United States: European Commission Adopts Passing-On Guidelines For National Judges Evaluating Cartel-Related Damages

As widely acknowledged, key problems in the implementation of the Antitrust Damages Directive [2014/104/EU, herein referred to as "Damages Directive"] were found in the vague provisions set therein, such as the rules on presumption of harm, passing on, and quantification of damages. In view of the quantification difficulties, the European Commission had earlier on adopted a more general Communication on quantifying harm in antitrust damages actions [2013/C 167/07] and a related practical guide focusing on the overcharge only. Nevertheless, Article 16 Damages Directive provides that the commission shall issue passing-on specific guidelines for national courts, since these "have the power to estimate, in accordance with national procedures, the share of any overcharge that was passed on" (cf. Article 12 par. 5). 

The commission has therefore through the recently published cuidelines for national courts on how to estimate the share of overcharge which was passed on to the indirect purchaser [herein referred to as "Guidelines"] offered much-needed insight to national judges facing the implementation of the right to full compensation in cartel-related cases. The commission clarifies that it takes into consideration mostly passing-on in cartel cases, although it considers these guidelines useful as a source of good practices in damage actions for vertical restraints and abuse of dominant position, provided that the specificities of applicable rules are sufficiently taken into account. These guidelines are based on a stakeholder consultation and a 2016 study on the passing-on of overcharges, and are to be read together with the Staff practical guide to quantifying harm in actions for damages [SWD(2013) 205] for further insight.

This nonbinding text is to be taken into account in future case law, although it ultimately leaves the national judge free to choose his/her preferred economic theory and method of quantification on a case by case basis. Moreover, these guidelines are without prejudice to the consideration of national law, provided they comply with the principles of equivalence and effectiveness.

I. First aim of the guidelines: providing clear legal tools for national judges to estimate the share of any overcharge

As the Court of Justice of the European Union (CJEU) jurisprudence and Damages Directive state, any person has the right to full compensation. This entitles both direct and indirect purchasers that are part of the same supply chain to obtain damages, having in their favor the general Article 17(2) Damages Directive presumption that cartel infringements cause harm. In fact, the infringer first applied an overcharge, which was then passed down to the purchasers through, in the price effect case, an undue price increase, or in the volume effect case, through the reduced purchasers or supplier sales and resulting profit loss. Distinguishing between actual loss and loss of profit is customary, thus differentiating between the two effects, yet an inherent link between the two is to be taken into consideration through the economic tools extensively set out in the guidelines.

There are two scenarios in which national courts may face passing-on. In the first one, the infringer invokes it as a defense, using it as a shield. Thus, the defendant needs to prove that the claimant passed on the overcharge as provided under Article 13 Damages Directive. In the second one, the sword scenario, the indirect purchaser invokes it as a basis for the damage action. Burden of proof is for the claimant, although difficulties of indirect purchasers are addressed by the Damages Directive. In fact, if it is a commercial practice to pass on such overcharge, there is proof prima faciae. Furthermore, there is a rebuttable passing-on presumption under Article 14(2) Damages Directive if the claimant can show that the direct purchaser has paid an overcharge to the infringer and he/she as the indirect purchaser bought products from the former.

Therefore, parallel claims are possible, in which case courts should avoid under- and overcompensation. This is achieved by taking due account of other decisions related to the same infringement and damages actions, and relevant information in the public domain. It is in the interest of the parties to make the national court aware of such action, judgment or information. Stay of proceedings, joinder of claims, acquisition of another person claim (Article 2(4) Damages Directive) and any other appropriate procedural mean, even if found in national law, is to be taken into consideration.

Most important, national courts have the power to estimate the share of any overcharge, meaning that they cannot reject claims or submissions by a party that is unable to precisely quantify the passing-on effects. This includes the right to full compensation of victims of umbrella pricing, per the Kone CJEU jurisprudence.

Courts shall estimate the partial or full passing-on of an overcharge by identifying the overcharge harm that remains at a given level of the supply chain. They shall do so as stipulated under Article 12(5) and 17(1) Damages Directive by first basing their assessment on the information reasonably available and, second, striving for a plausible approximation of the amount or share of the passing-on. This exercise is subject to national law put into place following the Damages Directive.

In practice, courts will rely on assumptions, on which they have broad discretion, especially as to the way figures and statistical data are to be used for the calculation and assessment of damages. These are important to build the counterfactual, as in the economic situation absent the infringement, for the purpose of quantifying passing-on and volume effects as described in the following section. Thus it is advised that the courts ask the parties that in any submission, assumptions be carefully laid out and the related changes to subsequent predictions be made clear.

Therefore, judges are advised to consider whether economic experts comply with such best practices as early as in the request of disclosure phase, and they should not hesitate to ask concrete questions on the quantification method used and the data needed. In particular, the court should ask such economic experts to address alternative explanations for their findings and ensure equality of arms to the parties. On the matter of disclosure, under Articles 5 and 13 Damages Directive, in view of the principle of proportionality, the court may consider that no further data gathering is necessary as parties must use facts reasonably available to them to establish overcharge harm, such as information gathered during the course of business. The court may also order disclosure of confidential information, and as a measure of last resort, disclosure of evidence by a competition authority.

II. Second aim of the guidelines: affording economic tools for the quantification of damages

The guidelines then focus on quantification of damages, suggesting a three-step assessment that looks first at the overcharge effect, then at the passing-on related effect and, lastly, at the passing-on related volume effect. As previously mentioned, it is important for the court to determine the counterfactual in order to assess the harm done by the overcharge and related passing-on.

To determine price effects, the comparator-based approach is favored, and specifically the difference-in-differences approach by combining comparison over time and across markets. Nevertheless, the commission is cautious and underlines limits of the various approaches. Thus, pragmatic measures are also advised, such as a demanding threshold for statistical significance or a complementing consideration of qualitative evidence (i.e., records showing passing-on) instead of limiting itself to quantitative evidence. If sufficient data is not available, also because of the proportionality principle applied during disclosure, other methods such as economic modeling or the passing-on rate approach (i.e., overall likelihood that a market participant passes on changes in input factors) are suggested.

Although courts have rarely engaged in the quantification of volume-based effects, they are encouraged to do so since at least in theory a passing-on related price effect necessarily implies a volume effect. The assessment methodology is much the same, the comparator-based approach being useful also in this case. Nonetheless, the parameters are specific to volume-based effects and include information on the observed quantity sold by the direct purchaser, the counterfactual volume sold and the price-cost margin that would have been achieved absent the infringement. If comparative analysis fails, courts may again consider qualitative evidence or a further test, combining observed price increases and the estimated price sensitivity/price elasticity of the relevant demand.

All in all, these passing-on Guidelines offer a full spectrum of the economic methods of quantification available, underlining that there is no technique that could be singled out, since the courts shall decide on a case-by-case basis which approach is the most appropriate under the circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions