The High Court of England and Wales has struck out a claim for damages brought by Japanese computer monitor makers against a group of cartelists involved in the cathode-ray tube and cathode-ray tube glass cartels. In a blow to the claimants, the court held in its judgment of 23 May 2016 that the facts alleged by the claimants lacked a sufficiently close connection with the EU.
The court's consideration of the scope of the relevant infringement decisions, the international supply chains at issue and the need for territorial links with the EEA will have wider implications beyond these proceedings.
Parties to cartel damages claims may draw the following lessons from the judgment:
- Pleading a claim on a purely follow-on basis is risky - the four corners of the relevant decision will often turn out to be narrower than first anticipated.
- Claimants must be precise about the territorial connection between their claim and the EEA from the start – it is not sufficient to assume that the English courts will accept jurisdiction simply because goods containing cartelised products have ended up in the EEA without more.
- A claimant must take considerable care to ensure it satisfies the obligation to make full and frank disclosure in an application to serve outside the jurisdiction.
- The English courts expect parties in multi-defendant cases to work together to ensure proceedings are efficiently run and duplication is minimised.
Background on cathode-ray tubes and the cartels
Televisions and computer monitors have traditionally had cathode-ray tubes ("CRTs"), made out of glass, as their display mechanism. Both the CRT glass and the CRTs themselves were found by the European Commission (the "Commission") to have been cartelised in separate decisions issued in 2011 and 2012 respectively (the "Decisions"). The defendants in this claim were associated with either of the cartels.
The products identified in the Decisions reached the claimants via a complex international supply chain. In summary, the CRT glass was made in Asia and supplied to CRT manufacturers in Asia who turned it into tubes. The tubes were then sold to a monitor manufacturer, generally in Asia also. The completed monitors, containing the CRTs, were then sold to a Japanese company within the claimants' corporate group, who then sold the monitors to one of the claimants in the EEA.
The pleaded claim - follow-on or stand-alone?
The claimants pleaded their claim on a purely follow-on basis, relying entirely on the Decisions. This proved to be hugely problematic for the claimants when the court analysed what the Commission actually found in those decisions. In particular, the court found:
- The CRT glass cartel identified by the Commission was EEA-wide and intended to affect the prices for EEA customers. This claim concerned CRT glass and CRTs sold and made into monitors in Asia and therefore fell outside the scope of the decision.
- The CRT cartel was worldwide but, according to the court, the infringement identified by the Commission was only in relation to sales by cartelists into or in the EU. The relevant sales by the defendants were not made into or in the EU. Therefore, neither of the Decisions applied to the CRT glass and CRTs contained in the products purchased by the claimants, which had been manufactured and sold outside the EEA, only reaching Europe indirectly via several non-cartelists. On that basis, the court concluded that the claim could not follow-on from the Decisions. The claimants' attempt to plead a wider claim, not limited to the Decisions, was rejected as it had not been set out in the claim form or particulars of claim.
This demonstrates how an infringement decision can be narrower than first appears. To reduce the risk that the liability claimed is not ultimately established by the relevant decision, claimants may consider including a stand-alone limb to their claims in the claim form.
Even if the claimants were entitled to bring the claims on a stand-alone basis, the defendants challenged their ability to do so as a matter of EU law. The court conducted an analysis of the territorial limits of Article 101, reasoning that the cartels were not implemented in the EU because the cartelised products or transformed products containing the cartelised products were only sold to the claimants in the EU at the end of a largely non-EU supply chain. The mere alleged existence of a pricing effect in Europe was not sufficient to make out implementation there. Further, the CRT glass and CRT cartels did not have "qualified effects" in the EU - that is, a foreseeable, immediate and substantial effect in the territory. Again, the court considered the supply chains for CRTs and CRT glass, from manufacture to sale to the claimants in the form of monitors in the EEA. Notably:
- neither CRT glass nor CRTs were made in the EEA nor sold by the defendants in or into the EEA; and
- none of the claimants purchased any cartelised products directly from any of the defendants or on a cartelised market. Therefore, there was no sufficient EU connection to allow the conduct relied on by the claimants to be an Article 101 infringement.
Full and frank disclosure
Earlier in the proceedings, the claimants had obtained permission to serve their claims out of the jurisdiction. Certain defendants successfully challenged the court's decision to grant permission on the grounds that the claimants had failed to disclose material information in their application (in addition to the above points on territorial connection).
As in any application made without notice, the claimants had an obligation to give full and frank disclosure to the court. This required them to identify any material facts, including any which may constitute a defence or some ground for not granting the order sought. However, the court found that the claimants has made "serious" failings of non-disclosure such that the service out order should be set aside.
Multi-party case management
This claim was brought against 12 defendants, many of whom sought to make similar points in resisting the claim. Initially, the overlap between the defendants was not well managed according to the judge, leading him to devote a section of the judgment to case management practices in multi-party cases. In particular, the judge emphasised the defendants' duty to the court to liaise amongst themselves in order to ensure that the common points are dealt with sensibly to avoid duplication and repetition. Ultimately, the defendants did so, dividing up the issues between them and adopting a single joint submission on common issues.
Defendants in future cases would be well advised to factor in the need to liaise with each other to minimise the burden on the court, and to factor in the time needed to agree joint submissions in good time.
The English courts are a favoured jurisdiction for cartel damage claims due to the relatively well-established legal regime and the availability of broad disclosure. This has meant that many claimants have sought to bring their claims in respect of foreign cartels in the English courts. The courts have - to date - taken a generous view of their jurisdiction and accepted many such claims as properly brought. In this ruling, however, the court was not satisfied that there was a sufficient territorial connection and struck out the claims. While this will be a welcome development for defendants facing similar claims, it will be a blow to claimants who have sought to use the English courts to bring what are, in effect, worldwide claims. Its significance, however, means this judgment is unlikely to be the last word on the subject.