The European Court of Justice (ECJ) recently ruled that third parties – including public bodies that provide promotional loans to customers – must be compensated for competition law infringements, provided they can prove their loss and a causal link between the loss and the infringement. The ECJ confirmed that although the public body in question was not directly active in the relevant market, it could claim compensation for damages caused by the infringement. However, the ECJ also stressed that both the losses and a causal link between the infringement and the losses had to be established by the national court. The Court’s ruling broadens the category of parties that can claim damages for competition law infringements. By passing on losses to third parties, suppliers and customers can reduce their own losses, and the third parties can claim these losses. The ECJ does not clarify when the causal link between infringement and passing-on is too weak to establish liability and damages.
In proceedings before the Austrian courts, the province of Oberösterreich claimed that it had suffered damages as a result of a competition infringement by lift manufacturers. The latter had lent funds to construct residential buildings with lifts. These loans were typically calculated based on a percentage of the buildings’ total construction costs, including lifts. The province argued that the competition infringement had increased total construction costs. This increase resulted in the granting of higher loans at a subsidised interest rate – which loans would have been lower if there had not been an infringement. As damages, the province of Oberösterreich sought the difference between the promotional interest rate and the average interest rate of federal loans given for the higher loans.
Under Austrian law, a person is entitled to compensation of loss when a legal provision is infringed provided that the person belongs to the group of parties whose interests are protected by that legal provision. There is a similar provision in Dutch law: no obligation to repair the damage if the legal provision breached by the defendant does not serve to protect against the damage suffered by the claimant.
The Austrian court in Otis and others/Land Oberösterreich, which referred the question to the ECJ, noted that article 101 of the Treaty on the Functioning of the European Union (TFEU) intends to ensure that prices are set on the basis of free competition. Therefore, the referring court took as a starting point that the personal scope of protection of article 101 TFEU was limited to parties active in the relevant market − in this case, the lift market. Parties not active in the relevant market − such as the province of Oberösterreich, which merely provided loans to buyers of houses − were therefore not entitled to compensation under Austrian law.
The ECJ responded that “any loss which has a causal connection with an infringement of Article 101 TFEU must be capable of giving rise to compensation. It is not necessary “that the loss suffered by the person concerned present a specific connection with the ‘objective of protection’ pursued by Article 101 TFEU”. The national court must simply determine whether the claimant has established a causal connection between the alleged loss and the infringement at issue.
With this ruling, the ECJ confirms both the broad scope of parties that can potentially claim damages, and the variety of damages that can be recovered for infringement of competition law.
The ruling is also noteworthy for other aspects, including whether the requirement of a causal connection – as mentioned in the ruling – is governed by national law or by European law. The ECJ did not answer this question here, and the ECJ’s earlier case law is ambiguous. In Kone, the ECJ held that the concept of causal link is a matter of national law, provided that the EU principles of equivalence and effectiveness are observed. In this 2014 case, the ECJ was confronted with Austrian law that categorically denied the existence of a causal link between an infringement of competition law and umbrella damage. Although, the ECJ held in Kone that the concept of causal link is a matter of national law, it also held – in the same judgment – that the victim of umbrella pricing can claim damages if: (i) it is established that the cartel affected the prices of suppliers who did not engage in the cartel, and (ii) such a consequence “could not be ignored by the members of the cartel”. The ECJ has not yet explained how to reconcile causality as a matter of national law of member states with its own formulation of requirements to establish of a causal link between competition law infringement and umbrella damage.
The ECJ’s ruling in Otis and others/Land Oberösterreich is also relevant in determining the scope of the passing-on defence. In cartel damages cases, a well-known defence is that the claimant did not suffer any damage, because the claimant passed on the alleged overcharge to its customers. The passing-on defence intends to avoid, among other things, that infringers pay for the same damage more than once – a risk caused by the fact that “any individual is allowed to claim damages.” By broadening the scope of persons that can claim damages, the ECJ also seems to have broadened the possibility for defendants to invoke this passing-on defence. However, the question remains: what constitutes a sufficient causal link?
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