Competition Class Actions: An Evaluation of Deterrence and Corrective Justice Rationales

AuthorMargaret Sanderson and Michael Trebilcock
Margaret Sanderson and Michael Trebilcock*
In contrast to American antitrust laws, for most of their history Canadian
competition laws have been characterized by exclusive public enforce-
ment. While early renditions of competition law in Canada provided for
private initiation of public action against violations (through complaints
made by six citizens), it was not until 1975 that private parties could seek
damages stemming from violations of the criminal prohibitions in com-
petition laws. Private parties now also have been permitted to seek direct
relief from the Competition Tribunal for many reviewable practices, but
not damages. In 1975, the predecessor to section 36 of the Competition
Act was enacted.1 Section 36 allows any person who has suffered loss or
damage as a result of conduct that is contrary to the criminal provisions
of the Competition Act to sue for and recover an amount equal to the
loss or damage proved to have been suffered by him, together with any
additional amount that the court may allow, not exceeding the full cost
to him, for any investigation in connection with the matter.2 While on
the books since 1975, over the twenty years that followed very few cases
were brought under section 36.3 Recently, however, the level of activity
* Margaret Sanderson is a Vice President with Charles River Associates. Michael
Trebilcock is Professor of Law and Economics at the University of Toronto as
well as a Senior Consultant to Charles River Associates. The authors wish to
thank Vijiti Dixit for her research assistance. Any errors or omissions are the
sole responsibility of the authors.
1 See s. 31.1 of the Combines Investigation Act, R.S.C. 1970, c. C-23, as am. by
S.C. 1974–75–76, c. 76, s. 12.
2 Competition Act, R.S.C. 1985, c. C-34.
3 For a review and discussion of the few section 36 cases that were advanced
in its early years, see Glen Leslie & Stephen Bodley, “The Record of Private
Actions under Section 36 of the Competition Act” (1993) 14 Can. Comp. Rec.
has increased markedly with the enactment of class proceedings statutes
in Ontario, Quebec, and British Columbia.
Of course, class actions were not created to further private enforce-
ment of competition laws, although they have had this effect. Instead,
they are a more general procedural mechanism aimed at providing an
efficient means of redressing widespread harm or mass injury by allow-
ing one or more persons to bring an action on behalf of many.4 Similarly
injured persons may join together in a class action, which provides a
more effective and efficient means of litigating mass claims.5 Three goals
are advanced for class proceedings: judicial economy, access to justice,
and behaviour modification.6
Private parties who have suffered a competition violation may have
stronger incentives and better information to enforce competition laws
than public officials. Private enforcement is also generally superior to
public enforcement in compensating those aggrieved by violations, and
hence in achieving corrective justice. Corrective justice entails a legal
obligation to correct for the consequences of one party’s wrongdoing by
allowing innocent parties to secure compensation from those who have
wronged them. In combination with section 36, class actions allow par-
ties to obtain compensation when the harm to any individual member
from the conspiracy is modest and hence unlikely to provide sufficient
incentive for that class member to launch legal action alone.
In the context of competition law enforcement, enhanced private
enforcement through class actions has the potential to augment limited
public resources, impose additional accountability on the Commissioner
for her decisions not to take a case, and allow plaintiffs the ability to seek
remedies for both past and future harms.7 With these factors in mind, in
this article we examine the record of competition class actions in Canada.
4 Ontario, Report of the Attorney General’s Advisory Committee on Class Action
Reform (Toronto: The Committee, 1990) at 15.
5 Ibid. at 16.
6 Ibid. at 17–18. These goals were articulated as follows: “(i) class actions may
lead to more efficient judicial handling of potentially complex cases of mass
wrong; (ii) class actions may provide improved access to justice for those
whose actions might not otherwise be asserted; and (iii) class actions may
inhibit misconduct by those who might be tempted to ignore their obligations
to the public because claims by the injured were too small or too difficult to
7 For a discussion of the arguments for and against private enforcement of
competition laws in Canada, see Kent Roach & Michael Trebilcock, “Private
Enforcement of Competition Law” (1996) 34 Osgoode Hall L.J. 461.
We begin with a discussion of optimal deterrence and how class action
litigation fits into that rubric. We then discuss corrective justice and the
complications arising in conspiracy cases when one is trying to get the
right damages to the right parties. In the final section we examine the
types of conspiracy class actions undertaken to date in Canada.
As Gary Becker’s seminal article shows, the optimal amount of enforce-
ment depends on the cost of detecting and convicting offenders, the
nature of punishments imposed, and the responses of offenders to
changes in enforcement.8 The public’s decision variables are its expendi-
tures on enforcement,9 which determine the probability that an offence is
discovered and that the offender is apprehended and convicted; the size
of the penalty imposed for those convicted; and the form of the penalty.
These values can be chosen in a way that minimizes the social costs from
offences, while taking into account the costs that society bears in uncov-
ering and punishing offenders.10
In determining the size and form of punishment to be exacted,
price-fixing conspiracies will be deterred when the expected costs from
committing a price-fixing conspiracy exceed the expected benefits. The
expected benefits are the higher profits earned through the conspiracy.
For individuals within corporations committing price-fixing conspiracies,
these higher profits may entail monetary rewards, in the form of higher
salaries or bonuses, or they may encompass non-monetary benefits such
as reduced effort in meeting specific performance targets. The expected
costs are a function of the penalty and the probability that the penalty
will be successfully imposed. Because the probability that a price-fixing
conspiracy will be uncovered, successfully prosecuted, and a penalty
imposed is less than one, the “optimal” penalty should exceed the gains
earned from the price-fixing conspiracy. Thus, if a violator could antici-
pate a gain of $100 from a price-fixing conspiracy and faces a 10 percent
probability of apprehension and conviction, the optimal penalty, applying
this calculus, would be $1,000 (reflecting the reciprocal of the probability
8 Gary S. Becker, “Crime and Punishment: An Economic Approach” (1968) 76
Journal of Political Economy 169.
9 In the case of price-fixing conspiracies, these would include the budget devoted
to investigating and prosecuting conspiracies at the Competition Bureau, the
Department of Justice, various relevant provincial ministries, and the courts.
10 In this discussion, we abstract from attitudes to risk, which are also relevant.

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