The Regional Court of Dortmund estimated a minimum cartel overcharge of 15% of the net price on the sole basis of the fine notice and additional factual circumstances without consulting an expert opinion or applying any of the usual econometric methods for cartel damage analysis (judgement of 30 September 2020, Ref. 8 O 115/14 (Kart)).
Cartel agreements often last for a long period of time and can affect a large number of market players at different market levels. It is therefore not surprising that, after the announcement of a fine decision, a large number of potentially affected parties file follow-on claims seeking financial compensation for their (assumed) cartel damage. However, follow-on litigation is economically highly complex. Even though, under section 33b of the German Competition Act (‘GWB’), decisions of a competition authority finding a competition violation have binding effect, the plaintiffs must in principle prove that this violation has led to measurable damage in form of an overcharge on the hypothetical cartel free price. On the one hand, regarding many cartels, the proof that the competition violation led to a cartel return and thus to some damage on the opposite side of the market is facilitated by a factual presumption (for recent competition violations there is even a legal presumption of damage under section 33a (2) GWB). On the other hand, German law – unlike some other legal systems – does not provide for the presumption of a certain minimum amount of damage caused by a cartel. However, the court has the possibility to estimate the amount of damages incurred by applying section 287 of the German Code of Civil Procedure (‘ZPO’) under the condition that the estimate is based on relevant and proven facts. Up to now, it has been common opinion that, in follow-on proceedings, the econometric calculation of the hypothetical cartel-free market price – and thus a highly complex and expensive expert opinion to be provided by the plaintiffs – would provide the relevant facts for the judicial estimation of the cartel damage. Obtaining such an expert opinion is challenging for many reasons and is one of the major hurdles in the enforcement of follow-on claims. In fact, even though several follow-on proceedings have produced basic judgments in favour of the claimants stating that some cartel damage has resulted from the competition violation, there are very few judgments on the amount of cartel damages. In its newest judgement, the Regional Court of Dortmund is now taking a different approach, which might enable cartel victims to receive compensation for their follow-on damages more quickly.
The court´s decision related to the so-called rail cartel and concerned an action for damages brought by a public-law corporation in connection with various transactions. Once the court, by applying a presumption of facts, affirms the existence of damage, it also considers that the close connection to the existence of damage immediately opens the door to estimating the amount of damage incurred. Applying section 287 (2) ZPO, the court estimates the amount of damages solely on the basis of the circumstances of the competition infringement ‘coupled with an overall view of other aspects of the facts’. In the court’s view, all current methods of econometric damage calculation are associated with serious uncertainties and disadvantages for the claimants and would in any event only provide the basis for an approximate estimation of the cartel overcharge. The court lists the weaknesses of the three common econometric approaches used to determine the fictive competitive price (comparative market analysis, cost-based price review and comparative analysis within the market) and adds that the exorbitantly high costs (at least six-digit sum) for the preparation of these expert opinions would be disproportionate to the value of the claim at issue (EUR 385 540.80 plus interest). Therefore, an estimate of damages on the basis of econometric expert opinions is, in the opinion of the Regional Court of Dortmund, unsuitable for the effective enforcement of follow-on claims.
The court finds that the overall assessment of all relevant aspects of each acquisition results in a cartel-related overcharge of 15% of the net price. The court takes into account facts arising in particular from the nature, content and scope of the cartel agreement at issue and the details of its implementation. The following criteria are taken into account:
In addition to the above-mentioned criteria, the Regional Court also justifies the amount of damages with a contractual penalty of 15% of the net price agreed between the parties for violations of cartel law. By agreeing to such a contractual penalty ‘with eyes wide open’, the contracting party involved in the cartel had exposed itself to the risk of having to pay exactly that amount of damages in case of follow-on claims. This minimum damage is moreover plausible in the light of the medians of minimum damages from known economic studies and decisions of other European courts. Thus, according to the court, the interests of the defendant have been fully considered. In fact, they could have prevented a free estimation by the court by revealing the actual overcharge caused by the infringement.
The ruling makes it easier for plaintiffs to enforce their (alleged) follow-on damage claims in German courts. An expensive and lengthy expert opinion is not necessary if the court can estimate a minimum amount of damage on the basis of the circumstances set out in the fine notice. Since potential cartel victims can file their claims armed with the fine notice alone, the decision has the potential to trigger a wave of (even small) claims for cartel damages. On the defendant side, however, the production of an own expert opinion in defense of follow-on claims becomes even more important after this decision since the defendants have to submit their own calculation of the cartel overcharge in order to avoid the judicial assessment of the damage. There are chances that this legal view could prevail in the appeal proceedings since the reasons for the decision are largely based on an essay by Prof. Dr. Jürgen Kühnen, presiding judge of the 1st Cartel Senate at the Düsseldorf Higher Regional Court (NZKart 2019, 515 ff.).
As the Regional Court justified the free estimation of damages without using an expert analysis by arguing that the costs for the latter would be out of proportion to the claim in dispute, the decision was criticised as too cautious by the supporters of unconditional minimum cartel damages (see Kersting, "Paukenschlag in Dortmund: Freie Schätzung von Kartellschäden", 7 October 2020, D'Kart).
On the other hand, however, it appears that the court, under the guise of a courageous estimate, might be attempting to introduce a fixed minimum of follow-on damages even though this has been expressly rejected by the legislator. In fact, a minimum or lump-sum cartel damage would not fit in to the German delict law system since it conflicts with the concept that the victim should not enrich himself. The court is obviously seeking legitimacy and, in order to justify the minimum damage assessed, is using the 15% contractual penalty for antitrust violations agreed between the parties as an ‘objectifiable value’. It will be interesting to observe whether the Regional Court will continue to develop its approach in the many other cases in which no contractual penalty has been agreed between the parties and establish 15% as minimum cartel damage with a different justification.
The European Court of Justice (ECJ) will soon have the opportunity to opine on the judicial assessment of cartel damages. In the pending Spanish case C-267/20, it is seized of the prejudicial question of the retroactive effect of Article 17(1) of the Cartel Damages Directive 2014/104/EU. This provision stipulates that national courts may estimate the damage caused by a cartel if it is practically impossible or excessively difficult to quantify the amount of damage suffered. Since the ECJ usually judges in favour of the effective enforcement of follow-on claims the Regional Court of Dortmund could in future possibly by backed by the Luxembourg judges. (Potential) defendants in cartel damages proceedings are therefore well advised to start as early as possible with the econometric analysis of the cartel overcharge in order to effectively defend themselves against the free estimation of cartel damages by German courts.
Dr Borbála Dux-Wenzel, LL.M.
+49 221 9937 25100
Anne Caroline Wegner, LL.M. (European University Institute)
+49 211 5660 18742
+49 211 5660 24990