Supreme Court Of Canada Rules Indirect Purchasers Can Sue For Price-Fixing

On October 31, 2013, the Supreme Court of Canada released its decisions in three related appeals, two from the British Columbia Court of Appeal and one from the Quebec Court of Appeal, all dealing with the certification of price-fixing claims as class actions:

Sun-Rype Products Ltd. v Archer Daniels Midland Company1 (Sun-Rype) Pro-Sys Consultants Ltd. v Microsoft Corporation2 (Microsoft) Infineon Technologies AG v Options Consommateurs3 (Infineon) Although these appeals addressed a number of important issues relating to price-fixing class actions and the certification of class proceedings in general, the key issue before the court in all three appeals related to the viability of claims by "indirect purchasers": consumers and others who did not purchase products directly from a defendant, and instead purchased such products indirectly, often as a component or ingredient of a finished product, from a non-defendant further down the product distribution chain.

In the BC cases, the majority of the BC Court of Appeal held that indirect purchasers 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 Quebec Court of Appeal came to the opposite conclusion and authorized a price-fixing class action brought on behalf of both indirect and direct purchasers, opening the door for some much-anticipated clarification from the Supreme Court of Canada. Leave to appeal to the Supreme Court of Canada was granted in all three cases and the appeals were heard together on October 17, 2012.

Appeal court decisions

Mr. Justice Lowry of the BC Court of Appeal, writing for the majority in both Sun-Rype and Microsoft, relied on the Supreme Court of Canada's decision in Kingstreet4 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, the Supreme Court determined a defendant cannot reduce its liability to those who paid an unlawful overcharge 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 not recognize pass-through as a defence to a claim, logically the law cannot recognize pass-through as the basis for a claim. In the context of a price-fixing class action, this means if direct purchasers are entitled to recover 100% of an unlawful overcharge they paid, regardless of any pass-through, it follows that indirect purchasers cannot claim against the defendant for any portion of the overcharge passed through to them, as that would result in double recovery.

In this regard, Justice Lowry referred with approval to jurisprudence of the United States Supreme Court in which that court reached a similar...