Jensen v. Samsung Electronics Co. Ltd.

Jensen v. Samsung Electronics Co. Ltd.
Court (s) Database
Federal Court Decisions
Date
2021-11-05
Neutral citation
2021 FC 1185
File numbers
T-809-18
Notes
Reported Decision
A correction was made on February 12th, 2024.
Decision Content
Date: 20211105
Docket: T-809-18
Citation: 2021 FC 1185
Ottawa, Ontario, November 5, 2021
PRESENT: Mr. Justice Gascon
PROPOSED CLASS PROCEEDING
BETWEEN:
CHELSEA JENSEN AND
LAURENT ABESDRIS
Plaintiffs
and
SAMSUNG ELECTRONICS CO. LTD., SAMSUNG SEMICONDUCTOR INC., SAMSUNG ELECTRONICS CANADA, INC., SK HYNIX INC., SK HYNIX AMERICA, INC., MICRON TECHNOLOGY, INC., AND MICRON SEMICONDUCTOR
PRODUCTS, INC.
Defendants
ORDER AND REASONS
I. Overview
[1] The Plaintiffs, Ms. Chelsea Jensen and Mr. Laurent Abesdris, seek an order certifying this action as a class proceeding under Rule 334.16(1) of the Federal Courts Rules, SOR/98-106 [Rules]. In their proposed competition law class action, the Plaintiffs allege that the three leading manufacturers of Dynamic Random Access Memory chips [DRAM] have conspired to limit the global supply and raise the price of DRAM. DRAM is a type of semiconductor memory chip used in most computer products that allows information to be electronically stored and rapidly retrieved. The manufacturers targeted by this proposed class action are Samsung Electronics Co. Ltd., Samsung Semiconductor Inc. and Samsung Electronics Canada, Inc. [together, Samsung], SK Hynix Inc. and SK Hynix America, Inc. [together, SK Hynix] and Micron Technology, Inc. and Micron Semiconductor Products, Inc. [together, Micron] [collectively, the Defendants].
[2] The Plaintiffs contend that the alleged conspiracy discloses a straightforward cause of action under section 36 of the Competition Act, RSC 1985, c C-34 [Act], for breach of sections 45 and 46. Broadly speaking, section 45 makes it a criminal offence for competitors or potential competitors to conspire, agree or arrange to fix prices, allocate markets or restrict output. Section 46 provides that it is a criminal offence for a corporation carrying on business in Canada to implement a directive or communication from a controlling person outside Canada, for the purpose of giving effect to a conspiracy entered into outside of Canada that, if entered into in Canada, would have been in contravention of section 45. For its part, section 36 of the Act grants a statutory right of private action to recover damages for harm suffered as a result of certain criminal conduct prohibited by the Act, including conduct covered by sections 45 and 46, as well as the cost of investigation and prosecution. Here, the Plaintiffs allege that the Defendants have conspired, through direct communications in private meetings and through public statements – or “signalling” – to each other, in order to suppress the supply of DRAM and increase DRAM prices.
[3] As the proposed representative plaintiffs for the class members, the Plaintiffs seek damages or compensation from the Defendants in the amount of $1,000,000,000 on behalf of all persons or entities in Canada who, from June 1, 2016 to February 1, 2018 [Class Period], purchased DRAM manufactured and/or sold by the Defendants, or products containing DRAM manufactured and/or sold by the Defendants, excluding the Defendants and their parent companies, subsidiaries and affiliates [Class].
[4] The Plaintiffs maintain that they satisfy all the required legal elements for certification, namely, (i) that there is a reasonable cause of action; (ii) that there is an identifiable class; (iii) that there are common questions of law and fact; (iv) that a class proceeding is the preferred procedure; and (v) that they are appropriate representatives of the Class. The Defendants oppose certification of the Class and contend that the Plaintiffs have failed to meet their burden of showing that this action should be certified as a class proceeding. More specifically, the Defendants submit that the conduct alleged by the Plaintiffs does not constitute a criminal violation of the Act and does not amount to an actionable conspiracy under section 45 or an unlawful foreign directive under section 46. Hence, say the Defendants, (i) the statement of claim does not disclose a reasonable cause of action; (ii) the issues identified by the Plaintiffs do not qualify as common issues as the Plaintiffs have failed to provide some basis in fact for the existence or commonality of their liability or harm issues; and (iii) without liability and harm certifiable as common issues, a class proceeding is not the preferred procedure. The Defendants do not challenge that there would be an identifiable class or that the Plaintiffs would be appropriate representatives of the Class.
