On 5 June 2014, the European Court of Justice (ECJ) ruled on a cartel case referred by an Austrian Court, concerning a lift and escalator cartel and is crucial in clarifying the EU’s position on the controversial subject of umbrella pricing.
The ECJ ruled that customers of non-cartel members were able to claim for damages caused by market price inflation, provided a causal link could be proved between the cartel’s actions and a third-party price increase.
The case stems from an European Commission (EC) Decision and fines issued in 2007. Four corporate groups were charged with infringement of Article 101(1) of the Treaty for the Functioning of the European Union (TFEU). These corporate groups were fined for operating a cartel which installed and maintained lifts and escalators in Belgium, Germany, Luxembourg and the Netherlands. The Austrian Court accepted the Commission’s Decision as establishing liability on the part of the defendants and then approached the issue of quantum and causation.
One of the claimants, a subsidiary of the Austrian Federal Railways, claimed damages of €1,839,239.74, which it believed to be the additional cost of an increased market price, caused by the cartel. In essence, the customer believed that their increase in expenditure, albeit paid to an innocent third-party corporate entity, was collaterally increased because of wider market patterns dictated by the cartel member’s infringement of the TFEU. This cost increase serves as an example of umbrella pricing in action as competitors to the members of the cartel were able to keep their prices higher then would have been otherwise because of the lack of price competition in the market.
The ECJ maintained that, because EU competition law created direct rights for individuals to claim compensatory for a breach of the Treaty, their compensatory rights should not be jeopardised simply because their losses stem indirectly from a cartel’s infringement. Domestic legal systems can therefore interpret the law and prove a causal relationship between artificially high market prices maintained by a cartel, and consequential losses from a non-member third party corporate entity.
Whilst the ECJ ruling does serve to clarify the position of the EC on corporate liability relating to umbrella pricing, it also raises a number of difficult issues for domestic courts. Primarily, little guidance is provided as to how to establish that the third party’s prices were higher than they would have been without the cartel (ie the counterfactual). It could also be argued that whilst the cartel members did adjust their own prices dishonestly, they did not directly control their competitors pricing behaviour, regardless of their own market effect. To hold them indirectly responsible for another’s pricing behaviour may seem fair from the point of view of innocent consumers but it is does seem a stretch to show a direct evidential link between the misbehaviour of the cartelists and a non-cartelists influenced but ultimately independent behaviour. The breadth of complex counterfactual analysis necessary for proving this causal relationship presents a difficult reality.
Regardless of the difficulties in this finding, the ECJ in this wider interpretation of the remit of competition laws has reaffirmed and strengthened its commitment to ensure victims of anti-competitive behaviour can claim compensation through private actions in the national courts.