Cartel damages litigation is an increasingly hot topic in Europe. For those who are not familiar with this topic a short explanation. Under normal market conditions, enterprises set their own market prices for their products. Under cartelized conditions, however there is some form of concerted practice (either explicit or tacit) which could lead to an agreement on prices for instance. If competitors agree on a price, this will normally lead to higher prices than under normal circumstances. Competition law prevents competitors this kind of behavior, setting high penalties (potentially in the billions of Euros for world-wide players) when trespassers on the EU competition laws are caught. However, these penalties, severe as they might appear, nevertheless pale into insignificance compared to civil damages claims. The gap between the normal market price and the artificial cartelized price is the so-called cartel damage. In addition, to give you an idea of the enormity of these kind of damages we give as an example the trucks case. Six truck companies were caught red handed by the European Commission in a cartel that lasted (at least) from 1997 to 2011. They were fined 3.8 billion euros. However, estimates are that the total of cartel damages amount to a staggering figure of 200 billion euros. These stakes are high enough to ensure massive court battles. The defendants have no other option than to put forward any possible or impossible argument to prevent the court from a decision that might cause their bankruptcy. For the claimants on the other side it is inevitable to go to court, since their losses have been so high.
Therefore, when stakes are as high as they are, there is no other option than to be very thorough in all the arguments and defenses that are brought to the court. Let alone to be meticulous in the first place as where to litigate.
Several legal topics have drawn special attention over the last few years. In this series of articles, we will shed light on the most hotly debated. Today we discuss the passing on defense. We made a comparative analysis between the Netherlands, France and the United Kingdom. The Netherlands and England (along with Germany) are considered mature jurisdictions in cartel damages litigation, while France (along Spain and Portugal for instance) are on the move to join this lawyer’s paradise.
“Passing-on” in competition cases is where overcharges caused by a cartel, which affect the customers of the cartelists (direct purchasers), are passed-on by these purchasers to buyers further down the supply chain (indirect purchasers). The pass-on argument as a defense may be invoked by a cartel member as a (partial) shield against a claim for damages and by an indirect purchaser as a sword to support the argument that it has suffered damages and/or to evidence cartel collusion.
The passing on defence is valid under both EU and national laws.
The Damages Directive Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law … Continue reading (and implementation laws in the Member States) has set two important presumptions reversing the burden of proof:
– as far as direct purchasers are concerned, it is presumed that they have not passed the overcharge on to their own customers. Thus, it is up to the defendant in the antitrust action for damages to prove that the overcharge has indeed been passed on and that its direct purchasers have not suffered any (or less) damage (Article 13 Damages Directive);
– concerning the indirect purchasers, it is presumed that their supplier has passed on the overcharge. Therefore, the burden of proof is here again placed on the defendant in the action for antitrust damages (Article 14 Damages Directive).
Those in itself contradictory presumptions could potentially apply to all claims. The presumptions in itself apparently are designed to help the (potential) claimants in a case. Everyone familiar with civil litigation knows that a sentiment of wrongdoing is not the same as proving you were wronged. Therefore, it is extremely important to have the burden of proof shifted to the wrongdoers. In that regard, national courts have established a common understanding for the enforcement of the passing on defence it is for the defendants to prove passing on and the extent thereof as well as the absence of volume effects. This outcome is consistent with the acquis communautaire on the burden of proving pass-on (i.e. in line with the EU principle of effectiveness) that has been codified in Article 13 Damages Directive. So how do courts apply these presumptions in practice in their case law? We believe that this would lead to the conclusion that the odds should favour the claimants. However, do courts indeed apply this presumption? We compared the United Kingdom, the Netherlands and France.
In two recent landmark cases the UK Supreme Court (SC) and the UK High court rendered decisions on the UK evidential standard in connection to the passing on defense. The Courts emphasized that claimants should be neither undercompensated nor overcompensated and therefore the evidential burden in relation to mitigation of loss on defendants / cartel members should not be ‘unreasonably high’. This is an approach in which no apparent choice seems to be made in favor of the claimants or the defendants.
In June 2020, the SC overturned a decision of the Court of Appeal in which it had decided that it required defendants (cartel members) to prove the (virtually) exact amount of loss mitigated in order to reduce claimed damages.  UK Supreme Court 17 June 2020, case refere The SC decided that the law does not require such high evidential standard and that the Court of Appeal had erred insofar that it required ‘unreasonable precision’ from the defendants in the proof of the amount of loss that the claimants had passed on to end customers. This decision was rendered in the context of a damages lawsuit brought by several supermarkets against Mastercard, Visa and several other large banks for the use of certain payment card schemes, in particular the multilateral interchange fees (MIFs) applicable in the EEA, which the European Commission found to be anti-competitive in 2007.
