In context

Dutch court rejects passing-on defence: full amount of damages claimed should be paid

July 6, 2015
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In context

A district court in the Netherlands recently ruled that Alstom should pay EUR 14.1 million – the full amount of cartel damages claimed – to TenneT, the Dutch electricity grid operator. The court dismissed Alstom’s defence that TenneT had passed on the overcharge resulting from the cartel to its customers. The court did not consider it “unreasonable” for TenneT to be potentially overcompensated. Cartel members can invoke a passing-on defence in claims for damages, but this defence may not always succeed.

TenneT sought damages from Alstom following the European Commission’s decision in the Gas Insulated Switchgear cartel. In an earlier ruling, the same court had already confirmed the civil liability of the cartel participants and their group entities and requested more information on the passing-on defence so that the actual damages could be assessed.

 

Because Alstom neglected to provide insight into its pricing policy, the court in its recent decision compared the prices of fellow cartel participant ABB during and after the cartel to calculate the overcharge paid by TenneT. The court rejected Alstom’s argument that TenneT did not suffer any loss because it had passed on the overcharge to its customers. Potential “benefits” gained by a cartel victim – TenneT in this case – may only be offset against the damage sustained “in so far as this is reasonable”. According to the court, a cartel participant should not be required to pay for the same damage more than once. But no such risk existed in this case, since it was highly unlikely that Alstom would face cartel damages claims by TenneT’s customers. Moreover, TenneT’s customers were likely to ultimately benefit from the damages awarded to TenneT through lower energy prices. Under these circumstances, the court did not consider it unreasonable for TenneT to be potentially overcompensated. The alternative would be for Alstom to retain its “ill gotten gains” which, according to the court, would in any case be unreasonable and unjustified.

 

This ruling shows that even though cartel members can invoke the passing-on defence in cartel damages claims, it may not always be possible to successfully meet the reasonable set-off test. The ruling can still be appealed.

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