[5] The formation and existence of the section 45 conspiracy alleged by the Plaintiffs are the central issue in dispute between the parties, as this core allegation drives the Plaintiffs’ pleadings and provides the backdrop for their proposed common issues. I pause to observe that this is highly unusual in competition law class actions brought under sections 36 and 45 of the Act. In the vast majority of those cases, whether the claims raise common issues concerning an alleged conspiracy is typically not in dispute. The main battleground is instead with respect to the proposed common issues relating to the consequences of the alleged wrongful acts, namely whether there is some basis in fact in the record that the alleged loss or harm can be established on a class-wide basis. More often than not, it revolves around whether there is a credible and plausible methodology to establish loss or harm on a class-wide basis. Not surprisingly, the parties have indeed spent a fair amount of their written and oral submissions on this point.
[6] However, this case is different and turns on the alleged wrongful conduct underlying the Plaintiffs’ proposed competition law class action. This, in my view, is the determinative issue in the Plaintiffs’ certification motion.
[7] For the reasons detailed below, I will dismiss the Plaintiffs’ motion for certification, as their case fails on the alleged section 45 conspiracy at the heart of their proposed class action. I conclude that it is plain and obvious that the pleadings disclose no reasonable cause of action based on sections 36, 45 and 46 of the Act, since the allegations of an actionable section 45 conspiracy and of a prohibited section 46 foreign directive are not anchored in material facts, are speculative and boil down to bald assertions. In addition, I find that there is no basis in fact for the common issues advanced by the Plaintiffs with respect to an alleged section 45 conspiracy. In this regard, the Plaintiffs fall well short of providing the minimal evidentiary basis required to support the existence of the alleged conspiracy. This is sufficient to dismiss the Plaintiffs’ motion and to deny certification. In the circumstances and without common issues dealing with the alleged wrongful conduct, none of the other proposed common issues relating to the alleged loss or harm can be certified. Absent common issues, a class proceeding is not the preferred procedure for the just and efficient resolution of the claims of the putative Class members, and will not achieve the three principles underpinning class actions, namely, judicial economy, behavioural modification and access to justice.
II. Background
A. The parties
[8] The Plaintiffs are indirect end-consumers of DRAM who live in Toronto, Ontario. Ms. Jensen purchased a mobile phone containing DRAM in June 2017. Mr. Abesdris purchased a laptop containing DRAM in January 2018.
[9] The Defendant Samsung manufactures, distributes and sells semiconductor products, including DRAM. Samsung also manufactures consumer electronics and other products that use DRAM as one of their components. Samsung Electronics Co. Ltd. is a corporation headquartered in South Korea. Samsung Semiconductor Inc. is a subsidiary of Samsung Electronics Co. Ltd. based in the United States [U.S.], whose headquarters are located in California. Samsung Electronics Canada, Inc. is a Canadian subsidiary of Samsung Electronics Co. Ltd.; its registered office is in Ontario and it is in the business of selling electronic devices, but not DRAM.
[10] The Defendant SK Hynix manufactures, distributes and sells semiconductor products, including DRAM. SK Hynix Inc. is a corporation headquartered in South Korea and has manufacturing facilities in South Korea and China. SK Hynix America, Inc. is a U.S. subsidiary of SK Hynix Inc., and its headquarters are located in California.
[11] The Defendant Micron also manufactures, distributes and sells semiconductor products, including DRAM. Micron Technology Inc. is a Delaware corporation headquartered in Idaho, and has production facilities in Taiwan, Singapore, the U.S., Japan and China. Micron Semiconductor Products, Inc. is Micron’s Idaho-incorporated subsidiary.
B. Factual context
[12] DRAM is a type of digital memory device that stores bits of data in capacitors situated in integrated circuits, allowing computers, smartphones and other digital electronic products to retain information. DRAM is a component found in virtually every electronic product, including personal computers, smartphones, tablets, televisions, cameras, servers and other items that perform a computing function. DRAM is a standalone product which has no independent utility: it must be inserted into a device (such as a smartphone or a computer) to serve any function.
