HouseofLords overturns CourtofAppeal decision Inntrepreneur v Crehan

28 July 2006

Richard Eccles, Louise Banér

July 2006

The Court of Appeal had reversed a High Court decision that beer ties imposed on a pub tenant had not infringed Article 81 and held that the High Court judge should have followed the European Commission’s findings in a similar case. It was the first time that the Court of Appeal had awarded damages for breach of competition law. In its judgment on 19 July 2006, the House of Lords overturned this decision finding that the High Court judge’s decision should be restored. Whilst damages are still in principle awardable for infringing restrictions of competition law, the overall result is that the judge is entitled to conduct the full assessment of the facts in the absence of an EU decision on the same facts.

This long running case concerns Mr Crehan who had taken leases of two pubs from the Inntreprenuer Pub Company (“Inntrepreneur”). The leases contained beer ties obliging him to buy his beer from Courage at their list prices. The businesses failed and Courage subsequently sued Mr Crehan for outstanding debts in 1993. Mr Crehan counterclaimed for damages against Courage and Inntrepreneur alleging his losses were a result of the beer ties which infringed Article 81 as he was unable to compete with other pubs which purchased beer at lower prices.

Inntrepreneur along with other large scale owners of tied houses such as Bass plc and Whitbread plc had notified their leases containing beer ties to the European Commission (the “Commission”). Inntrepreneur had notified the leases which Mr Crehan was subject to in 1992. After several years of negotiations and opposition from various Inntrepreneur tenants including Mr Crehan, the Commission finally issued a comfort letter to a new scheme of agreements proposed by Inntrepreneur in 2000. Meanwhile Inntrepreneur had withdrawn its 1992 notification and as a result the Commission wrote to Mr Crehan in 1997 stating that whilst there was no longer any Community interest in deciding whether those leases infringed Article 81, the national court was in a position to decide this point.

The English court case resumed in 1998 to decide the issue whether a party to an agreement could claim damages on the grounds that it infringes Article 81. This question was referred to the ECJ, which ruled in Case C-453/99 Courage v Crehan that a party to the agreement could have a cause of action. The case was referred back to the High Court and considered again in 2003 on the questions of whether there had been an infringement of Article 81 on the facts and the type and amounts of any recoverable damages. The High Court Judge ruled that Article 81(1) had not been infringed on basis that on the evidence before him the UK beer market was not foreclosed by the beer tie. This was despite the Commission’s findings to the contrary in relation to the beer tie agreements that Bass and Whitbread had notified previously. Mr Crehan appealed this decision.

The Court of Appeal reversed this decision in 2004 and awarded damages of £131,336 (plus interest) to Mr Crehan. The Court of Appeal held that the Judge had erred in law by concluding that the Commission’s view in Whitbread was wrong as he was not complying with the duty of sincere co-operation under the EC Treaty. Inntrepreneur was given leave to appeal this decision to the House of Lords.

The House of Lords referred to the EC case law on conflicts between decisions of the Commission and national courts (in particular Delimitis and Masterfoods) and agreed that it was clear that a national court is obliged to follow a Commission decision that an agreement infringes Article 81(1). However, there was no conflict between the decision of the Commission that the Whitbread agreements infringed Article 81(1) and a decision of the national court that the Inntrepreneur agreements did not. The House of Lords found that where there is no conflict of decisions on the same case, and whilst the court should respect the Commission’s expert analysis, Commission decisions are ultimately only part of the admissible evidence which the court will take into account. They found that it was correct that the High Court Judge did not simply follow the Commission’s findings in Whitbread without addressing the facts of the case in hand himself. The House of Lords also noted that the Court of Appeal did not comment on the Judge’s analysis of the facts as it considered this was an approach he should never have adopted in the first place. No petitions had been made which allowed the House of Lords to consider an appeal on the facts of the case either.

This case follows the well established principle that national courts must avoid giving decisions which conflict with Commission decisions on the same agreements, decisions or practices. As pointed out by the House of Lords this is in line with Article 16 of the Modernisation Regulation 1/2003. However, this will not apply to agreements, decisions or practices that cover merely the same market and not the same subject matter. This will benefit those who want to distinguish their own cases from Commission decisions on similar facts but may weaken arguments where parties want to rely on Commission decisions which are not addressed to their particular case. Both the High Court Judge and the House of Lords acknowledged that, considering the Commission’s expertise, its decisions would be highly persuasive evidence when applied to similar cases. However, the judge’s ability to apply the rule of reason approach in assessing a restrictive provision on the facts was upheld by the House of Lords which may make it more burdensome to bring a sustainable damages claim in the future.

Source: House of Lords Judgment in Inntrepreneur Pub Company and others v. Crehan at:
http://www.bailii.org/uk/cases/UKHL/2006/38.html

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