Quantification of Harm in Actions For Damages

1
Master Thesis

Quantification of harm in actions
for damages based on breaches
of Articles 101-102 TFEU

Pamela Vukman

Marco Botta

Submitted in August 2014 at the
University of Vienna School of Law
LLM Program in European
and International Business Law

2

Table of content

List of abbreviation 3
1. Introduction 4
2. Definition of damages.... 7
2.1. Difference between public and private enforcement... 7
2.2. Definition and types of damages in competition law.......................................... 10
2.3. Actions for damages in the European Union...................................................... 14
3. Quantification of harm 19
3.1. Quantifying overcharge caused by cartels.. 19
3.2. Quantification of harm in Manfredi case............ 23
3.3. Punitive damages in EU 25
4. Methods and techniques used to quantify harm 27
4.1. Comparator-based methods. 27
4.2. Simulation models, cost-based, finance-based analysis and other methods 32
4.3. Choice of method... 34
4.4. Ex aequo et bono quantification.......................................................................... 35
5. Conclusion. 36
Bibliography.. 40

3

List of abbreviations

EU European Union
US United States
MS Member State
NCA National competition authority
ECJ European Court of Justice
ECSC European Coal and Steel Community
TFEU Treaty of functioning of European Union
TRIPS Agreement on Trade-related aspects of intellectual property rights
IP Intelectual property
FCO German Federal Cartel Office

4

1. Introduction

Treaty of functioning of European Union (TFEU) is one of the most important
documents for EU because it gives principles and rules necessary for undisturbed
functioning of the Union. Among these, one of most important are the principles and
rules for protection of the single market, also known as rules on the competition.
These are of extreme importance because distorted competition has enormous impact on
single market and on the welfare of the consumers.

Two of the most important Articles of the TFEU, which are regulating the competition
on the single market, are the Articles 101 and 102.

Article 101 of TFEU prohibits and declares as incompatible with the internal market
all agreements between undertakings, decisions by associations of undertakings and
concerted practices which may affect trade between Member States and which have as
their object or effect the prevention, restriction or distortion of competition within the
internal market.
1

For example, these agreements can directly or indirectly fix purchase or selling price,
or any other trading condition, limit or control production, markets, technical
development or investment, share markets or source of supply, apply dissimilar
conditions to equivalent transactions with other trading parties placing them at a
competitive disadvantage or make the conclusion of contracts subject to acceptance by
the other parties of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts.

However, these practices can be declared as inapplicable if any agreement, decision or
concerted practice between undertakings or association of undertakings contributes to
improving the production or distribution of goods, or to promoting technical or
economic progress, while allowing consumers a fair share of the resulting benefit, and if
does not impose on the undertakings concerned restrictions which are not indispensable
to the attainment of these objectives, affording such undertakings the possibility of
eliminating competition in respect of a substantial part of the products in question.
2

Article 102 of TFEU prohibits abuse of a dominant position by one or more
undertakings within the internal market or in a substantial part of it and it shall be
prohibited as incompatible with the internal market in so far as it may affect trade
between MS.
3

Such abuse may consist in directly or indirectly imposing unfair purchase or selling
prices or other unfair trading conditions, limiting production, markets or technical
development to the prejudice of consumers, applying dissimilar conditions to equivalent
transactions with other trading parties, thereby placing them at a competitive
disadvantage and making the conclusion of contracts subject to acceptance by the other

1
art.101 TFEU
2
Ibid
3
art.102 TFEU
5

parties of supplementary obligations which, by their nature or according to commercial
usage, have no connection with the subject of such contracts.
4

While these behaviors are strictly prohibited, to this date we can find many breaches of
competition law. Even large companies such as Microsoft, France Telecom and many
others were investigated and fined by European Commission (Commission) for
breaches of these articles.

Main issue arising from the breaches of EU competition law is the question of damages.
Infringement may have lasted for years and affected parties may have had damages
which are sometimes significant.
How and will the victims be compensated is a question EU tries to resolve because she
wants to achieve exercise of the right to full compensation, making the balance between
public and private enforcement and effective enforcement of EU competition law.

EU is actively resolving this question. Many documents, which main purpose is to make
a full compensation possible in practice, were drafted.
In 2005 Commission published Green paper which identified many obstacles to
efficient system of compensation.
5
It was followed by White paper from 2008. Goal of
this paper was to suggest policy measures needed so that all victims of antitrust
infringement can be fully compensated.
6

In 2013 Commission published two important documents.

First one is Proposal for directive of the European Parliament and of the Council on
certain rules governing actions for damages under national law for infringements of the
competition law provisions of MS and of the European Union (Proposal of antitrust
directive). On April 17
th
2014 the European Parliament adopted text of Directive on
antitrust damages which is based on the text of Proposal.
7

Second document Commission published in 2013 was the Practical Guide on
Quantifying Harm in Actions for damages based on breaches of Article 101 or 102 of
the Treaty on the Functioning of the European Union (Practical guide) which will be
discuss later in detail.
8

Practical guide is not legally binding but it offers assistance to national courts and
parties in actions for damages, giving them many relevant information, methods and
techniques available to quantify harm caused by anticompetitive practice.

4
Ibid
5
Annex to the Green paper on damages actions for breach of EC antitrust rules COM (2005) 672 final
6
White Paper on Damages actions for breach of the EC antitrust rules {COM(2008) 165 final}
{SEC(2008) 405} {SEC (2008) 406}
7
Directive of the European Parliament and of the Council on certain rules governing actions for damages
under national law for infringements of the competition law provisions of the Member States and of the
European Union
8
Practical guide quantifying harm in actions for damages based on breaches of article 101 or 102 of the
Treaty on functioning of the European Union

6

Quantification of harm is one of the burning issues in the EU.
Victims of infringement of competition law cannot be compensated through public
enforcement. Commission has the right to fine the undertakings which have breached
Articles 101 and 102 but it has no competence to award compensation to the victims.
Thus, parties which have been affected by anticompetitive behavior must seek
compensation before of national courts of the MS.

While the right to full compensation is guaranteed by the TFEU itself in the practice it
is difficult or almost impossible to get compensation because of applicable rules and
procedures of national laws.
Therefore, many victims of the infringement of the EU competition law in practice do
not obtain compensation and even if they do, it is not certain are the victims fully
compensated owning to the fact that many courts have difficulties when determining
how to quantify the harm.
Proving and quantifying harm is sometimes costly, long lasting process and most of the
time based on the national rules and procedures. Since these ones are different in many
MS it can lead to the fact that victims of infringement can be fully compensated in one
MS and partially or not compensated at all in others.

Commission has made the basis for damage claims in its Proposal for directive on
antitrust damages but both Proposal and directive do not give much practical
information. Namely, we understand that, in theory, victims will not have issues to get
full compensation, we noticed there were not many information given how to make
assessment of harm in practice, which is a key issue.

It is not the question whether the victims of infringement have the right to be
compensated. The right comes from TFEU itself and it was confirmed by the Proposal
of antitrust directive.
Nevertheless, we ask how a judge, who probably has no economic knowledge, should
make a correct assessment on the damages, on his own, when there are so many
questionable issues he will have to resolve.

Therefore, this thesis will mostly follow Practical guide, which gives many methods and
techniques for assessment of the damages. We will try to give and argument opinion on
solutions presented in the Practical guide.

Before we start with techniques and methods suggested by Practical guide, it is
important to answer some previous questions if we want to make a completely accurate
assessment.

Main questions we need to answer are : what damages, what type of damages exist, who
is harmed by the infringement of EU competition law, can victims of the infringement
be overcompensated, what is the opinion of the ECJ on the question on damages, which
method will court choose to quantify harm.

Answers to the mentioned question will be given in the chapters which follow.

7

2. Definition of damages

Enforcement of competition law aims to prevent and sanction violations of prohibitions
imposed by antitrust law and therefore seeks to avoid the occurrence of anti-competitive
conduct and effects.
9
This is achieved throughout public and private enforcement.

2.1. Difference between public and private enforcement

Public and private enforcement are two different modes of enforcement of competition
law which have different approach and aims.

Public enforcement means that antitrust rules are enforced by state authorities.
10

Key role of public enforcement is detterence and discouragement of anticompetitive
behavior by the undertakings. Those authorities have the right and the power to use
special procedures to investigate infringement of competition law. Therefore, we can
say that public enforcement is consisted of detection of infringement and intervention
by authorities.

Detection means that competition authorities have to separate forms of suspicious
conduct from procompetitive business conducts. In general, there are two fundamental
answers to this challenge: per se rule and the rule of reason. While a per se rule
approach generally prohibits well defined forms of bad behaviour (such as, e.g.,
horizontal price fixing), the so-called rule of reason approach accommodates the more
frequent case that the procompetitive effects of certain behaviour have to be weighted
against the anticompetitive effects.
11

In the investigation stage competition authorities must decide which type of intervention
should be applied if there is/was an infringement of the competition law.

Private enforcement refers to the litigation which is initiated by an individual, either in
stand alone or follow on action, before a court, asking remedies for infringement of
antitrust law. If sucessful, a court will impose some legal sanctions on infringing
undertaking such as damages, restitution, injunction, nullity or interim relief.

Unlike in US,
12
private enforcement is Europe is mostly treated as something new or
less important than public enforcement. Antitrust system which gives more importance
to public enforcement has discouraged private enforcement for decades.

It is clear that only public or private enforcement solution has place only in theory. One
integrated approach should be the best model for the EU. In the process of creation of

9
Paolisa Nebbia, Damages actions for the infringement of EC competition law: compensation or
deterrence?(2008), E.L. Rev. 33(1), pp 23-43
10
Kai Hschelrath, Sebastian Peyer, Public and private enforcement of competition law A different
approach(2013), <http://ftp.zew.de/pub/zew-docs/dp/dp13029.pdf> accessed 16 July 2014
11
Ibid.
12
Sylvain Bourjade, Patrick Rey, Paul Seabright, Private antitrust enforcement in the presence of pre-
trial bargaining(2009) <http://idei.fr/doc/wp/2009/private_antitrust.pdf > accessed 16 July 2014

8

that model we need to notice that both public and private enforcement have some
advantages and disadvantages.

