Randall Hofley and Rob Kwinter identify key drivers behind the majority of competition damages claims in Canada, and discuss the low certification threshold and broad jurisdiction of the courts
1 Are there any particular sectors in your jurisdiction which tend to be a focus for competition damages actions? Why do you think this is the case?
Competition damages actions in Canada have not been sector specific. In the past decade or so, the key driver of the vast majority of Canadian competition damages actions have been cartels involving companies that sell products globally, where the products are inputs into a consumer product downstream. These ‘international’ cartels have typically been identified by Canadian claimants as a result of publicly disclosed investigation, prosecutions or civil proceedings in or outside of Canada. Canadian-based cartels – generally only where they have been the subject of publicly disclosed Competition Bureau or other regulatory investigations – have only led to a handful of ‘made in Canada’ competition damage actions. To that end, while the construction industry has been a recent focus of Competition Bureau investigations and prosecutions, this has not led to a significant number of follow on competition damages actions in the construction sector.
2 Who do damages claims tend to be brought by in your jurisdiction? (e.g. direct purchasers, indirect purchasers, end consumers?) If claims are not currently being brought by indirect purchasers and/or end consumers, why do you think this is?
Competition damages claims in Canada have generally been driven by class plaintiff lawyers, rather than particular claimants or claimant groups. Because Canada has no analogue to the Illinois Brick rule in the U.S., there is no bar to indirect purchaser claims, and, as the law has developed, no need to bring claims separately on behalf of direct and indirect purchasers. In fact, claims are commonly made on behalf of both direct and indirect purchasers (including consumers) in a single action with plaintiffs’ counsel deciding in particular cases which claimant groups will be included in any particular action. The vast majority of competition damages claims seem driven by the ability to include claims by indirect purchasers, most notably end consumers of a product, including the product said to have been the subject of the alleged cartel.
3 What approach are the courts taking to claims that originate from investigations or infringements arising out of the jurisdiction?
Canadian courts have taken a comparatively expansive approach to the courts’ jurisdiction in civil damage claims. In broad terms, jurisdiction will be found where there is a “real and substantial connection” between Canada (or a jurisdiction within Canada) and the conduct alleged. Jurisdiction will most certainly be found where the foreign defendant has operations in the relevant Canadian jurisdiction or where conduct relevant to the alleged illegality took place in Canada. More broadly, the jurisdictional threshold will be met where the court is satisfied that the foreign defendant could reasonably have foreseen that its product would find its way to Canada through the ordinary channels of trade. Moreover, absent a defence challenge supported by evidence, pleaded facts asserting the requisite connection to Canada will be taken as true by the court. Defendants have had very limited success challenging jurisdiction in Canada even with respect to competition damages claims founded on ‘international’ cartels where the conduct occurred entirely outside of Canada. Although an Ontario court recently allowed a jurisdictional challenge by one defendant in the lithium-ion batteries case, that case turned on its unique facts and did not alter the prevailing law that the threshold for establishing jurisdiction in Canada is low.
4 Do claimants favour your jurisdiction when they have a choice as to where to lodge a claim? Why?
As indicated above, Canadian plaintiffs’ counsel have been the key drivers behind competition damages claims in Canada. As such, there does not appear to have been instances where a claimant has opted to bring a case in Canada in preference to another (national) jurisdiction where a claim would have been possible – indeed claims in Canada typically follow on claims in the U.S., sometimes even claims launched elsewhere. Having said that, within Canada, claimants have clearly favoured launching proceedings in the three most populous provinces in Canada (British Columbia, Ontario and Quebec), covering both common law and civil law remedies as well as statutory damages in the process. Indeed, while British Columbia does not allow for a national class (like Ontario, for example), it seems to be the preferred venue in which to engage in actual litigation presumably due to the fact that it is a ‘no cost’ jurisdiction and perhaps because of the location of the largest class plaintiffs firms in Canada.
5 In practice, are the courts generous to claimants when awarding disclosure, including pre-action disclosure?
In Canada, disclosure is mandated by relevant court rules and is therefore not a matter of judicial discretion, at least in broad terms. As a matter of law and practice, there is typically no oral or documentary discovery at the pre-class certification stage, save through cross-examination on any affidavit evidence filed in support of an application for certification or in opposition to any such application. If a matter is certified as a class proceeding, the ordinary disclosure requirements of the relevant provincial jurisdiction apply and the parties are then entitled to receive all relevant documents and conduct oral discovery (in most provincial jurisdictions in Canada, oral discovery is permitted of a single party representative, subject to the court ordering otherwise). Given the class nature of the claims, discovery of the (class) plaintiffs is generally not of any material utility to defendants.
6 How do the dynamics of a settlement really work in your jurisdiction? Is there a mechanism by which a "global settlement" can be approved/enforced?
