I often work with litigation counsel in relation to regulatory, criminal and commercial litigation matters, including in the competition/antitrust, corporate/commercial, defamation and white-collar crime law areas.
My counsel may involve advising clients of their rights or defences in regulatory investigations, options and strategies for pursuing commercial litigation or resolving marketplace or competition issues, or working to negotiate settlements to resolve commercial disputes.
Some of my representative matters have included defending clients involved in price-fixing and customs investigations under Canadian competition and customs laws, acting for clients involved in professional regulation investigations, competition law related private actions in the price-fixing, refusal to supply and misleading advertising law areas, defamation claims and commercial litigation involving competition, tort, contract and other theories of liability.
COMPETITION LAW PRIVATE
ACTIONS & CLASS ACTIONS
Private parties may commence damages actions under the Competition Act (the “Act”) for contraventions of the criminal provisions of the Act or a breach of a court or Competition Tribunal (“Tribunal”) order made under the Act.
Private competition law actions in Canada have typically been commenced in the context of (i) consumers alleging damages as a result of a conspiracy between suppliers (e.g., a price-fixing conspiracy relating to a product or key input), (ii) consumers alleging damages as a result of misleading advertising claims (e.g., false or misleading claims in relation to a product, investment or other business opportunity, etc.) or (iii) competitors alleging damages based on misleading claims made by a competitor or alleged conspiracy entered into between competitors.
There have as well been an increasing number of class actions commenced in Canada and recent amendments to the Act make it easier for private plaintiffs, whether singly or as a class, to commence civil actions for violations of the Act.
Section 36 of the Act creates a statutory cause of action for private parties seeking to commence a private action under the Act.
Section 36 provides that any person that has suffered loss or damage as a result of conduct that is contrary Part VI of the Act (criminal offences, including the criminal conspiracy, bid-rigging and criminal misleading advertising provisions), or failure to comply with a Tribunal or other court order under the Act, may commence a private damages action.
Private actions cannot be commenced, however, under the Act’s civil “reviewable matters” provisions (e.g., for abuse of dominance, tied selling, exclusive dealing or market restriction, although limited rights of “private access” are available, with leave, under the latter three provisions, as well as under the Act’s refusal to deal provision).
No private right of access to the Tribunal is currently available for abuse of dominance (the Canadian equivalent of monopolization) and the Commissioner of Competition (“Commissioner”) has exclusive jurisdiction to enforce section 79 of the Act (abuse of dominance).
In the past, the majority of competition law private actions have been commenced for alleged breaches of the criminal conspiracy or criminal misleading advertising provisions (e.g., in relation to alleged price-fixing conspiracies, misleading representations in relation to the sale of products or on occasion misleading claims in relation to business or investment opportunities).
It has been relatively uncommon for private plaintiffs to commence proceedings under other criminal provisions, although there have been some cases – for example, one case brought for alleged predatory pricing which was, until recently, a criminal offence.
With respect to private actions commenced under the conspiracy provisions of the Act, private action activity may increase following the coming into force of new U.S.-style “per se” criminal cartel rules in March, 2010.
This is because, whereas formerly private plaintiffs, as well as the Competition Bureau (“Bureau”), were required to establish anti-competitive effects as a key element of a conspiracy offence (i.e., that the alleged illegal conduct prevented or lessened competition “unduly” in one or more relevant markets), this competitive effects test has now been removed from three forms of “hard core” criminal cartel offences (price-fixing, market division/allocation and supply/output restriction agreements between competitors). The key impact of this is that both private plaintiffs and the Bureau now have a lower burden to establish these three forms of “hard core” criminal cartel conduct.
In addition, the fact that section 45 (conspiracy) can at least in theory apply to many forms of common commercial agreements (e.g., joint venture, franchise, dual distribution and license agreements), it remains to be seen how the Bureau, private parties and courts will in practice interpret and apply Canada’s new conspiracy rules. In this regard, while the Bureau issued new enforcement guidelines at the time the Act was amended (Competitor Collaboration Guidelines) they are not law and are not binding on the courts, private parties seeking remedies under the Act or indeed the Bureau itself.
