This country-specific Q&A provides an overview to Competition Litigation laws and regulations that may occur in Canada.
What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?
Section 36 of the Competition Act (“Act”) provides that any person who has suffered loss or damage as a result of violations of the criminal provisions of the Act, which cover price fixing, bid rigging, and intentionally misleading representations associated with the sale of goods or services, or as a result of a failure to comply with an order of the Competition Tribunal (“Tribunal”) has a right to commence a private right of action to recover damages equal to actual loss suffered, plus legal costs.
While private applications before the Tribunal are available with leave for certain reviewable anti-competitive practices, namely, exclusive dealing, price maintenance, and refusal to deal, damages are not available from the Tribunal and such applications are rare. Accordingly, for the most part, the balance of this chapter addresses damages claims before the courts, not cases before the Tribunal.
What is required (e.g. in terms of procedural formalities and standard of pleading) in order to commence a competition damages claim?
Competition damages claims typically proceed as class actions, though not always. These proceedings are commenced through a statement of claim that would give rise to a cause of action assuming all the facts pleaded are true. Meeting this requirement is a relatively low threshold.
The first major step in a class action is a motion for an order certifying the proceeding as a class proceeding and appointing a representative plaintiff. Each jurisdiction has its own rules for certification, though they are substantially similar. The thresholds for certification are addressed below in response to question 11.
What remedies are available to claimants in competition damages claims?
Under section 36 of the Act, claimants can recover compensatory damages equal to the actual loss suffered, i.e., the “overcharge”, plus the costs of investigating the misconduct and bringing the proceeding. The overcharge is the extra amount claimants paid for the good, as compared to the price they would have paid in the absence of the anti-competitive conduct. The Act does not allow for recovery of punitive damages or treble damages.
Claimants typically bring equitable and common law claims often predicated upon breaches of the Act, as damages that can be recovered under the Act are limited. Such claims, such as common law conspiracy, unlawful interference with economic interests, unjust enrichment, or waiver of tort, can allow for aggravated and punitive damages, restitution, and disgorgement of profits.
There is debate as to whether the Act is a complete code for remedies available for a breach of the Act. The viability of equitable and common law claims for breaches of the Act has been resolved in plaintiffs’ favour in the civil law province of Quebec, and will be decided by the Supreme Court of Canada this year for common law provinces in the appeal of Godfrey v Sony Corporation, 2017 BCCA 302 (“Godfrey”).
Three class action certifications decided by the Supreme Court of Canada (Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57; Sun-Rype Products Ltd v Archer Daniels Midland Company, 2013 SCC 58; Infineon Technologies AG v Option Consommateurs, 2013 SCC 59) confirmed that indirect purchasers can bring class actions for damages based on violations of Canadian competition laws. Indirect purchaser actions are seen as furthering the goal of deterrence and are consistent with the principles of restitution, as indirect purchasers often bear the cost of antitrust violations, despite not having a contract or direct relationship with the alleged conspirators.
What is the measure of damages? To what extent is joint and several liability recognised in competition damages claims? Are there any exceptions (e.g. for leniency applicants)?
Unlike in the United States, the treble damages principle does not exist in Canada. Rather, in accordance with section 36 of the Act, the measure of damages available in competition litigation are the actual losses proved to have been suffered by the claimant and investigative costs.
Immunity and leniency applicants receive immunity or lenient treatment in regard to criminal prosecution from the Public Prosecution Service of Canada and the Competition Bureau for cooperating with an investigation. However, such applicants receive no immunity or leniency in competition damages claims and are liable for the full amount of damages under section 36.
Although there has been no definitive answer by the Supreme Court of Canada, the joint and several liability principle is likely recognized in competition damages claims.
What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?
Section 36(4) of the Act provides that the private right of action to recover damages for any loss or damage incurred as a result of a breach of one of the criminal provisions of the Act is subject to a two-year limitation period.
Case law to date suggests that the “discoverability rule” applies to section 36 claims. This means that the start of the limitation period is postponed until the time that the plaintiff knew or ought to have known of the anti-competitive conduct or disposition of criminal proceedings, although this is presently before the Supreme Court of Canada in Godfrey.
