Litigation Brief

Alberta Court of Queen’s Bench Issues Important Decision on Costs for Competition Law Private Actions Under Section 36 of the Competition Act

On February 7, 2012, the Alberta Court of Queen’s Bench issued an important decision on the award of costs in private competition law civil actions under section 36 of the Competition Act.  This case is the first decision reported regarding a party's right to claim costs under section 36 of the Competition Act.

In 321665 Alberta Ltd. v. ExxonMobil Canada Ltd., 2012 ABQB 76, the Alberta Court of Queen’s Bench interpreted the plaintiff’s right in a successful upstream cartel case to recover costs in the action under section 36 of the Competition Act.

Section 36 of the Competition Act is the operative provision for commencing competition law private actions in Canada, which provides that private plaintiffs may sue for, among other things, violations of the criminal provisions of the Act (e.g., conspiracy agreements, bid-rigging, criminal misleading advertising) and recover actual loss or damage suffered, “together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under [section 36]”.

To date, however, it has not been clear what the scope of a plaintiff’s right was to recover the costs of bringing a private action under section 36.

Ontario Securities Commission Recognizes Alpha as a Stock Exchange

The Wall Street Journal reported earlier today that the Ontario Securities Commission (“OSC”) has approved Alpha (Alpha Trading Systems Limited Partnership and Alpha Exchange Inc.), Canada’s largest alternative trading platform to the TSX, as a stock exchange (see: Ontario Securities Regulator Allows Alpha to be Exchange).

The OSC’s Recognition Order sets out the terms and conditions of Alpha’s recognition as an exchange and the review process to be followed for the rules, policies and other similar instruments of Alpha Exchange.

The TMX, which owns and operates the TSX, is currently subject to a Cdn. $3.8 billion friendly bid by Maple Group, which requires, in addition to Provincial securities regulatory approvals in Ontario, Quebec, Alberta and British Columbia, clearance by the federal Competition Bureau.  Alpha’s shareholders include a number of the Maple Group consortium’s investors including CIBC, Dejardins, National Bank and Scotia.

Last week the Commissioner of Competition expressed “serious concerns” about the Maple/TMX transaction, which is currently subject to a second stage review by the Bureau (see: Commissioner of Competition Addresses Current Enforcement Priorities in Two Wide-ranging Talks in Vancouver).

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For the OSC’s Notice of Approval and Recognition Order see:

Recognition of Alpha Trading Systems Limited Partnership and Alpha Exchange Inc. as an Exchange

 

Canadian Supreme Court Grants Leave in Pro-Sys/Microsoft and Sun-Rype Indirect Purchaser Competition/Antitrust Class Actions

Earlier today the Supreme Court of Canada, per Justices LeBel, Fish and Cromwell, granted leave to appeal in the Pro-Sys Consultants Ltd. v. Microsoft Corporation and Sun-Rype Products Ltd. v. Archer Daniels Midland Company cases.

These cases relate to conflicting indirect purchaser class action certification decisions in British Columbia (two companion decisions of the British Columbia Court of Appeal) and Quebec (a recent decision of the Quebec Court of Appeal).

(See: Quebec Court of Appeal rejects B.C. Court of Appeal passing-on defence decisions in Pro-Sys and Sun-Rype and British Columbia Court of Appeal allows Microsoft appeal in Pro-Sys v. Microsoft - creates de facto passing-on defence).

The central issue to be decided by the Supreme Court will be the ability of “indirect purchasers”, that is purchasers further down the supply chain than "direct purchasers" of products, to proceed with claims against defendants in price-fixing class actions.

Presently, based on conflicting appellate decisions in British Columbia and Quebec, there is uncertainty as to indirect purchasers’ ability to proceed with such claims as well as the status of the related “passing-on defence” in Canada (which originated in the United States in the context of indirect purchaser class action litigation).

For the British Columbia Court of Appeal’s judgments in the Pro-Sys and Sun-Rype cases see:

Pro-Sys Consultants Ltd. v. Microsoft Corporation (B.C.C.A.)

Sun-Rype Products Ltd. v. Archer Daniels MIdland Company, et al. (B.C.C.A.)

