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On December 12, 2019, the Court of Justice of the European Union (CJEU) ruled that a public body that, to finance the acquisition of products in a market distorted by a cartel, has granted subsidies in the form of loans at a below-market interest rate is entitled to restitution for damages it may have suffered due to the cartel. These damages would have been due to granting subsidies for more than they would have if there had been no cartel, where the public body would have been able to use the difference for other more profitable investments.

The Spanish case

In 2007, the Austrian Competition Court (Kartellgericht) sanctioned several companies for creating a cartel in the elevator and escalator installation and maintenance market.

In 2010, the Upper Austria state (Land Oberöstereich or the “Land”) and 14 other entities filed a claim for damages they believed had been caused by the cartel. As opposed to the other entities, the Land did not sue as a direct or indirect buyer in the market, but rather as the body that had awarded grants in the form of loans to finance construction projects that included the cartel members’ elevators.

The Land argued that, since the loan amount was linked to the construction costs, including the purchase of the elevators in question, the existence of the cartel and the ensuing price hike had forced it to grant larger loans, and that, had there not been a cartel, it could have invested this difference at the average interest rate of the Austrian federal government loans (higher than the rate on the loans granted).

Although the Vienna Commercial Court rejected the Land’s claim in 2016 by ruling that it was not a market operator affected by the cartel, the Vienna Regional Superior Court overturned the judgment on appeal.

The sanctioned companies then appealed that judgment in the Austrian Supreme Court, which found that the damages claimed by the Land did not have sufficient relation to the purpose of the ban on collusive agreements; therefore, it ruled that causation could not be proven to claim damages for the loss suffered.

Based on this, the Austrian Supreme Court decided to suspend the proceedings and seek a preliminary ruling from the CJEU regarding whether the EU law principle that anyone  who has been harmed by a cartel can bring a claim for damages also applies to those that do not act as suppliers and buyers in the market affected by the cartel and that were harmed due to damages suffered by a directly affected third party.

The CJEU judgment

The CJEU reiterated that, according to its consolidated case law on the matter, anyone has the right to claim damages incurred, if causation can be proven between the damages and the agreement or practice prohibited by article 101 of the TFEU (citing the judgments in the Manfredi and Skanska cases), and that the national laws on how to exercise that right must not undermine the effective application of that provision, as was already made clear in Kone.

Agreeing with the opinion of Advocate General Kokott, the court found that the full effectiveness of article 101 TFEU and the effective protection against the harmful consequences of an infringement of competition law would be severely undermined, if the possibility of bringing claims were to be limited to suppliers and buyers in the market affected by the cartel, thus upholding the standing of those indirectly affected by the cartel.

The viability of the claim would be predicated on the need to prove causation between the competition infringement and the alleged damage. The court also stressed that the damages suffered by the affected party does not need  to be specifically connected to the objective pursued by article 101 TFEU, confirming that causation is primarily a question of fact.

The CJEU thus concluded that entities that did not act as suppliers or buyers in a market affected by a cartel, but that were forced to award larger subsidies (in the form of loans at a below-market interest rate) because of the competition infringement, and could therefore not use the difference for a more profitable investment, must be allowed to claim compensation for such damages.

However, since it was a preliminary ruling, the CJEU did not go into determining whether the Land should actually be paid restitution in the case in question. In this regard, the CJEU repeated that it was up to the national jurisdictional body to determine whether the claimant suffered the damages, and whether it could prove causation between the damages and the competition infringement.

Implications for national proceedings

The recognition that indirectly affected parties have standing to sue underscores the importance of analyzing passing-on to ensure the principle of compensation that governs EU law on damages, preventing unjust enrichment of direct (or indirect) buyers downstream the supply chain, as underlined by the Pass-On Study commissioned by the European Commission and prepared by Cuatrecasas and RBB, and the Pass-On Guidelines.  

Meanwhile, the recognition of the standing to sue of injured parties located in markets other than the one affected by the cartel, together with the confirmation that the question of causation is an eminently factual question, makes it impossible to rule out the pass-on defense beforehand “in cases where that market identity cannot be determined,” as the Ruling of the Valencia Commercial Court no.3 of December 17, 2018 found that doing so would break the necessary link of causation between the infringement and the repercussions.

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