Damages

Author Definition

Definition

Damages are a monetary relief available for the party harmed by a competition law infringement. The term refers to the sum of money that the claimant seeks compensation for and is causally connected to the anticompetitive conduct that injured the claimant in her business. Damages awards for competition law infringements compensate the overcharge and loss of profits caused by the infringement, plus interest. Damages can also compensate the loss of chance and, occasionally, non-material harm.

Commentary

Introduction

Infringements of competition law, such as cartels and abuses of dominant positions, have a double negative effect. Firstly, they distort competition and have a negative impact on social welfare in general and consumer welfare in particular, Inter alia, they cause price increases, limitations in output or the exclusion of market actors. Secondly, the price increase caused by the infringement obliges customers of infringers (direct purchasers) to pay a higher price than the one that would have been set absent the infringement. This difference, known as the overcharge, is the basis for quantifying the anticompetitive harm suffered. It must be noted that direct purchasers can absorb the effects of the infringement or, if market conditions allow it, pass it on to their own customers (indirect purchasers).

Damages awards compensate the individual harm caused by infringements of competition law. According to national tort law rules, claimants will have to prove that (i) there was an infringement of competition law, (ii) they suffered a harm, (iii) there was a causal relationship between the injury and the anticompetitive conduct and, when appropriate, (iv) the defendant’s fault. Victims can claim for the following heads of damage: actual loss (damnum emergens) and the profits lost (lucrum cessans), plus interest (Manfredi). Depending on the jurisdiction, claimants may also seek compensation for loss of chance and non-material harm, such as harm to its reputation, though the latter is rare.

The purposes of damages: compensation and deterrence

Damages for infringements of competition law have a two-fold purpose. Firstly, they seek to compensate the victim and put her into the position she would have been absent the infringement. Secondly, they have a deterrent effect on current or future infringers deciding whether to continue an ongoing anticompetitive conduct or to engage in one. Whereas damages are always compensatory, if emphasis is set on the latter purpose, they may become punitive.

The double nature of damages is undeniable regardless of the legal tradition of each jurisdiction. The European Union and, as a consequence of the partial harmonisation of the damages claims regime by EU 2014 Damages Directive, its Member States too are the paradigm of jurisdictions where the award seeks to compensate victims: they are built upon the principle of full compensation. Thus, passing-on arguments are accepted to grant legal standing to indirect purchasers and to allow defendants to raise the passing-on defence. Furthermore, the Court of Justice of the European Union has stated that damages claims contribute to the effectiveness of the enforcement of the prohibitions laid down in Articles 101 and 102 of the Treaty on the Functioning of the European Union (Courage, Skanska and Sumal). This is a clear recognition of a collateral deterrent effect. Norway’s damages regime is aligned with the EU and the award compensates the net amount of the harm suffered.

In other jurisdictions, however, damages are primarily punitive. In the United States of America at the Federal level, section 4 of the Clayton Act allows victims to seek treble damages, i.e. an award of up to a threefold of the harm. There, the enforcement of competition law relies on private actions and encouraging them and keeping the treble damages system operating efficiently had spill over effects, such as the denial of both the passing-on defence and the legal standing for anyone who is not a direct customer of the infringer (Hanover Shoe and Illinois Brick). Punitive damages are also present in Brazil and Turkey, where courts may award double or treble damages, respectively, provided that certain conditions are met.

Quantifying damages

Quantifying damages is one of the main challenges that claimants, defendants and courts face in damages actions. The specific market circumstances of the affected market and the impossibility to observe the counterfactual scenario render it especially burdensome. Parties must nonetheless provide a quantification of the award as accurately as possible.

Therefore, the European Commission issued the Practical Guide on quantifying antitrust harm in competition law damages claims in 2013 and the Guidelines for national courts on how to estimate the share of overcharge which was passed on to the indirect purchaser in 2019. Those guidelines set forth several methods to assist parties elaborating the counterfactual scenario that will allow them to quantify the impact of the infringement and estimate the net harm suffered. With enough data, economic experts can prepare their reports and quantify the damage that both direct and indirect purchasers may have suffered: actual loss, including the share passed on, lost profits and loss of a chance, plus interest.

The guidelines are also useful for judges that need to appraise the economic reports provided by the parties and decide whether they are robust enough to present a plausible result and supported by evidence. If the report is robust and based on sound economic theory, damages may be awarded in full. If courts consider that the economic evaluation is not well founded or presents methodological issues, the result may be the dismissal of the action or a reduction of the damages awarded and its setting by judicial estimation. The latter may happen if the court considers that the claimant proved all other requirements and tried to offer a precise economic assessment, but quantifying the harm is excessively difficult or practically impossible. In these cases, courts may do an ex novo estimation of the damage or use one of the reports provided as a starting point. For instance, such has been the case for appellate judgments in the paper envelopes cartel and trucks cartel litigation in Spain.