At the same time, some of the former criminal offences in the Act have been repealed, so that private actions are no longer possible for certain types of conduct – for example, for predatory pricing, which before March, 2009 could be enforced as a criminal offence, but can now be exclusively dealt with under the abuse of dominance provisions of the Act. The 2009 amendments to the Act also resulted in the repeal of the criminal promotional allowance, price discrimination and per se resale price maintenance provisions (the latter of which has now been replaced with a civil provision under section 76).
Private actions under the Act may be commenced in provincial superior courts or the Federal Court. However, as the Federal Court has limited jurisdiction, plaintiffs that wish to rely on causes of action in addition to those under the Act – for example, common law causes of action – must commence their proceedings in provincial superior court.
With respect to asserting jurisdiction in relation to cross-border cases, Canadian courts have generally relied on the so-called “real and substantial connection test” to determine whether a court has jurisdiction. The jurisdiction of Canadian courts to hear private actions under the Act is particularly relevant in the context of international price-fixing conspiracies, where the agreement may have been formed outside Canada with potential anti-competitive effects in Canada. There is now, however, authority for the proposition that where a conspiracy is formed abroad, with anti-competitive effects in Canada, a Canadian court will have jurisdiction. (Canada also has a standalone foreign-directed conspiracy provision.)
To establish a private action claim under section 36 of the Act, a private plaintiff must show that the defendant contravened one of the criminal provisions of the Act (e.g., establish all of the elements of a criminal price-fixing conspiracy) or breached a Tribunal or court order under the Act and has suffered actual damage or loss as a result of the conduct. In other words, a private plaintiff must establish both the elements of the alleged criminal offence and actual loss or damage as a result of the conduct (and that the damage or loss was caused by the defendant). The absence of a prior criminal conviction does not act as a bar to parties commencing private actions.
The necessity under section 36 for private plaintiffs to establish actual damage may, in many cases, mean it is easier for downstream purchasers (as compared to a direct competitor) to establish and quantify damages (e.g., consumers paying an overcharge as a result of a price- fixing conspiracy engaged in by suppliers, based on misleading claims made by a supplier in relation to a product that does not work, etc.).
Section 36, which is the provision under which private actions under the Act are commenced, also contains a helpful rebuttable presumption for plaintiffs. It provides that the “record of proceedings” in a matter that results in the conviction for a criminal offence under the Act (or a failure to comply with a Tribunal order) is “prima facie” evidence of the alleged conduct in a civil action.
It is also possible to commence class actions under the Act. For example, competition law class actions can be commenced in British Columbia under the British Columbia Class Proceedings Act and Ontario under the Ontario Class Proceedings Act. To date, Ontario, Quebec, British Columbia, Alberta, New Brunswick, Saskatchewan, Manitoba and Newfoundland have adopted class action legislation.
The introduction of class action legislation has led to a relative increase in competition law private actions in Canada, largely as a result of consolidating the considerable expenses of commencing competition law private actions. Competition law class actions are also in many cases “follow on” actions, following announcements by the Bureau or international investigations.
To commence a competition law class action a representative plaintiff must first obtain leave (“certification”) to commence the action as a class action after which, if certification is granted, the action proceeds on the merits.
The test for certification of a class action in most provinces is as follows: (a) the pleadings of notice of application disclose a cause of action, (b) there is an identifiable class of two or more persons, (c) the claim of the class members raises common issues, (d) a class proceeding is the preferable procedure for the resolution of the common issues and (e) there is a representative plaintiff that: (i) would fairly and adequately represent the class, (ii) has produced a workable plan for advancing the proceedings on behalf of the class and of notifying class members of the proceeding and (iii) with respect to the common issues, does not have interests that may conflict with other members.
