Several damage actions for breach of competition law have been brought before civil courts in the Netherlands against Dutch as well as foreign defendants. The available case law has recently been supplemented with an interesting judgment in appeal in the case of TenneT, the Dutch national grid operator, versus several entities of Swiss company ABB. This case follows the cartel fines imposed by the European Commission on several manufacturers of gas-insulated switchgear, including ABB. This judgment is most notable because it confirms the availability to defendants in such litigation of the so called passing on defence and gives guidance as to how to apply this defence.
TenneT was initially successful in its cartel damages claim. In September 2013, the District Court in first instance ruled that ABB had to compensate TenneT for the damages it sustained as a result of ABB’s collusive behavior. The court considered it highly likely that TenneT had suffered damages, as the cartel by its nature and object was aimed at raising the prices for customers like TenneT. With regard to the amount of damages (to be established in separate proceedings), the District Court considered that, based on a comparison between offers made to TenneT by ABB during and after the cartel, the overcharge could have been as high as 54 percent. ABB had argued that TenneT did not suffer any loss because it passed on the overcharge to its customers. This argument was rejected by the District Court, considering that TenneT’s customers would in turn be compensated in the form of reduced electricity prices.
ABB appealed the judgment of the District Court. The judgment of the Arnhem-Leeuwarden Appeal Court of September 2014 deals with several questions, including liability of an ABB entity that was not an addressee of the Commission decision (accepted on principles of Dutch law), the start of the limitation period (in this case not before the date of the Commission decision) and the passing-on defense (allowed).
With regard to the passing on defense, the Appeal Court reasoned as follows. Damages should bring the aggrieved party to the situation it would have been had it not suffered loss as a result of the unlawful act (the counterfactual). Taking away cartel profits is not the prime consideration in a decision on damages. The starting point to determine the counterfactual is the moment the damages are sustained – in this case the moment of purchase of the equipment – but later events can be taken into account. If TenneT had passed on the overcharge, there would no longer have been a loss for TenneT, since this loss would have been compensated by higher revenues instead of by a damages award.
The Appeal Court considered that allowing the passing on defense is in line with case law of the European Court of Justice and the draft EU Directive on antitrust damages actions. The Appeal Court argued that this was moreover necessary to ensure that indirect purchasers had a legitimate course of action in cases where the overcharge had been passed on and to prevent double recovery by claimants against defendants. Unfortunately, the Appeal Court did not rule on the division of the burden of proof when the question is whether damages have been passed on and to what extent they have been passed on.
The passing on of damages results in the relocation of damages down the supply chain. Customers of TenneT are likely to claim compensation from ABB of the damages that TenneT was able to pass on to its customers. Direct and indirect purchasers in other cases have found solutions to consolidate their damages claims. For example, in the cartel damages litigation initiated by DB before the Dutch courts against manufacturors of pre-stressed steel, purchasers of claimant DB have assigned their claims to DB.