The Paris Court of Appeal judgment of February 27, 2014 makes it easier for victims of anti-competitive practices bringing an action for damages to prove the prejudice they have suffered.
In this case the Doux group, a poultry producer, bought feed containing lysine from Ceva Santé Animale, Ajinomoto Eurolysine’s exclusive distributor, and supplied it to chicken farmers.
However, a European Commission decision revealed that Ajinomoto and other undertakings were involved in a cartel on lysine prices and sales volumes, resulting in prices being pushed up higher than what they would have been otherwise.
The Doux group complained that the purchase price of the lysine was higher because of the cartel, causing it a loss of margin and reducing its competitiveness, and it sued Ceva Santé and Ajinomoto to obtain damages for the prejudice suffered.
A first Court of Appeal judgment was overturned by the French Supreme Court, ruling that the Court had failed to ascertain whether the higher prices asserted by Doux had actually been passed on to its customers. The Court of Appeal to which the case was referred back was of the opinion that there were two methods of demonstrating that the increase had not been passed on: (1) the empirical method whereby it was not passed on or (2) the theoretical method whereby it could not have been passed on. The Court then recognized that the Doux group, a supplier of poultry essentially to large retailers, could not have passed on the higher prices by imposing a price increase on its distributors, because the lysine was not a major component of the product’s price which could have justified a price increase when the commercial negotiations were being conducted. In addition, many factors are taken into account when fixing poultry prices, including the bargaining power of the large retailers, which generally block price increases.
The judges deduced that as the Doux group could not have passed on the additional costs to the distributors, it had actually suffered prejudice because of the cartel. It was awarded damages of close to €1.5 million because of the higher prices and for having had to cover them with its own funds.
However, in the opposite case, when the price increase is passed on, the authors of the anti-competitive practice cannot automatically escape from being sued for damages. Those on the receiving end of the price increase, in other words large retailers or consumers, can take them to court, particularly now that class actions are available to consumers.