[13] The Defendants all manufacture and sell DRAM for use in various types of end-products. They primarily sell DRAM to original equipment manufacturers [OEMs] such as computer, mobile phone, flash drive, and memory card makers. These OEMs then incorporate DRAM into various DRAM products and sell them to consumers or to retailers who then sell the items to consumers. Direct purchasers of DRAM use it in the products they manufacture. Indirect purchasers of DRAM are purchasers of products that contain DRAM. The Class includes both direct and indirect purchasers.
[14] DRAM supply is a highly concentrated industry, and the Plaintiffs have described the production and manufacture of DRAM as an oligopoly market, namely, a highly concentrated market structure where a few sellers dominate the supply of a product or service. The Defendants are the three largest manufacturers of DRAM and are estimated to have manufactured 96-98% of DRAM sold globally in 2017-2018. During the Class Period, the Defendants accounted for the bulk of worldwide DRAM sales. The Canadian market for DRAM accounts for approximately 10% of the global DRAM market, which was estimated to be worth $72.5 billion in 2017.
[15] The Plaintiffs estimate that the Class is likely to consist of almost all adults in Canada as most Canadian households have one or more devices containing DRAM and that the Defendants control over 96% of the global DRAM market.
C. Procedural context
[16] The action was commenced in May 2018 and the Plaintiffs filed their “Amended Amended Statement of Claim” on April 23, 2019 [Statement of Claim]. In their motion for certification, the Plaintiffs are seeking the following orders from the Court:
a. an order certifying this action as a class proceeding pursuant to the Rules;
b. an order appointing Ms. Chelsea Jensen and Mr. Laurent Abesdris as the representative plaintiffs for the Class;
c. an order defining the Class as:
i. All persons or entities in Canada who, from June 1, 2016 to February 1, 2018 purchased DRAM manufactured and/or sold by the Defendants or products containing DRAM manufactured and/or sold by the Defendants. Excluded from the Class are the Defendants and their parent companies, subsidiaries, and affiliates;
d. or such other class definition as may be approved by the Court;
e. an order that the within proceeding is certified on the basis of the six following common issues:
i. Did the Defendants, or any of them, breach section 45 of the Act?
ii. Did the Defendants, or any of them, breach section 46 of the Act?
iii. Did the Class members suffer loss or damage as a result of the Defendants’ conduct contrary to any provision of Part VI of the Act?
iv. Are the Class members entitled to recovery of their loss or damage pursuant to section 36 of the Act and, if so, in what amount or amounts?
v. Are the Defendants, or any of them, liable to pay pre-judgment interest and post-judgment interest pursuant to sections 36 and 37 of the Federal Courts Act, RSC 1985, c F-7 and, if so, in what amount?
vi. Should the full costs of investigation in connection with this matter, including the cost of the proceeding or part thereof, be fixed or assessed on an aggregate basis pursuant to section 36 of the Act and, if so, in what amount?
f. an order appointing Koskie Minsky LLP and Affleck Greene McMurtry LLP as Class counsel;
g. an order approving the proposed litigation plan;
h. an order staying any other proceeding based on the facts giving rise to this proposed class proceeding;
i. an order declaring that no other proceeding based upon the facts giving rise to this proceeding may be commenced without leave of the Court; and
j. an order for such further and other relief as counsel may advise and this Court deems just.
[17] The Plaintiffs supported their motion for certification with the following evidentiary record:
The affidavit, dated April 22, 2019, of Annie (Qurrat-ul-aim) Tayyab, a lawyer of Affleck Greene McMurtry LLP, one of the two Class counsel, to which 54 exhibits were attached [Tayyab Affidavit]. The exhibits attached to the Tayyab Affidavit include articles regarding an investigation by China’s economic regulator (9 exhibits); financial reports and documents related to the Defendants (8 exhibits); public statements and transcripts of earnings calls and investor calls involving the Defendants [Public Statements] (35 exhibits); documents from trade associations in the DRAM industry (3 exhibits); and documents related to a prior conspiracy involving the Defendants (4 exhibits).
The supplementary affidavit of Annie (Qurrat-ul-aim) Tayyab, dated February 13, 2020, to which was attached the “Indirect Purchaser Plaintiffs’ Consolidated Amended Class Action Complaint” [Amended U.S. Complaint] filed in a related class action litigation commenced in the U.S. and based on facts closely similar to this matter.
The affidavit, dated April 22, 2019, of the Plaintiff Chelsea Jensen.
The affidavit, dated April 21, 2019, of the Plaintiff Laurent Abesdris.
The affidavits, dated April 22, 2019 and February 12, 2020, of Dr. Hal J. Singer. Dr. Singer is an economist and managing director at Econ One Research, Inc. in Washington, D.C. Dr. Singer submitted an expert report and a reply expert report [Singer Reports]. Dr. Singer was cross-examined.
[18] The Defendants resisted the motion for certification with the following evidentiary record:
The affidavit, dated December 19, 2019, of Trevor May, an articling student at Davies Ward Phillips and Vineberg LLP, counsel to SK Hynix, to which 10 exhibits were attached. These exhibits include financial documents and transcripts of various earnings calls and investor calls involving the Defendants.
The affidavit dated December 19, 2019, of Dr. Mark A. Israel. Dr. Israel is an economist and Senior Managing Director at Compass Lexecon, an economic consulting firm, in Washington, D.C. He submitted an expert report in response to Dr. Singer. Dr. Israel was not cross-examined.
D. Summary of the Plaintiffs’ allegations
[19] In their Statement of Claim, the Plaintiffs assert a single statutory cause of action under section 36 of the Act, for breach of section 45 forbidding conspiracies and of section 46 on implementation of a foreign directive.
[20] Under section 45, the Plaintiffs allege that the Defendants conspired, agreed or arranged to fix, maintain, increase, or control the price for the supply of DRAM; to allocate sales, territories, customers, or markets for the production or supply of DRAM; and to fix, maintain, control, prevent, lessen, or eliminate the production or supply of DRAM (Statement of Claim at para 135). This paragraph of the Plaintiffs’ pleading essentially echoes the language of section 45 of the Act. However, I note that, throughout the Statement of Claim, the Plaintiffs repeatedly refer to a much narrower conspiracy and to the Defendants conspiring to “suppress DRAM supply and increase DRAM prices” (see, e.g., Statement of Claim at paras 2, 5, 18, 22, 26, 45, 50, 52, 128, 129, 130).
[21] Under section 46, the Plaintiffs allege that the Defendants implemented a foreign directive, instruction, intimation of policy or other communication, which communication was for the purpose of giving effect to a conspiracy, combination, agreement or arrangement entered outside Canada that, if entered in Canada, would have been in contravention of section 45 of the Act (Statement of Claim at para 136). Again, this paragraph reproduces the language of the Act.
[22] In summary, the Plaintiffs claim that, prior to 2016, the Defendants competed vigorously over market shares but that, in early 2016, the Defendants conspired to reduce the supply of DRAM in order to drive up DRAM prices. Throughout 2015 and the first half of 2016, DRAM prices had steadily declined. However, after the second quarter of 2016, prices reversed course and began a sharp ascent to record highs, for all types of DRAM, all sizes and all markets. According to the Statement of Claim, at that point in time, the Defendants adopted the same policy of refusing to increase their own supplies of DRAM. They signalled, through public statements made to investors and at industry conferences, what the Plaintiffs present as coordinated decisions to limit the supply of DRAM. According to the Plaintiffs, Micron’s and Samsung’s public statements reassured each other and SK Hynix of their continued participation in the conspiracy. The Plaintiffs further allege that the nature of the DRAM market, an oligopoly where the Defendants were responsible for at least 96% of worldwide DRAM sales, fostered this collusion.
[23] According to the Plaintiffs, the Defendants’ reduction of DRAM supply below market demand marked a departure from prior market behaviour, where the Defendants and other market participants competed primarily, if not solely, on price, aiming to increase their own market share.
[24] The Plaintiffs allege that the conspiracy between the Defendants was formed and achieved through direct communications in private meetings between the Defendants as well as through public statements – or “signalling” – to each other, both of which, say the Plaintiffs, are actionable forms of conspiracy conduct well recognized by the case law in Canada. In terms of evidentiary basis, the Plaintiffs’ allegations rely on what they called four main indicia of breaches of section 45 of the Act. First, a regulatory investigation initiated by the Chinese antitrust authorities [China Investigation]; second, massive and coordinated supply restrictions and price increases in the Class Period, resulting in steep increases in prices for DRAM products and in revenues for the Defendants; third, the continuous and repeated statements made in private and in public by the Defendants’ senior executives that they would restrict DRAM supply and that their competitors would do likewise; fourth, a similar anti-competitive conduct admitted by the Defendants a few years ago in the same DRAM industry.
