On 27 February 2014, the Paris Court of Appeal awarded the poultry breeder Doux € 1.66 million in damages against Ajinomoto Eurolysine, a lysine producer, and its exclusive distributor, CEVA Santé Animale.
Back in 2000, the European Commission found that Ajinomoto participated in a cartel among lysine producers. Doux argued that the cartel resulted in higher prices for lysine, a feed additive which it bought from Ajinomoto's exclusive distributor, and demanded financial compensation. In 2009, the Court of Appeal allowed Doux's action for damages, but its judgment was subsequently quashed by the French Supreme Court in 2010 on the grounds that it had not responded to Ajinomoto's claim that Doux had passed-on the overcharge to its customers.
In the current proceedings, the main issue before the Court of Appeal was whether Ajinomoto could escape liability on the basis of the passing-on defense. The passing-on defense allows undertakings to escape, or at least reduce, their liability for the harm caused by anticompetitive conducts by claiming that the overcharge was passed-on by their direct customers to their own customers.
The Court of Appeal held that Doux sufficiently established that it had not passed-on the overcharge to its customers on two grounds. First, it was established that large retailers, which represented 80% of Doux's customers, had strong bargaining power and had consistently refused to accept any price increase. Second, the cost of lysine as feedstock represented only 1% of the total cost of the final product, the amount of which was not sufficient for Doux to request a higher price to its customers. As a result, the Court of Appeal dismissed Ajinomoto's claim that it was not liable for damages on the grounds that the price increases stemming from the cartel were passed-on from Doux to its customers.
This rare judgment on damages is of interest as its finding appears to differ from the European Commission's draft Directive on actions for damages, which provides that the burden of proof that the overcharge was passed-on rests on the cartelist. In the present case, the Court of Appeal appears to consider that the burden of proof rests on the direct customer of the cartelist (the claimant).
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