One of the primary issues relating to the certification of competition law class actions to date has been difficulties arising from the calculation of damages and, in particular, the challenges in some cases of calculating damages in the context of indirect purchasers (i.e., where it is alleged that that direct purchasers passed on, for example, a price-fixing overcharge to a second downstream level of consumers). As a result, much of the contested activity in relation to Canadian competition law class actions has been at the certification stage of proceedings.
As a result of the unsettled law regarding the right of indirect purchasers to commence price-fixing class actions, the Supreme Court of Canada has recently granted leave in two companion indirect purchaser class actions.
The limitation period during which plaintiffs must commence a private action under the Act is two years from the later of: (a) the day on which the relevant anti-competitive conduct was engaged in (or court or Tribunal order was contravened) or (b) the day when any criminal proceedings were “finally disposed of”.
Under section 36 of the Act, the potential remedies for a successful competition law private action are the actual damages (i.e., compensatory damages) proven as a result of the criminal violation (or breach of a Tribunal or court order).
In contrast to the United States however, only single not treble damages, are available to successful plaintiffs in Canada. This is intended as one of several procedural safeguards against strategic litigation. As a practical matter, the majority of private actions in Canada have resulted in settlements.
In addition, in Canada the general rule is that the successful party in an action, whether the defendant or plaintiff, is entitled to recover the costs of a proceeding, including its legal fees and disbursements.
It is also common for private plaintiffs to argue common law causes of action together with claims under the Act (e.g., common law conspiracy, unjust enrichment, unlawful interference with economic interests, etc.).
In addition to private damages actions, private parties also have a limited right of “private access” under the Act to the federal Competition Tribunal. “Private access” rights are distinct from the private action regime, only available in relation to certain sections of the Act and, unlike private actions, no monetary damages are available.
Private access rights were introduced in 2002 to allow small and medium sized firms to challenge allegedly harmful conduct to their businesses under provisions which have not historically been enforcement priorities for the Bureau (e.g., section 75, refusal to deal).
Since the private access provisions were introduced in 2002, most private access applications to date have been under the refusal to deal provision of the Act (i.e., by distributors seeking a Tribunal order for resupply).
Private access proceedings, unlike private civil actions under the Act (which may be brought in the Federal Court or provincial courts), are brought in front of the Tribunal.
Private access to the Tribunal is available to private parties, with leave, under the refusal to deal, exclusive dealing, tied selling and market restriction provisions and, as a result of recent amendments to the Act, under the price maintenance provisions.
Private parties are required to obtain leave to make private access applications to the Tribunal. In addition, damages are not available and costs may only be awarded in the discretion of the Tribunal.
To grant leave in a private access application, the Tribunal must have “reason to believe that the applicant is directly and substantially affected by any practice [under sections 75, 76 or 77] that could be subject to a [Tribunal order]”. With respect to evidence, the Tribunal has held that a leave application must be “supported by sufficient credible evidence to give rise to a bona fide belief that the applicant may have been directly and substantially affected in the applicant’s business by a reviewable practice, and that the practice in question could be subject to a [Tribunal] order”.
Where leave is granted, the Commissioner may also intervene in the proceedings.
The burden of proof on a private access leave application is a lower burden than the civil balance of probabilities (i.e., an private access applicant need only establish sufficient credible evidence of the alleged conduct to lead to a bona fide belief by the Tribunal).
Applications for leave under the private access provisions of the Act must be brought within one year following the end of the conduct.
Under the private access provisions of the Act, the available remedy is a Tribunal remedial order (e.g., for a supplier to commence supply on “usual trade terms” in the case of a refusal to deal). Private parties are not entitled to seek damages and costs may only be awarded in the discretion of the Tribunal.
Private parties that have been granted leave to commence private access applications may also file consent agreements with the Tribunal (which, once filed, have the force of a Tribunal order).
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