Firstly, we may assume that public authorities have better access to informations
than private parties. Competition authorities are specialised in their field and
have greater investigative powers than private claimants.
13
Secondly, competition
authorities investigate antitrust behavior. They have evidences which private parties
often miss and therefore struggle to prove their claims. Thirdly, benefit of the public
enforcement is social welfare, unlike in the action for damages where the party which
seeks for damages is the only one to get benefit. Private enforcers have more personal
motives to initiate proceedings against the infringer and they are often motivated by
financial gain from reporting. Second motive to bring forward information is to avoid
suffering harm. Fourthly, sanctions imposed by competition authorities are larger than
the sanctions imposed by the courts in actions for damages.

Because of all mentioned public enforcement has had many supporters which still
believe public enforcement must stay dominant. They see only few gains from litigation
by victims of the infringement of antitrust law. That may be considered as very narrow
and limited view of the public enforcement.

We must not forget the role victims of infringement have in the process of detecting
anticompetitive behavior. Customers, suppliers or competitors that are hurt by
anticompetitive behavior are likely to have relevant information about such breaches of
competition law; giving them an opportunity to bring this information to a court in order
to seek compensation may help punish violators and, in this way, contribute to deter
future breaches of law.
14

Private enforcement may be needed because number of cases to be dealt with may be
too large for the public authorities. It is true victims often have difficulties to prove their
claims before court because they are lacking evidence. We must not forget that
provisions of Directive on antitrust damages can help victims in their claims.

National courts have authority to impose a disclosure of evidences, even those with
confidential information if they are relevant for the case.
With presumption that cartels cause harm burden of proof is now in the hands of the
infringing undertaking.
He has to prove he did not cause harm. We should not believe victims will be free of
more difficulties to prove their claims. Pfleiderer case, where ECJ discussed whether
national court should allow disclosure of leniency note, which would be such powerful
evidence in the hands of affected parties, showed there will be more issues to resolve.
15

Disclosing leniency note can affect efficiency of these programs, but on the other hand,
if national courts forbid disclosure of leniency note in every case it may mean victims

13
Roger Van den Bergh, Sonja Keske, Private enforcement of competition law: Quo vadis?(2007)
European Review of Contract Law Vol.3(4), pp.468-486
14
Sylvain Bourjade, Patrick Rey, Paul Seabright, Private antitrust enforcement in the presence of pre-
trial bargaining(2009), <http://idei.fr/doc/wp/2009/private_antitrust.pdf > accessed 17 July 2014
15
Case C-360/09 Pfleiderer AG v Bundeskartellamt, [2011] ECR I-5161
9

do not have a chance to prove their claim. That must be taken into account and courts
should not absolutely ban leniency from disclosure.

It is true that victims of infringement seek only for compensation and they do not worry
about social welfare but this conclusion offers no arguments to prove private
enforcement is unnecessary.

Strengthening private enforcement will bring social welfare. With more lawsuits
undertakings who infringe competition law will have to worry not just about being
uncovered and fined by Commission. They will have to worry about the victims as well
because they will put their claims before court and seek for remedies.
Settlements awarded by the courts are important, especially if there are more victims
which have successfully proved their claims. However, main issue with private
enforcers is they may be afraid to initialize an action or reporting illegal conduct.

Creating a better atmosphere and solving legal issues may influence more injured
parties to be more likely to sue. Thus, undertakings will be discouraged to infringe law,
especially if they are not strong, big companies in the market. This proves actions for
damages do have social welfare, even though otherwise considered.

Both public and private enforcement are costly. Some worry that private enforcement
can have risks and impose unnecessary costs on society, in particular when poorly
designed substantive rules and/or inadequate procedural rules result in excessive
litigation and discourage procompetitive conduct.
16
That may be true but we need to
look on the matter from other perspective.

Private parties may abuse the possibillity of private damage actions detterance and
efficiency of public enforcement. Encouraging parties to sue may lead to excessive
actions, mostly because interesting parties may complain for the wrong reasons,
especially if the infringing undertaking is a big company with significant funds.

There will always be private enforcers who seek not just to be compensated but also to
get a bigger piece of cake. However, we must not forget main objective of EU is to
encourage realization of the right to full compensation and excessive litigation cannot
be used as valid argument to ban actions for damages completely.

ECJ has confirmed the right to compensation in Courage&Cehran.
17
Consequently, we
do not need to discuss do we actually need private enforcement in EU. What should be
discussed is how to make one parallel, effective system of public and private
enforcement of competition law.
Both of these modes of enforcement should exist but we need to have balance between
them. EU has noticed same and thus we have more legal documents and discussions
dealing with the question of the right to be compensated and actions for damages.

16
OECD (2011), Private remedies, OECD Journal: Competition Law and Policy, Vol. 11/2.
<http://dx.doi.org/10.1787/clp-11-5kg9qgf34z5l> accessed 21 July 2014
17
Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and others [2001]
ECR I-6297

10

2.2. Definition and types of damages in competition law

Making correct assessment of harm is not possible without knowing what are damages.
Damages are award, typically money, which are paid as compensation for loss or injury.
There are three types of damages. Those are: price overcharge, affecting profits rate of
competitors and hampering quality, product choice and adopting new technologies.

Price overcharge or cost effect is the extra price the plaintiff has to pay for the
cartelized input.
18
It is most common type of damages.

Affecting profits rate of competitors and new entrants refers to exclusionary practice
by dominant undertaking which may affect the profit rate of its competitors and
discourage potential new entrants in the market. Examples for this type of damages are
predatory pricing and tying and bundling.

Predatory pricing is a pricing strategy where price of a product or service is set very low
intending to drive out competition from market or create barries to entry for potential
new competitors.
Tying is practice of a supplier of one product, tying product, requiring to buy a second
product, tied product. Tying may have various forms such as contractual tying, refusal
to supply, withdrawal or withholding of a guarantee and technical tying.
Bundling is closely related to the idea of tying. It refers to a situation in which two
products are sold in single package at a single price.
19
There are two types of bundling:
pure, which occurs where it is only possible to purchase two products together and
mixed bundling, which occurs where two products are sold separately, however, when
they are sold together they are available at a discount to the price what would be
charged if they were purchased separately. There were not many cases for compensation
for this type of damages due to the fact that it is difficult to quantify harm in these cases.

One of the most important cases for tying and bundling was the Microsoft tying case.
20

We will not discuss case in detail, what is neccessary to know is that Microsoft tried to
tie its Media Player to its personal computer operating system.

Third and last type of damages are hampering quality, product choice and adoption
of new technologies which refer to exclusionary practices by dominant company
affecting product quality and technological inovation. There are also very few cases for
compensation for this type of damages because it is very difficult to quantify damages.
The infringers of competition law cause great harm to the economy, competition and
proper functioning on the internal market, especially affecting consumers and other
undertakings. Although infringers will be fined by Commission or National competition

18
Frank Verboven, Theon van Dijk (2009), Cartel damages claims and the passing-on defence, The
Journal of Industrial Economics Vol.57(3), pp 458-491
19
Richard Whish, David Bailey, Competition law,(2012), Oxford Univ. Press, 7th edition, pp 670
20
Commission's decision of 6.3.2013 addressed to Microsoft Corporation relating to a proceeding on the
imposition of a fine pursuant to Article 23(2)(c) of Council Regulation (EC) No 1/2003 for failure to
comply with a commitment made binding by a Commission decision pursuant to Article 9 of Council
Regulation (EC) No 1/2003, Case AT.39530 Microsoft (Tying)

11

authorities (NCA) they should also be responsible for harm caused to private parties.
Parties which were affected by infringement have to have a possibility to be
compensated for harm suffered.

Compensation for harm suffered means placing the injured parties in the position they
would have been if had there been no infringement of Article 101 or 102 TFEU.
21

Full compensation principle was firstly propagated in Green paper, therefore, it is not
surprising to find compensation definition in that document:

Compensation is the grant of an equivalent in kind or in money for the harm suffered. It
differs from restitution that aims at putting the victim in the situation he was in prior to
the infringement. In some Member States compensation may only be given where full
restitution is impossible or excessively difficult.
22

One of important questions in actions for damages is what the type of loss victims can
recover. ECJ has discussed the matter in its previous case law.
In the 1993 Marshall case Court stated full compensation must count in important
factors, such as effluxion of time. Court implied payment of interest should be
understood as covering whole period from time damage occurred until the moment
capital sum awarded was paid.

Next question which arises is who can claim damages? Before we answer this question
in the following figure
23
we can see who may be affected by infringement.

Figure 1. Potential victims of breach of EU antitrust law

21
Communication from the Commission on quantifying harm in actions for damages based on breaches
of Article 101 or 102 of the Treaty on the Functioning of the European Union (2013/ C167/ 07)
22
23
Oxera, Quantifying antitrust damages. Towards non-binding guidance for courts Study prepared for
the European Commission',(2009), <http://ec.europa.eu/competition/antitrust/actionsdamages/> accessed
29 July 2014
12

From the figure we see it is certain direct purchasers are entitled to claim damages.
We need to find out should indirect purchasers, who were not directly harmed by breach
of EU competition law, be allowed to claim damages? ECJ has discussed answered this
question in famous Courage&Crehan case.
24

Courage&Crehan was the case from 2001 before Court of Appeal (England and Wales)
between Courage Ltd and Bernard Crehan.

The background of the case leads to 1990 where Courage, a brewery which had 19%
share of the United Kingdom market, agreed to enter into agreement with Grand
Metropolitan plc - a company with a range of catering and hotel interests.
Goal of the agreement was to merge their leased public houses and their pubs were
transfered to Inntrepreneur Estates Ltd (IEL). Agreement provided that all IEL tennants
had to buy their beer exclusively from Courage.

In 1991 IEL concluded two 20-years leases with Bernard Crehan which imposed on him
obligation to buy from Courage. The tenant had to purchase fixed minimum quantity of
specified beers and IEL agreed to procure the supply of specified beer to the tenant by
Courage at the prices shown in the latter's price list.

