Competition Act
Chadha et al. v. Bayer Inc. et al. was the first certification order involving the Competition Act and the first to involve a claim by an indirect purchaser of goods. The plaintiffs alleged that the defendants conspired to raise the price of iron oxide which is used to colour concrete building materials such as paving stones, bricks, tiles and mortar. The plaintiffs did not, however, buy the products from the defendants. Instead they bought houses which incorporated these products. The plaintiffs alleged the conspiracy cost new home purchasers some $70.00 to $112.00 each during the period 1985 to 1992 for a total of $100,000,000.00. Mr. Justice Sharpe certified the class, i.e., allowed the action to proceed as a class proceeding. One witness testified to the tendency in price fixing cases for the additional cost to be passed “downstream” so that the ultimate buyers bore the full impact of the conspiracy. Leave to appeal was granted because there was a debatable issue with respect to the definition of the appropriate class of plaintiffs. Mr. Justice Sharpe’s initial decision dated July 6, 1999 is reported at 45 O.R. (3d) 29. Leave to appeal was granted by Mr. Justice Lane, whose decision is reported at 45 O.R. (3d) 478. The appeal was allowed by a divided Divisional Court. The Divisional Court decision is reported at (2001) 54 O.R. (3d) 520. In this regard it is also worth reviewing Gariepy v. Shell Oil Co. [2002], O.J. No. 2766 and 3495, Nordheimer J.
The Court of Appeal released its decision in Chadha v. Bayer Inc., [2003] S.C.C. No. 106 on January 14, 2003. The Court of Appeal upheld the majority in the Divisional Court and refused certification. The Court of Appeal stated that the crucial question was whether the ultimate users’ loss was provable on a common basis. In other words, could the plaintiffs (the end users of the iron oxide pigment which was used in the bricks or paving stones in their homes) actually prove, using common evidence (as opposed to on an individual basis) that there had been a pass through of the price increase of the iron oxide to the homeowners. The court determined that the evidence filed in support of certification did not establish that common proof was available. While evidence was filed that common proof of damages was available the court was concerned that there was no evidence that could establish the causal connection between the alleged conspiracy by the defendants and the loss said to have been incurred by the end users.
The Court of Appeal, however, did not adopt comments by Divisional Court suggesting that s. 23 of the Class Proceedings Act, which contemplates the use of statistical evidence to determine the amount or distribution of a monetary award, would not allow the issue of liability to be proved through otherwise inadmissible statistical evidence. The Court of Appeal (para. 51) expressly left this question to be determined on another day and noted that American cases had used statistical data to establish class wide loss.
While the Court of Appeal refused certification in part because of the inability to establish that loss (as a component of liability) could be proved on a class wide basis, the court did not say this could never be done. The court expressly noted that:
“The question of whether and how consumers will be able to use class actions to obtain relief from price fixing by suppliers and manufacturers remains an open one in this jurisdiction.” Per Feldman J.A. at para. 65.
It is also worth noting that the Court of Appeal referred to the evidence filed in an analogous U.S. case, Re Linerboard Antitrust Litigation 305 F. (3d) 145 (2002) (U.S. Federal Court of Appeals, 3rd Circuit). The Ontario Court of Appeal in Chadha positively referred to the reliance by the U.S. court on evidence based on economic theory as well as industry evidence. This evidence formed the basis for expert opinions as to what actually occurred in the market when corrugated cardboard was sold as sheets and boxes. The evidence demonstrated to the U.S. court that the plaintiffs might be able to establish class wide proof of loss.
In any such case in the future it will be important, therefore, to have evidence from industry representatives as well as appropriate expert evidence. The Ontario Court of Appeal also noted that:
“If it could be shown that all home prices were artificially inflated as a result of the use of both iron oxide pigmented and non-iron oxide pigmented building materials, that could well have formed the basis for concluding that proof of loss could be presented on a class wide basis as a common issue.” Per Feldman J.A. at para. 48.