Consumers can join class actions over price-fixing
Written by Brian N. Radnoff on November 1st, 2013
On October 31, 2013, the Supreme Court of Canada released three important judgments dealing with whether consumers can sue manufacturers who are involved in conspiracies that increase the prices of products that consumers purchase. The Supreme Court of Canada ruled that consumers can sue manufacturers who are alleged to have fixed the prices of goods that are inputs into final goods.
Each of the three cases, Pro-Sys Consultants v. Microsoft, Sun-Rype Products v. Archer Daniel Midlands Company and Infineon Technologies v. Option Consommateurs, are class actions in which the defendants are alleged to have been involved in improper conspiracies to increase prices of products that they manufacture which are inputs into a final product. Therefore, they are not bought directly by consumers, but are part of the product the consumer buys.
For example, in the Infineon case, the alleged conspiracy involves the production of computer memory chips. This is an input into the final product, namely a computer. In the Sun Rype case, the product is high fructose corn syrup, a sweetener used in soft drinks. The manufactures who make computers or soft drinks may be able to pass some or all of the increased costs they have to pay due to the conspiracy to consumers. Therefore, in these cases it is the consumer, the “indirect purchaser”, who may suffer all or most of the harm caused by the conspiracy. Before these judgments, it was unclear whether indirect purchasers could sue in this situation.
In my view, it is important to allow consumers to sue in these cases, as they may be the only group who suffers and has incentive to sue. This ruling has important implications for competition law and class actions in Canada. Nonetheless, these are difficult class actions for plaintiffs to bring, requiring complex economic evidence to prove any harm was caused, assuming the plaintiffs can first establish that there was a conspiracy. So far, none of these class actions has been resolved by trial, and the Supreme Court of Canada judgments deal with whether the class actions can be certified. Now that we know these class actions can proceed, it will be interesting to see if they can succeed after a contested trial.
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