In EU and UK competition law, there has always been an inherent tension with cartels between the need to have effective public enforcement (i.e. through the cartel immunity and leniency policy) and allowing those harmed by cartel activity (individuals or businesses) to claim damages for the overcharge and/or damage they suffered as a result of the cartel activity – these are known as private damages actions. The recent decision in Britned Developments v ABB (full judgment available here) was not only the first “follow-on” damages case in the UK to reach a final judgment but also provided some specific guidance about how overcharges may be dealt with in such cases going forward.
In 2014, the European Commission released its decision from its investigation into a global cartel operating in the underground and submarine high-voltage power cable sector. The Commission found that between 1999 and 2009, eleven companies (one of these being ABB) were involved in a cartel arrangement which led to sharing of markets, bid rigging and exchanges of commercially sensitive information.
The cartel first came to the Commission’s attention with ABB made an application for immunity under the Commission’s leniency programme. The other ten companies were fined a total of €302 million for their participation in the cartel. As ABB was the first company to come forward and report the cartel to the Commission, they did not receive any penalty under the leniency programme.
Britned Developments v ABB – The Facts
Britned Developments was a customer of ABB’s during the cartel period and, subsequent to the Commission decision, raised proceedings against ABB claiming damages of €180 million for an alleged overcharge it was subject to due to the cartel being in operation during this time.
This decision has been heralded as a landmark case as it is the first follow-on damages case stemming from a cartel decision that has provided a judgment on the merits of the case. This provides helpful guidance about how the UK courts may treat other such cases in the future.
Of the €180 million claimed by Britned Developments, the court in this instance only awarded around €13 million in damages due to its assessments of the facts in this case and its examination of the overcharge that Britned Developments were subject to during the cartel period.
The majority of the damages claimed by Britned Developments were in relation to the Britned Interconnector project, however the court found that, upon examination of the facts, that the price charged by ABB for this project was in line with prices pre and post cartel activity and therefore Britned Developments were not subject to any overcharge in relation to this specific project as ABB had submitted a fair bid for the work.
The court awarded the following damages attributable to ABB’s participation in the cartel:
(1) €7.5 million for “baked-in inefficiencies” attributable to the lack of competition in the market during the cartel period which led to excessive cable widths which in turn required more material therefore increasing the price of the cable.
(2) €5.5 million for restricted supply of the cables due to the cartel activity which increased the price of the cable for Britned Developments during the period.
This case does provide helpful guidance as to how the UK courts may approach other such follow-on damages claims in the future:
• Facts – the court does not consider the whole of a Commission cartel decision to be binding upon it where facts are presented to it stating the contrary.
• Presumption of an overcharge – as this case was not considered under the EU Antitrust Damages Directive (which only applies to cartel conduct beginning after the entry into force of this Directive) there is no presumption of harm and/or any overcharge in cartel follow-on damages actions.
This case does clarify that not all cartel activity leads to an overcharge when assessed on the specific facts of each individual customer/situation. It seems that the courts give particular attention to the facts of each case and whether any actual overcharge has been passed on to the customer in that circumstance.
This article was co-written by Rebecca Henderson.