Cartel Damages

Violation of the cartel prohibition

Companies are not allowed to make agreements with each other if the object or effect is to restrict market competition. Making such agreements means that they violate the cartel prohibition. These agreements include price coordination, market division or supply limitation. And it does not take much to be a company. Any entity participating in trade already qualifies as a company. Violating the cartel prohibition comes with many risks. The competition authority may impose fines on the company itself and/or on the person effectively in charge when the cartel agreement was made. Although the violation will also generate bad publicity for the company, those who will be hit the hardest will be cartelists involved in civil proceedings in which customers seek compensation for their damage.

Legal framework for cartel prohibition

At European level we have the cartel prohibition in Article 101 of the Treaty on the Functioning of the European Union (TFEU). Public enforcement of this prohibition is the responsibility of the European Commission (EC). Article 6 of the Competitive Trading Act [Mededingingswet] applies at national level, with the Netherlands Authority for Consumers and Markets (ACM) being the competent authority for public enforcement.

In the event of a violation of the cartel prohibition, both the EC and the ACM are authorised to impose a fine of no more than 10% of the total (group) annual turnover or a penalty subject to non-compliance, to impose a ‘binding order to comply with the law’ and may also declare a commitment made by a company to be binding.

Antitrust damages

Term ‘antitrust damages’

The possible financial loss suffered by aggrieved customers as a result of the cartel is referred to as ‘antitrust damages’. Antitrust damages may consist of the actual damage suffered by the customer(s), the lost profit and the interest. ^[1]ECJ 13 July 2006, C-296/04, (Manfredi). Actual damage includes the additional costs, which is the difference between the price paid by the customers for the product or service and the price they would have paid if the cartel had not existed ^[2]Directive 2014/104/EU Article 2(20).. It follows from case law that damage may also include umbrella damages ^[3]CJEU 5 June 2014, C-557/12, (Kone et al./ÖBB-Infrastruktur), paras. 33 and 34.. This is the damage suffered by customers because competitors of the cartel can also increase their prices, even if they do not participate in the cartel. This results in higher price levels on the market.

Antitrust Damages Directive

From the beginning of this century, there has been increased focus on the possibility of enforcement of competition law under private law. As a result, the Directive on damages for infringements of the competition law provisions was adopted in 2014 (‘the Directive’) ^[4]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. Some of the provisions of the Directive constitute a codification of the case law of the Court of Justice up to that point. The aim of the Directive is to optimise the internal market for undertakings and consumers by removing barriers with regard to antitrust damages claims ^[5]Directive 2014/104/EU recital 54 preamble.. The Directive aims at minimum harmonisation and the Member States are therefore free to include stricter or more far-reaching standards in their legislation. The European Commission considers civil enforcement to be an additional incentive to reduce cartel agreements.

Dutch Implementation Act

On 10 February 2017, the Netherlands implemented the Directive in the Dutch Code of Civil Procedure (DCCP) and the new Section 3b in Book 6 of the Dutch Civil Code (DCC) entitled “Violation of Competition law”. The Netherlands did not adopt any more provisions from the Directive than was necessary. Not all provisions of the Directive have been transposed into national law, as Dutch law often already complies with the Directive on those points.
The Implementation Act introduces the new evidentiary presumption: a cartel is presumed to cause damage. The injured party therefore no longer needs to prove that damage occurred. This was decided to compensate for the secret nature of a cartel and the lack of information on the part of the injured party. What still has to be demonstrated is the extent of the damage and the causal link between the cartel and the damage. If the ACM or the European Commission has established an infringement of competition law, the infringement in the antitrust damages proceedings is irrefutably established. There are a number of exceptions to the joint and several liability of the cartelists, for example with regard to small or medium-sized enterprises that fulfil certain conditions. In practice, this evidentiary presumption is of great importance. Not only does a cartel agreement not need to be proven again in civil proceedings, but the existence of damage has also been established. In practice, this means that the attention shifts from the lawyer to the economist who has to quantify the damage.

References[+]

References
1	ECJ 13 July 2006, C-296/04, (Manfredi).
2	Directive 2014/104/EU Article 2(20).
3	CJEU 5 June 2014, C-557/12, (Kone et al./ÖBB-Infrastruktur), paras. 33 and 34.
4	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.
5	Directive 2014/104/EU recital 54 preamble.