise challenge a plaintiff's claim of loss or damage. However, in April 2011, the Court of Appeal of British Columbia reversed certification orders in the Microsoft and Sun-Rype cases upon concluding that indirect purchasers have 'no cause of action recognized in law' and therefore no capacity to sue to recover an alleged overcharge.1

The plaintiffs in both Microsoft and Sun-Rype were granted leave to appeal these decisions to the Supreme Court of Canada on 1 December 2011. On 17 May 2012 the Supreme Court of Canada granted leave to appeal the Quebec Court of Appeal's decision in the Infineon case, which certified a class action including indirect purchasers.2 The appeals are currently scheduled to be heard together in October 2012 and it is anticipated that these decisions will clarify the law with respect to claims by indirect purchasers in Canada.

II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT

i Section 36: private actions for damages incurred as a result of criminal conduct

Section 36 of Canada's Competition Act ('the Act') provides that individuals or companies can bring private actions in a court of competent jurisdiction to recover damages incurred as a result of an alleged violation of the Act's criminal provisions (Part VI, Sections 45–62). The offences in respect of which damages can be sought are conspiracy (Section 45), bid rigging (Section 47), misleading advertising (Section 52) and deceptive telemarketing (Section 52.1).3 Recovery in such cases is limited to the actual loss suffered by the plaintiff, plus the full cost of any investigation and legal costs in connection with the matter. Double or treble damages are not recoverable, nor are punitive damages.

If the private defendant has been convicted of a criminal offence under the Act, the record of the criminal proceedings constitutes proof that the defendant engaged in anti-competitive conduct, absent evidence to the contrary. However, an essential element of actions under Section 36 is that the plaintiff must have suffered actual loss or damage as a result of the defendant's conduct. It is not enough for the plaintiff to point to anticompetitive conduct that did not affect it. Where, however, the private defendant has not (yet) been convicted of a criminal offence under the Act, the plaintiff bears a burden of proof on the traditional civil 'balance of probabilities' standard.

A civil claim for damages under Section 36 is also available against a party that has breached an order of the Tribunal, the federal adjudicative body with exclusive jurisdiction over all non-criminal antitrust offences.4

ii Section 103.1: private access to the Tribunal for civil offences

Section 103.1 of the Act permits private litigants to bring an application before the Tribunal with respect to certain civil 'reviewable matters'. Private access to the Tribunal is permitted only with respect to the following restrictive trade practices: refusal to deal (Section 75); resale price maintenance and refusal to supply (Section 76); and exclusive dealing, tied selling and market restriction (Section 77). Notably, no private actions are permitted in respect of mergers or abuse of dominance. Further, even if an applicant is ultimately successful in showing that the respondent violated a provision of the Act, the Tribunal is only permitted to order the respondent to cease its anti-competitive behaviour. The Tribunal has no jurisdiction to grant monetary remedies or awards.

Private litigants must obtain leave from the Tribunal before being allowed to bring an application. To obtain leave, an applicant must show that it is 'directly and substantially affected' in its businesses by the allegedly anti-competitive conduct; to do so it must, at a minimum, provide 'sufficient credible evidence of what is alleged to give rise to a bona fide belief by the Tribunal (i.e., that the applicant may have been directly and substantially affected in the applicant's business by a reviewable practice)', which is 'a lower standard of proof than proof on a balance of probabilities'.5 While this test might not seem difficult to meet, private litigants to date have faced some difficulty in obtaining leave.

iii Common law: torts of conspiracy and interference with economic interests

In practice, claims for damages under Section 36 of the Act are often accompanied by claims in tort. One potential reason for a plaintiff to add a common law tort claim is that it may allow for claims of punitive damages, which cannot be awarded under Section 36. The two tort claims most frequently pleaded in conjunction with Section 36 claims are claims of common law conspiracy and unlawful interference with economic interests. The constituent elements of these torts are different from the elements of claims under the Act but they can be complementary.

iv Limitation period

The limitation period is set out in Subsection 36(4) of the Act. Actions must be commenced within two years of the later of (1) a date on which the anti-competitive conduct was engaged in or (2) the final disposition of any criminal proceedings relating to the anti-competitive conduct.

III EXTRATERRITORIALITY

i General jurisdictional rule

In order for a Canadian court to have jurisdiction over a dispute, there needs to be a 'real and substantial link' between Canada and the conduct in issue in the case.6 In the context of private actions alleging anti-competitive conduct, the courts have held that the language of Section 45 of the Act prohibiting anti-competitive conspiracies is not limited to conduct that has taken place in Canada.7 An Ontario court held that the ultimate issues for the court were whether the...