Recent decisions favour the inclusion of ‘umbrella purchasers’ in price-fixing class actions
WITHIN THE SHORT SPAN of nine days in August, Ontario courts managed to add new horizons to the potential liability of defendants in the burgeoning arena of price-fixing conspiracy class actions. “These decisions have significant impact on the ability of Canadians to pursue compensation for illegal cartel conduct,” says Linda Visser of Siskinds LLP in London, the law firm that represented or co-represented the plaintiffs in all four actions.
Each of the four August cases involved a separate conspiracy involving LCD panels (Fanshawe v. AU Optronics), lithium-ion batteries (Shah v. LG Chem), CRT technology (Fanshawe v. Hitachi) and shipments of cargo by air (Airia v. Air Canada). Visser says the affected products were purchased by “millions” of Canadian consumers and businesses.
All the cases were based on s. 45 of the Competition Act, which makes conspiracies to fix prices illegal. The plaintiffs asserted claims based not only on s. 36 of the Act (which provides for a statutory right of private action) but also on civil conspiracy under the common law.
Arguably, the most important issue was whether “unconnected” or “umbrella purchasers” (who bought products from someone other than the named defendants) could be included in a price-fixing conspiracy case. In both CRT and Air Cargo, the superior court ruled that the claim against umbrella purchasers could proceed to trial; and in Lithium-Ion, the divisional court granted leave to appeal from a decision excluding umbrella purchasers from the class. “The theory behind including umbrella purchasers is that, because the defendant conspirators controlled the market, non-conspirators will follow their lead on pricing,” Visser explains.
The case for including purchasers, then, depends on expert evidence showing that the defendants controlled more than half the market and that their conduct impacted market prices generally. That’s not usually a problem for plaintiffs, Visser explains, because most price-fixing cases involve defendants who together have “two-thirds or more” of the market share between then.
Still, the inclusion of umbrella purchasers in a class can ramp up risk materially for defendants. “Even if the umbrella purchasers account for only 10 or 20 per cent of sales on a global basis, the increase in liability can be quite significant,” says Paul Martin of Fasken Martineau DuMoulin LLP in Toronto, who represented Asiana Airlines in the air cargo case.
CRT, Air Cargo and Lithium-Ion bring the issue to a head. “Umbrella cases have been included in price-fixing class actions in the past, but the propriety of doing so has not been argued until fairly recently,” says Katherine Kay of Stikeman Elliott LLP, who represented Air Canada in Air Cargo.
The issue won’t be resolved to any degree of certainty until the divisional court rules on the substantive appeal in Lithium-Ion, but there’s little doubt that the trend favours the inclusion of umbrella purchasers.
The other issue arising from these cases is whether the Competition Act is a “complete code” or whether plaintiffs may pursue common-law civil conspiracy claims based on breaches of the legislation in addition to or instead of asserting their rights under s. 36 of the Competition Act.
In LCD, the Ontario Court of Appeal ruled, in conformity with Watson v. Bank of America, that the Competition Act was not a complete code and that the common-law claims could proceed: “There is nothing in the language of s. 36 or in the debates surrounding its enactment that suggests it was Parliament’s intention to eliminate the use of a breach of Part VI of the Act as the unlawful means in a civil conspiracy claim. To the contrary, it would appear to be incongruous with the purpose of the Act, being the elimination of anti-competitive behaviour, that Parliament would eliminate a common law cause of action that serves to punish such behaviour.”
But despite what appears to be a trend to broadening the scope of price-fixing class action, Kay believes that there’s no need for defendants to panic. “These decisions are based on the pleadings alone, and they do not determine how the umbrella purchaser and other issues will be dealt with at trial.”
Besides, the Supreme Court of Canada hasn’t had its crack at the can yet.