Canada Debates Expanding Private Access to Competition Tribunal

Antitrust litigation in Canada differs significantly from that in the United States.Whereas private antitrust litigation has been widespread and robust for many years in the U.S., private antitrust litigation in Canada has been slow to grow.However, increasing calls for expanding private parties’ access to antitrust lawsuits in Canada signal that Canada may be in store for a growth spurt.Companies doing business in Canada should thus take note that private enforcement of Canada’s antitrust law is likely to escalate.

For many years, private parties had no right of access to bring antitrust lawsuits.In 1976, they gained a right to bring lawsuits for injury suffered as a result of another party’s alleged violation of certain criminal antitrust offences.In 2002, Canadian antitrust law expanded the availability of private antirust lawsuits to include claims based on breaches of certain practices that have civil, not criminal, penalties.Once more, there are signs that Canada may again expand access to private parties to litigate antitrust disputes.Canada may thus be in store for a conspicuous growth spurt in antitrust litigation.

Prior to 1976, the Competition Act, which comprises most of the law regulating antitrust matters in Canada, vested all authority to administer and enforce the Competition Act with the Commissioner of Competition.In 1976, however, Section 36 of the Act was introduced.It provided, for the first time, a right of private enforcement of the Act, for loss or damage that results from an alleged breach of any of the criminal offences set out in Part VI of the Act, and for failure to comply with a court or Tribunal order.Part VI of the Act sets out the offences of conspiracy, bid-rigging, predatory pricing and price discrimination, misleading advertising, price maintenance and resale price maintenance.Under Section 36 of the Act, a private party may initiate an action whether or not the defendant has been convicted of the underlying criminal offence.Ordinary courts and the Federal Court of Canada have jurisdiction for Section 36 actions.

Unlike in the United States, where successful litigants can recover treble damages, private parties bringing claims under Section 36 of the Competition Act can only recover actual damages.Punitive damages are not available.On the other hand, a plaintiff can recover the costs of the proceedings and its discovery, including the costs of its investigation undertaken in connection with the matter.If the plaintiff’s action does not follow an investigation by the Commissioner of Competition, a criminal conviction or proven non-compliance with the Act, then the plaintiff will likely incur significant costs in order to meet its evidentiary burden.The burden of proof for a Section 36 action is lower than the criminal standard of beyond a reasonable doubt but higher than the civil standard of balance of probabilities.

Very few actions have been brought under Section 36 and the standard of proof is high.Not only must the plaintiff establish that they suffered injury as a result of the alleged criminal conduct, but if there has not been a criminal conviction, the plaintiff must also prove that the underlying criminal offence has occurred.While class action proceedings are available in several provinces including Quebec, Ontario and British Columbia, and in the Federal Court of Canada, few class actions have proceeded past the certification stage with several courts finding that each class member’s individual loss would have to be shown and that liability could not be a common issue based on the facts.These precedents make it unclear whether indirect purchasers (often consumers) will get past the certification stage in seeking to recover for price-fixing and other conduct that violates the Act.Those advocating expanded access to private parties are also calling for an amendment permitting the Tribunal to certify class actions in antitrust cases.

In 2002, the Act was amended to create Section 103.1.Section 103.1 allows limited access to the Competition Tribunal, an adjudicatory body consisting of both judicial and lay persons that decides civil antitrust cases.A party may not recover damages in an action brought under Section 103.1; only behavioral orders, for example, an order requiring a manufacturer to supply product to a distributor, may be obtained.The government has proposed, however, allowing private parties to recover damages where the Tribunal has issued an order concerning civil antitrust conduct.Private access to the Tribunal is permitted only for alleged breaches of certain civil antitrust conduct, namely, refusal to deal (Section 75 of the Act) and exclusive dealing, tied selling and territorial restrictions (Section 77 of the Act).A private party must obtain leave from the Tribunal to proceed with its case.To date, only eleven private actions have been brought to the Tribunal, with the Tribunal granting leave in only five cases, all of which were brought under the refusal to deal provision of the Act.

The 2002 amendments were relatively conservative in that they only expanded private access with respect to the few civil matters noted above, and left many others out.If a private party has been injured by a monopolist’s anticompetitive conduct, for instance, it has no ability under the Act to bring an action to recover damages or obtain injunctive relief.This could change, however, if proponents of new amendments expanding private parties’ right of access have their way.The expansion could mean that private parties could bring lawsuits based on any of the civil reviewable matters found in Part VII of the Act, including monopolization, abuse of dominance, and mergers.Furthermore, if the government’s proposal to allow private parties to recover damages for such civil conduct, private enforcement of Canada’s antitrust law could increase significantly.

Proponents of the new amendments argue that greater access to private parties will ensure that justice is served and will improve the accountability of the government’s antitrust regulator, the Competition Bureau.The Bureau, like nearly all government agencies, faces limited resources and must be selective in choosing what cases to pursue.Proponents also contendthat like the 2002 amendments, further expansion of a private right of access will not result in a flood of antitrust litigation.Detractors, on the other hand, allege that the Act is a public policy instrument and was not intended to resolve private sector disputes.For its part, the Tribunal appears to be preparing itself for the extended application of the Act.The Tribunal’s chair, Justice Sandra Simpson, stated on May 26, 2006 that private access to the Tribunal will generate more cases and that it may need to relax its expectation that a case be supported by sophisticated economic or competition law theory.

Demand for increased private parties’ access to antitrust claims, and broader remedies for their claims, in particular, monetary damages, is likely to increase and further amendments may indeed be on the horizon.If the amendments are adopted, private enforcement of the antitrust law is likely to increase markedly.Even now, the number of antitrust class actions brought in Canada is rising.Companies doing business in Canada should therefore be aware of the risks associated with private actions and consult qualified counsel to help calculate those risks.

Authored by:

Heather M. Cooper

213-617-5457

hcooper@sheppardmullin.com