Ontario Court refuses to certify a competition class action

1 juillet 2002

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A recent decision of the Ontario Superior Court of Justice refusing to certify a competition civil case as a class action should stand as an important precedent for defending such proceedings brought under the Competition Act. The case, Price v. Panasonic Canada Inc., alleged that Panasonic had engaged in “resale price maintenance” in respect of several of its electronic products. The Court based its refusal to certify the case as a class action on the need for each member of the class to establish that he or she had actually suffered damages as a result of the alleged breach of the Competition Act.

The Plaintiffs sought to certify a class of roughly twenty million Canadian consumers who had purchased Panasonic’s electronic products from authorized dealers between 1980 and 1999. The Plaintiffs asserted that the Defendant had attempted to influence the prices at which its products were sold and induced dealers to maintain such prices as a condition of doing business, contrary to section 61 of the Competition Act (resale price maintenance) and its redecessor,section 28 of the Combines Investigation Act (the CIA). The Plaintiffs also alleged that Panasonic had committed the common law torts of intentional interference with contractual relations, unlawful interference with economic interests and had been unjustly enriched.

Civil liability for violations of the criminal provisions of the Competition Act and the CIA (including resale price maintenance) arises from section 36 of the Competition Act and section 31 of the CIA. These provisions permit a person “who has suffered loss or damage” as a result of a breach of the criminal provisions of the relevant legislation to sue for and recover the loss or damage so suffered.

Under the Ontario class proceedings legislation, the test for certification of a class proceeding does not require a preliminary review of the merits of the action, except on the basis of the “plain and obvious” test (a relatively easy hurdle for a Plaintiff to meet). While the Court held that the allegations of resale price maintenance did satisfy the “plain and obvious” test, in reviewing other aspects of the test for certification, the Court concluded that it would not be appropriate to certify the case as a class action because such a proceeding would not be the “preferable procedure” (really the focus of the certification test). In reviewing section 36 of the Competition Act as well as its predecessor, the Court held that for liability to be established, each Plaintiff ’s individual loss would have to be demonstrated. Thus, the question of what harm or damage was suffered by each member of the class is not only a question relating to damages; rather, it is an integral element of the statutory cause of action in order to establish liability. The Court Stikeman  Elliott’s Competition Group reached a similar conclusion with respect to the common law torts pleaded, although the analysis here was not as rigorous as with the statutory claim. In the result, the Court reasoned that even after determining the issues common to all class members, there would remain many individual issues to be determined for each class member, such that proceeding by way of class action would not have the usual benefits. Put another way, answering the common issues would in a sense only start the case, and would not truly advance it, given the many individual issues to be determined.

The Plaintiffs had used statistical data regarding aggregated losses to argue that purchasers of certain Panasonic electronics products from authorized dealers between 1980 and 1999 had overpaid for same by 15-20%, and that their loss as a class was therefore equivalent to this figure. However, in ruling that individual loss was an essential element of liability, the Court held that aggregated statistical evidence could not be used to resolve issues of proof of liability. As such, the Court rejected the Plaintiffs’ submissions that Panasonic’s liability and the amount of that liability were separate common issues. Rather, the Court held that each member of the proposed class would have to establish actual loss as a result of an act of the Defendant, with the proof of such loss requiring numerous individual trials to determine how each Plaintiff had bought his/her particular product. Although certification is possible where each claimant’s evidence is necessary, in this particular case, a class proceeding was held not to be fair, efficient or manageable.

Notably, the Court stated that the goal of behaviour modification (of Panasonic), which was cited by the Plaintiffs as a basis for certifying the class proceeding, was not a factor in this case because of the role of the specialized Competition Bureau in enforcing Competition Act offences.

 Although this case is a decision of the Superior Court and not an appellate court, it could have significant consequences for future class action proceedings under the Competition Act. Since civil liability under the Competition Act arises only under section 36, it would seem that the analysis regarding individual loss (and the consequent separate trials) in Price v. Panasonic would be applicable in most proposed class actions brought under the statutory provision. Note, however, that many of these cases are pleaded on the basis of both the statutory provision as well as common law claims, and the Court’s analysis really did focus upon the statutory language rather than the elements of the common law torts. As of the date of publication, the Plaintiff has not filed a Notice of Appeal.

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