EC consultation on draft Guidelines concerning pass-on of cartel overcharges

Following adoption of the Antitrust Damages Directive, it has become easier for claimants to bring follow-on cartel damages actions. However, a successful claim requires an assessment of whether and to what extent the harm caused by the cartel has been passed on down the supply chain. The job of estimating passā€on falls to national courts and is a challenging one. 
 
Against this background, the EC has consulted stakeholders on a set of Draft Guidelines for national courts. The non-binding Guidelines are intended to help national courts assess the extent to which any overcharge (and therefore, any loss) caused by anticompetitive behaviour has been passed on by those paying the affected price (direct purchasers) to their own customers (indirect purchasers) by way of corresponding price increases.
 
Complex issues at stake
The assessment of pass-on raises complex issues, particularly in the context of multi-jurisdictional proceedings.
 
An example is the different approaches to methodology for the assessment of pass-on. One approach is to rely on internal documents which record the mechanisms by which a business sets its prices.  However, this may not reflect the commercial reality. Alternatively (or in addition) one could carry out a robust economic analysis of relevant data to identify the causal relationship between an increase in the relevant input cost and a change in prices charged. The latter option would require the claimants to disclose significant volumes of commercial data and would usually be the more complex and expensive approach. However, it may be more conclusive than the former.
 
Another issue is that because both direct and indirect purchasers are able to claim damages for loss suffered as a result of an antitrust infringement, claims may be initiated by multiple parties at different levels in the same supply chain. Also, given the cross-border nature of much anticompetitive behaviour, claims may arise in different jurisdictions brought by claimants at any level in the same supply chain. Therefore, there is a real risk of inconsistent judgments and a real possibility either that defendants are unfairly required to over-compensate or claimants are unfairly under-compensated.
 
The EC’s Draft Guidelines seek to assist national courts in responding to these challenges, and others, when engaging with the complex issue of pass-on.
 
Advocating for a sound and balanced regime

Linklaters responded to the EC’s consultation earlier this month in conjunction with Analysis Group (our response is available here). We put forward our views, which are aimed at ensuring a sound and balanced regime for competition damages claims in Europe. In particular, we advocate that:

  • National courts should perform their role in ensuring that a best estimate of pass-on is obtained by applying empirical methods that are scientifically robust, appropriate to the case in question and simple enough to be applied using available data.
  • In doing so, national courts must examine all of the evidence submitted and, if necessary, request additional evidence (subject to the protection of commercially sensitive data).
  • Legal presumptions must be confined to their proper role. In particular, a national court should only apply the legal presumptions introduced by the Antitrust Damages Directive in circumstances where the evidence before the court does not enable it to decide whether (part of) any overcharge was passed on.
  • Among the available methods for economic analyses, the comparator based approaches are preferable because they provide the highest assurance that the results of the analysis will accord with the real position, thereby limiting the risk of over- or under-compensation.
  • National courts are urged to respect the rights of defence, to exercise caution in declining a comparator based approach on grounds of cost, and to apply potential safety discounts in favour of the defendant.
  • There is little precedent on quantification of volume effects of pass-on in the context of cartels. The assessment of such effects should take into consideration a number of additional aspects such as capacity constraints and economies or diseconomies of scale.