Indirect Purchaser Litigation In Canada

• Pages: 345-395

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CHAPTER XI

INDIRECT PURCHASER LITIGATION IN

CANADA

In an era of increasingly globalized markets and economies, one

increasingly encounters antitrust complaints having some

international aspect. This is particularly true in the context of matters

involving indirect purchasers, since supply and distribution chains

frequently involve expansive networks that extend across borders.

There is a growing appreciation among U.S. courts and legal

practitioners of the developing body of foreign jurisprudence, policy,

and legislation that may have relevance to the resolution of antitrust

concerns. Whether for comparative analysis of the merits and

disadvantages of alternative approaches to considering indirect

purchaser issues, or when addressing questions of extraterritorial

impact and risk, it is helpful to have some understanding of the

international arena.

Canada’s approach to indirect purchaser claims is a relevant

example. Class actions were introduced into Canadian Provincial

jurisdictions decades ago; however, the jurisprudence has been

relatively slow to develop as few cases have proceeded to

determination on the merits. Until recently, there was considerable

uncertainty in Canada regarding whether, and to what extent, indirect

purchasers could pursue civil remedies for alleged antitrust wrongs.

A lack of clear, consistent guidance from the Canadian courts

eventually led to direct conflict among the appellate courts of

different Canadian jurisdictions. That direct conflict, in turn, brought

this issue before the Supreme Court of Canada.

In 2012, the Supreme Court of Canada heard arguments in a

trilogy of cases that would determine whether indirect purchasers

have a legal cause of action in Canada to recover antitrust losses. In

October 2013, in decisions released concurrently in the three cases,

the Supreme Court concluded that indirect purchaser claims are

recognized in Canadian law. The Supreme Court “Indirect Purchaser

Trilogy,” as it has become known, has significantly changed the

Canadian legal landscape.

When considered together with Canada’s expansive approach to

jurisdiction, Canada’s new approach to indirect purchasers and

private enforcement is likely to prove increasingly relevant for U.S.

practitioners and their clients. This Chapter provides a brief overview

of Canadian competition (or antitrust) law, and the avenues for

pursuing indirect purchaser claims in Canada. It reviews the

development of indirect purchaser legal claims in Canada, and the

conflict in the case law that eventually culminated in the Indirect

346 Indirect P urchaser Litigation Ha ndbook

Purchaser Trilogy. Finally, this Chapter examines the Indirect

Purchaser Trilogy and considers its potential extraterritorial impact.

A. Brief Synopsis of Canadian Competition Law

The primary legislation governing competition in Canada is the

federal Competition Act (the “Act”).1 The Act’s stated purpose is to

“maintain and encourage competition in Canada in order to promote

the efficiency and adaptability of the Canadian economy, in order to

expand opportunities for Canadian participation in world markets

while at the same time recognizing the role of foreign competition in

Canada, in order to ensure that small and medium-sized enterprises

have an equitable opportunity to participate in the Canadian economy

and in order to provide consumers with competitive prices and

product choices.”2

The Act governs most commercial conduct in Canada. The

legislation contains both criminal and civil provisions, as well as

private rights of action.

Examples of criminal offenses contained in the Act include

conspiracy,3 bid-rigging,4 some types of misleading advertising,5

deceptive telemarketing,6 and pyramid schemes.7 The Act also

contains a foreign directed conspiracy offense, which criminalizes

any i mplementation by a Canadian corporation of “a directive,

instruction, intimation of policy or other communication,” given by a

person outside Canada “who is in a position to direct or influence the

policies” of the Canadian company, where the communication is “for

the purpose of giving effect to a conspiracy.”8

There were important changes to the Act that came into effect in

March 2010.9 Among the changes were amendments to the criminal

offense provisions, including a shift fr om Canada’s former partial

rule of reason approach to a new per se offense.10

In addition to criminal offenses, the Act also describes

“reviewable” practices. These practices are considered potentially

anticompetitive. Reviewable practices include refusal to deal;11 price

1. Competition Act, R.S.C. 1985, c. C-34 (Can.).

2. Id. § 1.1.

3. Id. § 45.

4. Id. § 47.

5. Id. § 52.

6. Id. § 52.1.

7. Id. § 55.1.

8. Id. § 46.

9. Budget Implementation Act, 2009, S.C. 2009, c. 2, § 444 (Can.).

10. Competition Act, R.S.C. 1985, c. C-34, §45(1) (Can.).

11. Id. § 75.

Indirect P urchaser Litigation In Ca nada 347

maintenance;12 exclusive dealing, tied selling, and market

restriction;13 and abuse of dominant market position.14 Reviewable

practices that substantially prevent or lessen competition may be

restrained by the Competition Tribunal, a specialized adjudicative

body for non-criminal competition matters.15

While the stated purpose of the Act is to “maintain and

encourage competition in Canada,”16 the Act may apply to conduct

and companies outside of Canada.17

B. Private Actions Under the Competition Act

Canadian law does not recognize a tort of breach of statute,18

although there is continuing uncertainty as to whether breach of the

Competition Act constitutes a basis for a claim for common law

conspiracy.19 Remedies for breach of the Act are limited to two

statutory avenues expressly provided for in the Act: (i) a limited

opportunity to seek leave to make a private application to the

Tribunal;20 and (ii) a right to bring a civil action in Canadian courts to

recover loss or damage suffered as a result of an offense under the

Act.21

1. Application to the Tribunal

Section 103.1 of the Act provides a limited ability for a person to

initiate proceedings before the Tribunal if a person is directly and

substantially affected by certain “reviewable” trade practices.22

Under this section, a person may apply to the Tribunal for leave to

make an application for a finding that another person is engaging in

restrictive trade practices of refusal to deal,23 price maintenance,24

exclusive dealing, market restriction, or tied selling.25

12. Id. § 76.

13. Id. § 77.

14. Id. § 78.

15. Id. Part VIII, “Matters Reviewable by Tribunal”, §§ 75 -103.1.

Competition Tribunal Act, R.S.C. 1985, c. 19 (2nd Supp.) (Can.).

16. Competition Act, R.S. 1985, c. C-34, §1.1 (Can.).

17. See, e.g., Sun-Rype Products Ltd. v. Archer Daniels Midland

Company [2013] 3 SCR 545, 2013 SCC 58, ¶¶ 46-47.

18. The Queen (Can.) v. Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205.

19. See Wakelam, 2014 BCCA.

20. Competition Act, R.S.C. 1985, c. C-34, §103.1 (Can.).

21. Id. § 36(1).

22. Id. § 103.1.

23. Id. § 75.

24. Id. § 76.

25. Id. § 77.