Damages and collective redress

In the EU, the principle of full compensation requires that all victims have a right to damages. Depending on the extension of legal standing, anyone from customers of the infringers to final consumers can claim damages, as well as customers of the infringers’ competitors (Kone) and other undertakings key to the functioning of a market that are not active operators therein (Otis GmbH). Usually, the more distanced from the origin of the damage, the lower is the amount of the harm accrued and the harder its quantification becomes, especially taking into account that it should not overcompensate them.

When it comes to small and scattered (or dispersed) harm, collective redress mechanisms may become a suitable mean to foster damages claims. The issue, however, is setting the amount of damages per each victim so that they are fully compensated, especially if the action is opt-out, i.e. where victims are included in the group unless they expressly renounce to be part thereof. In these cases, the amount set is likely to be an aggregation of the harm suffered by the class as a whole (Merricks) and victims may be over- or undercompensated since the individual harm is not quantified.

See also Collective redress (class action)

Case references

  • European Union

Case C-882/19, Sumal, S.L. v Mercedes Benz Trucks España, S.L. (“Sumal”), ECLI:EU:C:2021:800

C724/17, Vantaan kaupunki v Skanska Industrial Solutions Oy and Others (“Skanska”), ECLI:EU:C:2019:204

C-435/18, Otis Gesellschaft m.b.H. and Others v Land Oberösterreich and Others (“Otis GmbH”), ECLI:EU:C:2019:1069

C-557/12, Kone AG and Others v ÖBB-Infrastruktur AG (“Kone”), ECLI:EU:C:2014:1317

Joined cases C295/04 to C298/04, Vincenzo Manfredi v Lloyd Adriatico Assicurazioni SpA, Antonio Cannito v Fondiaria Sai SpA and Nicolò Tricarico and Pasqualina Murgolo v Assitalia SpA. (“Manfredi”), ECLI:EU:C:2006:461

Case C-453/99, Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others (“Courage”), ECLI:EU:C:2001:465

  • European jurisdictions

Judgment of the Court of Appeals of Asturias 882/2021, of 7 October, ECLI:ES:APO:2021:2713 (an example of the trucks cartel litigation in Spain)

Mastercard Incorporated and Others v Walter Hugh Merricks CBE (“Merricks”), [2020] UKSC 51

Judgment of the Court of Appeals of Barcelona 60/2020, of 13 January, ECLI:ES:APB:2020:184 (an example of the paper envelopes cartel litigation in Spain)

  • United States of America

Illinois Brick Co. et al. v Illinois et al., 431 US 720 (1977) (“Illinois Brick”)

Hanover Shoe v United Machinery Corp, 392 US 481 (1968) (“Hanover Shoe”)

Bibliography

Barry Rodger, Miguel Sousa Ferro, Francisco Marcos, The EU Antitrust Damages Directive: Transposition in the Member States, Oxford University Press, 2018.

Herbert J. Hovenkamp, “A Primer on Antitrust Damages”, Faculty Scholarship at Penn Law 1846, 2011.

Rafael Amaro and Jean-François Laborde, La réparation des préjudices causés par les pratiques anticoncurrentielles, 2nd edn, Concurrences, 2021.

Rafael Amaro (Editor), Private Enforcement of Competition Law in Europe. Directive 2014/104/EU and Beyond, Bruylant, 2021.

Richard Posner, Antitrust Law, 2nd edn, University of Chicago Press, 2001.

Institution Definition

According to the Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union : "Infringements of Article 101 or 102 of the Treaty on the Functioning of the European Union (“TFEU”), hereafter the “EU competition rules”, cause great harm to the economy as a whole and hamper the proper functioning of the internal market. In order to prevent such harm, the Commission has the power to impose fines on undertakings and associations of undertakings for infringing EU competition rules. The objective of the fines imposed by the Commission is deterrence, i.e. sanctioning the undertakings concerned (specific deterrence) and deterring other undertakings from engaging in, or continuing, behaviour that is contrary to Articles 101 and 102 TFEU (general deterrence).

