The Devenish litigation, consisting of five separate but concurrent claims issued in the High Court in 2005, arose as a result of the well-publicised vitamins cartels of the 1990s. The European Commission’s decision found that a number of undertakings, including the three main defendants in Devenish, had participated in price-fixing and market-sharing arrangements for many years. One of the defendants, Sanofi-Aventis, had been the whistleblower and the other defendants (F Hoffmann-La Roche and BASF) had both had their fines significantly reduced as a result of co-operation under the Commission’s leniency programme.
The claimants were all purchasers of vitamins, either directly or indirectly (in the form of animal feedstuffs containing the vitamins) from one or more of the defendants. Two claimants were selected as representative of all claims, one a direct purchaser and the other an indirect purchaser (purchasing vitamins supplied by the three defendant undertakings indirectly as part of animal feedstuffs for feeding to poultry). The indirect purchaser then sold on chickens and chicken products to supermarkets and others.
The claimants alleged specifically that the defendants’ wrongful actions (ie cartel activities) had been carried out in the knowledge of and in wilful disregard of the claimants’ rights, in a calculating fashion and/or with the expectation of profiting from them by amounts exceeding the amounts that would be payable by way of damages to the claimants.
The claimants claimed (in addition, or as an alternative, to compensatory damages):
- that the defendants actions ‘are properly such as to evoke a sense of outrage’ and that exemplary damages should be awarded;
- restitutionary relief; and
- that they had a right to an account of profits.
The Court was asked to determine as a preliminary issue whether these three particular remedies were available and it held that they were not.
Exemplary damages were not available in cartel damages cases because this would infringe the principle that, put broadly, prohibits the same person from being sanctioned more than once for the same unlawful conduct. This principle of ne bis in idem would be infringed if the Court awarded exemplary damages because that remedy has the same aims (deterrence and punishment) as the Commission fines (which related to the same conduct and subject matter, and had been levied on the same parties).
In addition, the Court accepted that an award of exemplary damages would ‘run counter’ to a Commission decision fining the defendants. This is prohibited by article 16 of Regulation 1/2003/EC. An award of exemplary damages would essentially be concluding that the Commission’s fines were inadequate. This second-guessing of the Commission by a national court is not permitted.
The result is that the Court found there are rules of Community law that prevent the award of exemplary damages by a national court.
The Court also indicated that, even if it were wrong on that point, domestic English law was such that the fact that a defendant had already been fined would be a powerful (albeit not conclusive) factor against the award of exemplary damages. Taken together with the practical difficulties of allocating exemplary damages among potentially numerous claimants, this would mean a claim for exemplary damages would be unlikely to succeed as a matter of domestic English law alone. In this case, it would not succeed.
Restitutionary relief is aimed at stripping relevant profits from the wrongdoer, in contrast to measuring the loss of the victim. The Court held that a restitutionary award is not (yet) generally available under English law in all cases of tort and is not an available remedy in principle in an antitrust case. Unless and until a higher court rules on this point, the clear pre-existing law on restitution must be applied. In any event, on the facts, there was no difference in amount between the restitutionary relief claimed and an award of compensatory damages – accordingly, restitutionary relief would not be granted.
Account of profits
The claim for an account of profits was also rejected. It is a remedy also aimed at stripping a wrongdoer’s profits, and involves an extensive and wide-ranging examination and assessment of those profits. The Court found no reason why compensatory damages would not be adequate in the present circumstances (and it rejected the argument that evidential difficulties in making out the compensatory damages claim should lead it to permit alternative relief). Thus, an account of profits was found in principle not to be an appropriate remedy. In any event, factors such as the difficulty of allocating the relevant profit between claimants, the fact that a fine had already been imposed and the scale of the inquiry required meant the claimants would not be entitled to an account of profits at trial in the present case.
Implications of the judgment
The judgment has broad implications for those bringing and defending cartel damages claims. It is a measure of good news for defendants in such cases, which perhaps stands in contrast to the impetus at Commission and national regulatory level to seek to increase the deterrent effect of private damages enforcement in the antitrust arena. The Court takes a clear line indicating that compensation is the appropriate manner of redress in such cases.
Of particular interest is the ruling that Community rules prohibit the granting of exemplary damages. These rules ought, therefore, to prevent the award of exemplary damages in other national courts of the EU – and it will be interesting to see if the Devenish precedent is of persuasive value in countries outside the UK.
Looking to the future, it remains to be seen whether the European Commission will seek to (and take the view that it can) derogate from the European Community rules prohibiting exemplary damages to create new legislation on this subject through its private enforcement initiative – it is understood that a White Paper on this and other private enforcement issues is likely to be published during the early part of next year.