Year in Review – Umbrella Purchasers
Over the last several years, the Ontario and British Columbia courts have grappled with significant issues affecting the scope and viability of price-fixing class actions. One of these issues is whether “umbrella purchasers” have a cause of action in a price-fixing conspiracy class action.
Umbrella purchasers are people who purchased the relevant product from a company that was not involved in the alleged conspiracy. 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.
Until this year, there was a divide between Ontario and British Columbia appellate courts in their treatment of umbrella purchasers.
In Ontario, the first case to consider the issue in depth was Shah v LG Chem, Ltd.—a class action alleging price-fixing in the market for lithium-ion batteries. At first instance, Shah was certified on behalf of direct and indirect purchasers; however, the certification judge held that umbrella purchasers did not have a cause of action. Among other reasons, the motion judge held that the claims of umbrella purchasers would expose the defendants to indeterminate liability. On appeal, the Divisional Court affirmed this aspect of the certification decision.
In British Columbia, the umbrella purchaser issue was considered in Godfrey v Sony Corp—a class action alleging price-fixing in the market for optical disc drives. At first instance, the chambers judge expressly rejected the reasoning in Shah and certified the claims of umbrella purchasers. On appeal, the British Columbia Court of Appeal affirmed the certification decision.
In 2018, the Ontario Court of Appeal heard the Shah appeal and issued reasons. Like the British Columbia Court of Appeal, the Ontario Court of Appeal concluded that umbrella purchasers can claim for damages in a price-fixing class action.
With respect to the statutory cause of action, the Court held that section 36(1) of the Competition Act provides a cause of action to “any person” who suffered damages as a result of conduct contrary to s. 45. On a plain reading, the statutory language is “broad and inclusive” and would not restrict umbrella purchasers from claiming for damages. Moreover, the Court held that the Competition Act’s purposes—which include compensation, deterrence, and the promotion of competition in Canada—would be furthered by an interpretation that permitted umbrella purchasers to recover their damages. The Court also held that concerns about indeterminate liability do not apply to the statutory cause of action because it already contains significant internal limitations, including the need to establish that the defendants specifically intended to engage in anti-competitive conduct and that the plaintiffs suffered a loss as a result. 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, the 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.
The Ontario and British Columbia Courts of Appeal have now reached a consensus on the umbrella purchasers in price-fixing class actions. However, this may not be the final word on the issue. In June 2018, the Godfrey defendants were granted leave to appeal to the Supreme Court of Canada on, among other things, certification of umbrella purchaser claims. The appeal was heard in December 2018, and the Supreme Court has not yet issued its reasons. The Supreme Court’s decision will be of considerable importance to plaintiffs and defendants because it will likely provide additional clarity on the appropriate class definition in a price-fixing class action and the scope of the defendants’ liability.
To access more case summaries like this, visit Siskinds’ 2018 Class Action Case Law Year in Review, available on Canlii.
Posted in Class Actions