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Barriers to private actions deemed too high

Counsel should caution clients
|Written By Dale Smith
Barriers to private actions deemed too high
Nikiforos Iatrou says that while the threshold for leave under the Competition Act was meant to be low, the way it has been applied means that very few cases have made it through to the tribunal.

While the Competition Act allows for private actions at the Competition Tribunal in limited circumstances, it’s a provision that has seen little take-up, in part because of the high bar that was set in order for those actions to go ahead. Competition lawyers say it makes sense to make it easier to start more private actions.

“You’re dealing with a Competition Bureau that is resource-restrained — they’re not going to bring every case that comes to them by way of a complaint,” says Nikiforos Iatrou, partner with WeirFoulds LLP in Toronto.

Iatrou says that while the Competition Tribunal has said that it wants to deal with competition issues, it doesn’t see itself as a place for parties to air private grievances and has put in place a leave process to vet cases.

Purely private cases are stopped, Iatrou says, while cases that would have a broader impact on competition are allowed to proceed.

He says that while the threshold for leave under the act was meant to be low, the way it has been applied means that very few cases have made it through to the tribunal.

“My suspicion is [that it is] because the tribunal really feels like the cases are really coming into it more from the aspect of a private dispute rather than a large-scale competition issue,” says Iatrou.

He says the problem is that, if the system relies on parties to bring cases forward, it won’t do it for purely altruistic reasons and there will inevitably be an element of private dispute.

Steven Szentesi, a lawyer in private practice in Toronto, says he would prefer the ability to make references to the Competition Tribunal be made easier.

The reference section in the act, s. 124.2, was added in 2002, but it states that private parties cannot bring a reference unilaterally but need the commissioner’s consent.

“It’s quite an important limitation on the section because there are many instances when private parties want to have guidance on the law without going to a contested proceeding, and that may be for a variety of reasons — deciding whether or not to convince litigation, assessing the level of risk associated with something they want to do or avoiding the litigation process, which can be very expensive and very time consuming,” says Szentesi.

“There are all kinds of practical reasons to have a reference provision that private parties can access unilaterally.”

Szentesi says the Commons standing committee on industry recommended such access in 2000, but it was never adopted.

“There’s compelling arguments to amend the act to allow private access provisions,” he says.

Iatrou has personally tried to get leave on two cases, and he managed to do so in one of them because it met the lower test found in s. 76 of the Competition Act, whereas actions under ss. 75 and 77 have a higher bar because they necessitate that challenges be directly and substantially affected by the behaviour they are challenging.

“These tests have been set up that effectively act as barriers to parties bringing a case,” says Iatrou.

“It’s a fine line between trying to filter out cases that are purely commercial disputes that don’t have broader competition-related issues while still nonetheless allowing access to justice for companies that can’t convince the bureau to bring a case, but who have a legitimate case that does have a competition aspect to it.”

Iatrou says that he doesn’t feel that a proper balance has been struck and that responsible counsel should warn their clients that it won’t be easy to get leave.

Szentesi says that, short of litigation, there are few other ways to get guidance on competition issues.

While lawyers can ask the bureau for an advisory opinion, the process is both discretionary and the policy in recent years has been to limit the scope of opinions so that they offer no opinions on defences or competitive effects.

“There’s a lot of very old and under-considered sections of the Competition Act, some of which have never been considered,” says Szentesi.

“Clients want to know what the law is, clients want to know what the level of risk is or whether they should proceed in a particular matter, and this is a significant limitation on them getting guidance in the law.”

Outside of access to the tribunal, the act does allow for private causes of action under s. 36, but again, it limits the types of wrongs under the act that can be grounds for action, expressly excluding abuse of dominance as a cause.

“It would seem to us that there would be a number of policy reasons why it would be good to expand the private causes of action under s. 36 to include abuse of dominance violations,” says Julie Rosenthal, partner with Goodmans LLP in Toronto.

She says she can’t find a reason why abuse of dominance would be less actionable than other types of conduct, such as conspiracy or misleading advertising.

“Given the bureau’s limited resources, there would seem to be some merit to allowing private litigants effectively to police those types of breaches of the act, which would presumably free the bureau up to pursue other conduct that isn’t being policed,” says Rosenthal.

“It spreads the costs around, which would seem to be in the public interest.”

Rosenthal says more private causes of action would allow the better development of case law, which is in everyone’s interest.

“I would think that there’s some benefit to spreading the consideration around, so you get to have as broad a group of judges considering these issues,” says Rosenthal.

“That’s really how our law develops best — when you get cases that develop in Nova Scotia and Prince Edward Island and in the west and Ontario, where the judges all cross-pollinate with their different areas of expertise and their different perspectives to bear, and that ultimately gives you the best chance of developing a robust and coherent case law.”

Iatrou says that, currently, the bureau occupies an important spot when it comes to shaping jurisprudence in competition law because it usually decides what cases to bring forward or not and which cases it is willing to take a risk on in order to develop case law.

“If you think about other economic cases, like economic torts or interference with contractual relations or a conspiracy to injure, you’ve got dozens of cases that have interpreted how the law should develop,” says Iatrou.

The Competition Act, in comparison, might have one or two cases on any given section, which is why Iatrou believes it would make sense to allow more private cases to go forward.

That way, more robust interpretations of the act could be developed, bypassing the gatekeeping role of the bureau.

“When you look at small numbers of cases that the bureau brings, it’s very hard to advise a client that they even have a great chance of convincing the bureau that they should bring a case,” says Iatrou.      

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