High Court hands down important judgment on the extraterritorial application of the competition rules.
This week the High Court struck out a €1 billion damages claim on the basis that, among other things, the sales in question did not generate a ‘sufficient EU connection’ to allow the conduct to be relied on as an infringement of the EU competition rules. This is a significant development in the law relating to the territorial boundaries of EU competition law, and will likely have an important impact on the scope of competition damages claims.
Background
The Claimants sued a number of companies for damages arising from two cartels: one in the manufacture of glass used in cathode ray tubes (CRT Glass) and one in the manufacture of TV and Computer Monitor Tubes (CRT). The Claimants sought to rely on two European Commission decisions finding that these cartels restricted competition within the EEA contrary to Article 101 of the Treaty on the Functioning of the European Union.
Although the cartels had a worldwide scope, the Commission Decisions relied on the fact that the participants had implemented their agreements in the EEA through their direct sales into the EEA or measures impacting their sales into the EEA. Significantly, the Claimants’ situation was very different. They did not purchase directly from the cartelists. In fact, the cartelised products which ended up in the Claimants’ products sold in the EEA were all made in Asia. No CRT Glass or CRTs incorporated in their monitors sold in the EEA were made in the EEA, or were sold by the cartelists in or into the EEA.
Issues
The Court had to decide whether this had a sufficient territorial connection to the EU or whether it was too remote and therefore fell outside the scope of Article 101. The Judge considered whether the cartels relied on were ‘implemented in the EEA’ or whether they had ‘foreseeable, immediate and substantial’ effects in the EEA.
The Court found against the Claimants under both tests. There was no arguable case for saying that the cartels were implemented in the EEA. The fact that there is some ‘end of the road’ effect in the pricing of the Claimants’ purchases in Europe does not mean that the cartel was implemented there. Similarly, the effects in the EEA could not be described as ‘immediate’ but rather were plainly only ‘knock-on’.
Significance
The judgment is important because it established a territorial limit for damages claims based on EU competition law. This will significantly restrict the ability of a claimant to seek damages for indirect sales from outside the EEA (i.e. where the claimant purchased the cartelised products outside of the EEA from a third party who was not party to the cartel).
The judgment does not, however, restrict the ability of a claimant to seek damages for an overcharge where the claimant purchased the products directly from a cartelist outside of the EEA.
There is also a cautionary tale for defendants in complex multi-party litigation: the judge was very critical about the duplication in their defences and their apparent disregard of their duty to the court to coordinate sensibly.
It is as yet unclear whether the claimants are seeking to appeal the judgement.
Case: iiyama Benelux BV and Others v Schott AG and Others [2016] EWHC 1207 (Ch)