Competition class actions are often sparked by regulatory or criminal investigations, especially when there are admissions of anti-competitive conduct or guilty pleas.
In the recent Jensen decision, the Federal Court of Canada considered when the mere existence of an investigation can support certification, and what is required for a foreign investigation to satisfy the “some basis in fact” standard.
Jensen: Insufficient Evidence of Foreign Investigations
The plaintiffs’ motion for certification included an affidavit by class counsel attaching articles describing in very general terms an investigation by Chinese antitrust authorities into dynamic random access memory (DRAM) price-fixing by the defendants.
The Court rejected certification, finding that the articles did not provide “some basis in fact” for the alleged conspiracy to limit the global supply and increase the price of DRAM computer chips.
First, the articles did not come from the Chinese antitrust agency itself – they were only media reports. There was no evidence sourced directly from the Chinese antitrust authorities.
Second, the articles did not mention specifically that the investigation concerned the conspiracy alleged. It was not clear that the investigation concerned the suppression, restriction or limitation of DRAM supply, or increases in DRAM prices resulting from such supply suppression.
Third, the articles only offered evidence about the existence of an investigation. The articles were silent on the results of the investigation. There was no reference to any of the subjects of the investigation admitting misconduct or being sanctioned. Further, there were no specific examples of the alleged wrongful conduct or specific references to the Chinese laws said to have been violated.
Fourth, there was nothing in the evidence suggesting that the anti-competitive behaviour under review extended beyond China. The articles did not provide any basis in fact for a conspiracy affecting Canadian markets. Further, the Court could not determine whether the investigation related to matters that could breach Canada’s Competition Act. There were no specific examples of the alleged wrongful conduct or specific references to the Chinese laws said to have been violated and whether the conduct would be prohibited in Canada.
The Court noted that, to claim that anti-competitive behaviour investigated in a foreign country by a foreign agency provides an evidentiary basis supporting the existence of an alleged illegal agreement in Canada, the plaintiff must, at a minimum, adduce some evidence about the specific conduct being investigated in the foreign country, as well as some evidence showing that the foreign country’s laws prohibit behaviour or conduct that would be unlawful in Canada.
In Jensen, there was not a scintilla of evidence regarding any investigation by any authorities in Canada, the US, the European Union or any jurisdiction other than China regarding DRAM supply or DRAM prices.
For all these reasons, among others, the Court found that the evidence did not amount to “some basis in fact” for the proposed common issues regarding an alleged agreement between competitors to restrict DRAM supply, increase DRAM prices or otherwise.
A key take-away arising from the decision is that evidence regarding a foreign government’s investigation cannot establish a basis in fact for a conspiracy offence in Canada, particularly where there is no evidence on the actual nature of the investigation and on the specific anti-competitive behaviour being investigated; where there is no evidence or findings from the foreign regulators themselves; where there is no evidence that the scope of the potential investigation includes or extends to Canada; and where there is no evidence on the foreign law and on whether the anti-competitive behaviour investigated in the foreign country, and possibly sanctioned in that country, is also conduct and behaviour that would constitute an illegal agreement under Canadian law.