Moreover, infringements of Article 101 or 102 TFEU cause great harm to consumers and undertakings. Anyone who has suffered harm through an infringement of EU competition rules has a right to compensation. This is guaranteed by EU law, as the Court of Justice has repeatedly emphasised. While the objective of the fines is deterrence, the point of damages claims is to repair the harm suffered because of an infringement. More effective remedies for consumers and undertakings to obtain damages would, inherently, also produce beneficial effects intterms of deterring future infringements and ensuring greater compliance with those rules. (...) Anyone can claim compensation for the harm suffered where there is a causal relationship between that harm and an agreement or practice prohibited by the EU competition rules. Compensation for harm suffered means placing the injured parties in the position they would have been in had there been no infringement of Article 101 or 102 TFEU. Parties injured by an infringement of directly effective EU rules should therefore have the full real value of their losses restored: the entitlement to full compensation covers the actual loss (damnum emergens), as well as compensation for loss of profit (lucrum cessans) suffered as a result of the infringement ; and entitlement to interest from the time the damage occurred." © European Commission

See also Collective redress (class action) and Private enforcement

Case Comments

Francesca Richmond The UK Competition Appeal Tribunal set to hear the first environmental class action claim brought under UK collective action regime against a water company (Severn Trent Water)

A claim against one of the UK’s largest water companies for allegedly misleading regulators about the number of times it discharged sewage into waterways has been brought in the Competition Appeal Tribunal (CAT) on behalf of the company’s eight million customers. It is the first time the “opt (...)

Temidayo Alade The UK Competition Appeal Tribunal clarifies the applicability of EU law on claims accrued before Brexit being litigated post-Brexit (Umbrella Interchange Fee)

The basis on which the European Court of Justice (CJEU) determined the start of the limitation period in Volvo AB and DAF Trucks NV v. RM (“Volvo”) was the question for determination before the UK Competition Appeal Tribunal (“CAT or the Tribunal”) in the Umbrella (“UM”) Merchant Interchange (...)

Jonathan Swil, James Webber, Matthew Readings, Matther Skinner, Alex Bevan, Chris Collins The UK Supreme Court rules that litigation funding agreements are damage-based agreements and are likely unenforceable (Trucks Cartel)

In a decision of major importance for litigation in the UK, the UK Supreme Court has held that litigation funding agreements (“LFAs”) under which a litigation funder receives a percentage of any damages recovered by the claimant are damages-based agreements (“DBAs”) for the purposes of s58AA (...)

Wessen Jazrawi, Nanret Senok The UK Competition Appeal Tribunal issues a landmark decision and finds against arguments that it was required to follow post-Brexit EU case law developments where a competition law infringement took place before the completion of Brexit (Umbrella Interchange Fee)

In July 2023, the UK’s Competition Appeal Tribunal ruled that the European Court of Justice’s 2022 Volvo judgment on limitation periods did not change the Tribunal’s interpretation of English limitation rules. The Tribunal also found against arguments that it was required to follow post-Brexit (...)

Anthony Maton, David Lawne, Chrysanthi Bampali, Dexter Stevens, Rachael Baillie The UK Court of Appeal overturns the Competition Appeal Tribunal’s judgment and holds that collective action against six banking groups over alleged foreign exchange manipulation can proceed as ‘opt-out’ collective proceedings (Evans / O’Higgins)

London, 25 July 2023 – The Court of Appeal ruled today that FX Claim UK, the collective action brought by Phillip Evans against six banking groups over alleged foreign exchange manipulation, can proceed as ‘opt out’ collective proceedings. This ruling overturns the Competition Appeal (...)

Jeremy Robinson, Temidayo Alade The UK Court of Appeal rules on the carriage of competition disputes at the CAT, affirming the CAT’s specialist role in competition class actions (Evans / O’Higgins)

Introduction The UK Court of Appeal recently ruled on a carriage dispute in competition collective proceedings at the Competition Appeal Tribunal (CAT or Tribunal). The CAT had ruled on 31 March 2022 in Evans v Barclays PLC & Ors / O’Higgins which, amongst other issues on appeal, raised (...)

Helen Fairhead, Natalia Maj, Emilia Radley The UK Competition Appeal Tribunal stays rather than dismisses a data privacy case possibly cracking the door open for data-related class actions (Meta)

This article has been nominated for the 2023 Antitrust Writing Awards. Click here to learn more about the Antitrust Writing Awards. The competition collective action against Meta (formerly Facebook) is one of a number of pending collective actions against the tech giants, including Apple (...)

