Discoverability, continuing effects, and Competition Act limitation periods
- Class Actions and Other Private Actions
- Competition Bureau Investigations
- Criminal Matters
In a recent decision, the Federal Court of Appeal left open the possibility that the discoverability principle may apply to the two-year limitation period established for private actions under section 36 of the Competition Act, but confirmed that the effects of a conspiracy are not a part of the offence and thus do not extend the limitation period. This decision has important implications for private actions under the Competition Act and possibly also for prosecutions of international conspiracies.
Garford Pty Ltd. sued Dywidag Systems International, Canada Ltd. in August, 2008, for allegedly engaging in conspiracy and price fixing during negotiations and discussions leading up to three purchase agreements in November 2003, February 2005 and March 2006.
Dwyidag moved for summary judgment dismissing Garford’s claim on the grounds that it had sued after the expiry of the two year limitation period established by the Competition Act. Subsection 36(4) of the Competition Act provides that a plaintiff must bring an action alleging criminal conduct within two years from “a day on which the conduct was engaged in”.
In 2010, the Federal Court held that discoverability does not apply to the two year limitation period and dismissed Gardford's claims (see Discoverability does not apply to competition claims for our report on this decision).
Garford appealed. In reasons issued on February 13, 2012, the Federal Court of Appeal held that discoverability did not arise on the facts, as the information available to Garford on April 10, 2006, was essentially the same as the information that it had when it sued in August, 2008, more than two years later. However, the court left the door open for future plaintiffs to claim that discoverability applies to the limitation period under section 36, holding that the motion judge's findings of fact "preclude any argument based on discoverability, assuming without deciding, it is legally available".
Perhaps more importantly, the appeal court also agreed with the motion judge in rejecting the plaintiff's theory that the continuing effects of the conspiracy extended the limitation period. They do not, the court said, because the Competition Act's conspiracy offence (section 45) is complete upon the making of the agreement. The court said:
In this case, as the judge explained, the alleged offence under section 45 was complete at the time of the conclusion of the purchase agreements. Ongoing effects do not extend the time period established in subsection 36(4). Garford’s position is tantamount to saying that the conduct prohibited by section 45 is only an agreement which, in fact, injured the market. That is not the law. At the relevant time (section 45 has since been amended), the offence was complete upon the finalization of an agreement that, if carried into effect, would unduly limit competition.
This is potentially an important ruling. The Competition Bureau routinely asserts "long arm" jurisdiction over price fixing conspiracies entered into abroad, on the basis that they have effects in Canada. However, subsection 6(2) of the Criminal Code says that "no person shall be convicted […] of an offence committed outside Canada". The Bureau's assumption of jurisdiction over foreign conspiracies only works if the effects of the conspiracy form part of the offence, otherwise the foreign conspiracy will be an offence committed outside Canada. The Federal Court of Appeal has effectively confirmed that the effects do do not form part of the offence. This undercuts the foundation relied on by the Bureau and the Crown to investigate and prosecute foreign price fixing conspiracies.