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ECJ opens the door for parties not directly affected by actions of a cartel to claim compensation for losses

Lawyers:
Mattijs Baneke
Ruben Elkerbout
Jan Bart van de Hel
Gerben Smit
Tanja Schasfoort

In its judgement of 12 December 2019 (Case C-435/18), the European Court of Justice (ECJ) ruled that a party that was not directly affected by actions of a cartel may claim compensation for losses incurred.

The request for a preliminary ruling was made by the Oberster Gerichtshof (Supreme Court of Austria) in proceedings that had been initiated, inter alia, by the province of Oberösterreich against five companies active on the market for the installation and maintenance of lifts and escalators, whose participation in anti-competitive behaviour in the context of a cartel had already been established by a European Commission decision of 21 February 2007.

Unlike other applicants, the province of Oberösterreich did not claim to have suffered loss as a direct or indirect customer of the products covered by the cartel at issue. Instead, the province of Oberösterreich argued that it had suffered damages in its capacity as a body granting subsidies. During the cartel period, the province of Oberösterreich had granted promotional loans for the financing of building projects. The province of Oberösterreich claimed that increased construction costs caused by the cartel led it to grant subsidies in a higher amount than would have been the case in the absence of that cartel, depriving the province of Oberösterreich of the possibility of using that difference more profitably. Under Austrian law, the principles governing compensation for material losses restrict compensation to losses which the rule infringed was intended to prevent. According to the criteria of Austrian law, the loss suffered by the province of Oberösterreich did not present a sufficient connection with the purpose of the prohibition of cartel agreements, which is to maintain competition on the market affected by the cartel at issue. Therefore, at first instance the Handelsgericht Wien (Commercial Court of Vienna) rejected the province of Oberösterreich’s claim.

On appeal, the Oberster Gerichtshof (Supreme Court of Austria) then asked the ECJ whether Article 101 of the Treaty on the Functioning of the European Union (TFEU) must be interpreted in such a way that persons who are not active as suppliers or customers on the market affected by a cartel, but who provide subsidies to buyers of the products ordered on that market, may also seek compensation for losses they suffered as a result of such cartel.

In its decision, the ECJ considered that the effective protection against the negative consequences of an infringement of EU competition rules would be seriously undermined if the right to compensation for losses caused by a cartel was from the outset restricted to suppliers and customers on the market affected by the cartel. National rules relating to procedures for exercising that right to compensation may not undermine the effective application of Article 101 TFEU. Consequently, the ECJ ruled that Article 101 TFEU must be interpreted in such a way that a public body which granted promotional loans to purchasers of products covered by a cartel may request compensation for losses caused by that cartel. In this regard, the ECJ furthermore considered that the loss suffered by the person concerned does not require a specific connection with the ‘objective of protection’ pursued by Article 101 TFEU, thereby deviating from the rules under Austrian law. Further, the ECJ stated that it is up to the national courts to determine whether the province of Oberösterreich had the possibility to make more profitable investments and whether the applicant had established the existence of a causal connection between that loss and the cartel at issue.

This judgement learns that the ECJ offers increased protection to third parties affected by anticompetitive behaviour, provided that they can prove both their losses and a causal link between such losses and a cartel. This ruling underlines the ECJ’s promotion of effective private enforcement of infringements of competition law. At the same time, it should be noted that applying for leniency might become less attractive if the group of parties entitled to compensation is extended. It illustrates the continuous search of striking the right balance between private and public enforcement.

Questions?

Get in touch with Tanja Schasfoort or any other member of our Competition Litigation team.