The two-year limitation period is restarted every time there is a fresh conviction for the anti-competitive conduct in question.
Which local courts and/or tribunals deal with competition damages claims?
Superior courts of each province have typically heard these cases, but recently, plaintiffs have been attempting to bring cases before the Federal Court. However, there is jurisprudence to the effect that, as a statutory court, the Federal Court does not have jurisdiction to entertain common law claims. The Competition Tribunal also has the ability to adjudicate private matters brought before it regarding exclusive dealing, refusal to deal, and price maintenance, but it has no authority to order damages.
How does the court determine whether it has jurisdiction over a competition damages claim?
Canadian courts have jurisdiction simpliciter over competition damages claims where the defendants are present in Canada, or where there is a real and substantial connection to Canada (or the province in which the action is commenced). Canadian courts have assumed jurisdiction over claims alleging foreign conspiracies where the conspiracies are alleged to have effects in Canada or were intended to affect prices in Canada. In cases where a Canadian court has jurisdiction simpliciter, the court retains the discretion to stay the proceeding on the basis that there is another forum that is more appropriate for determination of the dispute (forum non conveniens).
How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?
In relation to a competition damages claim, the plaintiff must establish, on a balance of probabilities, both harm (including causation) and quantum of damages suffered. Although the conduct that underpins a section 36 claim is criminal, which would have to be proven beyond a reasonable doubt to secure a criminal conviction, this standard does not apply to a civil damages case.
To what extent are local courts bound by the infringement decisions of (domestic or foreign) competition authorities?
Courts are not bound by infringement decisions of competition authorities. However, a guilty plea or conviction on the same facts is prima facie evidence that the conduct occurred. Under section 36 of the Act, absent any evidence to the contrary, a person who has been convicted of an offence under the criminal sections of the Act or convicted or punished for non-compliance of an order issued under the Act, is presumed to have engaged in conduct contrary to the Act or failed to comply with the order.
To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?
Although private applications before the Tribunal cannot proceed while a Competition Bureau (“Bureau”) inquiry or proceeding is ongoing, private damages actions before the courts may proceed in tandem with public enforcement actions. Historically, however, the Bureau’s case has proceeded first. For example, in 2009, the Bureau began an investigation into auto parts bid-rigging, which related to a series of bid-rigging agreements among auto parts suppliers. This investigation resulted in 13 guilty pleas between April 2013 and October 2018. Although some class actions settlements have been achieved with various defendants, many of these actions are still proceeding and are likely to continue for several years.
What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold criteria have to be met?
Class actions raising competition damages claims are available in all Canadian provincial superior courts, and in the Federal Court. While the criteria varies between courts, in order to certify a case as a class action, a plaintiff must generally satisfy the Court that the following criteria are met:
i. the pleadings or the notice of application disclose a cause of action; and
ii. there is “some basis in fact” for each of the following:
a. there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
b. the claims or defences of the members of the class raise common issues;
c. a class proceeding would be the preferable procedure for the resolution of the common issues; and
d. there is a representative plaintiff or defendant who:
i. would fairly and adequately represent the interests of the class,
ii. has produced a plan for the proceeding setting out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
iii. does not have, on the common issues for the class, an interest conflicting with the interests of other class members.
Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
Defendants in competition and other class actions cannot use the defence of passing-on. The Supreme Court of Canada has held that the passing-on defence is contrary to basic principles of restitution, and that any risk of double recovery in hybrid actions brought by direct and indirect purchasers can be managed by the courts.
Section 45(7) of the Act allows defendants to use the regulated conduct defence. In Hughes v Liquor Control Board of Ontario, 2019 ONCA 305, the Ontario Court of Appeal found that the regulated conduct defence is available if the legislation governing the industry in question, in this case the Liquor Control Act, expressly or by necessary implication directs or authorizes the defendant to engage in the impugned conduct.
Section 45(4) of the Act also allows defendants to use the defence of ancillary restraint. This defence provides that a defendant shall not be convicted for an agreement or arrangement that would contravene section 45, the conspiracy offense, if it is ancillary and necessary to give effect to other agreements or arrangements that are not anti-competitive. However, the case law has not commented on the application of section 45(4) in the private action context.
Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the court or the parties and what duties do they owe?
