Lexpert US Guides

36 | LEXPERT • December 2014 | www.lexpert.ca ANTITRUST CLASS ACTIONS passing-on cannot be used offensively by indirect purchasers to ground a cause of action. Canada's highest court disagreed funda- mentally with the notion that a prohibition on the offensive use of passing-on must go hand in hand with the rejection of the passing- on defense. The court provided four principal reasons for its critical divergences on this point: 1. e risk of double or multiple recovery can be managed by the courts: Recovery will be limited to the aggregate amount of the loss, no matter how it is ultimately shared by direct and indirect purchasers. Where there is a risk of double recovery, the courts can manage this risk through practical means, e.g. by reducing damage awards. However, it will be up to defendants to prove double or multiple recovery. 2. Indirect purchaser actions should not be barred solely because of issues of remoteness and complexity associated with proving damages: Complex evidence, economic theories, and multiple distribution chains are not new to indirect purchaser actions. ese challenges are present in most antitrust cases and should not serve to deny indirect purchasers the chance to make their case, even if the claim ultimately fails at trial. 3. Indirect purchaser actions further the goal of deterrence: Sometimes, direct purchasers will be reluctant to bring an ac- tion against the off ending party for fear of jeopardizing a business relationship. In such cases, indirect purchaser actions may be the only means of deterring overcharges. 4. Indirect purchaser actions are consistent with the principles of restitution: Indirect purchaser actions are consistent with the remediation objective of restitution law in that these purchasers o en bear the cost of antitrust violations. The court also noted that, while Illinois Brick remains good law at the federal level in the US, the US Supreme Court upheld the "re- pealer statutes" enacted by many states at the state level, affirming in ARC America that state-level repealer statutes are not pre-empted by federal antitrust law. WHY DOES A CANADIAN CASE MATTER TO FOREIGN COMPANIES? In Sun-Rype, the defendants argued that the Canadian courts lacked jurisdiction because the alleged conspiracy was entered into by for- eign defendants, outside of Canada, to fix prices for products sold to foreign direct purchasers. The majority of the court agreed with the defendants that conduct cannot be contrary to Part VI of the Competition Act unless there is a "real and substantial connection" to Canada. Applying the framework from its 2012 decision, Club Re- sorts Ltd. v. Van Breda, 2012 SCC 17, the court found that there is at least some suggestion in the case law that where defendants conduct business in Canada, make sales in Canada, and conspire to fix prices on products sold in Canada, Canadian courts have jurisdiction. In Sun-Rype, the conduct in question allegedly involved each for- eign defendant's Canadian subsidiary acting as its agent, and the sales in question were made in Canada to Canadian customers and Cana- dian end-consumers. The Supreme Court held it was not "plain and obvious" that Canadian courts have no jurisdiction over the alleged anti-competitive acts committed in this case. The question remains, however, whether the court would have come to this conclusion had Canadian subsidiaries not been involved. Québec courts appear to have been given an even wider reach. In Infineon, the court held that Québec courts have jurisdiction under the Civil Code of Québec in respect of an alleged anti-competitive con- spiracy which occurred outside of Québec, so long as there is some injury or economic damage to a Québec consumer. This suggests that foreign companies with no presence in Canada beyond having sold products into the Canadian market may nonetheless be required to defend antitrust class actions brought in Québec. Again, however, another open question remains as to whether Infineon's expansive ap- proach under Québec civil law can also apply to Canada's common- law jurisdictions. Another critically important element of the Supreme Court's mes- sage is that the risk of multiple recovery will not prevent indirect purchasers from suing U.S. companies in both the U.S. and Canada. In Sun-Rype, the defendants argued that permitting indirect pur- chaser class actions in Canada would result in overlapping claims for the same loss. In that case, direct purchasers had already reached a settlement in the US for the alleged overcharges at issue. The court summarily dismissed this argument, again noting the court's ability to modify settlement and damage awards to reflect amounts already received by plaintiffs in other jurisdictions. Thus, proving overlap- ping recoveries will require coordinated efforts by counsel — and potentially by the courts — across multiple jurisdictions. CONCLUDING OBSERVATIONS In the wake of the Pro-Sys trilogy, all foreign companies marketing products into Canada must be prepared to defend indirect antitrust class actions in Canadian courts. Where simultaneous proceedings are brought in one or more foreign jurisdictions and in Canada, counsel will confront potentially differing legal standards — this is certainly the case as between Canadian and US federal and some US state jurisdictions. Foreign and Canadian counsel will need to coordinate strategy across the jurisdictions, particularly in cases where the defendant alleges and must prove double or multiple recoveries in related actions. This is clearly new law carrying with it expanded risk factors for foreign companies doing business in Canada. They are now subject to accountability under Canadian competition laws to a "Foreign and Canadian counsel will need to coordinate strategy across the jurisdictions, particularly in cases where the defendant alleges and must prove double or multiple recoveries in related actions. This is clearly new law carrying with it expanded risk factors for foreign companies doing business in Canada. They are now subject to accountability under Canadian competition laws to a new constituency of potential plaintiffs."

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