Francesca Richmond The UK Competition Appeal Tribunal declines to certify a £2.3B opt out class action brought against a social media platform over an alleged abuse of a dominant position (Meta)

The UK Competition Appeal Tribunal (“CAT”) has refused to certify an opt out class application brought by Liza Gormsen in relation to the alleged abuse of a dominant position by a social networking platform. The application signified a trend in claims pursued in the UK, in which it is argued (...)

Sean P. McConnell, Sarah O’Laughlin Kulik, Adam Berger, Frank DiGiacomo, Alexander Chester The US District Court for the Eastern District of California set to adjudicate a class action suit filed by a group of volunteer college baseball coaches against a national athletic association for alleged antitrust violations (Smart / NCAA)

On November 29, 2022, a group of volunteer college baseball coaches filed a proposed class action against the NCAA for alleged antitrust violations in the Eastern District of California. The plaintiffs in the case, captioned Smart, et al., v. NCAA, claim that by limiting the number of paid (...)

Catherine North Hounfodji, J. Warren Rissier The US Supreme Court denies a certiorari petition seeking to resolve a split by the Court of Appeals for the Ninth Circuit relevant to the litigation of class action matters (Olean Wholesale Grocery / Bumble Bee Foods)

The US Supreme Court denied a certiorari petition seeking to resolve circuit court splits relevant to the litigation of class action matters, including if and when class certification is appropriate where a significant portion of the class may be uninjured and on the use of representative (...)

Lesley Hannah, Anna Stellardi, Sofie Edwards The UK Competition Appeal Tribunal issues an opt-out certification decision in a class action filed against a Big Tech company (Liz Coll / Google)

On 31 August 2022, the Competition Appeal Tribunal released its judgment in Elizabeth Helen Coll v Alphabet Inc. and Others [2022] CAT 39, which confirms that consumer champion Liz Coll is authorised to bring an opt-out collective claim against Google for alleged competition law infringements (...)

Steve Petkis The US District Court for the Northern District of California issues a decision on a decertification order in a long-running class action dispute concerning class-wide damages model (Freitas / Cricket Wireless)

On July 29, Judge William Alsup of the Northern District of California issued a decertification order in a long-running class action dispute concerning Cricket Wireless’s 4G advertising, ruling that plaintiff’s counsel made “too critical a mistake” in fashioning their class-wide damages model. (...)

Erika Inwald The US Court of Appeals for the Eleventh Circuit blocks the payment of incentives to class representatives and denies an en banc hearing on the grounds that it violates historical precedent, signalling a different approach to other Circuit Courts (Johnson / NPAS Solutions)

Today, it is impossible to guess what law previously considered to be settled will be newly determined to violate historical precedent or the Constitution. In September 2020, the Eleventh Circuit decided in Johnson v. NPAS Solutions, LLC, that class representatives may no longer receive (...)

Luke Streatfeild, Charles Laporte-Bisquit The UK Court of Appeal unanimously upholds the decision of the Competition Appeal Tribunal to grant an opt-out collective proceedings order in a railway sector class action (Gutmann / South Western Trains)

In an eagerly awaited judgment, the UK Court of Appeal (the “CoA”) has unanimously upheld the decision of the UK Competition Appeal Tribunal (the “CAT”) to grant an opt-out Collective Proceedings Order (“CPO”) in proceedings brought by class representative Justin Gutmann against defendant (...)

Gal Rozent, Irit Brodsky, Ran Karmi The Israeli Supreme Court gives a landmark ruling to support private enforcement and class actions claims against monopolists for charging unfair and excessive prices (Gafniel / Coca-Cola)

On July 26, 2022, the Israeli Supreme Court handed down a precedent-setting ruling in the Central Bottle Company (Coca-Cola Israel) case (Permission for Civil Appeal Gafniel v. Central Bottle Company Ltd.). The court determined the Economic Competition Law enables would-be plaintiffs to sue (...)

Articles

Claudio Calcagno UK collective actions regime: Some early lessons for economists

The UK Consumer Rights Act 2015 made it easier for groups of claimants with small individual claims to bring competition damages actions. Following a slow start of the thus-formed UK collective actions regime, an increasingly large number of diverse collective actions have been launched. As (...)

American Bar Association Indirect Purchaser Lawsuits: A State-by-State Survey

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of (...)

Sonja Keske Group Litigation in European Competition Law

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of (...)

Eda Sahin-Şengül Collective Redress and EU Competition Law, ŞAHIN Eda

This section selects books on themes related to competition laws and economics. This compilation does not attempt to be exhaustive but rather a survey of themes important in the area. The survey usually covers publication over the last three months after publication of the latest issue of (...)