In 1993, Courage, the plaintiff in the main proceedings, brought an action for the
recovery from Mr Crehan of the sum of GBP 15 266 for unpaid deliveries of beer.
Mr Crehan contested the action on its merits, contending that the beer tie was contrary
to Article 85 of the Treaty. He also counter-claimed for damages.
After the case came to the Court of Appeal the Court refered to ECJ for preliminary
ruling because of some issued questions.

In the judgement ECJ was of opinion Mr. Crehan must be available to any individual
claim damages for loss caused to him by a contract or by conduct liable to restrict or
distort competition

.
25

ECJ has given some additional informations, namely, ECJ confirmed there should not
be any absolute bar to such an action being brought by a party to a contract which
would be held to violate the competition rules.
26
However, in the absence of
Community rules governing the matter, it is for the domestic legal system of each MS to
designate the courts and tribunals having jurisdiction and to lay down the detailed
procedural rules governing actions for safeguarding rights which individuals derive
directly from Community law, provided that such rules are not less favourable than
those governing similar domestic actions (principle of equivalence) and that they do not
render practically impossible or excessively difficult the exercise of rights conferred by
Community.
27

24
Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and others [2001]
ECR I-6297
25
Ibid para 26.
26
Ibid para 28.
27
Ibid para 29.
13

European Commission discussed this issue in both Green and White paper under the
concept of passing on of defence.

Direct purchasers may pass some of illegal overcharge to the indirect purchasers.
In this case the next line of purchasers, who are only indirectly linked with the initial
anti-competitive behaviour (indirect purchasers), suffers a loss by paying a supra-
competitive price which has been passed on to them.

If passing on of defence would not be allowed that would lead to the fact that only
direct purchasers, who have already passed some of illegal overcharge to the indirect
purchasers, now are the only ones who can claim for damage compensation.
They will be overcompensated due to the fact that they passed on illegal overcharge to
indirect purchasers. This scenario would actually lead to unjust enrichment EU wanted
to bypass.

We will not discuss the passing on of defence in detail because we will discuss it in the
some of the chapters that follow. Still, it was important to mention what is passing on of
defence and how it connected to direct and indirect purchases because it actually gives a
chance to indirect purchasers to claim damages.

Therefore, to conclude the discussion on question can indirect purchasers claim for
damages we can certainly state that there is no absolute bar against claims of indirect
purchasers. Indirect purchasers should not be discriminated and they have to have the
right to put their claim for damages before a court.

Of course, this does not mean that indirect purchasers will actually be able to get
compensation in every case. National courts will still in the end have to decide whether
a claimant is entitled to compensation and does a causal relationship between the injury
of the claimant and the infringement of competition law actually exist.

Claims of indirect purchasers run into evidentiary difficulties. In particular, they consist
in the obligation to prove both damages and the existence of a direct relation between
the damage and violation of competition rules.
28

It is certain that plaintiff will have difficulties to prove his claim. Not every plaintiff
will actually be able to be compensated in the practice. Still, this scenario is much better
than one which would totally exclude indirect purchasers from actions for damages for
breach of EU competition law.

After discussion on damages and who can claim them we will continue with discussion
on actions for damages.
Firstly, as comparison we will shortly discuss position of actions for damages in USA.
Moreover, we will try to mention what are some issues that follow actions for damages
and how can they be resolved. Furthermore, we will see what is the attitude of ECJ and
MS toward actions for damages and we will give some examples of cases where and in
which countries in EU damages were awarded.

28
Robert Stefanicki, Civil law remedies for violation of competition law(2012), European Review of
Contract Law, Vol.8(4), pp.400-419
14

2.3. Actions for damages in the European Union

Damage actions are still underdeveloped in European Union, unlike in US, where in a
typical year more than 90% of antitrust complaints filed in the United States are by
private plaintiffs rather than the federal government.
29
Nowadays, number of private
law cases involving issues related to the enforcement of competition law is very little,
only 60 cases involving damages actions based on infringements of competition law are
found all over the EU territory. Moreover, only 28 of those cases lead to an award of
damages.
30

There are several issues which make obtaining compensation difficult. Firstly, one
reffers to economical expertise. Judges are experts in law, not in economics. It is
neccessary to have an economical expert before court which will help quantify harm.
Any abuse by an expert may lead to situation that victims cannot vindicate their claims.
Rarely any judge or the jury is able to identify instances where the expert did not
provide unbiased information.
This is extremely difficult to spot out in most cases without any previous knowledge of
the field. It should also be noted that it is rare that experts are sanctioned for violation of
this duty to the court.
31

Secondly, we refer to difficulty of quantifying harm in intelectual property cases.
Obligation for such compensation may come from international or statutory documents.
For example, according to Article 45(1) of the TRIPS agreement, judicial authorities
shall have the authority to order the infringer to pay the right holder damages adequate
to compensate for the injury the right holder has suffered because of an infringement of
that persons intellectual property right by an infringer who knowingly, or with
reasonable grounds to know, engaged in infringing activity.
32

In US patent law, damages are typically awarded in the form of lost profits or
reasonable royalties or both. Damages cannot fall below the floor of reasonable
royalties. Court employs a four-prong test for awarding lost profits in a patent
infringement case. They permit an award of lost profits on the establishment of four
elements: demand for the patented product, absence of acceptable noninfringing
substitutes, manufacturing and marketing capability to exploit the demand, and the
amount of the profit he would have made (the Panduit test).
33

When deciding on damages in cases of IP infringement, court will determine reasonable
royalty on several factors, such as entire market value, established royalty based on
marketplace licensing, valuation calculation or any additional, relevant factor. This can
lead to situation that damages can be extremely high and therefore private enforcers in
US are motivated to engage in actions for damages because they have possibility to get
high awards, sometimes triple damages as well.

29
Herbert J. Hovenkamp,Quantification of harm in private antitrust actions in the United States(2011),
< http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1758751>accessed 22
nd
July 2014
30
Fernando Pea Lopez,Issues and problems regarding E.U. competition law private enforcement:
damages and nullity actions(2013), The USV Annals of economic and public administration, pp. 230-235
31
Ioannis Lianos, Quantification of damages workshop(2010), Faculty of Laws, UCL, pp 2
32
Ibid pp 28
33
Ibid pp 29
15

Damages in IP infringement in EU have pure compensatory purpose. Their goal is to
order to redress the loss which has been suffered and to award compensation. One
difficulty exists: how to compensate victims for loss suffered? Loss goes beyond mere
compensation because, as we already mentioned, victims can claim both loss suffered
and loss of profit and in these cases it is difficult to quantify loss of profit. Victims
should be restored in the position they would have been if no wrong had been done and
victims should be able to recover loss which was foreseeable, caused by infringement,
and not excluded from recovery by public or social policy.

When we talk about actions for damages in EU we can talk about countries where
damages have been awarded or where cases are pending.

In France we can find concept of harm done to economy and by the French law harm
done to the economy is not limited to the actual harm caused to competition. According
to the case law, this concept includes not only disturbances anticompetitive behaviors
are liable to cause to the economic sectors and markets directly or indirectly concerned,
but also negative impact of such anticompetitive behaviors on the economy in general
and on the consumers.

The ground rules for assesement of harm done to economy can be found reviews of
courts and practice of Autorit.
34
There is no single method used by courts or the
experts, though it is possible to identify two different methods which have been used in
practice: comparisons between the price, costs, margins usually encountered in the
relevant market and the price, costs, and margins encountered at the time of the
anticompetitive practices (i.e. the before and after approach); and assessing the profits
that would have been made in the potential markets, based on an hypothetical but for
price by estimating a reasonable profit margin to be added to the unit costs (i.e. the cost
based approach and accounting measures of lost profit).
35

It is therefore different from individual or collective damages suffered by victims of
anticompetitive practices, including when these victims have locus standi to lodge an
antitrust complaint before the Autorit.
36

Awarding damages in France has some history. We can find some cases which date to
the 90s which can show us french attitude toward damages if we compare it to year
2004, where we can notice there was no damages cases in other MS of EU than those
we have already mentioned. For example, from 1993 we can find Mors Labinal case
37

where Labinal, a company specialised for planes with a Tyre Pressure Indication
System (TPIS) carried out illegal pricing practice with only purpose to eliminate Mors,

34
Authorit is French national competition authority.
35
Emily Clark, Matt Hughes, David Wirth,Study on the conditions of claims for damages in case of
infringement of EC competition law(2004)
<http://ec.europa.eu/competition/antitrust/actionsdamages/economic_clean_en.pdf> accessed 30 July
2014
36
29 July 2014
37
Ibid
16

which was a competitor. Mors claimed for damages and in 1998 court decided to award
damages to Mors for the loss of market caused by Labinals infringement, although the
court did not award damages to Mors for the loss on neighbouring markets.

Second important case is 1985 Ecosystem Peugeot
38
, where Peugeot, french car
manufacturer, tried to use many different measures to prevent Ecosystem, active seller
of new cars to individuals, to get Peugeot vehicles from car dealers across EU. In 1996
Paris Commercial Tribunal (Tribunal) awarded damages to Ecosystem for Peugeots
infringement. Tribunal calculated damages based on loss of operating income and
depreciation of goodwill.

Germanys modern competition law started developing after Second World War
parallel with countrys economic development. German competition law developed
against the backdrop of U.S. influence, exerted in part directly, during the occupation
years, and in part indirectly, through US involvement in the subsequent shaping of both
German and E.U. competition policy.
39
Before US influence Germany even considered
legality of cartels as fundamental component of German economy. In the 1949 US and
West German Republic jointly started creation of national competition law. It is
indisputable that the Law Against Restraints of Competition (GWB), ultimately enacted
in 1957 reflects strong U.S. influence - seen perhaps most clearly in the general
prohibition of contractual cartel arrangements.
40

After Regionalisation and creation of European Coal and Steel Community (ECSC)
competition provisions of ECSC did not mirror US law precisely. US influence in
german law was not determinative, although it was still present. In the stages of
European integration Germany had important role in creation of competition law
because she had most substantial experience in this field. Therefore, it is not surprising
Germany is one of the countries where damages were awarded. Most important
principle of german competition law is putting victims of infringement in position they
would have been if infringement had not occured. Most popular methods to estimate
harm and damages are comparative market approach and cost-based approach.