For the procedural history of these cases before the Supreme Court see:

Pro-Sys Consultants Ltd., et al. v. Microsoft Corporation, et al. (docket 34282)

 

Quebec Court of Appeal Rejects BC Court of Appeal Passing-on Defence Decisions in Pro-Sys and Sun-Rype

Earlier this month, the Quebec Court of Appeal unanimously overturned the earlier 2008 Quebec Superior Court decision in Option Consommateurs v. Infineon Technologies AG, which had denied a motion to commence class action proceedings.

The decision in this case, which follows U.S. proceedings and guilty pleas in relation to a price-fixing conspiracy for the supply of dynamic random access memory (“DRAM”), is significant in expressly allowing indirect class action plaintiffs to proceed despite two earlier British Columbia Court of Appeal decisions that created a de facto passing-on defence (see: British Columbia Court of Appeal Allows Microsoft Appeal in Pro-Sys v. Microsoft - Creates de facto Passing-on Defence).  (for the earlier BC judgments in Pro-Sys and Sun-Rype see: Pro-Sys Consultants Ltd. v. Microsoft Corporation and Sun-Rype Products v. Archer Daniels Midland Company).

In these two earlier British Columbia decisions, the Court of Appeal set aside the plaintiffs’ earlier certification decisions largely based on the risk that allowing indirect purchaser plaintiffs to proceed may lead to double recovery.  In this regard, Mr. Justice Lowry held:

“… in the absence of the passing-on defence, a defendant would be liable for both the whole of the charge passed on (liability to the direct purchasers) and for all or any portion of the charge passed on (liability to the indirect purchasers) … [that] would result in double recovery … which our law does not permit.”

In the recent Quebec Court of Appeal decision in DRAMs, a unanimous Court rejected the holdings in Pro-Sys and Sun-Rype, adopting instead the dissenting opinion of Donald J.A. in Sun-Rype to allow the DRAMs plaintiffs to proceed.

The Quebec Court of Appeal held, in reasons delivered by Kasirer J.A., that rather than automatically resulting in double recovery, allowing the indirect plaintiff purchasers to proceed in this case would instead mean they would be required to prove indirect harm suffered in a hearing on the merits:

“I disagree with the motions judge that the rules relating to passing-on are a bar to authorizing the class action here.  The appellant’s allegations of injury are not defeated by either the double recovery argument or the complexity argument raised by the respondents in connection with passing-on of the loss to indirect acquirers of DRAM.

I draw my views in large part from the dissenting opinion of Donald J.A. in Sun-Rype to conclude that it would be premature to dismiss the motion under article 1003(b) C.C.P. based on the claim for losses by members of the class who are indirect purchasers.  To my mind, the respondents do not face an unfair risk of double recovery given that the motion alleges a single, aggregate loss notwithstanding the mix of direct and indirect purchasers in the class.  In addition, the complexity not to be underestimated – is an evidentiary concern that can be properly attended to as part of the burden of proof resting on the appellants when the case is considered on the merits.

The facts of this case invite us to consider the use of the theory of passing-on not as a shield to protect the wrongdoers but as a sword to allow the indirect purchasers to make plain their losses.  The respondents are not invoking passing-on of the overcharge by direct purchasers as a defence to the claim against them; instead, the indirect purchasers are arguing that, as a matter of fact, those losses moved down the chain, in whole or in part, and justify, aggressively rather than defensively, a claim by them against the respondents for price fixing. … As the trial judge noted in [Sun-Rype], ‘it is a mistake to equate pass-through as a defence at law with pass-through as a factual occurrence.’”

The Quebec Court of Appeal in essence held in this decision that allowing indirect purchasers to proceed will not necessarily lead to double recovery and, rather than assuming this result, they should be permitted to argue their indirect damages at trial (despite the difficulty and complexity of doing so, which the court acknowledged).

This case now means that the status of the passing-on defence in Canada is now more unsettled than ever, with conflicting decisions by two Canadian appellate courts.

This Quebec Court of Appeal decision is also leading to more speculation of how the Supreme Court of Canada will rule in relation to leave applications made to Canada's highest court in Sun-Rype and Pro-Sys.

 

Supreme Court of Canada Denies Leave in U.S. Steel Investment Canada Case

On November 24, 2011, the Supreme Court of Canada denied leave in United States Steel Corporation et al. v. Attorney General of Canada (FC) (Civil) (By Leave) (34389).  See: Supreme Court of Canada Judgements.  See also: National Post - Supreme Court Won't Hear U.S. Steel Appeal.