Expert evidence is permitted and represents a crucial element in competition litigation. Both plaintiffs and defendants will typically file extensive expert evidence with respect to liability and damages issues.
Expert evidence may be used to address various stages in the class action process, such as common issues of harm or loss at certification and causation and damages at trial.
Several elements will be considered in assessing the admissibility of expert evidence, including relevance, necessity in assisting the trier of fact, the expert’s qualifications, and the absence of any exclusionary rule.
Parties retain and instruct experts; however, the expert’s duty to the courts overrides duties to clients: experts must be independent and impartial. The expert has a duty to the courts to give fair, objective, and non-partisan opinion evidence. Before many provincial superior courts, experts must certify that they will provide independent evidence. The Tribunal also requires the expert to sign an acknowledgement of his or her duty to assist the Tribunal impartially.
Describe the trial process. Who is the decision-maker at trial? How is evidence dealt with? Is it written or oral, and what are the rules on cross-examination?
It is extremely rare for a competition class action in Canada to proceed through a full trial. While juries are theoretically available, they are not typically chosen in commercial matters. The decision maker at trial is likely to be a single judge. The evidence of witnesses is typically given orally, although special arrangements can be made to have the evidence in chief of witnesses submitted by way of affidavits and for their oral testimony to be limited to cross examination. Witnesses are subject to cross examination on all matters relevant to the issues in the case.
Where there has been a conviction in prior criminal proceedings on the same facts, the record of those proceedings is admissible at trial as prima face evidence that the conduct occurred.
How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?
The process for determining a competition class action is lengthy and, to date, most cases have settled and not gone to trial. Given that many issues surrounding competition class actions are still matters of first impression, appeals of decisions are frequent, and often, other cases in the pipeline are stayed or suspended pending the determination of appeals in other cases. Accordingly, it is not uncommon for cases to take several years to even reach the certification stage.
Do leniency recipients receive any benefit in the damages litigation context?
As explained above in question 4, leniency recipients do not receive any benefit in the damages litigation context.
How does the court approach the assessment of loss in competition damages cases? Are “umbrella effects” recognised? Is any particular economic methodology favoured by the court? How is interest calculated?
A Canadian court would typically start by estimating the overcharge resulting from the alleged anti-competitive conduct. This can be done by comparing the alleged conspiracy time period with time periods which precede or follow the anti-competitive conduct, and/or through regression analyses that attempt to identify the overcharge attributable to the anti-competitive conduct. In class actions, the overcharge must then be allocated among class members.
The Supreme Court of Canada has held that indirect purchasers have a right of action in competition damage claims, which requires the court to assess the portion of the loss that has been passed on to those indirect purchasers. Canadian courts have also recognized the potential for “umbrella effects”, i.e., the concept that the sellers who are not alleged to have participated in the conspiracy nevertheless increased their prices as a result of the conspiracy, and that the defendants should be liable for their increase. To date, no Canadian court has awarded damages based on an “umbrella effects” theory, but Canadian courts have declined to strike such allegations at the pleadings stage. One question that we expect will be decided by the Supreme Court of Canada this year when the appeal of Godfrey is released, is whether “umbrella damage claims” are available pursuant to section 36.
Pre-judgment and post-judgment interest is generally available, calculated in accordance with the applicable provincial or Federal Court rules.
Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?
This remains an open question. Given this uncertainty, most settlements of competition class actions contain “bar orders” prohibiting non-settling defendants from bringing contribution claims against the settling defendants, and correspondingly limiting the plaintiffs’ claims against the non-settling defendants.
In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?
It is exceedingly rare for a competition class action to proceed to a full trial. Most cases terminate following the court’s decision on whether to certify the case as a class action. Cases that get certified as class actions most often settle. Where certification is denied, the claims seldom proceed on an individual basis.
In addition, the procedural rules in each of the provinces and in the Federal Court provide for preliminary attacks on pleadings on the basis that they do not disclose a reasonable cause of action or are frivolous and vexatious. These preliminary motions generally occur prior to certification.
Finally, there are summary judgment procedures available in all provincial superior courts and in the Federal Court. Those procedures allow the court to dismiss claims or grant judgment in cases in which the written evidentiary record is sufficiently clear that no genuine issue exists that would require a trial.