One of important case comes from 2004 and it is called Vitamin case.
41
Before court in
Dortmund Company X, worldwide producer of sintetic vitamins, was sued for damages
by company Y which was supplied by X with vitamins between September 1989 and
February 1999. Claim for damages followed cartel investigation by the US, Swiss and
European authorities into price fixing and market sharing agreements. Landgericht
Dortmund awarded damages to Company Y. The names of parties were excised and it is
not clear exactly how the amount of damages was calculated.

38
Ibid
39
Hanna L. Buxbaum,German legal culture and the globalization of competition law: A historical
perspective on the expansion of private antitrust enforcement(2006), Issues in Legal Scholarship, 2006,
Vol.6(2, pp 474-494
40
Ibid
41
29 July 2014

17

One of the newest cases in Germany is so called German cement cartel case
42
and dates
to spring 2002 when German Federal Cartel Office (FCO) discovered cartel in cement
sector. Customers of cartel had damages and some had been driven out from the market.
Now, they are seeking compensation. We still do not know weather the damages will be
awarded because case is still pending.

In Italy we find, at firtst, Telsystem v SIP case.
43
Telsystem sued SIP, who was
telecommunication monopolist, for abuse of dominant position whithin the vocal
telephony service market for a closed group of users. Telsystem required a line to rent
from SIP to connect to clients office and SIP was delaying execution of contracts
relating to installation, refusing to fulfil the contracts already executed for the
installation of urban direct circuits, attempting to dissuade Telsystems current and
potential clients from using Telsystems services making demands for the payment of
the line rental even though the contracts had not been fulfilled. Corte dAppello of
Milan awarded damages to Telsystem but damage calculation was concentrated on the
plaintiffs lost business and profits foregone as a direct result of the infringements.

Second case, known as Albacom v Telecom case,
44
was similar to the previous one and
reffered to the abuse of dominant position by Telecom Italia (Telecom) by foreclosing
access to the market for services of data transmission through digital subscriber line
(DSL) and other technologies. Market had been liberalised and the incumbent with
market power was required to allow access to the network upon request of potential
competitors.
However, Telecom denied access to network for data transmission to competitors and
abused its dominant position. Case was decided by the Corte dAppello of Rome in
2003. Court stated damages could be calculated only on loss of income suffered by the
plaintiff arising from its exclusion from the market. Courts assessment of damages was
based on the market share held by the plaintiff in the year before the infringement
multiplied by the turnover earned by Telecom in the market for data transmission for
the period of the infringement. Court used a profit margin of 10 cents (Court reduced
the 12 per cent profit margin identified by the Italian telecommunication authority for
Telecom, because Albacom was considered an innovator in the market and was
therefore subject to higher costs) to calculate the total damage.
One point to note is that there does not appear to have been an adjustment for the fact
that profit margins might have fallen if Telecom had permitted access as Telecom might
well have cut prices its prices in response to the competition from new rivals.
45

Sweden had case called Europe Investor Direct Aktiebolag and others v. VPC
46
from
2008 where competitors of VPC, central securities depository in Sweden and only

42
Description of case can be found at <http://www.carteldamageclaims.com/portfolios/cdc-german-
cement-cartel/> accessed 25 July 2014
43
29 July 2014
44
Ibid
45
Emily Clark, Matt Hughes, David Wirth,Study on the conditions of claims for damages in case of
infringement of EC competition law(2004)
<http://ec.europa.eu/competition/antitrust/actionsdamages/economic_clean_en.pdf> accessed 31 July
2014
18

company holding information on the share registers of Swedish limited companies
refused to supply claimants with full CD-ROM copies of such share registers.
Stockholm District Court constituted abuse of a dominant position and stated VPC
should be ordered to pay damages. Claimants were searching ammount of SEK7.6m
(approximately 750,000) in damages, but Court disagreed and awarded damages of
only SEK3.9m (approximately 384,000) since it considered claimantshave not
presented full proof with respect to the quantum of their damages.

Reffering to Spain we will mention two cases. First one, Antena 3 TelevisinSA v. Liga
Nacional de Ftbol Profesional case
47
followed after Spains NCA decision that Antena
3 was illegally excluded from tender for the right to broadcast football matches.
Antena 3 claimed damages in ammount between 34m-36m. Madrid First Court
Instance accepted Antena 3 claim partially because it believed claim was flawed and
awarded only 25m damages. Antena 3 tried to appeal but spanish Supreme court
rejected appeal in 2009.
Another spanish case, Conduit Europe, S.A. v Telefnicade Espaa S.A.U
48
, reffered to
abuse of dominant position by Telefonicade which refuse to give information to
claimant and gave incomplete and inaccurate data. Claimant asked for 6m damages but
only 670.000 were awarded by Court.

After Denmarks NCA decision from 2004 that Danish post abused dominant position
damages were claimed in case known as Forbruger-Kontakt a-s (Sndagsavisen a-s) v.
Post Danmark.
49
Danish post charged different prices to its own and consumers of
claimant, causing claimant to lose 2/3 of its consumers. In its judgment Eastern High
Court of Denmark found claim was justified and awarded around 10m damages.

In Lithuania there is a case from 2006 UAB Siauliu tara v. AB Stumbras
50
, where
damage claims were filled after NCAs decision that dominant supplier of alcohol
beverages abused its dominant position and claimant did not get any market payment
other wholesalers did. Court awarded damages but not in the amount claimant asked for
because it believed claimant managed to prove damages partly.

Last case we mention is Austrian case from 2007 called Bundesarbeitskammer
v Powerdrive Fahrschule Andritz GmbH.
51
Austrian Cartel Court fined five driving
schools for price fixing. Federal Chamber of Workers (Bundesarbeitskammer) brought
claim on behalf of customers of driving schools who have suffered harm.
Bundesarbeitskammer argued that loss suffered by customers could be quantified as the
22% difference between price charged by the driving schools during the two months of
the cartels duration and the lower price once the cartel had ended. Court did not
elaborate further, but stated that the prices charged by the cartel members fell from
around 1,140 to around 900 once the authorities had initiated the investigations.

46
29 July 2014
47
Ibid
48
Ibid
49
Ibid
50
Ibid
51
Ibid
19

3. Quantification of harm

Calculating harm can be hard even in the simplest damages cases. Since different MS of
EU have different legal systems this leads to situation that ability of court to calculate
harm varies, which often leads to different results in the same cases.

Directive on antitrust damages shall ensure that, in proceedings relating to an action for
damages, a national competition authority shall be able, if it deems it appropriate, to
assist on the determination of the quantum of damages upon request of a national
court.
52
This assistance may be needed for quantification of overcharge.

3.1. Quantifying overcharge by cartels

Typical consequence of infringement of competition law is increase of price by cartels
or excessive pricing by dominant undertaking. For this topic increase of price is more
relevant, therefore we will focus on it.

Lets take a cartel as example, which is one of the typical examples of breach of
antitrust law. Cartels are agreements and concerted practices between two or more
undertakings aimed at influencing the parameters of competition through practices such
as fixing the purchase or selling price or other trading conditions, allocating production
or sales quotas or sharing markets (including bid-rigging). No matter how many
undertakings are in a cartel the customers will eventually pay a higher price if the
undertakings breach antitrust law and decide to fix the price.

There is an interesting, well known Christies and Sothebys cartel case
53
which we can
use to explain cartels easily.

Christies and Sothebys were the two leading fine art auction houses which decided to
enter into cartel. Their goal was to reduce the fierce competition between them.
Namely, their competition was abruptly ended in 1995 by an agreement between the
chief executives of the auction houses. At first, Christies declared they will charge
seller fixed, non-negotiable commission on the sales price and a month later Sotheby
introduced the same policy.

The weirdest fact in this case is that there was actually no need for cartel agreement
because Sotheby was only real competitor of Christies and if they introduced same
commission on basic of pure competition illegal conduct would not exist.

Case itself is interesting because it showed that judge involved in the case had to be
creative when the customers began filling civil suits. Judge Louis A. Kaplan agreed to
class action status for the suit and announced that the lead counsel will be decided by an
auction. Law firms had to name a dollar amount minimum sum expected to be won for

52
European Union
53
In re Auction Houses Antitrust Litigation, 164 F. Supp. 2d 345 (S.D.N.Y. 2001), aff'd, 2002 U.S. App.
LEXIS 15327(2d Cir. 2002) and Kruman v. Christie's International PLC, 284 F.3d 384 (2d Cir. 2002).
20

plaintiffs, excluding fees or expenses. Law firm with the highest bid would claim
position of lead council and would receive 25 percent of any settlement in excess of that
dollar amount.
54
In September 2001 both auction houses entered into settlement and had
to pay $256m damages each to their plaintiffs (both buyers and sellers) although
plaintiffs had same conditions whether they approached Christies or Sothebys in the
moment of sale. According to the settlement this amount was calculated taking the
price-fixing or buyers premium into account. Thus, auction idea judge Kaplan designed
proved to be very original and successful. This case showed us that even in the simplest
cases of cartels, where we have just two infringing parties, it can be difficult to
determine damages.

Cartels are illegal activity which certainly have impact on markets and customers and
economical experts warn about similar issues when it comes to the matter of overcharge
quantification. The results of study done by Commission show that over 93% of all
cartel cases lead to overcharge.
We have already mentioned what is overcharge in some of the previous chapters when
we were mentioning passing on of defence. But why exactly is overcharge important for
the topic of quantificiation? Anticompetitive price overcharge has been commonly used
as a basis for computing damages claims in price-fixing cartels
55
. Plaintiff can shift the
burden of the price overcharge to its own customers. Usually neglected output effect
refers to the sales that are lost when part of the price overcharge is passed on the
customers. As the initial overcharge is a transfer of money from the direct customer to
the infringing undertakings, any information that may exist on the illicit profits made by
infringers can also serve to quantify this overcharge, although this will likely
underestimate the amount of overcharge paid.

