Recent developments in Canadian competition law have caused the defence of criminal prosecutions and class action litigation under the Competition Act to be increasingly intertwined. The most significant of these developments is the Supreme Court of Canada’s trilogy of decisions that make it easier for indirect purchasers to bring competition class action claims.

The availability of national indirect purchaser class actions in Canada obviously means that the number of persons who can pursue civil claims under the Competition Act has increased significantly. As a result, the outcome of Canadian and U.S. criminal proceedings (which typically precede class action litigation) has even larger implications for class action defendants.  Other factors contributing include a defendant’s ongoing disclosure obligations to the Competition Bureau after a plea agreement is entered, as described in the Competition Bureau’s revised Immunity and Leniency FAQs.

Indirect Purchasers have a Cause of Action

In October, 2013, the Supreme Court of Canada released a trilogy of long-awaited decisions in proposed class proceedings brought by purchasers of products alleging competition law violations. The Supreme Court concluded that indirect purchasers have a cause of action. While defendants cannot rely on a “passing-on defence”, the rejection of the passing-on defence does not prevent indirect purchasers from claiming that unlawful overcharges were passed on to them. The Supreme Court also made a number of salient findings that apply to certification generally, the result of which is an arguably low standard of proof for plaintiffs to meet on certification motions.

The finding that indirect purchasers have a cause of action, together with an arguably low standard of proof for plaintiffs to meet on certification motions, will likely result in more class action filings, and possibly, more certified class actions. The availability of national indirect purchaser class actions also means that the number of persons who can pursue claims has increased significantly. As a result, the outcome of Canadian and US criminal competition proceedings that typically precede class action litigation will now have even larger implications for class action defendants. For example, a defendant’s decision to plead guilty to price fixing and, if so, to what (e.g. which product(s) arise from the collusion; what is the time period of the collusion) will impact the scope of damages that plaintiffs may seek in subsequent class actions.  In other words, more products and longer time periods generally means more volume of affected commence in a plea agreement, which may mean larger subsequent civil damage claims.

Ongoing Disclosure Obligations to the Competition Bureau

It is well known that the Competition Bureau (the “Bureau”) has established immunity and leniency programs designed to detect and investigate criminal anti-competitive activities prohibited by the Competition Act. In this regard, the Bureau has published answers to Frequently Asked Questions (“FAQs”) for its Immunity and Leniency Programs. The FAQs, together with the Bureau’s Immunity and Leniency bulletins, are designed to provide a comprehensive overview of the Bureau’s approach to immunity and leniency applications.

The most recent version of the Bureau’s FAQs creates a positive obligation for applicants to update or correct all information and evidence promptly, even after a plea agreement is entered.  This ongoing disclosure obligation is significant because disclosure obligations typically end when the criminal and civil litigation ends.

Ongoing disclosure obligations without any temporal restrictions creates a number of issues for applicants to consider. First, applicants will need to be vigilant for an indefinite period of time with respect to relevant information and documents in their possession, control or power. Second, criminal proceedings typically precede and end before civil litigation. Thus, ongoing disclosure obligations means that applicants that are also defendants in class proceedings will need to have ongoing regard to their disclosure obligations to the Bureau as they make their way through the class proceedings.

Overall, the defence the competition criminal prosecutions and class action litigation is increasingly intertwined, requiring a harmonized defence strategy.