As to the dynamics of a settlement, settlements can occur at any stage, including before or after class certification. Settlements will be driven by many factors specific to the particular case, including the status and/or outcome of any related regulatory proceedings, the relative strength of the plaintiff’s casein respect of a particular defendant, the status of civil proceedings in other jurisdictions (most notably the U.S.) and the outcome or likely outcome of certification proceedings. With respect to the settlement mechanism in Canada, settlements in class proceedings require court approval (following notice to the class). There is no formal “MDL”-type procedure in Canada providing for a mechanism for resolving matters on a national basis, and matters are typically commenced in individual provincial courts. To address this on a practical level, as indicated above, plaintiffs’ counsel (operating on their own or as part of a plaintiffs consortia) will typically commence parallel cases in multiple jurisdictions across Canada – for example, in Ontario, Québec and British Columbia, including on behalf of a “national class” in one or more jurisdictions. The various matters will then be settled simultaneously to achieve a “national settlement”, although there may be residual claims in certain provinces, the status of which has not been fully resolved.
7 How long do damages actions take? What is the likely range of costs required to defend a claim?
There is no simple answer to the question “how long do damages actions take”, because there are no typical competition damages actions in Canada and, moreover, no competition damages action in Canada has gone to trial. Matters can settle at any stage, and many parties have settled prior to certification, so particular cases need not be lengthy. Once the claimants file a certification application following service and filing of a claim (a process that can itself take years), it typically takes a class action one to two years to be certified. Of course, there is always the possibility of an appeal from the certification decision and the precise duration may depend on whether the claimants seek approval of any settlements – and access to the settling parties’ information pursuant to its settlement cooperation obligations – prior to proceeding with the certification process, or at least proceeding to a certification hearing. It is reasonable to assume that it will take two to four years for a case, once certified, to be tried (and there could be appeals from any trial decision). Individual damage claims (i.e. non-class proceedings) have been unusual in the Canadian competition damage claim context, but such cases follow the same path as other complex commercial civil proceedings in Canada and likely take three to five years to complete, to the conclusion of the trial (and likely longer if appeals are taken into account). Given the range of length and complexity of these cases, it is difficult to meaningfully estimate the expected costs associated with defending a competition damages claim; indeed, a significant difference exists depending on whether it is a class action and the number of defendants in the ‘joint defence group’ which acts, in concert, to oppose certification and ultimately any damages award at trial. Having said that, it is fair to say that defending a fully contested claim through trial would typically cost many millions of dollars in total when one includes legal fees, expert fees and other trial-related costs.
8 What funding options are available for (i) claimants and, (ii) defendants, in your jurisdiction?
With respect to class actions, competition damages actions in Canada are principally funded by plaintiffs’ counsel. The latter often work in consortia with other counsel to share the costs. Contingency fee arrangements are available to allow plaintiffs’ counsel to recover their fees from damage amounts recovered at trial or through settlement. Some Canadian provinces make some funding available to assist class plaintiffs. Funding of class actions by third parties has not been commonin Canada, but is developing. Recent court decisions have laid out a protocol for such arrangements, which include notice to the defendants and to the court, and the latter’s approval of the proposed funding arrangement. Defendants fund their own costs in defending class proceedings. Some jurisdictions, like Ontario, allow successful parties to recover a portion of their legal costs from the unsuccessful party, but, other jurisdictions, like British Columbia, do not allow for the recovery of costs in class proceedings.
9 Do you anticipate any significant increase in damages actions in your jurisdiction over the next year or two? If so, where and why do you anticipate these increases coming?
It is difficult to say. There has been a significant increase in damage actions in Canada the past few years driven by two key factors: i) the 2013 Supreme Court of Canada rulings (the so-called “Trilogy”) that confirmed the availability of indirect purchaser actions; and ii) the auto parts investigation by global competition authorities which spawned a large number of new claims across Canada. These and other cases will continue to occupy plaintiff and defence lawyers over the next couple of years, but there are no obvious factors pointing to a particular increase in proceedings in the near term. If history is a guide, any increase will result from new or enhanced efforts by global competition and other regulatory authorities to pursue cartels and other competition-related investigations and prosecutions, a result often driven by government resources and enforcement priorities. Having said that, if these sources of competition damages actions ‘dry up’, we expect that class plaintiffs’ counsel will look to alternative sources for identifying and pursuing competition law-related class actions, focused on conduct involving products that are sold, directly or indirectly, to a substantial number of end consumers in Canada.
10 your opinion, what are the key changes (if any) required in your jurisdiction to improve the effectiveness of private enforcement of competition law?
There remain unresolved issues of law in respect of the certification and conduct of class proceedings in competition damages actions that continue to contribute to the cost and delay of such proceedings. Clarity on these points through court decisions or legislative amendment would contribute to a more effective and expeditious class proceeding process. For example, there are conflicting decisions regarding overlapping availability of statutory and common law causes of action which complicates both the availability of remedies and the application of limitation periods. More broadly, the threshold for class certification appears to have been lowered by recent court decisions, or at the very least rendered uncertain, raising the possibility of permitting highly complex proceedings to proceed to trial only to have them flounder at that stage. Restoring or reinforcing the courts’ “gatekeeper” role at the certification stage would both expedite matters and ensure a better use and allocation of scarce judicial resources. Finally, greater support for the efficacy of national settlements through either judicial or legislative action would both facilitate settlements and save resources by reducing the likelihood of re-litigating issues that have already been resolved.