To define and quantify overcharge caused by cartel we need to compare the prices
actually paid before or after the infringement, when infringement stopped having effect,
and try to reconstruct prices as they would have been if infringement had not occured.
It is necessary to determine which prices were affected by the infringement. This means
we need to find out when cartel infringement began, and had an effect, and at which
point that effect ended. Timing of the cartel infringement may be different from the
timing of the effects of the infringement, therefore it is necessary to look at the timing
of the effects of that agreement. Beside time effect overcharge can be quantified by
comparing the prices on another geographic or product market.

We have mentioned that direct purchasers can pass on illegal overcharge to their
customers. Therefore, we need to introduce the concept of passing on of defence. ECJ
has simply restated that Community law does not prevent national courts from taking
steps to ensure that the protection of the rights guaranteed by Community law does not
entail the unjust enrichment of those who enjoy them.
56

54
Orley Ashenfelter, Kathryn Graddy,Anatomy of the rise and fall of a price-fixing conspiracy: auctions
at Sothebys and Christies, Manor Road Building,(2004),
<http://www.economics.ox.ac.uk/materials/working_papers/paper203.pdf> accessed 2
nd
August 2014
55
Frank Verboven, Theon van Dijk (2009), Cartel damages claims and the passing-on defence, The
Journal of Industrial Economics Vol.57(3), 457-491
57
Magnus Strand, The defence of passing on: Comparing Reasons in the Commission White Paper with
those presented by the United States Antitrust Modernization Commission,(2009), Upsala University,
Department of law, pp 1-19
21

In the claim for compensation overcharge pass-on defence can be relevant in two cases:
in an action brought by the direct customer claiming reparation for the initial overcharge
paid by him, and in an action brought by an indirect customer against the infringer.
In first case, when action is brought by direct consumer, infringer might argue direct
customer should not be compensated for the overcharge on the basis that direct
consumer raised his own price aswell and thus transfered overcharge to his own
customer. This is what we call pass on of defence.

In both situations claimants and defendants could rely on two different approaches to
substantiate their claim that overcharge was passed on to the indirect customer: they
could either quantify the initial overcharge and determine the pass-on rate to the indirect
customer, possibly at several levels of the supply chain and using the econometric
techniques, or use the methods and techniques outlined above to determine whether the
indirect customer concerned paid an overcharge. This second approach will often be
easier to implement.
57

Where an indirect customer brings a claim for compensation of an overcharge caused by
a cartel, that indirect customer can either show that there was an initial overcharge and
that this overcharge was passed on to him or he may quantify the overcharge passed on
to his level in the same manner as a direct customer would quantify an initial
overcharge, namely by comparing the actual price he paid with the likely price in a non-
infringement scenario.

Where the direct customer of the infringing undertakings uses the cartelised goods to
compete in a downstream market, it is likely that the direct customer will normally not
be able to pass on this increase in cost if his own competitors in that downstream market
are not subject to the same or a similar overcharge.

Where all the undertakings in that downstream market are hit by the cartel and are thus
similarly exposed to the payment of the direct overcharge, it is likely that the direct
customer will be able to pass on at least part of that overcharge. The degree of such
pass-on is influenced by the intensity of competition in the downstream market.

In the US the practice of the Supreme court of the United States have combined effect
of rejecting the defence of passing on and barring indirect purchaser claims under
federal antitrust law. Regarding the development in the U.S., the starting point is the
1968 Supreme Court decision in Hanover Shoe, Inc. v United Shoe Machinery Corp. in
which it was ruled that the defendant could not use a pass-on defence to avoid
liability.
58

Defendants are not allowed to invoke the defence of passing on against the claims of
direct purchasers and indirect purchasers cannot claim damages on the basis that an
overcharge has been passed on to them.

38
Treaty on the functioning of the European Union
58
Jan Boone, Wieland Mller, The distribution of harm in price-fixing cases,(2012), International
Journal Of Industrial Organization Vol.30(2), pp.265-276
22

Nearly 30 years ago, the US court dealt with the issue in the Illinois Brick case
59

holding that only direct purchasers can recover for overcharges in federal antitrust cases
and that no adjustment is to be made for the passing on of those overcharges.
60

Yet Antitrust Modernization Committee (2007), henceforth AMC, rigorously assessing
the U.S. antitrust law, gives the following advice to Congress:

Direct and indirect purchaser litigation would be more efficient and more fair if it took
place in one federal court for all purposes, including trial, and did not result in
duplicative recoveries, denial of recoveries to persons who suffered injury, and windfall
recoveries to persons who did not suffer injury. To facilitate this, Congress should enact
a comprehensive statute with the following elements: Overrule Illinois Brick and
Hanover Shoe to the extent necessary to allow both direct and indirect purchasers to
sue to recover for actual damages from violations of federal antitrust law. []
Damages should be apportioned among all purchaser plaintiffs - both direct and
indirect - in full satisfaction of their claims in accordance with the evidence as to the
extent of the actual damages they suffered.
61

The other characteristics that may also have an influence on the degree of pass-on in
such situations include: the price elasticity of demand and the question whether
customers become more or less sensitive to price as prices rise, the variation of marginal
cost with output changes, the impact of the infringement on different types of costs and
the duration of the infringement and the frequency of business exchanges.

Harm caused by volume effect is closely connected to pass on of defence and thus we
need to mention how to quantify this type of harm.
Where a customer of the infringing undertakings does not pass on the overcharge and
thus absorbs it entirely, his own sales will not decrease because of the infringement as
his customers will not experience a rise in prices due to the infringement.
Where the overcharge is passed on partly or entirely to the final customer, that customer
will be subject to the rise in prices and will reduce his demand. This in turn will reduce
demand upstream in the supply chain.

This loss of profit is harm for which compensation may be awarded and we can use the
same approach as in overcharge by cartel to quantify harm caused by volume.
A comparison over time or across markets can be used to reconstruct the sales volume
in the non-infringement scenario. In some instances court may also agree to these
methods being used in a simplified fashion, for instance by determining an average
profit margin per transaction and then multiplying it by the units that were not sold
because of the infringement.
Since other types of infringement can cause overcharge aswell, such as anticompetitive
joint-venture or abusive charging of excessive prices by dominant undertaking, by the
Practical guide the same approach used to quantify overcharge by cartel can be used in
this case aswell.

59
Illinois Brick Co. v. Illinois 431 U.S. 720 (1977)
60
Franklin M. Fisher, Economic analysis and antitrust damages(2006), Kluwer law international, pp 389
61
Jan Boone, Wieland Mller, The distribution of harm in price-fixing cases,(2012), International
Journal Of Industrial Organization Vol.30(2), pp.265
23

3.2. Quantification of harm in Manfredi case

In the last years we could have find more claims for damages in EU, for example, 2012
case called European Union v Otis&Others
62
, one of the most important cases for
quantification of harm are already mentioned Courage and Crehan and Manfredi case.
Since we have previously discussed the Courage and Crehan case we will now focus on
the Manfredi.

The case dates to the 2006 and it reffers to the preliminary ruling to ECJ from the
Giudice di Pace di Bitonto (Italy).

The questions were raised in an action for damages brought by Vincenzo Manfredi
against Lloyd Adriatico Assicurazioni SpA, by Antonio Cannito against Fondiaria Sai
SpA and by Nicol Tricarico and Pasqualina Murgulo against Assitalia SpA in order to
obtain an order against those insurance companies for repayment of the increase in the
cost of premiums for compulsory civil liability insurance relating to accidents caused by
motor vehicles, vessels and mopeds paid due to the increases implemented by those
companies under an agreement declared unlawful by the national competition authority.

It was alleged that those companies had participated in an arrangement for the purpose
of the tied selling of separate products and the exchange of information between
competing undertakings. As regards the present cases, only the arrangement for the
exchange of information between competing undertakings is relevant.
63

The applicants in the main proceedings brought their respective actions before the
Giudice di pace di Bitonto to obtain damages against each insurance company
concerned for the increase in the cost of premiums paid by reason of the agreement
declared unlawful.

ECJ had several questions to answer in the preliminary ruling but for us the most
interesting are those which refer to quantification of harm.

Firstly, importance of Manfredi case was that ECJ clearly stated what type of loss can
be compensated. In paragraph 95 we can noticethat ECJ follows the principle of
effectiveness and claims that the right of any individual to seek compensation for loss
caused by a contract or by conduct liable to restrict or distort competition that injured
persons must be able to seek compensation not only for actual loss (damnum emergens)
but also for loss of profit (lucrum cessans) plus interest.
64

The same principle was taken over in Green and White paper and in 2013 it was
incorporated in Communication from the Commission on quantifying harm.

Secondly, in its judgement ECJ confrirmed that Article 81 EC must be interpreted in
that way that any individual can rely on the invalidity of agreement or practice

62
Case C-199/11 EuropeseGemeenschap v Otis and Others (CJEU, 6 November 2012)
63
Joined cases C-295/04 to C-298/04 Manfredi [2006] ECR I-6619
64
Ibid para 95
24

prohibited under that article and, where there is a causal relationship between the latter
and harm suffered, claim compensation for the harm.

In the absence of Community rules governing the matter, it is for the domestic legal
system of each MS to prescribe the detailed rules governing the exercise of that right,
including those on the application of the concept of causal relationship, provided that
the principles of equivalence and effectiveness are observed. Moreover, domestic legal
system of each MS to designate the courts and tribunals having jurisdiction to hear
actions for damages based on an infringement of the Community competition rules and
to prescribe the detailed procedural rules governing those actions, provided that the
provisions concerned are not less favourable than those governing actions for damages
based on an infringement of national competition rules and that those national
provisions do not render practically impossible or excessively difficult the exercise of
the right to seek compensation for the harm caused by an agreement or practice
prohibited under Article 81 EC.

In the absence of Community rules governing that field, it is for the domestic legal
system of each MS to set the criteria for determining the extent of the damages for harm
caused by an agreement or practice prohibited under Article 81 EC, provided that the
principles of equivalence and effectiveness are observed. Therefore, first, in accordance
with the principle of equivalence, if it is possible to award particular damages, such as
exemplary or punitive damages, in domestic actions similar to actions founded on the
Community competition rules, it must also be possible to award such damages in
actions founded on Community rules.

