In its judgement 8 O 75/19 Kart of 8 July 2020 the German Lower Regional Court of Dortmund dismissed a follow-on damage claim1 against a specialist wholesale company for sanitary and heating products. The case highlights the Courts view on group liability and the evidentiary burden appropriate for claims with modest monetary claim value.
The claimant argued that whilst the wholesalers coordinated the recommended gross prices vis-à-vis individual customers in the federal state of North Rhine-Westphalia, the conduct had the ability to impact trade between the member states resulting in a violation of the cartel prohibition not just of §1 ARC but also Article 101 TFEU – and accordingly, that the principles of group liability set out in the Skanska judgement2 would apply to the case at hand.
It called for relief of damages allegedly suffered from purchases of a variety of sanitary and heating products made at inflated prices (totalling an affected volume of commerce of around 1.1 million EUR).
To prove its claim, the claimant produced extensive exhibits containing information on the purchases underlying the claim. As regards the alleged overcharge, the claimant referred to two meta-studies on the price-increasing effects of historic cartels. The first study3 had identified a median mark-up (i.e., if one sorts the estimated cartel mark-ups according to their magnitude, half of the estimated mark-ups are considered below and the other half above this value) of 18% of the cartel price. The second study4 identified a median mark-up of 19%. The claimant then applied this mark-up to its volume of commerce to derive at total damages of 207,859.40 EUR plus interest.
The defendant's argument
The defendant argued that a liability to be sued does not follow from the FCO's decision, as it was not an addressee of the decision. Instead, the decision addressed a separate (albeit potentially related) economic entity. As the addressee was not an economic unit of the defendant, the principle of separation would apply. Furthermore, as the decision never mentioned that the cartel had any relation to trade between member states, the relevant law would be domestic and not Community law.
The defendant denied all negligence, which it did not consider to be conclusively claimed anyway, and contested that prices were artificially inflated. It argued that no actual presumption of harm ("tatsächliche Vermutung") would apply.
The defendant further complained that the claimants "lapidary reference" to general reports on historic overcharges were not adequate.
Moreover, it argued that the claimant had failed – even after a corresponding indication by the Court – to substantiate which individual purchases it considered relevant for the case. The invoice data presented related to invoices by a different company (which was neither the defendant nor the addressee in question) and also included many products that were not cartelised.
Finally, the defendant argued that any loss suffered would have been mitigated by passing-on the inflated costs to end customers.
The Court dismissed the claim in its entirety as unsubstantiated (both under domestic and European law).
The Court noted that the claimant had – undisputed between the parties – claimed damages from a company that was not an addressee of the fining decision, but which was at most associated with an addressee. The claimant had not explained how that association is structured, e.g. whether the companies in question were parent company and subsidiary, or whether both were subsidiaries of a further (unknown) parent company. Accordingly, the Court could not identify any exercise of group control.
The Court highlighted in passing that, contrary to the predominant case law of first instance courts, it bases its consideration of the general liability of group companies for the conduct of the economic units they belong to on the principles set out in the Skanska case. As such, against the background of the economic unit between group entities, a cartel violation of an individual group entity also constitutes own conduct in terms of liability for all other entities.
The Court then, however, states that for the case at hand any such considerations were irrelevant, as was the question whether the infringement was actually subject to Community law given the purely regional character of the cartel identified by the FCO (in which case the Court would question the transferability of the Skanska judgement). This is because the claim for damages as a whole was not sufficiently substantiated.
As such, the Court notes that for it to ascertain a "cartel affectedness" ("Kartellbefangenheit") which leads to the actual possibility of damage and thus the resulting causality that underlies the liability, it requires that the individual purchases are substantiated with regards to the seller, the price and the exact product that was purchased. However, in the case at hand, the claimant failed to do so.
Even though the Court indicated the necessity, the claimant had failed to substantiate the relevant transactions on which the claim is based. The claimant had only presented invoices and excel tables, which included products and services that were not remotely related to the sanitary cartel. The claimant had also failed to explain which products and services it considered to be subject to the cartel agreement – whereas the defendant had identified product groups which evidently were outside the scope of the cartel.
Furthermore, the products and services listed in the exhibits predominantly related to purchases made by a different company, for which the claimant did not present any proof of an existing relationship with the addressee. Additionally, it was left open whether the claimant called for damages as an indirect purchaser or via an "umbrella" claim.
Accordingly, the Court ruled the claim as inadmissible as it would deprive the defendant of the opportunity to comment in a substantiated manner on the question of the cartel affectedness and the occurrence of any damage.
The Court also commented on the easing of the burden of proof that would be recognised in case law in favour of the claimants. In as far as the claimant wants to make use of any easing with regards to the question whether any damage has occurred and subsequently wants to rely on the assessment of "Anknüpfungstatsachen", i.e. facts of the case for the determination of the amount of damage (as was recently suggested by Judge Kühnen – see box below), then the claimant still would need to specify the relevant individual purchases in a way that allows the defendant the opportunity to submit a substantiated defence. This would be in line with recent case law – and would in particular apply to a case in which the actual entity that sold the product is not itself sued for damages, but a related group entity.
