July 2, 2014
On June 5, 2014, the Court of Justice of the European Union (respectively, the "EU" and the "CJEU") issued a Ruling in relation to so-called "umbrella pricing" cartel damage actions. These claims refer to damages allegedly suffered due to the surcharge applied by non-cartelists who, independently and rationally, adapted to a price increase resulting from a cartel by increasing their own prices.
Pursuant to the Ruling of the CJEU in Case C-557/12 Kone ("Kone"), the Treaty on the Functioning of the European Union ("TFEU") preempts the EU Member States from having in place domestic regulations which "categorically exclude" umbrella pricing claims deriving from breaches of EU Competition law.
In February 2007, the European Commission issued a Decision imposing fines on the members of an alleged cartel in the markets for lifts and escalators. The members of the alleged cartel included the Finnish company Kone AG.
Relying on the "umbrella effect" of the cartel, ÖBB-Infrastruktur AG ("ÖBB"), a subsidiary of the Austrian Federal Railway, brought an action before the Austrian courts against the members of the alleged cartel, including Kone AG, claiming damages. These damages would result from ÖBB buying from third party suppliers which were not a member of the cartel at a higher price than ÖBB would have paid but for the existence of that cartel, on the ground that those third undertakings benefited from the existence of the cartel in adapting their prices to the higher level (see Kone, at § 10).
ÖBB’s action was rejected by an Austrian Court of First Instance but it was upheld by the appellate Court. The Austrian Supreme Court ("Oberster Gerichtshof") asked the CJEU for a preliminary ruling on the issue of whether Article 101 TFEU (namely, the provision of EU law which prohibits anti-competitive agreements, the EU equivalent to § 1 Sherman Act) requires the recognition of "umbrella claims". This recognition would apparently be contrary to the requirements, applicable to damages claims under Austrian torts law, of "adequate causal link" between the conduct of the infringing entity and the injury and "unlawfulness", that is, whether the provision infringed had as its object the protection of the interests of the injured person (see Kone, at § 13 to 15).
The CJEU recalled that, in the absence of EU rules governing damages claims, it is for the domestic legal system of each Member State to lay down the rules governing damage claims for breaches of EU law, "including those on the application of the concept of causal relationship", provided that the general principle of effectiveness of EU law is observed (see Kone, at § 24)
The CJEU indicated that "the full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for the harm suffered were subject by national law, categorically, and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an [entity] not party thereto, whose pricing policy, however, is a result of the cartel" (see Kone, at § 33). The Ruling is somewhat blurry, and might not necessarily depict Austrian law in an accurate manner or, for that matter, be entirely consistent with the question asked by the Austrian Supreme Court,
Consequently, argued the CJEU, "the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel, even if it did not have contractual links with them, where it is established that the cartel at issue was [. . .] liable to have the effect of umbrella pricing being applied by third parties acting independently and that those circumstances could not be ignored by the members of the cartel" (see Kone, at § 34).
The practical implications of the Kone Ruling remain to be seen. Ultimately, plaintiffs have to prove the causal link between infringement and damage. Nonetheless, the following considerations come to the fore.
Conventional wisdom would have the European antitrust bar think about EU developments in relation to cartel damage claims in terms of the attempts by the institutions of the EU to legislate in this domain. Indeed the European Parliament approved on 17 April 2014 the text of a Draft Directive on antitrust damage actions. However, the Kone Ruling of the CJEU recalls us the importance of direct intervention by the European Courts in this domain.
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