However, Community law does not prevent national courts from taking steps to ensure
that the protection of the rights guaranteed by Community law does not entail the unjust
enrichment of those who enjoy them.
65

This means that ECJ did not consider punitive damages neccessarily forbiden by the
Community law, yet it leaves the possibility to national law to choose whether it is
allowed to grand punitive damages.

In our opinion ECJ made a correct decision since in the EU we have countries which are
based on common law which gives the opportunity to claim punitive damages.
Moreover, total ban would mean that courts in these countries would not be able to
award punitive damages even their national law knows the concept.
Furthermore, with this decision there is a possibility for civil law system countries to
deny punitive damages, if it is contrary by their law, and yet allow some common law
countries to use the punitive damages.

The judgement in Manfredi confirmed the principle of full compensation and it stated
that the victims of infingement can claim not just actual loss but also loss of profit plus
interest. Punitive damages were confirmed as a possibility and they have their base in
the national law of MS. In the next chapter we will discuss the concept of punitive
damages in the EU.

65
Ibid para 99
25

3.3. Punitive damages in actions for damages

The concept of punitive damages was introduced in actions for damages with the
judgement in Manfredi case. As we could have already seen, ECJ does not prohibit
punitive damages per se.
66
Still, the judgement in Manfredi does not mean that the
courts will actually grant them.

What are punitive damages? The concept of punitive damages comes from the common
law system, including US, New Zealand, Canada and Australia.
Punitive damages essentially serve four purposes: to punish the off ender for uncivilized
conduct, to deter the off ender and others from similar conduct, to reward the plaintiff
for enforcing the law and to supplement inadequate compensatory damages.
67

They are not intended to compensate for harm done but are awarded in excess of any
compensatory or nominal damages.
68

In the US legal basis for punitive damages are found in Clayton Act which is the most
important legal document for antitrust law.
69
The concept is opposite of the EU laws
principle of full compensation and putting victims back in the position they would have
been if the infringement had not occurred. In the European Union only the common law
countries England, Wales, Ireland, Northern Ireland and the mixed system of Cyprus
provide for this specific kind of damages in their respective legal systems.

EUs attitude toward punitive damages is described as self-contradictory.
In the process of drafting Rome II Regulation original proposal, in the Article 24,
referred to question of punitive damages: The application of a provision of the law
designated by this regulation which has the effect of causing non-compensatory
damages, such as exemplary or punitive damages, to be awarded shall be contrary to
Community public policy.
70

This provision forgot about legal system of Ireland and England which know the
concept of punitive damages and should be allowed to use it, as we have already
mentioned in the discussion on Manfredi. Therefore, in the final version this provision
was modified and it was stated punitive damages can be awarded unless it would be
contrary to public order of MS. With this provision I believe we are getting an optimal
solution. Those countries who allow punitive damages can still award them and public
order policy avoids unjust enrichement and over-compensation in countries which do
not allow punitive damages.

Although there were some discussions that punitive damages are unneccessary in EU
law ECJ has confirmed possibility of having punitive damages in the case law. Many
other agree with this opinion stating that single damages have too low detterance effect

66
Cedric Vanleenhove, Punitive damages and European law: quo vademus?(2012),
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2054595> accessed 4
th
August 2014
67
Ibid
68
Ibid
69
Clayton Act, 15 U.S.C. 12-27, 29 U.S.C. 52-53
70
Proposal for a Regulation of the European Parliament and the Council on the law applicable to
noncontractual obligations (Rome II), 22/07/2003, COM/2003/0427 final.
26

and that many victims of infringement would only be motivated to start actions for
damages if they had a chance to get multiple damages. In the US many lawyers would
disagree because of the opinion that treble damages reduce firms' incentives to violate
antitrust laws, but also increase their incentives to use antitrust laws strategically against
their rivals.
71

European Commission obviously tries to squeeze punitive damages in the EU
competition law because we can find concept of double damages both in Green and
White paper. Moreover, paragraph 150 of Green paper considers this concept. This
proposal called for the awarding of double damages for horizontal cartel cases and was
seen as a means to provide for an incentive for private enforcement of competition law,
inspired by the treble damages of U.S. antitrust law.
72
Furthermore, paragraph 181 of
White paper mentions the same concept again: The definition of damages could also go
beyond mere compensation in order to provide greater incentives for victims to start an
antitrust damages action.
73

In that context, the Green Paper asked for comments on the suggestions to award double
damages for horizontal cartels, and to set an interest rule that compensates more
than real value. It is strange that Practical guide from 2013 yet does not mention double
damages at all. This can be used to argument behavior from Commission as confusing.

Germany has interesting point of view toward punitive damages. Namely, under
German law, exemplary or punitive damages are deemed to be contrary to
public policy.
74
That did not stop Germanys Monopolkommission, independent expert
committee which advises German government and legistrature in area of competition
law, to publish report in 2004 with lists of measures which do not have purely
compensative nature. Namely, claims for damages for copyright infringement are
collected by GEMA which is entitled to recover double damages under which a 100%
addition to the ordinary licensing fee can be made. These facts obviously prove
previous constatation that EU has contradictory attitude toward punitive damages.
Punitive damages are taken from common law and they are something unknown in civil
law countries but they are not necessarily a bad idea. We can find many discussion
regarding them and we can see they have a benefit. By this moment mixed signals were
sent. In Manfredi ECJ gave clear rule regarding punitive damages. Those countries who
know the concept can award punitive damages. In others concept can be avoided
thankfully to the public policy rule. Yet many countries like Germany do not know
whether they want them or not. They see the benefits in one case but in another they
pull the public policy argument.

From our point of view, EU has to make clear statement what does she want regarding
punitive damages to avoid further contradictions.

71
Preston R. McAfee, Hugo M. Mialon, Sue H. Mialon, Private v. public antitrust enforcement: A
strategic analysis(2008), Journal of Public Economics Vol.92(10), pp.1863-1875
72
Cedric Vanleenhove, Punitive damages and European law: quo vademus?(2012),
th
August 2014
73
White Paper on Damages actions for breach of the EC antitrust rules {COM(2008) 165 final} {SEC
(2008) 405} {SEC (2008) 406}
74
Ibid para 150.
27

4. Methods and techniques used to quantify harm

We have discussed all important questions for the matter of damage quantification.
We know what damages are, who can claim them and what position actions for
damages have in the EU. We still have not discussed the methods for quantification of
harm which are on judges disposal.

In the last chapter we will focus on Practical guide and we will discuss methods and
techniques which can help quantify harm in actions for damages. As we have previously
mentioned, Practical guide is not binding. It is a recommendation for national courts
how to make assessment of damages.

In the guide we can find comparator-based methods and simulation models, cost-based
and finance-based analysis and other methods. Every method uses different basis and
techniques to make assessment. Following, we will discuss all of them but we will start
with comparator-based methods because comparator-based method is the most
commonly used methods by judges in actions for damages, both in US and EU.

4.1. Comparator-based methods

Comparator-based methods use data from sources which is external to the infringement
to estimate counterfactual.

These methods take infringement scenario and they compare it with a non-infringement
scenario that is established on the basis of data observed (prices, profit margins, sales
volumes or other variables) either on the same market at a time before and/or after the
infringement or on a different but similar geographic market or on a different but similar
product market.

Comparator based methods are divided into three classes: comparison with data from
geographic or product market, comparison over time and combination of previous two,
comparison over time and across markets, also known as difference in differences
approach.

Comparison with data from geographic or product market look data from different
geographic or product market.
75

To make correct assessment we need to know which markets should be used for
comparison. Therefore, it is important to mention what are geographic and product
market. Definitions of markets can be found in Commissions notice on the definition of
relevant market for the purposes of community competition law from 1997.
76

Relevant geographic market comprises the area in which the undertakings concerned are
involved in the supply and demand of products or services, in which the conditions of
competition are sufficiently homogeneous and which can be distinguished from

75
The method is also known as yardstick approach.
76
Commissions notice on the definition of relevant market for the purposes of community competition
law (97/C 372/03)
28

neighbouring areas because the conditions of competition are appreciably different in
those area.
77

Furthermore, the notice defines product market as relevant product market comprises all
those products and/or services which are regarded as interchangeable or substitutable by
the consumer, by reason of the products characteristics, their prices and their intended
use.
78

The more a geographic or product market is similar to the market affected by the
infringement, the more it is likely to be suitable as a comparator market.
This means, for example in a comparison across two geographic markets, that the
products traded in the markets compared should be the same or, where this is not
possible, sufficiently similar. It does not mean that comparator markets always need to
be in its entirety.

Geographic markets on which the same or a similar infringement occurred are, in
principle, not good candidates for being used as comparator markets. Also neighbouring
markets on which no similar infringement occurred may still have been influenced by
the anticompetitive practices on the infringement market.
79

Making a comparison with these types of markets usually does not lead to estimate full
damages but it can be used as a basis to determine lower-bound estimate of the harm.

Comparison over time is a second approach and alternative to comparison on relevant
market. This approach compares period in which infringement occurred with period in
which infringement did not take place. Therefore, this approach can use three different
periods for comparison.

First one is so called before and during approach and it is using pre-infringement period
which was not under the effect of infringement.
Comparison during and after approach is a second one which takes post infringement
period, which was unaffected, and it is comparing prices affected by infringement with
prices paid at same market after infringement ended.
Last one is before, during and after approach and it is using both pre and post
infringement period as comparison.

It is extremely difficult, or almost impossible to make correct assessment what would
happened if infringement had not occurred. Therefore, it is sufficient to re-create
sufficiently similar time period which allows non-infringement scenario to be
reasonably determined.

Even if we cannot determine non-infringing scenario correctly, if we have relevant data
we can use it can still lead to the fact that we can create lower-bound estimate of harm.

77
Ibid para 8.
78
Ibid, para 7.
79

29

This approach can be better option than relevant market approach because we can
determine when the infringement ended.

An advantage of this method compared to the simplest time series analysis that allows
for structural breaks is that the beginning and end phases of the cartel are determined
endogenously.

Using comparison over time approach can be a great option when we have all relevant
data from the time before and after infringement. Comparing these facts with
infringement period can lead us to create non-infringing scenario and make correct
estimate of damages.

On the other side, this approach has some disadvantages.

