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Kyle Le Croy: Richard, thank you for joining
me. Today, we are discussing the UK Competition Appeal
Tribunal’s judgments in the matters of Royal Mail v
DAF and BT v DAF. The two sets of proceedings were
case managed together and a single judgment was handed down in
February 2023. Before we get into the details of the judgment, how
did the dispute arise between DAF and each of Royal Mail and
BT?
Richard Whish KC: Well, it’s a very
interesting case, it will go down in history when we write future
books on damages actions and competition law in the EU. So, the
European Commission, in 2016, adopted a decision in which it found
a cartel between five producers of trucks that had lasted for 14
years. DAF, the defendant here, being one of those five.
Subsequently, there was also a decision against Scania. And, in
this particular case, DAF was fined, I think it was ?750 million,
so a very significant fine was imposed upon it. And then, of
course, that attracted damages claims. Very interestingly, I was
told the other day that, apparently, there are actions in at least
20 Member States in the EU – because, of course, there are fleets
of trucks wherever one goes, trucks cost a lot of money, people
that run fleets of vehicles have a lot of vehicles, they get
replaced over a period of time. So, it’s self evident that the
damages claims in this case are potentially absolutely enormous.
What’s interesting about this judgment is it’s the first
time in the UK that we’ve had a judgment actually on the award
of damages. Elsewhere in the EU there have been lots of awards. I
read the other day that, in Spain, where a lot of these cases are
taken individually to a local court in Valencia or Malaga, or
whatever, apparently, there have been over 2,000 awards of damages
so far.
Kyle Le Croy: So, it’s the first
substantive assessment by the English courts in the Trucks
litigation.
Richard Whish KC: Yes.
Kyle Le Croy: It was also the first substantive
assessment in relation to some of the pass-on arguments that the
defendants had raised. I wonder, before we get into some of the
details of the judgment itself, can you remind our viewers, what is
the pass-on defence?
Richard Whish KC: Yes, the pass-ondefence. So,
actually, it’s really a very simple idea, which is if
there’s a cartel between widget producers and I buy widgets, I
may have been overcharged by, let’s say, 10 per cent of what
the price otherwise would have been. Well, I’m entitled to be
compensated for that harm, so I can claim for that 10 per cent.
That’s the basic action. However, it may be that I incorporate
these widgets into another product, blodgets. I then sell blodgets
and I incorporate that 10 per cent overcharge into my own price
when I come to sell downstream. Well, if I’ve done that, I have
passed all the harm on to my own customer. So, I shouldn’t be
compensated, because the principle of compensation is I should not
be undercompensated, but equally, of course, I should not be
overcompensated either. Interesting point, though, if I have been
overcharged and passed the overcharge on, query, should my
purchaser, the indirect purchaser, as against the cartelist, should
the indirect purchaser be able to sue, because it has been
harmed?
Kyle Le Croy: So, how did the Tribunal address
those arguments in this case?
Richard Whish KC: Well, it’s interesting
that if you look at this judgment, it is very useful. And,
specifically, paragraph 228 sums up the position in relation to
pass-on, and it may even be worthwhile reading the first few
sentences. Paragraph 228, by way of summary on the legal test for
causation in relation to a pass-onform of mitigation defence -
because this is the defendant saying that the claimant didn’t
suffer harm because it passed it on to a sub purchaser – so this is
a defence, a plea of mitigation that there was no harm: We
respectfully conclude that DAF must prove a direct and proximate
causative link between the overcharge and any increase in prices by
the claimants. It is not enough for DAF to say that all costs,
including increases in costs, are fed into the claimants or their
regulator’s business planning and budgetary processes. There
must be something more specific than that, and there are a number
of potentially relevant factors that it can rely on. And then the
Tribunal suggests at least four different factors. But what it is
saying here is that DAF, the defendant, can’t just say, oh,
they absorbed the losses, they got lost somewhere. If they’re
saying there’s a pass-on, you’ve really got to establish
what that pass-onis, and you’ve got to be able to demonstrate
it.
Kyle Le Croy: You mention four factors that the
Tribunal read out. What were the factors that it discussed, which
defendants should be alive to?
Richard Whish KC: Well, I won’t go through
all of them but, for example, it says you should look at the
relative size of the overcharge against the claimant’s overall
costs and revenue. So, how significant was this overcharge compared
to everything that the claimant does? Now, I think one can see,
quite easily, that if I have purchased a fleet of trucks to run my
logistics business, well, those trucks are a pretty significant
input into my overall business. We should also consider, are there
identifiable claims by identifiable purchasers from the claimants
in respect of losses caused by the overcharge? I mean, that’s a
nice point, isn’t it? Suppose I have been overcharged by 10 per
cent and suppose I have passed that 10 per cent on to my own
purchasers, query, is it easy to identify those purchasers? If so,
one can imagine that those purchasers are themselves in a position
to bring an action for the harm that they have suffered. On the
other hand, you could imagine a different market where I have
suffered the input overcharge, but then that is dispersed across an
infinitely large customer base of my own where you can’t really
trace through to them, on an individual basis, what overcharge
there has been. So, those are just two of these four factors.
Actually, in the next paragraph 229, the Tribunal says, and, of
course, there are other factors as well – because these cases are
all profoundly different from one another. There’s never going
to be one-size-fits-all to this question.
Kyle Le Croy: So, looking at this from the
30,000 foot view, what takeaways, what lessons should we draw from
the judgment of the Tribunal?
Richard Whish KC: Well, one thing I would say
is that, on the facts of this case, the Tribunal ended up deciding
that the pass-ondefence should not be allowed. Because they said,
really, if you’ve got Royal Mail providing postal services to a
range of millions of customers, it’s really all but impossible
to identify per customer what harm has been suffered. So, this was
not an appropriate case for a pass-ondefence. Interestingly, one of
the members of the panel, Derek Ridyard, a very distinguished
economist, said, look, actually, there will have been a pass-onto
customers, but it is very difficult to quantify and it is almost
inconceivable that the downstream indirect purchasers would bring
an action, whether collectively or individually, and, furthermore,
it’s very important that the competition rules are effectively
enforced, and actually having to pay damages, as it were, is just
as important as paying a fine and the effet utile requires that
there should be adequate enforcement in damages terms against DAF.
And, for that reason, this pass-ondefence should be not allowed.
So, I think that’s a very interesting way of looking at it.
More broadly, you ask, where are we and what are the takeaways
here? I think it’s very interesting that, by now, we’ve had
five or six judgments in the UK in which damages have been awarded
in competition cases. Noticeably, of course, Sainsbury’s v
Mastercard and Visa in the Supreme Court, but there have been
others as well. So, even a few years ago, there was very little
judicial precedent on the award of damages. We’re a lot further
on now. I suppose my concluding thought would be, now that
we’ve had those judgments, now that we’ve had real live
cases, now that we understand better the way that the courts think
about this, maybe that will produce an environment in which it
becomes easier to settle these cases out of court.
Kyle Le Croy: Thank you for your time,
Richard.
Richard Whish KC: OK.
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