To appeal a decision of a court of appeal in a civil case to the Supreme Court, the party wishing to appeal must first obtain leave (i.e., permission) to do so.  Under the Supreme Court Act, an application for leave to appeal may be granted if the Supreme Court finds that the case: (i) raises an issue of public importance and (ii) should be decided by the Supreme Court.  Any case must raise an issue that goes beyond the immediate interests of the parties.

The Supreme Court does not issue reasons for its decisions to allow or dismiss applications for leave to appeal.  Judgments on applications for leave to appeal are also generally final (under the Supreme Court of Canada Rules, an application for leave to appeal will not be reconsidered unless there are exceedingly rare circumstances in the case that warrant consideration).

This U.S. Steel case relates to the federal government’s lawsuit against U.S. Steel in relation to the performance of undertakings U.S. Steel provided in its 2007 acquisition of Hamilton-based Stelco Inc.  The Federal Court had previously allowed the government’s lawsuit to proceed.

Where an investor fails to comply with the Investment Canada Act (e.g., fails to file an application for review or notification, fails to comply with undertakings or completes a reviewable investment without the requisite approval) a number of penalties may be imposed.  These include divestiture of assets, the revocation (or suspension) of voting rights and financial penalties of up to Cdn. $10,000 per day that an investor is in contravention of the Investment Canada Act (being sought by the government in this case).

For the Supreme Court of Canada’s leave decision see:

Supreme Court of Canada Judgements

For more about the Investment Canada Act see:

Investment Canada

 

New Blog – Canadian Advertising & Marketing Law

We are pleased to announce the launch of our new Canadian advertising and marketing law blog: Canadian Advertising & Marketing Law. 

Our new blog will include news and developments in Canadian advertising and marketing law by Steve Szentesi, who works as associate counsel with Hakemi & Company Law Corporation, key resources and links and overviews of advertising law, the new anti-spam legislation (Bill C-28), comparative advertising, promotional contest law, misleading advertising, packaging and labeling laws and telemarketing.

 

Competition Tribunal Grants Leave to CREA and Realtysellers to Intervene in TREB Abuse of Dominance Case

On November 2, 2011, Madam Justice Simpson of the federal Competition Tribunal (the “Tribunal”) granted leave to Realtysellers (“RS”) and The Canadian Real Estate Association (“CREA”) to intervene in the Toronto Real Estate Board (“TREB”) abuse of dominance case.

Following the Tribunal’s decision, CREA’s President Gary Morse said:

“We are pleased that the Tribunal is willing to hear our position in this matter and look forward to contributing to the Tribunal on important issues that will affect not only TREB and its members, but will also have broader implications for other Boards and Associations … The important issues under discussion may lead to a Tribunal Order affecting data sharing over the Internet which directly affects the interests of all CREA members … It is important for us, and our members, to be at the table and part of this discussion.”

CREA and RS both moved for leave to intervene in the TREB abuse of dominance case on October 18, 2011.

Court of Appeal upholds injunction barring Rogers from promoting itself as "Canada’s most reliable network”

On December 4, the Court of Appeal dismissed Rogers Communications Inc. (“Rogers”)’s appeal of a decision that prohibited it from advertising its wireless telephone network as “Canada’s most reliable network.” The decision, indexed as TELUS Communications Co. v. Rogers Communications Inc., 2009 BCCA 581, provides some guidelines with respect to comparative advertising, particularly in industries where technological platforms are rapidly evolving.

Fastest and Most Reliable – Not for Long

Rogers had started using technology in September 2007 that rendered its network more advanced than the TELUS Communications Co. (“TELUS”) network.  After engaging in some empirical research regarding the quality of its network, Rogers began marketing itself as "Canada's fastest network" and "Canada's most reliable network".  Some of the advertisements contained small disclaimers qualifying Rogers' assertions.

On November 5, 2009, TELUS began providing service on a new network using technology similar to that used by Rogers.  One week later, TELUS started its lawsuit, disputing Rogers' claims that its network was faster and more reliable.  TELUS maintained that it would suffer irreparable harm if Rogers continued its advertising campaign and sought a temporary injunction to restrain Rogers from promoting itself as the provider of "Canada's fastest network" and "Canada's most reliable network".

TELUS' claim was based on section 52(1), Part VI of the Competition Act, R.S.C. 1985, c. C-34, which prohibits an individual from making a materially false or misleading representation to the public for the purpose of promoting a product or business interest.