Berlin Court of Appeals facilitates private actions for antitrust violations – excludes passing on defense for cartel members

On 1 October 2009, the Berlin Court of Appeals issued a judgment that may facilitate considerably damage claims for antitrust violations in Germany. The court excluded the passing on defense, which would otherwise allow a defendant to show that a claimant had passed on all or some of any cartel overcharge to its customers, and, obiter, allowed standing for indirect purchasers. It also provided mechanisms for the estimation of damages. Although the judgment is based on the predecessor of the current German legislation governing antitrust damage claims, it is anticipated that the interpretation of the current law should be no less claimant friendly given that it was introduced to facilitate damage claims. The judgment is final but the issues may be revisited by the Federal Supreme Court in other proceedings.

In detail:

On 1 October 2009, the Berlin Court of Appeals (Kammergericht, "the Court") issued a judgment which facilitates private actions for antitrust violations and which may pave the way for an increase in similar actions in German courts. The Court held that cartel members cannot escape or mitigate liability by showing that the plaintiff passed on the overcharge to downstream buyers and therefore suffered no, or only some, loss. It held that the so-called passing on defense is not available to cartel participants in private actions brought by direct purchasers. Whilst the judgment is based on a predecessor of the current Section 33 of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen; GWB) providing for private liability for antitrust violations, there appears to be no indication that the result under Section 33 should be different. Indeed, the contrary may apply as the enactment of Section 33 was intended to promote private actions for antitrust violations.

The case arose out of an investigation by the German Federal Cartel Office (Bundeskartellamt) concerning cement suppliers which had agreed quotas for undertakings participating in a cartel. Fines were imposed in 1999 but not on the defendant. However, the director of a company managing the defendant's business was fined for the antitrust violation as an individual.

In 2002, the plaintiff - a small building company in Berlin - brought an action against the defendant which is a cement supplier in the Berlin area. In 2003, the Berlin District Court (Landgericht Berlin, "District Court") dismissed the action and the plaintiff appealed. The Court reversed the District Court's judgment and awarded damages.

In justifying its decision, the Court explained that the District Court had erred in limiting private actions for antitrust violations to cartel victims which had been "specifically targeted" by the cartel. This requirement had been established by case law in order to restrict the number of potential claimants. Overturning prior case-law, the Court argued that such an approach would negate liability for cartel agreements covering a wide range of customers and thus causing the greatest harm.

The Court also rejected the defendant's argument that the plaintiff had passed on any damage it had incurred to its own customers, with the result that the action had to be dismissed. It held that the passing on defense is generally inadmissible for cartel participants in an action brought by a direct purchaser. The Court explained that direct as well as indirect purchasers have claims against the cartel participants. Both can file a private action for damages in court and both can claim the whole amount of the damage. According to the Court, this is so regardless of whether the overcharge was passed on from the direct to the indirect purchaser. However, payment to either the direct or indirect purchaser relieves the defendant of its obligation to compensate damage incurred by others. According to the Court, this ensures that those undertakings which actually suffered the loss are compensated, but avoids overcompensation. On the other hand, this will enable indirect purchasers to claim their share of the damages from the compensated direct purchaser.

The Court determined that the damage to be compensated for is the difference between the price which the claimant had actually paid (tatsächlicher Preis) and the price the claimant would have paid had there been competition between the cartel members (wettbewerbsgemäßer Preis). In addition, the Court ruled that the existence of a quota cartel is prima facie evidence of an overcharge, and thus of the existence of damage to the claimant. Section 287 of the German Civil Procedure Code specifically authorizes German courts to estimate the actual amount of damages if the court has a factual data basis for such estimate. The Court estimated the amount of the damage based on pricing data submitted by the plaintiff. Amongst other factors the Court used pricing data from the first year after the cartel had ended as a benchmark for the possible price difference as a result of the cartel. As a result, it appears that the judicial exercise of discretion to estimate damages may also show that the introduction of an extensive system of discovery is not necessary to boost private actions for antitrust violations in Germany.

The judgment of the Court was based on a predecessor of the current provision in the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen; GWB) establishing private liability for antitrust violations. Nevertheless, it is likely that the result under the current provision, Section 33, would not be any different, and certainly not less advantageous for the claimant. This is because the enactment of Section 33 in its current form was intended to promote private actions for antitrust violations in Germany.

The judgment has to be seen in parallel with a recent decision of the German Supreme Court in an on-going case. In that case, a company established under Belgian law purchased damages claims from victims of a market sharing and price fixing cartel in the German cement industry and sued the German cement producers under these claims. The German Federal Supreme Court (Bundesgerichtshof) held that such "bundling" of damages claims for antitrust violations is in principle permissible under German law. It also ruled that, at the stage of proceedings dealing with the admissibility of the action, it was sufficient for the company to assert the assignment of the claims to it. Lastly, the Federal Supreme Court found that the claim pleaded was sufficiently precise.

These recent developments are likely to give a further boost to private enforcement of antitrust violations in Germany.

Click here for the judgment of the Berlin Court of Appeals (in German).

Click here for the decision of the German Supreme Court (in German).

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