Canadian COMPETITION LAW

March 30, 2014

In an interesting and important decision issued late last week, the British Columbia Supreme Court has certified a Competition Act class action against Visa Canada Corporation, MasterCard International Inc. and a number of major banks (including Bank of America, BMO, Bank of Nova Scotia and CIBC) (Watson v. Bank of America Corporation, 2014 BCSC 532).  In this case the plaintiff seeks to represent two classes of Canadian merchants who accepted payments for goods or services by way of Visa and MasterCard credit cards from 2001 to the present.

At issue in the case are “default interchange fees” and other interchange fees paid by merchants to accept Visa and MasterCard credit cards, as well as certain “network rules” established by Visa and MasterCard governing merchants’ participation in credit card networks.  In particular, the plaintiff pleaded several theories of harm for the alleged harm suffered by merchants, including based on breaches of the former criminal price maintenance offences of the Competition Act (under section 61), former and current conspiracy offences of the Act (under section 45), civil conspiracy, and unlawful interference with economic interests.

The Court, per Bauman C.J., certified the class action under the British Columbia Class Proceedings Act, subject to a requirement for the plaintiff to redraft her pleadings to conform to several key holdings by the Court.

This decision is generally interesting, given that it considers and synthesizes several important Canadian competition law decisions (including the recent Visa/MasterCard price maintenance decision before the Competition Tribunal; recent Supreme Court trilogy confirming that indirect competition law class actions may be commenced in Canada; and an important British Columbia Court of Appeal decision on the ability of plaintiffs to import criminal Competition Act offences as elements for economic torts).  The release of this new decision was, in fact, delayed to allow the Court to consider these other decisions.

The decision also illustrates Canadian courts’ increased willingness to more easily certify competition law class actions following the Supreme Court of Canada’s recent indirect purchaser class action trilogy of decisions.

Some of the Court’s more specific findings that I found interesting include:

1.  Section 61 price maintenance claim: The Court struck the plaintiff’s section 61 Competition Act claim (i.e., claim based on the former criminal price maintenance offence in the Competition Act prior to the Act’s amendment in 2009).  In this respect, the Court held, relying on the recent British Columbia Court of Appeal (“BCCA”) decision in Wakelam v. Wyeth Consumer Healthcare, that plaintiffs cannot  use historical breaches of section 61 of the Competition Act to ground civil claims under section 36 of the Act as well as barring section 61 price maintenance claims based on the expiry of the two year limitation period under section 36 of the Act.  While not much of a surprise, the former criminal section 61 of the Act is clearly not a viable cause of action given its repeal now four years ago.

2.  Striking economic tort claims grounded on the Competition Act:  The Court struck the plaintiff’s Competition Act related claims in unlawful means conspiracy, unlawful interference with economic relations and constructive trust.  In this respect, the Court relied on the recent BCCA case Wakelam v. Wyeth once again, which held that the use of Competition Act provisions for economic torts (e.g., the tort of conspiracy) should be prevented.  On this point, the BCCA in Wakelam held: “I see nothing in the Competition Act to indicate that Parliament intended that the statutory right of action should be augmented by a general right in consumers to sue in tort or to seek restitutionary remedies on the basis of breaches of Part VI [of the Competition Act]” (see: Wakelam v. Wyeth Consumer Healthcare/Wyeth Soins de Sante Inc., 2014 BCCA 36).  These decisions – the Watson v. Bank of America and Wakelam v. Wyeth decisions – would now seem to seriously limit, at least in British Columbia, the ability of plaintiffs to import criminal sections of the Competition Act as necessary elements for economic torts.

3.  Competition Act limitation period: Interestingly, the Court indicated that an offence that is the basis of a section 36 Competition Act civil claim may be a continuing offence.  In this respect, while there has been a bit of a debate as to whether the Competition Act’s limitation period under section 36 runs, in the case of a conspiracy agreement based claim, from the entering into of the agreement or whether anti-competitive effects can extend the limitation period, the Court here acknowledged authorities that do stand for the proposition that it is nevertheless possible to have an ongoing offence.  While the Court held that this is a question best left to trial, it is a potentially helpful aspect of the decision for plaintiffs.

4.  Interesting comments on the amended section 45:  In addition to the above, this detailed and interesting decision also includes a few interesting remarks by the Court relating to the amended conspiracy offences of the Competition Act.

Perhaps most interesting to me in this respect, if slightly puzzling, was the Court’s analysis of the required elements of section 45, which it held in this certification decision now includes an objective mens rea element (in this particular case, a price-fixing case, an “objective intention to fix, maintain or control a price”) in addition to a subjective mens rea element (i.e., an intent to enter into an agreement and knowledge of its terms).  I say puzzling, as it is not clear to me what an additional objective mens rea element would add to a subjective intent requirement (i.e., a subjective requirement to show an accused/defendant intended to enter into an agreement and had knowledge of its terms).

In this respect, the Court held, citing the important pre-amendment section 45 case R. v. Nova Scotia Pharmaceutical Society (commonly referred to as the “PANS” case): “I see no reason why the elements of the mens rea required for New Section 45 would differ, except to the extent that the objective requirement should require an objective intention to fix, maintain or control a price instead of [the formerly required] objective intention to unduly lessen competition.”

While it is true, as the Court discusses, that the former criminal conspiracy provisions under section 45 did include both subjective and objective mens rea elements (i.e., two different types of required mens rea), it has generally been thought that the amended section 45 requires only a single mens rea or fault element – i.e., proof of an intention to enter into one of the three types of criminal conspiracy offences prohibited by section 45.

If this decision is followed and/or upheld, it seems to me that several potential implications include both the obvious (e.g., an additional element needed to prove a violation of section 45, whether for a criminal prosecution or civil action) and more interesting questions (e.g., the content of this objective mens rea element).

Under the former case law, the requirement for this element was essentially to prove that an accused knew (or ought to have known) that an agreement being entered into would be likely to prevent or lessen competition unduly.  And so it will remain to be seen whether, if followed, courts will interpret a modified mens rea element for the amended section 45 to require, for example, that an accused (or defendant) knew (or ought to have known) that an agreement being entered into would be for the purpose of fixing prices, dividing markets or restricting/limiting output (the three categories of prohibited competitor agreements under the amended section 45).

In any event, there are a number of important points in this recent and lengthy (87 page) decision which clearly indicate, among other things, that Competition Act class actions are now alive and well in Canada (albeit potentially subject to being pruned down) following the Supreme Court’s recent confirmation that indirect purchaser class actions may be certified.

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