damages against European vitamin cartel members

31 August 2004

Georg Terhorst

On 28 January 2004, the Higher Regional Court of Karlsruhe ruled that the customer of a cartel member has no claim for damages against its supplier if it has passed on the inflated prices to its own customers. It was found that the customer did not suffer any damage as, having passed the inflated price on, its profit margin had not been affected.

Facts

A member of the European vitamin cartel supplied the plaintiff, a German producer of baby food, with vitamins. This cartel was the subject of the Commission decision COMP/E-1/37.512 of 21 November 2001. In this decision the cartel members were fined the then record fine of €462 million.

The decision is in line with a series of recent judgments in Germany also dealing with claims against members of the European vitamin cartel. In the proceedings above, the plaintiff claimed damages for the difference between the inflated price and the price the vitamins should have cost without the influence of the cartel.

Ruling

The Karlsruhe court dismissed the case, finding that the plaintiff did not suffer any damages. The court emphasized that in many cases damages are not suffered by the direct customer of a cartel member but by the final consumer. Despite the fact that successful price-fixing cartels effect the entire distribution chain, the court held that, in this instance, as the plaintiff had not suffered any damages there was no justification for its enrichment at the final consumers’ expense. The final consumer, however, will normally not claim damages due to a lack of knowledge of the claim and the fact that his damages are marginal.

This set of judgments confirms the prevailing case law that, in principle, infringements against cartel prohibition can establish tort and antitrust claims for damages. This judgment is relevant because it establishes that not all those affected by a cartel can claim damages. A successful claim must supply evidence that the plaintiff could have attained a higher profit margin had there been a lower purchase price. The court stressed that despite this, there is no loophole in the law as the price increase as a result of the cartel is adequately sanctioned by means of antitrust law and the possibility of administrative fines.

It should be noted that the German court did not mention the judgment of the European Court of Justice in the Courage v Crehan case. In this judgment, the ECJ had ruled that the full effectiveness of Article 81 of the EC Treaty would be put at risk if it were not open to any individual to claim damages for loss inflicted on him due to a contract which restricts or distorts competition, solely because that individual was a party to the contract.

Change under the new competition legislation

As a result of future changes to the German Act against Restraints of Competition (ARC), potential future cartel members should be warned that the legal situation will soon change in Germany. In the last issue of this Competition Law Bulletin, we have already pointed out the fact that the ARC is currently undergoing its seventh round of amendments spurred on by the “modernisation” of European competition law. According to the latest official draft, Section 33 will be supplemented by a provision which will have the effect that a customer of a cartel member will not be affected in its claim for damages, merely because it resells the product, originally bought at an inflated price (new Section 33 para 3 of the draft ARC). Furthermore, the customer concerned will have the right to choose between claiming damages or claiming the pro rata profit made by the cartel member as a result of this particular infringement.

The legal position of those undertakings detrimentally affected by actions of a cartel to pursue their claims for damages before German courts will considerably improve with the new ARC. Since the amount of price inflation as a result of a cartel is normally quite significant, affected undertakings will have to pay special attention to this possibility in the future.