European Court confirms cartel victims can claim “umbrella” damages

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Summary: The Court of Justice of the European Union has confirmed that victims of cartels may claim compensation from cartelists for inflated prices paid to non-cartel members (so-called “umbrella damages”), providing a further boost for would-be claimants in seeking damages from companies involved in bid-rigging, price-fixing and other cartel activity.

In a judgment issued on June 5th, the Court of Justice of the European Union confirmed that victims of cartels may claim compensation from cartelists for inflated prices paid to non-cartel members, or so-called “umbrella damages”. The case, C-557/12 Kone AG and Others v ÖBB-Infrastruktur AG, provides a further boost for would-be claimants in seeking damages from cartelists.

In short, the Court has confirmed that even companies that have not bought products directly or indirectly from suppliers involved in the cartel, but which have paid higher prices to the cartelists’ competitors than would have been the case absent the cartel (because of the general softening of price competition in the relevant market), may be able to claim damages from the cartelists.

The case arises from a 2007 European Commission decision imposing fines of over €900m on four manufacturers of lifts and escalators, including Kone AG. In 2008 the Austrian authorities also imposed fines on a number of the same companies for operating a cartel in Austria in respect of the same market.

ÖBB-Infrastruktur AG (“ÖBB”), a subsidiary of the Austrian Federal Railways, had purchased escalators and elevators from companies not involved in the cartel. However, ÖBB brought a claim against Kone AG and the other cartelists in the Austrian courts for the loss sustained as a result of its suppliers setting a higher price than would have been achievable had the cartel not existed.

The case was referred to the Court of Justice to rule on whether such a claim was possible under EU law. The Court ruled that, in order to preserve the effectiveness of its competition rules, victims of cartels had to be able to seek compensation for losses caused by cartels. The court went on to say that this included losses suffered by customers of non-cartelists because the cartel caused market prices to be higher than they would have been in the absence of the cartel.

The judgment comes at a time when the EU Institutions are taking significant steps to facilitate damages claims. Earlier this year, the Institutions reached an agreement on the adoption of the EU Damages Directive.

This judgment will add a further weapon to the arsenal of potential claimants seeking damages from cartel members. Although those claimants must, of course, still prove that the losses in question have arisen, the judgment marks a further shift in the balance of power towards claimants, and exposes cartelists to another area of vulnerability from claims.

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