On 27 December 2013, the Spanish Supreme Court published its second judgment concerning actions for damages for breaches of EU and Spanish competition law arising out of the Spanish sugar cartel. The Court deals with four legal issues of importance:

  1. The effects of an administrative decision on civil proceedings.
  2. The pass-on defence.
  3. The duty to mitigate damages.
  4. The assessment of expert economic evidence on quantum.

The dispute arose in the context of an infringement decision adopted in 1999 by the Spanish Competition Authority and subsequently confirmed by the Audiencia Nacional and the Supreme Court. The decision found that from 1995 to 1996 sugar manufacturers had fixed prices and allocated markets and customers in Spain in breach of competition law.

In 2007, a group of direct purchasers brought a follow-on damages action claiming

4.1 million euros. In 2010, a First Instance Court in Madrid partially ruled in favor of the claimants awarding half of the damages claimed. Subsequently in 2011, the Appeal Court of Madrid found that the agreements in question could not be considered a cartel and ruled in favor of the defendant-appellant. The claimants appealed before the Supreme Court which awarded them the full amount of compensation claimed.

EFFECTS OF ADMINISTRATIVE DECISIONS IN CIVIL PROCEEDINGS

The general rule in Spain is that administrative decisions are not legally binding in civil proceedings; that is the principle of res judicata does not apply. However, the Supreme Court has clarified that findings of fact in administrative proceedings will be given effect by civil courts who, further, may only deviate from the legal interpretation given to these findings if such interpretation is explicitly and adequately reasoned.

According to the Court, the constitutional principle of legal certainty demands that the same facts cannot be given two conflicting interpretations by different jurisdictions and, furthermore, the rights of defence of defendants in civil proceedings is not violated since they are granted full opportunities to defend their positions before the administration or in the administrative appeal courts.

THE PASS-ON DEFENCE

The Supreme Court confirmed that the pass-on defence is consistent with Spanish law and, in particular, with the principle that a claimant should not be unjustly enriched by its claims.

However, the Court established two conditions on the defence. First, the burden of proof of the pass-on defence lies with the defendant. Second, to meet this burden fully, defendants need to prove both that claimants have passed on the overcharges down the supply chain to their customers and that they have not suffered a reduction in their volume of sales as a consequence. Only in this way, the Court reasoned, would a defendant be able  to show that an award of damages would give rise to the unlawful enrichment of the claimant.

MITIGATION OF DAMAGES

The member of the sugar cartel argued that the claimants could have reduced their losses arising out of the cartel by purchasing sugar overseas. However, the Court held that a mitigation defence requires negligent conduct by the victim which positively contributed to their losses. The Court placed weight in this context on the policy objective of not providing greater legal protection to infringers who have knowingly caused losses than to their victims.

ASSESSMENT OF ECONOMIC EVIDENCE

The Court confirmed that the claimants’ use of a counterfactual (“but for”) analysis, specifically a comparator-based before-and-after model, was in line with approved economic literature and was an appropriate way to assess quantum. Conversely, the Court found that the defendants’ expert report, which denied the existence of damage, ran counter to the administration’s findings that there had been a cartel and it had been implemented, and was inadmissible. Given then that the only acceptable economic evidence submitted in the proceedings was that of the claimants’ expert, and the first instance court had provided no good reasons to reduce the amount claimed, the Supreme Court held that the claimants should be awarded the full amount originally claimed, 4.1 million euros .