Law Times

PAGE 10 Competition class actions get SCC's attention Price-fixing matters a difficult issue for Canada's judges FOCUS BY JUDY VAN RHIJN For Law Times T Court Court of Canada. The class actions that were he future of class actions by indirect purchas- ers will soon be in the hands of the Supreme certified and then rejected by the higher court of British Columbia — Pro-Sys Consultants Ltd. v. Mi- crosoſt Corp. and Sun-Rype Prod- ucts Ltd. v. Archer Daniels Midland Co. — and a third decision from Quebec, Samsung Electronics Co. Ltd. v. Option Consommateurs, comprise a trilogy that will come before the top court in October. With the federal government and the Chamber of Commerce now on board as interveners, lawyers on both sides of the class action bar are hoping for a ruling that will end the current state of confusion in the area. "One presumes the Supreme is going to determine the question once and for all whether indirect purchasers can sue, litigation and competition law- yer at Lerners LLP. "It' These class actions oſten arise from conspiracies or cartels where a bunch of suppliers get together and restrict output or price competition. It' s a very important issue. rimental to consumers and bad for the economy. Radnoff recalls " cally, competition class actions were almost impossible to bring that histori- s very det- " says Brian Radnoff, a Court. He identifies a number of practical and legal problems with this type of class action. "The practical problem is that the class action won't work. It will be unmanageable because the court will have to engage in a lot of individual inquiries." A further problem that' to be the main focus of the Su- preme Court' culty in quantifying the loss. "The analysis of harm to indirect pur- chasers is extremely complicated, s analysis is the diffi- says Radnoff. "There is a tension between 'The issue is if the original supplier was a price-fixer, who suffers the loss?' says Brian Radnoff. forward. But he notes that in 2010, the jurisprudence reached a point where it was starting to be- come more viable. Now there are conflicting decisions in various provinces that have leſt the law in disarray and the cases themselves are never simple. "The difficulty in this day and age is that there are large supply chains," says Radnoff. "Many manufacturers make inputs for other products. No one goes to the restaurant and orders a glass of high fructose corn syrup, but you buy a drink with it in it and there could be several steps down the supply chain between you and the restaurant. The issue is if the original supplier was a price-fixer, who suffers the loss?" Michael Osborne of Affleck Greene McMurtry LLP is look- ing for an intellectually hon- est decision from the Supreme " the law of class action certification and sound economic theory. A claim of economic harm requires complicated economic theories and intricate statistical calcula- tions in order to determine dam- ages. Plaintiffs must propose a workable methodology to deter- mine harm on a class-wide basis." Andrew Roman of Miller s likely that it is artificial to simply bar all claims by indirect purchasers. The issue is whether there is some viable way that indirect purchas- ers are going to be able to prove their loss. If they can demonstrate that they can, the class action should proceed. the evidence, they can get redress. There does not need to be some absolute bar so that even if you can prove it, the courts won't let you have the possibility of trying. Radnoff agrees. "My view is " lem of the passing-on defence to surmount. The B.C. Court of Appeal found that the Supreme Court' that a loss has been passed on to someone else has the corollary that the person who suffered it has no cause of action against the original perpetrator. Osborne explains the theory as s refusal to accept a defence Thomson LLP refers to the rules laid down by a pair of U.S. cases from the 1970s that the B.C. deci- sions made reference to. "Both say indirect purchasers can't get relief because it' ure out the loss," he says. But Roman considers this rule s too complicated to fig- to be "silly and obsolete" and is hoping for a more contemporary common sense approach. "We have computers that can do cal- culations which were impossible when those cases were decided. In my view, judges shouldn't be mak- ing assumptions about econom- ics. Courts should leave it up to the parties. If they can introduce But then there's the legal prob- " even if it's not available as a de- fence, or can you make the price- fixer pay twice? To come up with a coherent view of the law, they have to change one rule or the other or follow the U.S. Supreme Court and say that only the direct pur- chaser can sue. in Samsung got around this analy- sis by relying on the unjust enrich- ment principle. "That sounds great until you start to analyze it," says Osborne. "An unjust enrichment requires a corresponding depriva- tion. It is a stretch to say that there is any deprivation here, so there is an absence of juristic reason." If the Supreme Court endorses The Quebec Court of Appeal " follows: "The B.C. decision means that if a plaintiff sues a defendant for a price-fixing loss and the de- fendant can't say 'you passed it on,' the direct purchaser is entitled to the full amount of the inflated price. The defendant pays the loss to the direct purchaser and the principle against double payment means there' the indirect purchaser. It's really a s nothing leſt to pay to matter of simple arithmetic." He says the issue the Supreme Court has to decide is whether it can "allow indirect purchasers to recover because it was passed on, the B.C. approach, there are many who think it will signal the demise of competition class actions alto- gether. Radnoff questions what will happen if someone buys com- ponents and they pass the cost on or are involved in the conspiracy but the person who pays the high- er price can't sue. "No one' the way the economy is set up, it' s going to sue. Given something subject to a conspiracy or cartel and actually ends up us- ing it." Osborne counters this argu- ment by pointing to the many U.S. states that have enacted legislation to overcome the Supreme Court position. "In most of the states, they allow indirect purchaser ac- tions and it hasn't stopped direct purchaser actions there. s rare that a party directly buys " LT Don't miss out on your chance to reach 150,000 up-market GTA households Produced by Telecommunications sector Can spectrum auction broaden competition? BY JUDY VAN RHIJN For Law Times S The new spectrum, which opened up aſter TV broadcasters vacat- ed it last year, is the last band available that's suitable to rural deploy- ubmissions have closed on the proposed rules for the 2013 spectrum auction with many of them expressing strong dis- satisfaction from new entrants and regional players with the government' s approach. ment. It allows a high level of coverage with a small number of sites, can travel longer distances than higher frequencies and penetrate walls, and offers a significant improvement in download speeds. The spectrum is valuable since the incumbents own nearly all of the spectrum that's currently available. Roger Watkiss of Norton Rose Can- is key to anyone who wants to roam into the U.S.," says Watkiss. But the Public Interest Advocacy Centre has expressed a concern s going on in the U.S. That that the incumbents could also hoard the spectrum as they can afford to keep their competitors out. Unlike the 2008 auction, in which the government set aside spec- September 17, 2012 • Law timeS ada LLP believes the big three incumbents — Bell Canada, Telus Com- munications Co., and Rogers Communications Inc. — will still want to use the new spectrum to manage their migration to long-term evolution systems. "This will enable them to match what' trum for new entrants and regional players, the 2012 auction will employ a cap mechanism. There will be four prime licences for each jurisdiction. Incumbents can buy one and new entrants can buy two. Small players say the reality is that the big three players will buy three and the others will have to fight over the remaining prime spectrum block. In the bidding, there will be a preference for the highest value package. Observers see this as a further disadvantage to a company that can only bid in a few regions. Untitled-2 1 www.lawtimesnews.com 12-09-10 3:27 PM See Foreign, page 11 LEGAL RESOURCE GUIDE 0 1 2 Serving the Greater Toronto Area

• Cover