Catherine Prieto, Florian Wagner-von Papp, Frank Kroes, Marcella Negri, Oliver Remien Limitation periods (Implementation of the EU Damages Directive into Member State law - Würzburg, May 5, 2017)

Limitation periods could imperil the enforcement of competition damage claims and in the footsteps of the Manfredi case of the ECJ artt. 10, 11 and 18 of the Damages Directive therefore give complex rules on this issue. France, Germany, Italy, the Netherlands and the United Kingdom have (...)

Events

Ben Tidswell, Aurora Luoma, Bill Batchelor, Matthew Martino, Elizabeth Robertson, Boris Bershteyn A dinner and discussion with Ben Tidswell (Competition Appeal Tribunal)

Dinner organised by Concurrences in partnership with Skadden with keynote speaker Ben Tidswell (Chairman, UK Competition Appeal Tribunal), Bill Batchelor (Partner, Skadden), Aurora Luoma (Partner, Skadden), Boris Bershteyn (Partner, Skadden), Matthew Martino (Partner, Skadden) and Elizabeth Robertson (Partner, Skadden).

Pinar Bagci, Mark J. Gidley, Jay Himes, Loretta Preska, Martha Samuelson, Lawrence J. White The Global Antitrust Economics Conference: Global Class Action

This webinar was organized by Concurrences, in partnership with New York University Stern School of Business, Analysis Group, Axinn, Bates White, the Brattle Group, Charles River Associates, Cornerstone Research, Cravath, Labaton Sucharow, Orrick, and Winston & Strawn with Loretta Preska (US District Court for the Southern District of New York), Pinar Bagci (The Brattle Group), Mark Gidley (White & Case), Jay Himes (Labaton Sucharow), Martha Samuelson (Analysis Group), and Lawrence White (NYU Stern).

Peter Roth, Bill Batchelor, Ingrid Vandenborre, Aurora Luoma, Bruce Macaulay, Helen Jenkins UK Competition & Antitrust Litigation

Webinar of the "Law & Economics" Series organised by Concurrences, in partnership with Skadden and Oxera, with Sir Peter Roth (President, Competition Appeal Tribunal), Bill Batchelor (Partner - Antitrust/Competition, Skadden), Helen Jenkins (Managing Partner, Oxera), Aurora Luoma (Counsel - Antitrust/Competition, Skadden), Bruce Macaulay (Partner - International Litigation and Arbitration, Skadden) and Ingrid Vandenborre (Partner - Antitrust/Competition, Skadden).

Joaquín Almunia, Benoît Hamon, Alexander Italianer, Howard Shelanski, Mario Monti, Wouter Wils, Andreas Mundt, Peter Freeman, Chris Fonteijn, Laurence Idot, Frederic Jenny, Bruno Lasserre, William E. Kovacic, Joshua D. Wright, Cristina Caffarra, Thomas Graf, Ali Nikpay, Nathalie Homobono, Matthew Readings, Anne Perrot, Mélanie Thill-Tayara, Hans W. Friederiszick New Frontiers of antitrust 2014

Fifth edition of the Concurrences Journal conference organized by Concurrences in partnership with Charles River Associates, Gibson Dunn,E.CA Economics, Cleary Gottlieb, Norton Rose Fullbright, Shearman & Sterling, Mapp (Panel Sponsor) and Cleary Gottlieb, Compass Lexecon, Clifford Chance, Jones Day, Mapp, Mayer Brown, Norton Rose Fullbright, Microeconomix, White & Case (Social Event Sponsors).

Books

John DeQ. Briggs Douglas H. Ginsburg Liber Amicorum : An Antitrust Professor on the Bench Re-Designing the American Antitrust Machine Part I: Treble Damages, Contribution and Claim Reduction

357 Douglas H. Ginsburg | An Antitrust Professor on the BenchLiber Amicorum - Volume I Re-Designing the American Antitrust Machine Part I: Treble Damages, Contribution and Claim Reduction John d EQ. b riggs * Axinn Abstract This is the first in a contemplated series of articles, and eventually (...)
Andrew Gavil William E. Kovacic: An Antitrust Tribute Liber Amicorum Vol. I Designing Private Rights of Action for Competition Policy Systems: The Role of Interdependence and the Advantages of a Sequencial Approach

GO TO TABLE OF CONTENT William E. Kovacic | An Antitrust Tribute - Liber Amicorum - Volume I Designing Private Rights of Action for Competition Policy Systems: The Role of Interdependence and the Advantages of a Sequential Approach * A NDRE W I. G AVIL ** agavil@law.howard.edu Professor of (...)
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