Consumers can sue manufacturers who are caught fixing prices of goods that are part of other products, the Supreme Court of Canada ruled Thursday.
At issue were three class-action lawsuits alleging that manufacturers were involved in conspiracies to hike the prices of their products.
The products, however, were integrated parts of other final goods that were then sold to consumers.
The defendants in all three cases argued that Canadian law did not allow for end purchasers to sue for overcharging for integrated products.
But the high-court rejected the so-called "passing-on" defence, saying there is nothing stopping end consumers from trying to prove that they suffered losses as a result of price fixing.
"Although the passing-on defence is unavailable as a matter of restitution law, it does not follow that indirect purchasers should be foreclosed from claiming losses passed on to them," Justice Marshall Rothstein wrote on behalf of the court in the lead case against Microsoft Canada.
"This is a huge, huge benefit to consumers," says Brian Radnoff, a partner with Lerners LLP of Toronto.
"It makes it easier to bring these type of class actions."
Richard Powers of the Rotman School of Business said it is an interesting ruling that could allow class actions to get bigger, but warned there is still an onus on every claimant in a class action to prove they are affected.
“It certainly changes the field of play when you look at litigation law for these types of issues, I don’t think it will have the dramatic effect that people are thinking,” he said.
“The court has said they can join in action. They still have to prove their claim and in most provinces – Quebec being the exception – it’s very difficult to certify class action lawsuits and all plaintiffs have to have a bona fide interest in the claim.”
Microsoft being sued in B.C.
Microsoft Canada is being sued in British Columbia for allegedly overcharging for its operating systems and applications.
Pro-Sys Consultants Ltd. and Neil Godfrey say the computer giant charged too much for its Intel-compatible systems and software.
B.C.'s Supreme Court had earlier certified the class action suit, brought on behalf of "indirect purchasers" who bought Microsoft products from resellers.
In a second case, Infineon Technologies was accused under Quebec's civil code of conspiring to inflate the price of computer microchips.
Again, the high court ruled the class action could proceed, allowing end purchasers of products containing the chips to sue for damages.
Infineon suit can go ahead
Both the Microsoft and Infineon rulings were unanimous.
But the court, in a 7-2 decision, rejected a class-action suit against Archer Daniels Midland, based on the facts of the case.
The company is alleged to have conspired to fix the price of high fructose corn syrup, which is used in most soft drinks, baked goods and countless other products.
While it upheld the right of indirect consumers to launch a civil class action, the high court decided that the plaintiffs in the Archer Daniels Midland case could not show that two or more people would be impacted by the lawsuit.
"Where the difficulty lies is that there is insufficient evidence to show some basis in fact that two or more persons will be able to determine if they are in fact a member of the class," wrote Justice Rothstein.
End product manufacturers typically don't want to sue their component suppliers for price fixing, either because they're worried about damaging supply relationships or because they can simply pass on price increases to consumers.
But Thursday's ruling puts power in the hands of consumers to take on that fight, and provides a mechanism to force price fixers to pay for their misdeeds, says Radnoff.
"It ensures that these manufacturers who engage in these conspiracies to increase costs . . . will bear the costs of their conduct," he said.