Monday

5th Dec 2016

EU ruling could open floodgates on cartel lawsuits

  • The ECJ's ruling could lead to a slew of private damages claims against firms involved in cartels (Photo: avail)

Individuals can claim compensation from cartels even if they did not buy products from one of the companies involved, the EU's top court has ruled.

In a verdict on Thursday (5 June), the European Court of Justice stated that companies that participate in cartels are responsible for the losses caused by competitors being forced to raise their prices.

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Thursday's judgement could open the floodgates for a slew of private damages claims, but has particular implications for the commission's ongoing cartel investigation into the Libor rate-fixing scandal.

The judgement relates to a case brought by Austrian firm OBB-Infrastruktur, after the commission imposed fines totalling €992 million on Otis, Kone, Schindler and Thyssenkrupp for a cartel on lifts and escalators sold in Belgium, Germany, Luxembourg and the Netherlands.

OBB, which forms part of Austrian Federal Railways, had bought elevators and escalators from firms outside the cartel but sued Kone, Otis and Schindler for €1.84 million on the grounds that they had paid a higher price because of the cartel's existence.

The EU court ruled in their favour, arguing that "any person is entitled to claim compensation for loss suffered where there is a causal relationship between the loss claimed and the cartel at issue".

The EU executive had itself also brought a parallel case before the Brussels Commercial Court in June 2008, seeking damages of over €7 million against the four firms on the grounds that the EU had also been short-changed by the cartel's price-fixing.

But the ruling by the Luxembourg-based court could set an explosive precedent.

For one, it could leave many of Europe's largest banks open to legal action from customers who have been mis-sold or over-charged for financial products affected by the London inter-bank lending rates, Libor, and its European equivalent Euribor.

In 2013, a handful of banks were fined for manipulating Libor and Euribor, which determine interest rates on a raft of different financial products.

Meanwhile, last December, a further eight European banks were fined a total of €1.7 billion after the commission found that they had fixed the multi-trillion euro market of financial derivatives, with other banks still facing similar charges.

"A cartel can have the effect of leading companies that are not a party to it to raise their prices in order to adapt them to the market place resulting from the cartel," the court stated.

"Victims of this price increase must be able to claim compensation for loss sustained from the members of the cartel," it added.

"It is a significant judgement, one in a series of cases that make the whole system across the EU more harmonised and claimant-friendly," said Bernd Meyring, an antitrust lawyer with Linklaters in Brussels.

Analysis

Austrian far-right: beaten, but not defeated

Far-right candidate Norbert Hofer's loss to Green-backed Alexander Van der Bellen sent relief across Europe, but his party is still in a good position to head a government in the future.

Italy referendum spooks eurozone

Prime minister Matteo Renzi's resignation, followed by a crushing rejection of his reforms, has sent the euro plunging against the dollar and put the country's fragile banking system at risk.

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