[25] The Plaintiffs allege that this supply reduction resulted in supra-competitive pricing for DRAM and DRAM products that would not have occurred absent the conspiracy and, further, that this “overcharge” was passed on to end-consumers (i.e., indirect purchasers), including the Plaintiffs, who purchased DRAM products. The overcharge and harm to the Plaintiffs and Class members is the difference between the price actually paid as a result of the alleged conspiracy and the price that would have been in place in the absence of such conspiracy.
[26] The Plaintiffs contend that the alleged conspiracy ended after news broke of the China Investigation undertaken by the Chinese antitrust authorities on alleged suspicions of DRAM price-fixing.
[27] As mentioned above at paragraph 16, the Plaintiffs propose six common issue questions. The first two questions concern the alleged wrongful conduct and liability issues for breach of sections 45 and 46 of the Act. The next two questions concern harm or loss issues resulting from the alleged wrongful conduct. Finally, the last two questions relate to follow-on interest and investigation costs issues.
E. The parallel U.S. class action
[28] It is important to observe that the certification motion filed by the Plaintiffs follows a parallel class action commenced earlier in the U.S., on which the claim in this proposed class action is directly based. The allegations made in the U.S. class action are closely similar to what is pleaded in this case. The two Plaintiffs in fact indicate, in their respective affidavits, that it was the news reports on the U.S. class action that prompted them to get involved in this class action lawsuit in Canada. In their written materials submitted in this matter, the Plaintiffs indeed referred to the parallel proceeding in the U.S. District Court for the Northern District of California involving most of the Defendants [U.S. Defendants], namely In re Dynamic Random Access Memory (DRAM) Indirect Purchaser Litigation. Moreover, the Plaintiffs filed the Amended U.S. Complaint submitted by the U.S. plaintiffs as an exhibit to one of their affidavits provided in support of this motion. This Amended U.S. Complaint had been filed following a decision by the U.S. District Court which granted in part the U.S. Defendants’ motion to dismiss the original complaint for failure to state a claim in conspiracy in violation of the U.S. federal antitrust laws but also allowed the U.S. plaintiffs to amend (Jones v Micron Tech Inc, 400 F Supp 3d 897 (N.D. Cal. 2019) [Jones]).
[29] On November 24, 2020, after the hearing of the certification motion before this Court, the U.S. District Court issued another decision, dismissing in part the Amended U.S. Complaint, again for failure to state a claim of conspiracy in violation of the U.S. federal antitrust laws (In re Dynamic Random Access Memory (DRAM) Indirect Purchaser Litigation, Order Granting in Part and Denying in Part Defendants’ Motions to Dismiss, U.S. District Court, Northern District of California, November 24, 2020 (see Case No. 4:18-cv-2518-JSW-KAW, Dkt No. 119)) In an oral direction issued on December 7, 2020, I determined that, in the circumstances, this latest U.S. decision was relevant to the certification motion before this Court and that it could be accepted for filing. Of course, even though they relate to the same factual background as in the case at bar, these U.S. precedents are not binding on this Court, and I am mindful of the fact that a U.S. motion to dismiss a class action is subject to a standard different from the Canadian standard on certification motions and involves a more extensive weighing of evidence. I am also aware that the November 24, 2020 decision of the U.S. District Court was appealed to the U.S. Court of Appeal for the Ninth Circuit in January 2021, and that this appeal is still pending.
[30] That said, it is worth noting that, in those decisions, the U.S. District Court found that the U.S. plaintiffs’ allegations of “plus factors” combined and viewed together fell short of alleging a plausible cause of action based on conspiracy, and that their claim amounted to nothing more than “conscious parallelism.” Broadly speaking, conscious parallelism refers to situations where, in the absence of an agreement to limit competition, competitors unilaterally adopt similar or identical business practices or pricing, as a result of rational and profit-maximizing strategies based on observations of market trends and activities of competitors. This type of conduct is frequent in oligopolistic markets where competitors base their actions in part on the anticipated reactions of their rivals. In the U.S., such parallel conduct is not unlawful on its own under the applicable federal antitrust legislation, and a plaintiff must plead some “factual enhancement” (called “plus factors” in the U.S.) showing further circumstances pointing toward a meeting of the minds of the alleged conspirators. These factual enhancements are economic actions and outcomes that are largely inconsistent with unilateral, lawful conduct but largely consistent with explicitly coordinated action (In re Musical Instruments & Equip Antitrust Litig, 798 F.3d 1186 (9th Cir. 2015) at 1194).
