“Umbrella Damages” Forecast For Canada

By on August 18, 2017

Nikiforos Iatrou and Kayla Theeuwen, Weirfoulds LLP

A customer buys a product from Manufacturer A. Two other dominant manufacturers of the product (B and C) previously conspired to raise prices. Although Manufacturer A was not part of that conspiracy, it nonetheless raised its prices to match those set by the dominant manufacturers. The customer has therefore overpaid. The question that is the subject of divergent decisions in Canada is whether Manufacturer A’s customer — an “umbrella purchaser” — can sue Manufacturers B and C for the overpayment.

In Godfrey v. Sony Corporation, May 2016, the British Columbia Supreme Court (BC’s superior trial court) parted ways with the only express consideration of whether umbrella purchasers have a cause of action. The plaintiffs asserted a breach of the price-fixing provisions of the Competition Act. The Court certified the statutory cause of action, holding that it was not plain and obvious that the umbrella purchasers did not have a cause of action. The Court recognized that allowing umbrella claims is inconsistent with restitution law.

However, in the Court’s view, the Act allows any person “who has suffered loss or damage” as a result of prohibited conduct to sue and recover an amount equal to the loss or damage.

Godfrey is under appeal. If the decision takes hold, U.S. companies that have participated or are alleged to have participated in price-fixing conspiracies may be liable to umbrella purchasers in Canada, a prospect that does not hold true for U.S. umbrella purchasers under U.S. federal law.

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