Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Competition Law, May 2008

On May 6, 2008, the B.C. Supreme Court issued its Reasons for Judgment in Pro-Sys Consultants Ltd. v. Infineon Technologies AG et al., 2008 BCSC 575 denying the Plaintiff's application to certify Canada's first combined direct and indirect price-fixing conspiracy case as a class action under the Class Proceedings Act, R.S.B.C. 1996, c. 50 (Act).

The proposed class action was brought against certain international manufacturers of dynamic random access memory chips (DRAM) who were alleged to have been engaged in an unlawful conspiracy to fix prices from April 1, 1999 to June 30, 2002. DRAM is an essential component in virtually all electronic products used today, including mainframe computers, servers, laptops, automobiles, global positioning devices, cellular phones, cameras and video games. The defendants, collectively, were alleged to have accounted for more than 70 percent of the DRAM market.

Among the important issues addressed in this case is the Court's finding that it was necessary for the Plaintiff to establish that harm from the alleged conspiracy to fix prices could be determined on a class-wide basis for the direct and indirect purchasers.

The Court also rejected the Plaintiff's position that its pleading of waiver of tort and constructive trust relieved it of this requirement. In particular, the Court held that there must be evidence of a methodology capable of proving on a class-wide basis that the alleged wrongful conduct that is, the alleged price-fixing conspiracy by the defendants in respect to DRAM products caused a wrongful gain that arose from the overcharges actually passed on to the various layers of indirect purchasers.

Justice Masuhara specifically rejected the plaintiff's position that it was appropriate for the plaintiff to rely upon the aggregation provisions of the Act as a basis to prove liability. His Lordship observed that aggregation provisions are only available after liability has been established, that is the amount and degree of pass through has been determined on a class-wide basis.

The B.C. Court also held that absence of a class-wide means to prove liability meant that a class proceeding was not the preferable procedure for the resolution of any common issues. As Justice Masuhara observed, the absence of a class-wide basis to prove liability leads to an unmanageable process that will not move the litigation forward in any meaningful way.

This decision entails that the complexities inherent in combined direct and indirect price-fixing conspiracy cases will render them unsuitable as class proceedings unless the evidence before the Court establishes there is an acceptable method for determining loss on the part of class members or a corresponding gain to the defendants on a class-wide basis.

To view the full reasons of the British Columbia Supreme Court, click here.

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