On April 15, 2011, the B.C. Court of Appeal released two decisions that overturned lower court decisions certifying claims of classes of indirect purchasers and determined that indirect purchasers do not have a valid cause of action for damages for price-fixing.1 These decisions, if upheld, will have a significant impact on competition class actions in Canada.

In Sun-Rype, a combined class of direct and indirect purchasers claimed that the defendants had conspired to fix the price of high-fructose corn syrup, a sweetener that was used by direct purchasers in the manufacture of products, or components of products, that were ultimately purchased by indirect purchasers. In Microsoft, a class of indirect purchasers claimed that Microsoft conspired with various computer manufacturers (the direct purchasers) to overcharge for Microsoft products that came preloaded on computers. The appeals involved overlapping issues and the decisions were released together.

In each case, the majority of the Court of Appeal found that a 2007 decision of the Supreme Court of Canada "made clear beyond question" that defendants cannot raise the defence of "passing on" to defeat claims made by direct purchasers who may have passed on to their customers (that is, to indirect purchasers) an alleged overcharge resulting from price-fixing.2 The majority determined that, as a matter of Canadian law, direct purchasers are entitled to recover the entire overcharge, regardless of whether and to what extent it was passed on. Adopting the rationale in the U.S. Supreme Court's 1977 decision in Illinois Brick Co. v. Illinois,3 the majority concluded that indirect purchasers have no claims under Canadian law because the law does not permit a direct purchaser to assert that an overcharge may have been passed on to them.

The Sun-Rype and Microsoft decisions signal a greater alignment between Canadian and U.S. federal law regarding price-fixing claims. They could also drastically limit the availability of consumer class actions for price-fixing. Applications for leave to appeal to the Supreme Court of Canada will certainly be made. The wider implications of these decisions (which are binding only in British Columbia) are currently unclear for certified indirect purchaser class actions in other provinces. However, it appears likely that existing indirect purchaser claims may be stalled pending the determination of the applications for leave.

Footnotes

1. Sun-Rype Products Ltd. v. Arthur Daniels Midland Company, 2011 BCCA 187 (Sun-Rype) and Pro-Sys Consultants v. Microsoft Corporation, 2011 BCCA 186 (Microsoft).

2 Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007 SCC 1.

3 431 U.S. 720 (1977).

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