Canadian COMPETITION LAW

In a bit of a setback to the defendants in the ongoing e-books cartel case, the New York District Court for the Southern District of New York recently dismissed a motion by the defendants to have the plaintiffs’ class action dismissed.

In a detailed judgment, justice Denise Cote provides a rather thorough restatement of pleading rules in federal antitrust cases and evidence required to establish a violation of Section 1 of the Sherman Act (the U.S. federal parallel to section 45 of Canada’s Competition Act), which prohibits unreasonable restraints of trade (including horizontal price-fixing agreements, market allocation agreements and in some instances group boycotts).

Some of the interesting aspects of this recent judgment that stood out to me, and there are a number of others, include:

1.  Rather strong language that the Court accepted, at least at this preliminary stage, the plaintiffs’ arguments of a horizontal price-fixing conspiracy.  For example, the Court held that the alleged agreement is “fundamentally horizontal”.

2.  An acceptance of the plaintiffs’ argument that the relevant standard should be a per se (not rule of reason) review, holding that the alleged agreement is “at root, a horizontal price restraint”.  In Canada, section 45 of the Competition Act makes price-fixing, market allocation and supply/output restriction agreements per se illegal, although it largely remains to be seen what types of cases will be challenged by the Competition Bureau under section 90.1 of the Act (which has parallels to the rule of reason standard in the U.S.).

3.  A recap of recent U.S. jurisprudence on hub-and-spoke cartels, including discussions of the Interstate Circuit and Toys “R” Us cases.

4.  A restatement of the types of indirect (i.e., circumstantial) evidence sufficient to establish a cartel, including simultaneous price changes.  In Canada, like the U.S., a number of different types of indirect or circumstantial evidence (sometimes also referred to as “facilitating factors”) can be relied upon to establish a conspiracy, including evidence of meetings, simultaneous price increases and language or conduct that can only be explained by the existence of an agreement.

5.  Distinguishing recent U.S. vertical price maintenance decisions, notably the U.S. Supreme Court’s decision in Leegin Creative, from horizontal arrangements between competitors.

6.  A general review of the necessary elements to establish a violation of section 1 of the Sherman Act (many of which being the same or paralleling Canadian requirements).

Given that class actions have now also been commenced in Canada (in British Columbia, Ontario and Quebec), it will be interesting to see what arguments, if any, may be made by the defendants in Canada in response to the Canadian plaintiffs’ claims.

For a copy of the Court’s Opinion see:

Opinion and Order

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