[31] While the U.S. plaintiffs presented allegations of parallel conduct between the U.S. Defendants, the U.S. District Court found that there was insufficient evidence of “plus factors” pointing toward the meeting of the minds of these defendants, whether express or tacit. More specifically, the U.S. District Court found that the general oligopolistic market conditions prevailing in the DRAM industry were not “plus factors” allowing one to conclude that there was a conspiracy, as they were just as likely to be consistent with innocent behaviour as with unlawful one. The U.S. District Court also determined that membership in trade associations and attendance at trade association meetings offered nothing more than an opportunity to collude for the U.S. Defendants, and that an opportunity without more was insufficient to state a conspiracy.
[32] With respect to the U.S. Defendants’ public statements and allegations of public signalling, the U.S. District Court found that the statements alleged in the pleadings were made in public settings during earnings calls with investors or at industry conferences, that they were the individual U.S. Defendants’ indications of their own future behaviour, descriptions of their past behaviour, predictions of industry trends and observations about competitors’ behaviour, and that such statements were insufficient to support an inference of conspiracy because they were not “largely inconsistent with unilateral, lawful conduct.” On the contrary, said the U.S. District Court, the U.S. Defendants’ behaviour and statements were consistent with lawful conscious parallelism, and did not constitute circumstantial evidence of a conspiracy in that case.
[33] The U.S. District Court also concluded that allegations relating to past investigations in the DRAM industry or previous guilty pleas by the U.S. Defendants were not sufficient to suggest a contemporary conspiracy, and that allegations of investigations or cases outside the U.S. were unpersuasive as foreign laws (in this case, China’s) may prohibit behaviour that is lawful under U.S. laws.
[34] I should also add that, in late June 2021, the Superior Court of Quebec dismissed an application for authorization to institute a class action alleging the same conspiracy to restrict the production and increase the prices of DRAM that underlies the Plaintiffs’ certification motion (Hazan c Micron Technology Inc, 2021 QCCS 2710 [Hazan]. In that case, the court concluded that the Quebec criteria for the authorization of the class action were not met due to vague, imprecise and general allegations, and to the absence of some evidence establishing, even summarily, the existence of the alleged conspiracy. Thus, said the court, the application did not present an “arguable case.”
[35] Again, even though the Hazan decision relates to the same factual background as in the case at bar, this precedent is not binding on this Court, and I am mindful of the fact that an application for authorization of a class action in Quebec is not subject to the exact same standard governing certification motions before this Court. However, I should observe that the “arguable case” requirement applicable in Quebec has been described by the SCC as a “less demanding” evidentiary burden and a less rigorous standard than the some-basis-in-fact standard that applies in other parts of Canada and before this Court (Infineon Technologies AG v Option consommateurs, 2013 SCC 59 [Infineon] at para 128). As is the case for the parallel U.S. decision referred to above, the Hazan decision is currently under appeal.
F. The particular nature of this case
[36] It is also necessary, at the outset, to underscore the particularities of this proposed class action. The Plaintiffs advance that their certification motion is a typical competition law class action raising an allegation of price-fixing conspiracy. They further claim that there are no meaningful differences between this case and a previous DRAM case where certification was confirmed by the Supreme Court of Canada [SCC] in Infineon, and that there is no reason to depart from this binding precedent.
[37] With respect, I disagree with the Plaintiffs.
(1) This is a supply suppression case [38] First, this proposed competition law class action differs significantly from the usual price-fixing class actions brought before Canadian courts under the conspiracy provision of the Act (i.e., section 45 and its predecessors). Despite the repeated attempts by counsel for the Plaintiffs to portray it as such, the conspiracy alleged by the Plaintiffs in this case is not a typical price-fixing conspiracy under section 45 of the Act; it is instead an alleged conspiracy to suppress the supply of DRAM, which has allegedly resulted in an increase in prices for DRAM. When the Statement of Claim is read in context and in its entirety, it is clear that the Plaintiffs’ core allegation of conspiracy is about supply suppression.[1] In fact, in the last iteration of their Statement of Claim, the Plaintiffs systematically replaced the references to a “price-fixing conspiracy” or to a “conspiracy to fix the price of DRAM” by references to a “conspiracy to suppress the global supply of DRAM and increase the price of DRAM.” In my view, on any fair reading of the pleadings, the Plaintiffs’ claim does not describe any standalone, independent price-fixing conspiracy, but rather an alleged conspiracy to restrict output, the alleged consequence of which was an increase in DRAM prices.