Some problems with this method are that if another geographic or product market is
truly comparable to the cartelised one, there are good reasons to believe that the
incentives to cartelise are also similar, so that it cannot be avoided that one cartelised
market is compared to another, thereby substantially underestimating damage.

Moreover, the case of cartels it is extremely difficult to find out exact moment when did
the cartel start operating and when did the infringement occur. Since some cartels last
for decades before they are discovered it may be difficult to get the relevant data for
comparison.

Furthermore, even if the infringement ended, in cases of large cartels this does not mean
we will be able to take instantly post infringement data. Sometimes it takes time to
eliminate consequences of cartel and equalize the prices.

Which period will be used it is a question it depends from a case to case and from a
specific circumstances, for example, type of industry.
There are some arguments for using post-infringement period, e.g. the likelihood of
damage assessment based on post-cartel prices may in fact create an incentive for
parties to price above the non-collusive price in the post-cartel period.
80

Still, strategic behavior can lead to an underestimation of cartel damages if the
assessment is based on post-cartel prices. Therefore there are many arguments to use of
pre-cartel price information as the more appropriate benchmark.

We should take all case circumstances into account. If we can determine exact moment
of infringement I agree with the opinion to use pre-infringement price. Otherwise, it
may be the best thing to use post-infringement price.

Comparison over time and across markets or difference in differences method, can be
considered a combination of time series analysis and cross sectional analysis, either the
average prices in the two markets can be compared or additional factors can

80
Theon van Dijk, Frank Verboven, Quantification of damages,(2005),
<http://www.econ.kuleuven.be/public/ndbad83/frank/papers/Van%20Dijk%20&%20Verboven,%202006.
pdf> accessed 5
th
August 2014
30

be considered by using a regression analysis.

Depending on a circumstances of case or applicable national law, data can be compared
directly or we can use other simple techniques, such as deriving a comparator value
from a range of data observations is linear interpolation.

If we have more price series before and after infringement and price during the
infringement we can create a line between pre-infringement and post-infringement price
and a comparator value can be read for every relevant period.

If method has been chosen it needs to be decided how to implement it in practice
Two dummy variables, one for the cartelized market and onefor the cartel period are
introduced as well as an interaction term that is defined as the product of the two
dummy variables. The estimated coefficient of this interaction term gives an estimate of
the cartel induced price increase. Application of the difference-in-differences method,
however, often encounters data constraints so that the basis for a time series comparison
across different geographic markets is not always given.
81

Judges also have two simple methods on their disposal: linear interpolation and
regression analysis.

Linear interpolation can be used to make an assesment if we have relevant data.
For example, if we know that infringment had effect in year 2000 and stopped having
effect in 2005 we can use the price which was paid in the infringing period and compare
it with pre and post-infringement period.

Connecting the actual prices from pre and post infringement period gives us
approximate estimated price. Comparing this price with price which was actually paid
in the infringement period gives a good basis to estimate damages.

Second technique we can also apply is regression analysis.
Regression analysis therefore makes it possible to assess whether, and by how much,
observable factors other than the infringement have contributed to the difference
between the value of the variable of interest observed on the infringement market during
the infringement period and the value observed in a comparator market or during a
comparator time period.

Regression analysis is thus a way to account for alternative causes for the difference
between the compared data sets. All comparator-based methods are, in principle,
capable of being implemented through regression analysis provided that sufficient data
observations are available.
82

Regression analysis has two approaches. It uses either only data fom non-infrigement
period to build regression equation which is later used to forecast effect of variable of

81
Frank Maier-Rigaud, Ulrich Schwalbe, Quantification of antitrust damages(2013)
th
August 2014
82
31

interest during the infringement period on the basis of the pattern identified outside this
period. This is called forecast approach.

Second approach uses data from infringement period to estimate regression and effect of
infringement accounted for in the regression equation through a separate indicator
variable. This approach is known as dummy variable.

Which approach will be used it depends from a case circumstances.

Forecast approach shows us connection between the input costs and price.
For example, if the price of flour was 140 in the infringement period and price of cerials
(input) was 60 and we can see that input in the infringing period was 50 than we can
make a forecast and state price of flower in non-infringement period should be 120.

Dummy variable shows us actual price in all periods, pre-infringement, during and post
infringement and compares this price with estimated prices in pre and post-infringement
period. Therefore, it is possible to make estimate what would price be if infringement
did not occur.

It is extremely important to know the industry and have all the important variables to
apply these methods and get correct, estimated price.

Although it is clear that although comparator-based methods have many advantages one
of the disadvantages of these methods is that we need to have all relevant factors. It is
difficult to distinguish between of infringement and separated factors.

As we have already mentioned, which method will the court use depends from the
circumstances of case, national law, whether sufficient data are available to the party
charged with the burden of proof and whether the costs involved are proportionate to the
value of the damages claim at stake.

We must be cautios when using this approach.
Firstly, former cartelists expecting damages claims in the aftermath of the cartel episode
will find it in their interest to maintain higher prices than would otherwise be warranted,
to the extent that the profit loss associated with such higher prices is overcompensated
for by lower damages claims if post-cartel prices are used in the estimation of damages.

Secondly, the breakdown of a cartel could result in a price war and the exceptionally
low prices during this period do not reflect prices that would prevail under normal
competitive conditions.

Thirdly, some cartel cases exist where the competition authority was not satisfied with
fining the cartelists and implementing a cease and desist decision but also tried to
reduce the future possibility of tacit collusion. As a result, prices observed after the
cartel ended may remain supra-competitive and it may be prudent to give such prices a
lower weight than pre-cartel prices in estimating the counterfactual price.
83

83
David Ashton, David Henry, Competition damages actions in the EU: law and practice(2013),
Edward Elgar Publishing Limited, pp 239
32

4.2. Simulation models, cost-based, finance-based analysis and other methods

Beside comparator-based methods there are also other methods which are supposed to
establish and simulate non-infringement scenario.

Cost-based method as alternative comparator-based method for determining the
counterfactual scenario involves using the variable cost of production and adding an
appropriate mark-up in order to derive a counterfactual price in a 'bottom-up' way.
The mark-up could be estimated using information on margins in comparable
competitive markets or theoretically determined information.
84
The resulting estimate
for a per unit non-infringement price can be compared to the per unit price actually
charged by the infringing undertakings to obtain an estimate of the overcharge.

Various cost measures can in principle be used: for example, short-run incremental
costs, long-run incremental costs or average unit production costs. Which of these is
most appropriate in a particular case depends, amongst others, on the time-horizon taken
in the analysis.
85

This method is likely to be applied because of its simplicity. The main information
required for computing the competitive but-for price is accounting information to
compute cost, and assumptions on what constitutes a reasonable competitive profit
margin.
86
First step in cost-based method is to determine production cost per unit. This
cost can be calculated by dividing actual relevant production costs incurred by the
infringer for the relevant business activity by the total number of products produced.
This approach is simple to use for companies produce only one main product. These
companies sometimes publish their costs in their audited accounts with public registries.
Therefore, it can be easy to use these costs and apply cost-based method. In other cases
it would be very difficult to assess these data.

It may be that these data were affected by infringement of Articles 101 and 102. In this
case we would have to make appropriate adjustment of costs. Otherwise, it would not be
desirable to use costs, although they can still use to make lower-bound estimate of the
possible price overcharge.

The second step of the cost-based method requires a reasonable profit margin to be
estimated and added to the per unit production costs.
87
Various approaches to make
estimate profin margin exist and they are similar tp comparison over time or across
markets, or on economic models methods.

Moreover, estimate for the profit margin that could reasonably be expected in a non-
infringement scenario maybe derived from the profit margins made by similar

84
Ibid pp 243
85
Theon van Dijk, Frank Verboven, Quantification of damages(2005),
<http://www.econ.kuleuven.be/public/ndbad83/frank/papers/Van%20Dijk%20&%20Verboven,%202006.
pdf> accessed 6
th
August 2014
86
Ibid
87
33

undertakings in a comparable geographic market not affected by the infringement or in
comparable product markets. Furthermore, another approach to estimating a reasonable
profit margin is to consider nature of competition and the characteristics of the market
absent the infringement and to derive a likely profit margin from the insights from
industrial organisation models. Both estimation have issues that need to be considered,
for example, how to obtain access to data that may be in the possession of the opposing
party or a third party.

Simulations (theoretical modelling) is closely related to cost-based approaches as it
often requires some cost information. However, this methodology uses an explicit
model of competition, which is used to simulate the profit margins. In addition to data
on costs, simulations thus require information on market structure and demand (such as
demand elasticities). As before, various empirical techniques exist to implement this:
individual parameters of the theoretical model can be adjusted to replicate the known
facts of the industry. Alternatively, one may estimate the parameters econometrically,
which is more demanding with respect to data.
88

This methodology uses an explicit model of competition, which is used to simulate the
profit margins.
89
Economic studies show how market functions and what competitive
behavior of companies is. These studies can help us predict outcome of market, for
example, market price or profit margins. Various models can predict various outcomes.
Choosing right type model is of extreme importance.

Simulation models can be built to make estimate price which would have existed if
infringement had not occur. The simulation model should be constructed in such a way
that it replicates the most significant factors influencing supply (in particular, the way
competition takes place between firms (competitive interactions) and the cost structure
of firms) and demand conditions (in particular, the extent to which customers respond to
price changes).
90

Each simulating model relies on theoretical and factual assumptions regarding market
characteristics and behavior of producers and consumers. They can provide useful
insight regarding damages. Even model still depends very much on the right
assumptions being made, in particular regarding the central questions of what is the
likely mode of competition and the likely customer demand in the non-infringement
scenario.
It is also important to mention that there are also other methods beside mentioned but
they are not mentioned in Practical guide, for example, those who estimate upper and
lower bound or approximate estimate for harm suffered. These methods can allso be
applied under applicable rules and if principles of equivalence end effectiveness of EU
law. Which of mentioned methods will be used it is up to court to decide.