What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?
Settlements are typical in competition damages claims. These settlements must be perceived as fair and reasonable to the class members. To ensure that settlements are fair, subsection 29(2) of the Class Proceedings Act provides that a settlement of a class proceeding is not binding unless approved by the court. It is the judge’s responsibility to determine whether the settlement is fair and reasonable at a settlement hearing. The court in Dabbs v Sun Life Insurance Co of Canada (1998), 40 O.R. (3d) 429 set out a list of considerations for the approval of a proposed settlement, such as whether the settlement is recommended by class counsel, the risks of proceeding to trial, and whether the settlement has been approved in other jurisdictions.
By the time settlements are entered into, foreign defendants will have typically attorned to the jurisdiction.
Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how are costs calculated, and are there any circumstances in which costs recovery can be limited?
In most Canadian courts, the losing party in an action is required to pay some or all of the winning party’s litigation costs – a “loser pays regime”. In calculating legal costs, the courts consider various factors including what a losing party would reasonably expect to pay in similar cases, the complexity of the case, and whether the case invoked a novel point of law.
To reduce the possibility of large adverse costs awards, plaintiffs have begun to bring their actions in Federal Court, where costs are awarded pursuant to fixed tariffs, which are typically much lower than the costs available in provincial superior courts.
Are third parties permitted to fund competition litigation? If so, are there any restrictions on this, and can third party funders be made liable for the other party’s costs? Are lawyers permitted to act on a contingency or conditional fee basis?
Litigation financing is beginning to be seen as a legitimate tool for access to justice in the context of class actions.
In David v Loblaw, 2018 ONSC 6469, the Ontario Superior Court of Justice approved a third party funding agreement in the context of a competition class action proceeding. The plaintiffs received independent legal advice, the agreement was fully disclosed to the court, the third party funder agreed to comply with all orders made by the court, the plaintiffs controlled their own litigation, and the third party funder was required to respect the deemed undertaking and the law of privilege.
The Court found that the funding agreement was fair and reasonable based on several factors: the third party funder’s commission was capped at 10% of litigation proceeds after deducting disbursements, lawyers’ fees and taxes, and administrative expenses; the claimants had sole right to direct proceedings and instruct counsel; termination of the funding agreement required leave of the court and the consent of class counsel if termination occurred before certification; the third party funder agreed to pay costs up to the termination date, including costs of a motion to approve termination; and any assignment was required to be on notice to all parties and required approval of the court.
Lawyers are permitted to act on a contingency fee basis. Where settlement amounts are below $50 million, and the fees are not excessive or otherwise unreasonable, up to one-third of the settlement amount will be presumptively valid as a contingency fee (see Brown v Canada (Attorney General), 2018 ONSC 3429 and Cannon v Funds for Canada Foundation, 2013 ONSC 7687).
What, in your opinion, are the main obstacles to litigating competition damages claims?
In Canada, many of the issues associated with competition class actions remain unresolved. These include the following:
i. The evidentiary burden on plaintiffs at class certification;
ii. Whether discoverability applies to limitation periods under the Act;
iii. Whether “umbrella purchasers” can have valid claims;
iv. Whether defendants are jointly and severally liable; and
v. The availability of rights of contribution and indemnity.
Some of these issues are presently before the Supreme Court of Canada in Godfrey, which was argued in December 2018 and is presently on review.
In addition, Canadian courts have struggled with the practical consequences and implementation of issues that have been decided at a conceptual level. For example, the Supreme Court of Canada found in 2013 that indirect purchasers can bring competition damages claims. Litigants and lower courts are still working through how to implement that principle in actual cases.
What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?
The release of the decision in Godfrey is highly anticipated and will affect a number of class actions that are currently suspended pending the release of that decision.
Because the threshold for certification is relatively low, there is increasing talk of defendants foregoing traditional certification challenges, and simply proceeding to trial or adopting other defence strategies. If that takes hold, the landscape for competition class actions might change dramatically, as many of the issues that have been decided in the abstract by Canada’s appellate courts – such as the availability of damages for indirect purchasers – would have to be determined in concrete terms on the basis of proof and evidence in fully litigated cases.