The Kühnen proposition for the assessment of damages5:
- § 287 (1) and (2) Code of Civil Procedure allows the Court to rule on damages at its discretion, based on its evaluation of all circumstances, in situations where the amount of a claim is in dispute between the parties and the complete clarification of all relevant circumstances is associated with disproportionate difficulties.
- The nature, content and scope of the cartel agreement as well as the details of its implementation can provide sufficient starting points for estimating the overcharge.
- Rule-of-thumb that a cartel inflates prices and that cartelists will aim for benefits that outweigh the risks of cartelisation can be the starting point for the assessment of a minimum overcharge – e.g., of 3%, 5% or 8%.
- All facts that provide information about the scope for price increases created by the cartel agreement and the extent to which the cartelists had the opportunity to use this scope should be taken into account – e.g. facts as to scope, duration, degree of organisation, substitutes, existing market transparency etc.
- Once claimants provided a substantiated and comprehensible assessment of the facts of the case, the defendants can respond and set out why the overcharge would be lower – e.g., based on an assessment of the actual nature of the cartel or by providing an own overcharge analysis.
- Potential benefits: relevant facts are often identifiable from fining decision; proportionality of costs for smaller claims.
The information required to identify the relevant purchases were neither provided in the written submission nor in the extensive annexes – for which the Court notes that it would not be required to search through itself to identify those relevant purchases.
Accordingly, the claim was found to be unsubstantiated with regards to the individual purchases in question, and inconclusive with regards to the question whether any damage has occurred.
Likewise, the claim failed with regards to the specific amount of damage claimed. The claimant did not quantify the damages suffered by means of an economic expert report. Instead, it merely referred to two academic meta-studies on effects of historic cartels. The court clarified that a reference to two meta-studies would – as recognised in case law6 – not be sufficient as – evidently – any comparability between the prices of the products in the case at hand to those used in the studies is missing.
As suggested by Judge Kühnen, an evaluation of the facts of the case may provide sufficient evidence for the Court to assess the cartel-related price-increase. However, the Court noted that in the case at hand such a "free-handed estimation" of the damage by the Court would not be warranted. This is because such an estimation would require substantial discussions of numerous "Anknüpfungstatsachen" / facts of the case, in particular given that the Federal Cartel Office had noted that the cartel occurred in a special situation whereby the cartel members tried to resist competitive pressure of larger companies. As such, determining any price increase would be an even more complex process.
The Court finally notes that all of these points had been made clear during oral hearing, giving the claimant amble opportunities to respond – which was not used.
As the claim failed for the above reasons, the Court left the question of liability open.
Whilst the question who is liable to compensate for damages – for which the Court said in passing it favours group liability as per the Skanska principles – is of legal interest, the case is of wider interest as it clarifies the evidentiary burden necessary to establish damages.
The case highlights the relevance of a well-substantiated discussion of which individual purchases are claimed to be subject to the cartel. It also clarifies that – in line with previous case law – even for claims with modest monetary claim value, lapidary reference to historic cartel effects (such as the (in)famous 18% found in one meta-study) is not sufficient.
Instead, either a full economic expert report deriving the damages or a detailed and economically and legally backed-up discussion and interpretation of the facts of the case is required, upon which the Court can then base its own assessment of the likely damage suffered.
It appears that the Court is generally willing to have the Judge estimate the damage at its own discretion, following the approach outlined by Judge Kühnen (himself Presiding Judge at the relevant Court of Appeals).
However, this seems limited only to cases instances where (i) sufficient facts of the case are presented to the Court, and (ii) it would be proportionate to do so.
This is in line with an earlier indicative ruling by the same Lower Regional Court of Dortmund in relation to a different damage claim, in which the Courts clarified that they consider the estimation approach introduced by Judge Kühnen to be an alternative (or even substitute) for other forms of damage assessment.7
Whilst the burden for small claimants ought to be set in a way that it does not strip them of their access to justice, it is clear that the courts are not willing to give free-passes to such claims.
1. In case B5 - 139/12, the German Federal Cartel Office ("FCO") imposed fines of 23 million EUR on ten wholesalers and one individual. The cartelists, all involved in the sanitary, heating and air-conditioning sector, had coordinated the calculation of gross price lists, purchasing conditions, discounts and sales prices covering nearly 250.000 products over the period from 2005 to 2013.
2. Judgment of March 14, 2019, C-724/17 = NZKart 2019, 217.
3. Oxera (2009), "Quantifying Antitrust Damages Towards Non-Binding Guidance for Courts - Study Prepared for the European Commission", p. 90 et seq. Commonly known as the "Oxera-study".
4. Conor (2010), "Price-fixing Overcharges: Revised 2nd Edition", Purdue University 2010.
5. Kühnen (2019), „Überlegungen zur Schätzung der Kartellschadensersatzhöhe", NZKart 2019, 515.
6. OLG Düsseldorf VI U Kart. 1/17, Para. 131 Juris.
7. LG Dortmund, 8 O 15/15 (Kart), Para. 61 et seq., OpenJur.