Short circuit: Federal Court denies certification of “speculative” semiconductor competition class action

In Jensen et al v Samsung et al.,¹ the Federal Court of Canada dismissed a motion to certify a proposed class action alleging that three leading manufacturers of dynamic random access memory chips (DRAM) conspired to limit the global supply and raise the price of DRAM contrary to the Competition Act. 

Jensen sends a strong message to potential class action plaintiffs that, while the threshold for certification is low, certification remains a vital screening device for speculative claims. This is especially true in the context of proposed price-fixing class actions, which often claim significant damages based on vague allegations of clandestine conspiracies.

Jensen marks another robust decision from the Federal Court in competition law class actions following Mohr v National Hockey League earlier this year.²

Background

DRAM is a type of semiconductor memory chip found in computers, smartphones and virtually every other electronic product that performs a computing function. DRAM supply is a highly concentrated industry. 

In 2018, the plaintiffs commenced a proposed class action alleging that, beginning in early 2016, the defendants conspired to “supress DRAM supply and increase DRAM prices” contrary to sections 45 and 46 of the Competition Act. The plaintiffs claimed the defendants adopted the co-ordinated policy of refusing to increase the supply of DRAM, despite increasing global demand. 

In 2019, the plaintiffs brought a motion to certify their proposed class action. The motion was heard in October 2020. 

The decision 

In a thoughtful decision, Justice Gascon dismissed the plaintiffs’ motion, holding that they had failed to (a) plead a reasonable cause of action and (b) provide any evidentiary basis to support the existence of the alleged conspiracy. 

First, the court held that the Statement of Claim “contains only vague and general allegations that amount to mere speculation and conjecture on an alleged agreement between the Defendants.” Applying the Supreme Court of Canada’s established jurisprudence, Justice Gascon determined that, even at the pleadings stage, the plaintiffs’ conspiracy allegations lacked adequate particularity and specificity. 

Further, the court found the plaintiffs’ allegations were consistent with “conscious parallelism,” a phenomenon where, in the absence of an agreement to limit competition, competitors unilaterally adopt similar or identical business practices or pricing. Conscious parallelism is frequent in highly concentrated, homogenous product markets where competitors may base their actions on the anticipated reactions of their rivals. It is not unlawful on its own under Canadian law.

Second, regarding the common issues, the court held that the plaintiffs had failed to advance enough evidence to establish “some basis in fact” for the alleged conspiracy. The plaintiffs’ allegations were grounded in speculation. The court emphasized that there was no evidence of any investigation by competition authorities in Canada, the US or the EU. Rather, China was the only jurisdiction that had undertaken an investigation, and the plaintiffs failed to file evidence on the applicable law in China or evidence that the conduct investigated by the Chinese authorities would amount to conduct prohibited in Canada. 

Key takeaways 

Jensen serves as an important reminder that the certification threshold is more than a speed bump for would-be class action plaintiffs. Where plaintiffs fail to plead with sufficient particularity, or fail to establish “some basis in fact” for the alleged common issues, certification will be denied. 

Further, Jensen adds to the growing body of competition class action decisions from the Federal Court. We expect decisions such as Jensen will increasingly carry persuasive value for other courts across Canada.

The authors wish to thank articling student Katarina Wasielewski for her help in preparing this legal update.