On 29 March 2017, the District Court of Gelderland (the "Court") dismissed a passing-on defence put forward by the Swiss technology company ABB in a cartel damages case initiated by the Dutch network grid operator TenneT. TenneT claimed that it had incurred damages as a result of higher prices paid for ABB's cartelised gas-insulated switchgears ("GIS"). The Court dismissed ABB's passing-on defence on the basis of the principle of effectiveness even though it assumed that pass-on had taken place.
This case had been referred to the Court for the quantification of the damages following prior judgments delivered by the District Court for the Eastern Netherlands, the Arnhem-Leeuwarden Court of Appeal (see VBB on Competition Law, Volume 2014, No. 9, available at www.vbb.com) and the Dutch Supreme Court (see VBB on Competition Law, Volume 2016, No. 7, available at www.vbb.com) which had confirmed that ABB was liable for loss that TenneT might have incurred but that ABB could invoke the passing-on defence..
ABB submitted to the Court two reports of economic consultancies to support its claim that TenneT had not paid an overcharge for ABB's GIS and that, even if it had, TenneT had passed on a substantial amount of the overcharge to its own customers. According to ABB, the magnitude of the overcharge was to be determined by comparing ABB's profit margins for GIS during its participation in the cartel and thereafter.
The Court instead held that the damage was, in principle, to be determined on the basis of the difference between the price of the GIS that TenneT had paid during ABB's participation in the cartel, and the price which TenneT would have been offered in a market without the cartel. The Court, therefore, dismissed ABB's comparison of its profit margins and found instead that the overcharge could be estimated on the basis of a comparison of a price offer made by ABB for GIS during its participation in the cartel and a price offer for identical GIS made by ABB after the cartel had ended. On this basis, the Court found that the total overcharge paid by TenneT during the cartel amounted to € 23,1 million.
As to ABB's passing-on defence, the Court assumed that the overcharge had been passed on to the final consumer, even though GIS represented a fixed cost for TenneT, because prices were regulated and cost-based in the electricity market. However, the Court held that, if it were to accept ABB's passing-on defence, it would be very unlikely that the final consumer would claim damages in light of the cost of legal proceedings and the difficulty to calculate the overcharge. This would relieve the infringer of its liability, which is not the purpose of the Antitrust Damages Directive which instead intends to ensure that damages are awarded to the direct and indirect customers to whom the overcharge has been passed on. Furthermore, it held that, if damages were awarded to TenneT, this would benefit those final consumers, since TenneT is owned by the Dutch state and the awarded damages would result in lower transport and electricity costs or profit distribution. The Court also considered obiter that the cartel fine which ABB had avoided as a result of its successful leniency application would have been ten times higher than the amount of damages to be paid by ABB in the current proceeding.
In view of these circumstances, the Court held that ABB's passing-on defence could not be reasonably accepted and ordered ABB to pay damages and interest to TenneT.
The Court's pragmatic, purpose-driven interpretation of the law enables it to equate the award of damages by ABB to TenneT with compensation for all, thereby dispensing with the (possible) need to reduce the award against TenneT to take account of the (potential) overcharge incurred by the chain of TenneT's own customers. It remains to be seen whether, on any appeal, the principle of effectiveness favoured by the Court can be considered to outweigh the rule that "the loss which has been passed on no longer constitutes harm for which the party that passed it on needs to be compensated" (Antitrust Damages Directive, recital 39).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.