In this class action, the plaintiffs allege that the defendants conspired to fix the prices of lithium-ion batteries (“LIBs”) in North America and elsewhere between January 2000 and December 2011. As a result, the plaintiffs paid higher prices for LIBs and products containing LIBs than they would have in a competitive market. The plaintiffs raised several causes of action, including unlawful means conspiracy and a statutory cause of action under s. 36 of the Competition Act, RSC, 1985, c C-34 (the “Act”), for breach of s. 45 of the Act.
The plaintiffs commenced their claim on behalf of all purchasers of LIBs and certain products containing LIBs in Canada during the relevant period. Notably, the plaintiffs’ proposed class included individuals who purchased LIBs manufactured by companies who were not involved in the alleged conspiracy (these individuals are known as “umbrella purchasers”). The theory behind the inclusion of umbrella purchasers is that the cartel was so dominant that it was able to drive up prices across the entire market. More specifically, the cartel created a supra-competitive pricing umbrella under which non-conspirator manufacturers were able to raise their prices without losing market share.
The case was certified at first instance. However, the certification judge held that umbrella purchasers did not have a cause of action. Among other reasons, the motion judge held that the inclusion of umbrella purchasers would expose the defendants to indeterminate liability. This finding was upheld by the Divisional Court.
Ontario Court of Appeal:
With respect to the statutory cause of action, the Court considered the Act’s plain language, the purpose of the Act, and relevant legal norms. Each of these considerations supported the plaintiffs’ position.
First, on a plain reading, section 36(1) permits “any person” who suffered damages as a result of conduct contrary to s. 45 to bring an action for damages. The Court held that this language is “broad and inclusive” and would not prevent an umbrella purchaser from recovering damages.
Second, the purposes of the Competition Act—which include compensation, deterrence, and the desire to maintain and encourage competition in Canada—support an interpretation that would allow umbrella purchasers to claim for damages:
It seems self-evident that when clandestine agreements between competitors are made to increase prices and lessen competition, ones that result in actual harm to consumers, that the purposes of the Competition Act are thwarted. Conspiracies among competitors to fix prices and lessen competition are the very antithesis of the Competition Act’s objective of promoting competition. Undoubtedly, where there is a wider berth for liability, the greater the availability of compensation for harm flowing from prohibited conduct, the greater the deterrent effect flowing from the award of damages, and the greater the protection for a strong, vibrant and healthy economy. In our view, interpreting s. 36(1) in a way that includes all those who have suffered losses as a result of a conspiracy – both umbrella and non-umbrella purchasers – accords with the purposes of the Competition Act.
Third, the normative concern about indeterminate liability does not apply because the statutory claim contains significant internal limitations, including the need to establish that the defendants specifically intended to conspire to engage in anti-competitive conduct and that the plaintiffs suffered loss as a result of the anti-competitive conduct. These restrictions limit liability and mitigate any concerns about indeterminacy.
The Court came to a similar conclusion with respect to the civil conspiracy claim. To make out an unlawful means conspiracy claim, plaintiffs are required to prove that the defendants’ conduct was directed at them and that the defendants knew or should have known that injury was likely to occur. These elements are more restrictive than those in the statutory claim, and eliminate any concerns about indeterminate liability.
Finally, the Court held that even if the concept of indeterminate liability was relevant to these causes of action, the risk of indeterminate liability did not apply on the facts of the case. While the inclusion of umbrella purchasers would increase the defendants’ exposure, their exposure would not be limitless. Rather, the defendants’ exposure would be limited to specific products sold over a specific time period.
The Ontario and British Columbia Courts of Appeal have now reached a consensus on the treatment of umbrella purchasers. In Godfrey v Sony (a class action alleging price-fixing in the market for optical disc drives), the British Columbia Court of Appeal affirmed a lower court decision certifying the claims of umbrella purchasers. The defendants in Godfrey were granted leave to appeal to the Supreme Court of Canada and the appeal was heard on December 11, 2018. The result of the Godfrey appeal will have important implications for both plaintiffs and defendants because it will affect who can bring a claim and the scope of the defendants’ liability.