Key considerations of the SC regarding the evidential burden of defendants:
The preceding approach does not offend the principle of effectiveness of EU Law, according to the SC:
“As we have said, the relevant requirement of EU law is the principle of effectiveness. The assessment of damages based on the compensatory principle does not offend the principle of effectiveness provided that the court does not require unreasonable precision from the claimant. On the contrary, the Damages Directive is based on the compensatory principle.” (220)
“ As the regime is based in the compensatory principle and envisages claims by direct and indirect purchasers in a chain of supply it is logical that the power to estimate the effects of passing-on applies equally when pass-on is used as a sword by a claimant or as a shield by a defendant.” (224)
On 25 February 2021, the UK High Court rendered a decision in which it validated the approach to pass-on of the SC decision of June 2020. The UK High court referred to several key considerations of the SC in its decision, among which the compensatory principle and the fact that claimants should not be overcompensated for their damages as much as they should not be undercompensated. In addition, the decision implies that the pass-on approach can / should also be applied in complex and a-typical cases of passing on of overcharges, as the underlying case, which would pose a difficult and costly evidential burden on both parties.
This case stems from the foreign exchange cartel and a damages lawsuit filed by Allianz Global Investors and other claimants against several banking groups for their participation in the aforementioned cartel. The case involves investment funds who seek to generate a return for their investors and in so doing make use of the foreign exchange services provided by banks. Pass-on in this case is said to occur when an investor redeems or withdraws his investment from the fund. The High Court made clear that even though this is not a typical pass-on case involving the sale and purchase of goods in a supply chain, the compensatory principle equally applies. Defendants should not be subject to double recovery (12).
Claimants argued that the defendants’ pass-on defense should be stricken out because there was no real prospect of success, mainly because investors would have no cause of action against the banks. They also argued that it would have great impact on the future scope of claims, in terms of disclosure of documents and provision of evidence. The UK High Court did not agree that there would be no real prospect of success. The UK High Court said that the defense was appropriate and therefore it considered it necessary to “investigate precisely how the alleged wrongdoing of the Defendants impacted upon the investment fund (…) and how that affected the sum payable to the investor”, by disclosure and by factual and perhaps expert evidence. The pass-on defense could therefore be advanced to trial.
Our preliminary conclusion is that the UK courts do not favor one party over the other. It seems as if the courts feel that over-compensation is just as bad as under-compensation. In addition, in this argument there seems to be a deviation from the choice for the principle of effectiveness. So how do the Dutch approach this?
In Dutch case law the threshold for an effective passing-on defense has been set relatively high, contrary to the standard that has been set in the UK. The principle of effectiveness and the scope of the Cartel Damages Directive have served as normative and guiding principles for Dutch courts in this regard. The landmark judgements stem from a follow-on damages case between electricity transmission operator TenneT and electricity equipment corporation ABB.
On 8 July 2016, the Supreme Court ruled in the cartel damages case between ABB and TenneT that ABB was liable for the damage suffered by TenneT through the cartel on the market of gas-insulated switchgear.
Amongst others, the Dutch Supreme Court considered in this case that even without retroactive effect for material law, the Damages Directive nevertheless has to be taken into account in order to sure the European l’effet utile and the principle of equality (4.3.1 and 4.3.4). In other words, it was clear that the Damages Directive was not applicable in this case but the Supreme Court did consider it. With reference to article 12 (3) of the Damages Directive, the Supreme Court decided that the evidential burden in connection to passing on is in principle on the cartel member. Furthermore, the Supreme Court confirmed that the court is authorized to estimate damages if it is not possible to determine the amount of damages precisely. So with reference to the not applicable Damages Directive the Supreme Court clearly decided in favor of the claimant.
The District Court of Gelderland delivered judgment on 29 March 2017 and ABB was ordered to pay € 23 million in compensation for the damage caused by the cartel. ABB argued against the extent of the damage by invoking the passing-on defense. The District Court did not agree with this and found that the question whether this defence is reasonable, the principle of equality, the principle of effectiveness and the scope of the Damages Directive serve as normative and guiding principles (4.17). The court considered that “the object of the Damages Directive is not that the infringer should be given a hook to get out his liability of damages. The intention is that the compensation to be paid by the infringer should accrue to the direct and indirect customers in the chain to whom the additional costs were charged” (4.18). The court also ruled that the chance of end consumers bringing their own damages actions (and thus the risk of double compensation) was negligible. Once again and even clearer than the Supreme Court the court here argued in favor of the claimant, especially because they took into account the possibility of actual passing on, but that it was unlikely that further down the line any consumer would collect these scattered damages.
