Canadian consumers will learn on Thursday whether they can fight price-fixing conspiracies by launching class-action lawsuits against manufacturers.
The Supreme Court of Canada is to rule on a trio of cases involving computer software, hardware and soft drinks. The principle at the heart of the three cases is whether "indirect purchasers" such as consumers can join class actions in alleged price-fixing cases – for instance, when they buy a computer with pre-installed software from Microsoft, where the direct purchaser of the software is an electronics company such as Dell or Hewlett-Packard.
Vancouver lawyer J.J. Camp said such overcharges are almost always passed on to consumers, who should therefore be able to recover damages. "The foremost issue is whether consumers have a cause of action for the overprices they've absorbed," he said in an interview.
"We're just the poor schlemiels who suffered the overcharge for Microsoft's overpricing of their software." His firm Camp Fiorante Matthews is representing British Columbia consumers and a company called Pro-Sys Consultants Ltd. who allege that Microsoft improperly drove up software prices. (The allegations have not been proven in a Canadian court.)
He added that, while authorities in the United States have aggressively prosecuted price-fixing cases, forcing companies to pay fines worth hundreds of millions of dollars, Canada's Competition Bureau has not been very active, and the class-action lawsuits are an important deterrent to collusion. "We've got to stop that kind of conduct."
The Supreme Court's rulings will have wide importance, as cases involving cathode-ray tubes, auto parts and cooling compressors, may depend on them. "The decision one way or the other will unblock a whole bunch of class actions that are waiting," Toronto lawyer Michael Osborne said.
A key question for the Supreme Court hinges on the so-called "pass-on" issue. It is settled law that those who engage in price-fixing cannot defend themselves by saying that whoever is suing them passed on the costs to someone else.
The B..C Court of Appeal said in a 2-1 ruling that consumers do not have the right to join class-action lawsuits as indirect purchasers. "If the law does not recognize pass-through as a defence to a claim, logically the law cannot recognize pass-through as the basis for a claim," lawyers Michael Brown and Michael Kotrly said in a written analysis of the Microsoft case and a second one from B.C. involving the maker of high-fructose corn syrup for pop.
Mr. Camp called the B.C. court's pass-on argument a "cockamamie reason," and said the Competition Act provides that any person who has suffered a loss may recover it.
Mr. Osborne said the three cases at the Supreme Court involve a collision of "bedrock principles:" "We have a bedrock principle that says that anyone who has suffered a loss is entitled to recover that loss. We have another bedrock principle that says we don't make defendants pay twice. We have another bedrock principle that says no one will force you to be in a class action. And we don't allow passing-on as a defence. The court has to choose."
The Quebec Court of Appeal expressly rejected the B.C. Court's argument in ruling unanimously that consumers do have the right to join class-action suits as indirect purchasers. The Quebec case involves consumers who challenged the manufacturer of a semiconductor memory product known as DRAM, found in most electronic devices.