[39] This is a distinctive feature of this case, and I am aware of no precedent where the primary focus of a competition law class action alleging a breach of section 45 of the Act was output suppression as it is here.
(2) The alleged conspiracy is in dispute [40] Second, this competition law class action is a rare case where the very existence of the alleged conspiracy at the source of the claim for loss and damages under section 36 of the Act is disputed and challenged at the certification stage. A review of the Canadian case law on competition law class actions involving price-fixing and other competition-related conspiracies under section 45 and its predecessors reveals that the existence of an alleged conspiracy is typically not an issue in such class actions. In fact, the battleground is usually beyond the allegation of an illegal agreement and focuses on whether the harm or loss allegedly resulting from the actionable conspiracy is common to the class members.
[41] This has been the situation for various reasons. In some instances, there were express agreements, rules or contracts at the source of the impugned unlawful conspiracy. In other matters, there were admissions on the conspiracy element of the impugned conduct, or guilty pleas had been previously entered by the defendants in related criminal proceedings in Canada or abroad. In yet other cases, there was an existing criminal investigation by the Canadian competition authorities or by foreign authorities (and affecting Canada). All of these situations meant that there were not only ample material facts supporting the conspiracy allegations made in the pleadings but also the minimal required evidentiary basis (i.e., some basis in fact) for the proposed common issues relating to the alleged wrongful conduct.
[42] Save for one exception (to which I will turn in a moment), this is indeed what the various precedents cited by the Plaintiffs in this case actually reflect. Examples of competition law class actions where there were express agreements, rules or contracts anchoring the alleged conspiracy include Prokuron Sourcing Solutions Inc v Sobeys Inc and Lexmark Canada Inc, 2019 ONSC 7403 [Prokuron]; Watson v Bank of America Corporation, 2014 BCSC 532 [Watson], var’d 2015 BCCA 362 [Watson CA]; 2038724 Ontario Ltd v Quizno’s Canada Restaurant Corp, 96 OR (3d) 252, [2009] OJ No 1874 (Div CT), aff’d 2010 ONCA 466; and Axiom Plastics Inc v E I DuPont Canada Co, 87 OR (3d) 352, [2007] OJ No 3327 (SC). Examples where the underlying criminal investigation left no doubt about the existence of an alleged conspiracy in Canada include Watson; Airia Brands v Air Canada, 2015 ONSC 5352 [Airia]; and Mancinelli v Royal Bank of Canada, 2020 ONSC 1646 [Mancinelli]. Examples where there was an underlying criminal investigation and either guilty pleas or admissions had been made by the defendants regarding the alleged conspiracy include Pioneer Corp v Godfrey, 2019 SCC 42 [Godfrey]; Infineon; Pro-Sys Consultants Ltd v Infineon Technologies AG, 2009 BCCA 503; Ewert v Nippon Yusen Kabushiki Kaisha, 2017 BCSC 2357, rev’d on other grounds 2019 BCCA 187; Shah v LG Chem, Ltd, 2015 ONSC 6148 [Shah], aff’d 2018 ONCA 819; Fanshawe College v LG Philips LCD Co, 2011 ONSC 2484 [Fanshawe]; Irving Paper Ltd v Atofina Chemicals Inc, 99 OR (3d) 358, [2009] OJ No 4021 (SC), leave to appeal ref’d 2010 ONSC 2705 (Div Ct) [Irving Paper]; Vitapharm Canada Ltd v F Hoffman-La Roche Ltd, [2005] OJ No 1118 (SC); and Alfresh Beverages Canada Corp v Hoechst AG, [2002] OJ No 79 [Alfresh].
[43] The present case is definitely different from all these precedents, as the formation and existence of the alleged conspiracy at the source of this proposed class action is not admitted or unchallenged, but is rather strongly disputed by the Defendants. In fact, this is the main battleground between the parties with respect to both the viable cause of action requirement and the common issues requirement. The above list of precedents is by no means exhaustive, but it illustrates the highly exceptional nature of the proposed class action advanced by the Plaintiffs in this matter.