The so-called efficiency defense has been paid particular attention to in this context. Nowadays, almost every claimant advances this defence. Parties claim the harm suffered and alternatively claim compensation by invoking the efficiency defence. Briefly stated, the efficiency defence results in the court nevertheless awarding compensation to the claimant even if strictly speaking, the claimant is unable to prove the harm. This is of course a slippery slope from the point of view of legal certainty. However, it does seem to follow the European starting position, which is that the process should not be made too difficult for claimants and which forms the basis for the Damages Directive.It is a means of ensuring that private litigation is not made impossible from the very start.
In France, in cases in which Pre-Damages Directive rules apply, the question of the burden of proof regarding the passing on defense is not entirely settled yet.
According to the Circular of 23 March 2017, the new Article L481-4 of the French Commercial Code (including burden of proving passing on) does not apply to damages claims resulting from an infringement, which took place before its entry into force, that is on 11 March 2017.
Prior to the adoption on 9 March 2017 of the rules implementing the Damages Directive in France, there was no specific legal provision on the issue of pass-on of overcharge in cartel damages cases. The general civil law provisions, namely Art, governed the issue. 1315 of Old French Civil Code (Art. 1353 of the New French Civil Code with the exact same wording).
In accordance with a ruling of the Cour de cassation, several French civil and commercial courts of first instance have handed down judgments putting the burden on the claimant to prove the absence of passing on. While in two cases the Paris Court of Appeal considered that it was for the defendant to prove the passing on after the plaintiff had brought some indicia showing that there was no passing-on, it recently quashed a ruling of the first instance court where it found that the plaintiff which had been granted damages had not provided any evidence that there had not been any passing on. Most recently however, the Paris Administrative Court of Appeal and the French Court of Cassation held that, in accordance with EU law and principles, the burden of proof regarding the passing on of the illegal overcharge lies with the defendant. Besides the economic aspects (additional damages in form of loss of profit and the difficult proof of causality), there are therefore strong legal arguments to counter any potential passing-on defence. As the case law stands, it therefore seems highly recommendable to the plaintiffs that they bring as much evidence as possible about the absence of passing-on, allowing then the French Courts to shift the burden of proof on the defendant to establish passing-on.
Therefore, overall it appears that the French courts are slowly marching away from Albion to get closer to the Dutch approach regarding cases in which Pre-Damages Directive rules apply.
On the other hand, with regards to cases where post-Damages Directive rules apply, there is no doubt that the plaintiffs will fully benefit from the presumptions set by the Damages Directive.
Next time we discuss the bundling of claims!
bureau Brandeis, 4 June 2021
Marc Barennes, Tessel Bossen, Hans Bousie & Sarah Subremon
 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance (OJ L 349, 5.12.2014, p. 1–19)
 UK Supreme Court 17 June 2020, case references UKSC 2018/0156 Sainsbury’s Supermarkets Ltd and others (Respondents) v MasterCard Incorporated and others (Appellants); UKSC 2018/015 Sainsbury’s Supermarkets Ltd (Respondent) v Visa Europe Services LLC and others (Appellants).
 MIFs are charged by a cardholder’s bank (issuer) to a merchant’s bank (the acquirer) for each transaction made to the merchant with a payment card. In practice, the acquiring banks passed these fees on to merchants by charging a merchant services charge (MSC), for which they were seeking damages. The banks however argued that the supermarkets had passed-on the overcharges by the MIFs/MSCs to their end consumers by raising retail prices.
 UK High Court 25 February 2021, Case no CL-2018000840.
 Supreme Court 8 July 2016, ECLI:NL:HR:2016:1483.
 District court of Gelderland 29 March 2017, ECLI:NL:RBGEL:2017:1724.
 Cour de cassation, 15 May 2012, Le Gouessant.
 Paris Commercial Court, 26 March 2018, Provera; Paris Commercial Court, 20 February 2020, Cora; Rennes High First Instance Court, 7 October 2019, FRSEA.
 Paris Court of Appeal, 20 September 2017, JCB; Paris Court of Appeal, 6 February 2019, Doux.
 Paris Court of Appeal, 14 April 2021, Johnson & Johnson.
 Paris Administrative Court of Appeal, 13 June 2019, SNCF Mobilités.
 French Court of Cassation, 12 February 2020, Collectes valorisation énergie déchets. This case does not relate to antitrust damages and may only be referred to by analogy.
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