For many years, defendants resisted certification of competition class actions primarily by arguing that determining harm to class members defied calculation—or, at least, defied those methods the plaintiffs typically proposed. They had little success. Between 2010 and 2019, Canadian appellate courts—including the Supreme Court of Canada—largely rejected such arguments.
Plaintiffs and defendants responded to these appellate decisions. Plaintiffs began filing more ambitious cases that did not always contain all the elements of their prior successful cases (e.g., alleged secret conspiracy, government enforcement outcome, parallel United States class action, etc.). Defendants began arguing that plaintiffs’ cases were increasingly speculative (even if they were not) and often did not—as a matter of law—give rise to liability under the Competition Act.
As recent outcomes demonstrate, to date, defendants have had greater success relying on these arguments than they enjoyed previously.
In April 2023, the Federal Court of Appeal kicked off a string of successes for defendants when it upheld the lower court’s decision in Jensen v Samsung Electronics Co. Ltd. (Jensen). The lower court had denied certification, primarily because the plaintiffs had not pleaded sufficient material facts—nor provided any other evidence—that the defendants had formed an agreement related to the price of DRAM, as opposed to having acted independently. The Federal Court of Appeal unanimously endorsed the lower court’s decision. Among other findings, it noted that the plaintiffs in Jensen had provided far fewer material facts about the alleged agreement than in other cases that had been certified. It also rejected the plaintiffs’ argument that the lower court had inappropriately examined the merits, writing that, “[n]othing can be further from reality.” Instead, “[a]ssessing whether the claim made by putative class members is genuine, even if asserted in common by a number of claimants, is entirely distinguishable from an examination of its merits.” The plaintiffs sought leave to appeal, but the Supreme Court of Canada denied their application in January 2024.
Defendants secured another victory in August 2023 when the Ontario court denied certification of a case related to canned tuna in Lilleyman v Bumblebee Foods LLC (Lilleyman). There, unlike in Jensen, Ms. Lilleyman did not have to speculate about the existence of an agreement. Defendants had already pleaded guilty or been convicted of forming an unlawful agreement for the sale of canned tuna in the United States. However, much like in Jensen, Justice Perell held that Ms. Lilleyman’s claim was speculative as it related to an agreement for the sale of canned tuna in Canada. The undisputed evidence confirmed that the Canadian and U.S. markets for canned tuna featured different products sourced from different suppliers and sold by different players. Indeed, Ms. Lilleyman had sued companies that did not sell tuna in Canada, yet failed to sue other companies who commanded a significant Canadian market share. For these and other reasons, Justice Perell held that Ms. Lilleyman had failed to plead a reasonable cause of action and had failed to demonstrate “some basis in fact” for her proposed common issues. He denied certification. Ms. Lilleyman has appealed.
The Federal Court then delivered decisions in August and September that—while not complete victories for defendants—reinforced the trend that courts will not accept speculative pleadings or causes of action that do not fit the statutory framework. In Difederico v Amazon.com, Inc. (Difederico), the Federal Court denied certification of a case against Amazon. Amazon prohibited third party sellers from charging higher prices on Amazon than they charged on other websites. The court held that it was plain and obvious that these contractual provisions as pleaded did not violate section 45 of the Competition Act. Third party sellers were free to set whatever price they chose. The contractual provisions simply prevented them from setting a higher price on Amazon than on alternative websites. After a detailed review of the language of the relevant section, its legislative history and the applicable jurisprudence, the court concluded that such conduct does not violate s. 45. The Federal Court conducted a similar analysis in Sunderland v Toronto Regional Real Estate Board (Sunderland), a case about rules promulgated by real estate associations related to compensation among their members. As in Difederico, in Sunderland, the court carefully reviewed the pleaded case in view of the statutory language, history and case law. It concluded that: (1) the claim disclosed a cause of action only in respect of one narrow aspect and only against certain defendants; (2) the claim disclosed a cause of action against certain other defendants for having aided and abetted the alleged underlying violation; and (3) the claim did not disclose any cause of action against certain defendants. Accordingly, it certified the case but only against certain defendants and based on a theory of the case that was more limited than that advanced by the plaintiff. Both Difederico and Sunderland have been appealed.
The end of the year featured another example of an untenable legal theory producing victory for defendants. In Williams v Audible Inc. (Williams), the plaintiff struggled to articulate a coherent legal theory, leading to multiple iterations of his case over several years. While many class actions evolve through the certification process, in Williams, the evolution was so complete that the evidence on which the plaintiff advanced at certification no longer aligned with his most recent case theory (which he advanced for the first time at the certification hearing itself). The plaintiff asserted that his evidence sufficed, but in the alternative asked for an adjournment to file more evidence. The certification judge denied his adjournment request and dismissed his certification motion, finding that to permit the plaintiff to file evidence at this late stage after so many prior amendments would prejudice the defendants. In December 2023, the British Columbia Court of Appeal agreed and dismissed the plaintiff’s appeal.
Although Lilleyman, Difederico and Sunderland are all under appeal, the appellate courts did not rescue plaintiffs in Jensen and Williams. They may not do so in those three cases either. Regardless, all these decisions demonstrate a shift from battles at certification over issues of harm (although those battles still occur) to battles over pleadings and case theories. We expect that trend to continue in 2024. However, we would predict less success for defendants in future years as plaintiffs will likely react to these decisions by taking fewer chances on difficult or complex case theories, improving the quality of their pleadings and choosing other avenues for cases that do not fit squarely under the current legal framework.