Certification not just a speed bump: Federal Court scrutinizes speculative claims and wishful conspiracies
Competition Class Actions Update: Two-Part Series
This is the first part of a two-part series that will look at two recent developments to the competition class action landscape: certification and pre-certification motions that may be dispositive of the purported claims.
Putative class actions in Canada have traditionally enjoyed a relatively low bar for certification. Likewise, the landscape in Ontario has only recently encouraged early resolution of issues through pre-certification motions that would dispose of an action, or part of one, before certification.
This post concerns the recent Federal Court decision Jensen v. Samsung Electronics Co. Ltd., in which the Federal Court dismissed a motion to certify a proposed class action because the plaintiffs failed to provide sufficient material facts to support a claim for conspiracy under sections 45 and/or 46 of the Competition Act (the “Act”).
Jensen reflects an ongoing trend by the courts to engage in a more critical review of claims at the certification stage, particularly in the context of price-fixing class actions, which typically allege some form of collusion by the defendants.
The plaintiffs in Jensen commenced the putative class action in May 2018, against three leading manufacturers of Dynamic Random Access Memory Chips (“DRAM”), a type of semiconductor memory chip used in most computer products that allows information to be electronically stored and rapidly retrieved.
The plaintiffs alleged that the Defendants conspired to reduce the supply of DRAM to drive up DRAM prices by, among other things, (i) adopting a uniform policy of refusing to increase their own supplies of DRAM and (ii) signaling through public statements made to investors and at industry conferences, a so-called “coordinated decisions to limit supply”. The plaintiffs further alleged that the actual or perceived supply shortage(s) that resulted caused supra-competitive pricing for DRAM and DRAM products that would not have occurred absent the conspiracy and that this “overcharge” was passed on to end-consumers.
The plaintiffs sought $1,000,000,000 in damages from the defendants on behalf of a proposed class of direct and indirect purchasers who purchased DRAM, or products containing DRAM, manufactured and/or sold by the Defendants between June 1, 2016 to February 1, 2018.
The Legal Framework
The plaintiffs grounded their proposed action in section 36 of the Act, which creates a statutory cause of action through which to recover damages for breaches of the Act. Specifically, the plaintiffs alleged the defendants had breached sections 45 and 46 of the Act, which provide as follows:
Conspiracies, agreements or arrangements between competitors
45 (1) Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges
(a) to fix, maintain, increase or control the price for the supply of the product;
(b) to allocate sales, territories, customers or markets for the production or supply of the product; or
(c) to fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.
46 (1) Any corporation, wherever incorporated, that carries on business in Canada and that implements, in whole or in part in Canada, a directive, instruction, intimation of policy or other communication to the corporation or any person from a person in a country other than Canada who is in a position to direct or influence the policies of the corporation, which communication is for the purpose of giving effect to a conspiracy, combination, agreement or arrangement entered into outside Canada that, if entered into in Canada, would have been in contravention of section 45, is, whether or not any director or officer of the corporation in Canada has knowledge of the conspiracy, combination, agreement or arrangement, guilty of an indictable offence and liable on conviction to a fine in the discretion of the court.
Justice Gason dismissed the plaintiffs’ motion on the basis that their claim disclosed no reasonable cause of action for breach of sections 45 or 46 of the Act. Justice Gascon concluded that, at best, the facts pleaded would support an allegation that the Defendants had engaged in “conscious parallelism”, which is not in and of itself unlawful, nor is it sufficient to establish the defendants entered into an unlawful agreement – an “essential and prominent” component of a section 45 conspiracy.
In dismissing the motion, Justice Gascon criticized the plaintiffs for “twisting the facts to fit an appearance of conspiracy”:
[t]he Statement of Claim essentially invents a fictitious scenario of intent, communications and coordination between the Defendants that does not exist in or flow from the documents the Plaintiffs claim to paraphrase. I do not find any material facts, nor any evidentiary foundation, supporting the possible existence of an agreement, of a meeting of the minds or of a mutual understanding between the Defendants. Nor are there allegations of overt acts by any of the Defendants that may suggest any form of two-way communications or course of conduct from which the acceptance of an offer could be reasonably inferred. There are only extracts showing what the state of mind and thinking of each separate Defendant was. In the extracts and documents relied on by the Plaintiffs, each Defendant sets out and explains its own policy and approach, with reference to what others are doing. These are examples of a competitive industry at work, where the competitors follow and are aware of what is happening in the market. The observation by one industry player that its view of the industry is not very different from the views of other industry players (see, e.g., Micron’s statements in the Statement of Claim, at paras 91-92) does not support any inference of an otherwise illegal agreement.
Justice Gascon went on to acknowledge that, while there could be circumstances where a group of defendants engaged in “something in addition to the consciously parallel conduct”, (for example, “facilitating practices” such as sharing another’s prices), which – taken together – could constitute sufficient circumstantial evidence to satisfy the ‘impermissible agreement’ requirement, “factual allegations relying on circumstantial evidence require material facts enabling the Court to infer that an impermissible agreement may exist.” In Jensen, the pleadings disclosed no such facts.
Given the absence of material facts to support the plaintiffs’ conspiracy claim, Gascon J. held that the plaintiffs were similarly unable to establish the minimum evidentiary basis (i.e. “some basis in fact”) for their proposed common issues.
At the certification stage, courts are required to construe the pleadings generously. However, as Justice Gascon acknowledged, “being generous with the pleadings does not mean being blind to what they do not contain.” Courts are not prepared to presume the existence of facts not pled.
When determining the sufficiency of a pleading, there is no relaxation of the rules for class actions as compared to any other civil proceeding. The same rules of pleading apply. Jensen highlights opportunities for defendants to defeat proposed class proceedings based on insufficient materials facts in the statement of claim.
Jensen v. Samsung Electronics Co. Ltd., 2021 FC 1185
File Number: T-809-18
Date of Decision: November 5, 2021
 Competition Act, RSC, 1985, c. C-34.
 Competition Act, (RSC 1985, c. C-34), s. 45(1).
 Competition Act, (RSC 1985, c. C-34), s. 46(1).
 Jensen at para 69.
 Jensen at para 147.
 Jensen at para 69.
 Jensen at para 147.
 Jensen at para 144.
 Jensen at para 164.