[44] I pause to add one comment. Contrary to what the Plaintiffs argued, the fact that some of these prior price-fixing class actions (such as Mancinelli, Shah or Watson) may have involved cases certified by the courts in concentrated industries and oligopolies does not have much relevance in the case at bar and to the main issue raised by the Plaintiffs’ certification motion, namely the existence of the alleged conspiracy and wrongful conduct. The reason is simple. In every single case cited by the Plaintiffs where price-fixing class actions have been certified in oligopolistic industries, the issue of the existence of the alleged conspiracy was simply not in dispute.
[45] The only notable exception, heavily relied on by the Plaintiffs in their written and oral submissions before this Court, is the Crosslink case (Crosslink v BASF Canada, 2014 ONSC 1682 [Crosslink 1], aff’d 2014 ONSC 4529 [Crosslink 2]). In Crosslink, as in the current case, the alleged conspiracy was challenged by the defendants on the basis that the plaintiffs had failed to plead material facts to support a claim of conspiracy and omitted to provide the sufficient basis in fact for the alleged conspiracy. In that matter, the Ontario Superior Court of Justice found that the requirements for certification were met for both the reasonable cause of action and the existence of some basis in fact for the common issues (Crosslink 1 at para 71; Crosslink 2 at para 51). As will be discussed in detail later, I respectfully conclude that the facts in the case at bar are distinguishable from the Crosslink matter, and thus lead me to a different conclusion.
(3) This case differs from Infineon [46] The Plaintiffs also claim that there are no meaningful differences between this case and the Infineon case decided by the SCC in 2013, and that there are no reasons to depart from this binding precedent at this certification stage. In Infineon, the SCC dealt with a Quebec class action involving the DRAM industry, the same products, the same types of claims, some of the same Defendants and the same types of indirect purchasers of electronic goods containing DRAM. In that matter, the SCC affirmed the “authorization” (as the certification process is known in Quebec) of a very similar action brought by indirect purchasers of products containing DRAM.
[47] However, this precedent cannot predetermine the result of the present certification motion as there is a fundamental difference between the current case and the SCC decision in Infineon. This difference, once again, relates to the issue of the alleged conspiracy. In Infineon, the alleged conspiracy was to fix the prices of DRAM and it was not in dispute at all, since the international price-fixing conspiracy had in fact been admitted by the defendants in that case (Infineon at para 5; Option Consommateurs v Infineon Technologies, AG, 2011 QCCA 2116 at para 16). Moreover, there was some evidence, originating directly from the U.S. and European competition agencies involved, relating to the existence of the alleged global conspiracy, the ongoing investigations by these government authorities, and the plea agreements entered into by the defendants (Infineon at paras 80-139). Here, to reiterate, the very existence of the alleged conspiracy to suppress DRAM supply is the main battleground between the parties, and the Infineon precedent therefore does not shed any useful light on the main issue in dispute.
III. Legal framework for certification
[48] Against that background, the legislative framework and general principles governing the certification of class actions in this Court can be summarized as follows.
A. Legislative framework
[49] Part 5.1 of the Rules sets out the framework for establishing and managing class proceedings before this Court. Rules 334.16(1) and (2) and 334.18 are the main provisions governing the certification of class proceedings. They are reproduced in their entirety in Annex A of these Reasons.
[50] Rule 334.16(1) prescribes that a class action shall be certified if the following five conditions are met: (i) the pleadings disclose a reasonable cause of action; (ii) there is an identifiable class of two or more persons; (iii) the claims raise common questions of law or fact; (iv) a class proceeding is the preferable procedure for the just and efficient resolution of those common questions; and (v) there is an appropriate representative plaintiff. The first condition echoes a requirement applicable to all actions brought by a plaintiff. The other four conditions are more specific to class proceedings.
[51] Rule 334.16(1) uses mandatory language, meaning that the Court shall grant certification where all five elements of the test are satisfied. Since the test is conjunctive, if a plaintiff fails to meet any of the five listed criteria, the certification motion must fail (Lin v Airbnb, Inc, 2019 FC 1563 [Airbnb] at para 21; Buffalo v Samson First Nation, 2008 FC 1308 [Buffalo] at para 35, aff’d 2010 FCA 165 at para 3). Conversely, the Court may not exercise discretion and refuse to award certification if all the criteria are met (Airbnb at para 21).
[52] Rule 334.18 describes factors which cannot by themselves, either singly or combined with the other factors listed, provide a sufficient basis to decline certification (Airbnb at para 22; Kenney v Canada (Attorney General), 2016 FC 367 [Kenney] at para 17; Buffalo at para 37). However, these factors may be relevant consideratio