88
Hans W. Friederiszick, Lars-Hendrik Rller, Quantification of Harm in Damages Actions for Antitrust
Infringements: Insights from German Cartel Cases(2010)
th
August 2014
89
OECD, Quantification of harm to Competition by National Courts and Competition Agencies,(2011),
pp 37.
90
34

4.3. Choice of method

Every method we have mentioned can be used to quantify harm occured by infringment
of competition law. Although these methods cannot completely and correctly predict
what would happend if competition law was not breached, they can only help make
estimate version of non-infringing scenario. Also, they can help judge not just
determine price overcharge but also sales volume and loss of profit.

Although courts in USA and Europe use comparator-based methods more often no
method is more significant or better than others. Simulation models can be used if we
have relevant data and circumstances of the case allow to rely on economic situation.
Methods based on financial analysis take the financial performance of the claimant or
the defendant undertaking as the starting point for estimating whether the claimant has
suffered harm and the amount of that harm.
91
These data can be relevant if we, for
example, use the data which refer to profitability.

We have previously mentioned that Practical guide is not binding and it is up to court
do decide which methods will be used. What court should take into account, when
choosing method, are the provisions of Directive on antitrust damages. Beside
presumption that cartel cause damages these provisions give possibility to court to ask
help from NCA in damage quantification. Since NCA has more experience with
competition law it would be good idea to actually consider involving NCA in the
process of choice of method and the process of quantification of harm.

Moreover, Directive claims it is for the domestic legal system of each MS to determine
their own rules on quantifying harm and for MS and for the national courts to determine
what requirements the claimant has to meet when proving the amount of the harm
suffered, how precisely he has to prove that amount, the methods that can be used in
quantifying the amount and the consequences of not being able to fully meet the set
requirements. However, these domestic requirements should not be less favourable than
those governing similar domestic actions (principle of equivalence), nor should they
render the exercise of the Union right to damages practically impossible or excessively
difficult.
92
Thus, national courts should take these provisions in their mind when
deciding which method will they use.

If oposing parties use different methods and get similar results this can lead a legal
system to attribute stronger evidentiary value to the damages estimate. In contrary, it
would not be appropriate to choose average of two results nor would it be appropriate to
consider that the contradictory results cancel each other out in the sense that both
methods should be disregarded.
93
In this case court should re-think about choice of
method. It will have to look circumstances of the case, data on its disposal, facts which
led to two opposing results,strenghts and weaknesses of all methods and compare it
with case circumstances and in the end find the best option and implement it in the case.

91
Ibid
92
European Union
93
Ibid
35

4.4. Ex aequo et bono quantification

Last relevant question for damage quantification is question of application of ex aequo
et bono rule, also known as ex aequo et bono quantification.

What is the concept of this rule and its historic origin? Namely, the term ex aequo et
bono is taken into law from latin and, if translated, it would mean in the name of equity
(fairness) and concience. The concept is taken into most legal systems and applied in
the manner that in certain case court has the right to decide on the basis what is fair and
just under the circumstances of the case and not on the strict rules of law.

In the documents European Commission has published we can find ex aequo et bono
quantification. First document which had it mentioned was Green paper and later it was
mentioned in White paper aswell. Moreover, White paper has even made a paralell
between ex aequo et bono quantification and methods used to quantify harm.

Namely, White paper states that from a legal perspective, the use of simpler models
could be underpinned by an ex aequo et bono estimation of damages. The latter would
imply that it is not always necessary to prove the exact amount of the damage, since it
allows the court to award a reasonable amount, based on some economic
approximation.
94

The basic rule, operating in many MS is that where exact quantum is difficult to prove,
proof of exact damage can be waived and the court can award a reasonable amount in its
place (this is often called an ex aequo et bono estimation). In a few MS, this possibility
only applies to certain categories of damage, most notably loss of future profit.
95

The rule is neccessary from one reason, at least. Namely, in a few MS this lowering of
the required standard of proof of the claimant in relation to the quantification of
damages does not exist. That means that if the claimant is unable to prove the exact
loss, the claim fails.
96

To avoid this scenario court has the power to apply the rule and award damages because
following the law strictly would not be fair if we take into account case circumstances.

One of the new cases in the EU which mentioned use of this rule was the italian case
called Fondiaria SAI SpA v. Nigriello case.
97
Supreme Court, which was also resolving
question of causal link between infringement and damages on basis of probabilistic
presumption in order to deduce the relationship between antecedents and consequents,
was discussing the question of application of this rule.
The Supreme Court confirmed that when the exact quantum of the loss is difficult to
prove, the Italian Courts can rely on Article 1226 of the Italian Civil Code and award an
equitable amount of damages (ex aequo et bono).

94
White Paper on Damages actions for breach of the EC antitrust rules {COM(2008) 165 final}
{SEC (2008) 405} {SEC (2008) 406}
95
Jrgen Basedow, Private enforcement of EC Competition law, (2007), Alphen aan den Rijn [u.a.]:
Kluwer Law Int. pp 308.
96
97
OECD, Quantification of harm,(2011), pp 124.
36

5. Conclusion

Creation and further development of EU is longlasting process which last untill this day.
Through the time EU became strong politic and economic Union with its own rules and
applicable law. Creation of single market led to many abuses by undertakings which did
not want to respect competition law provisions. Therefore, EU had to focus more on
public enforcement although there is another mode of enforcement of competition law,
private enforcement, which has been left behind.

We have seen some arguments pro and contra private enforcement. EU needs to give
more attention to private enforcers. Private claimants sometimes have more information
than Commission has. Damages payed can help discourage undertakings to breach EU
competition law. Excuses have been used by lawyers against claims just in EU.

In US
98
, for example, some fear that claims lead to many settlements which are not
based on meritous claim because undertakings are afraid of claims, especially if there is
possibility of class actions. Some fear these actions discourage legal competitive
behavior. For these and related reasons many members of antitrust community call for
the curtailment of private enforcement, some even of its abolition.
99

These arguments and others which mention lack of social welfare, fines set too low to
deter, are not convincing. Eu does not need to leave out private enforcement. Although
it is ungrateful to compare EU with any MS, because EU is not a state like, we still need
to make a parallel between national and EU law.

Private enforcement is not something new, both public and private enforcement exist
and they are both applied in every MS. National laws would not discourage private
enforcers to claim for damages although there is strong public enforcement. Not any
lawyer would reject a client wanting to sue because damages obtained would be too
low, they do not have social welfare, they do not discourage other parties to breach law
or affect behavior of other party. Some would not agree with this comparison and would
claim it is impossible to make a parallel comparison between EU law and the law of
MS.Yes, we agree EU is not a clasical state but EU has its own bodies which create EU
law, has its own court, it has even introduced concept of EU citizenship. Why should
not we use comparison?

Those supporting public enforcement agree sometimes fine imposed by Commission,
does not deter companies, which make huge profits, to breach law. EU has created
single market and it would be perfect if there were no breaches of law in practice. Still,
we must accept big players are on the market and they do not want to follow rules on
competition. They are interesting only in making profits and do not care about
competition law. They will try to earn more and if earing more means breaking rules.
Since public enforcement cannot fight these big players by its own it is time to actively
include private enforcers.

98
Albert A. Foer, Jonathan W. Cuneo, The International handbook on private enforcement of competition
law,(2010), Edward Elgar Ltd , pp 1-613
99
Ibid
37

We will not come to situation there will be no more infringements but worrying about
some issues like Commissions fine and compensation they will need to pay will deter
some undertakings. Of course we have not see benefits from private enforcement when
there are not many claims.

We have many cases where infringement occur but we would not be able to name 100
cases where private enforcers were actually compensated for harm suffered. Maybe EU
needs to consider strengtening concept of collective damages which is now still not
developed.

We have previously said not all private enforcers will behave in manner they should,
many will try to get compensation even if they were not harmed but national courts
could deal with those type of parties. For countries which do not have courts with
special jurisdiction, one of the solutions could be to create these courts which would
focus only on cases from competition lawand avoid courts being cluttered with damage
claims. This would not be easily conducted in national law, there would be many
difficulties. Still, it would be easier to resolve these issues than leave private
enforcement in behind, especially because we do have and will have more benefits with
stronger private enforcement. Public and private enforcement need to coexist and only
with this integrated approach we can make results.

We have seen most courts follow compensatory principle when determing ammount of
damages. Compensatory principle is based on the idea that a person that suffered antitrust
injury has to be made whole of the loss sustained.
100

This type of damages is supposed to deter further infringements, serve as correcting justice,
namely putting parties in position they would have been and protect internal market.

Oposite to compensatory principle is the concept of punitive damages and there are
many disputes on this topic. Manfredi judgment made by ECJ showed punitive damages
should not be banned per se.

We need to take into account some countries in EU have common law system and it is
not fair to discriminate and forbid them to use punitive damages just because the rest of
civil law countries in EU does not like it. Moreover, Manfredi showed that in some
cases awarding damages following principle of effectiveness and proportionality may
not be fair. For example, damages awarded following these principles may be set too
low and in these situations courts should consider following ex aequo et bono rule and
award treble damages.

We are aware punitive damages are not classical civil law institute. They are contrary to
public policy and civil law countries focus only on full compensation. Therefore it is not
surprising many lawyers rebel and protest against punitive damages. But to be clear
and honest we have already taken and incorporated in EU competition law one common

100
CEPS, EUR, LUISS, Making antitrust damages more effective in EU: welfare impact and potential
scenarios,(2007),
<http://ec.europa.eu/competition/antitrust/actionsdamages/files_white_paper/impact_study.pdf> accessed
8
th
August 2014
38

law institute, leniency note. We have many benefits from leniency: infringers report
anticompetitive behavior because they want to avoid being fined by Commission,
competition authorities get necessary evidence and impose fines on infringing
undertakings and victims of infringement can get compensation. We have already taken
and implemented something foreign in EU competition law. Then why do we have such
a hostile attitude toward punitive damages?

Law is not static, it grows and evolves. We saw leniency had many benefits and we
have already incorporated in in EU law. Why not consider doing same with punitive
damages. Of course, we should not take every foreign concept and implement it in EU
law but we should make more studies to see how they could be implemented, what are
expected results and then make decision.

Punitive damages would make much effective deterrence although it would probably
bring some other problems, for example overdetterence. Even if most of the claims in
private cases are meritorious, many believe that treble damages, especially in light of
the other existing antitrust sanctions, lead to overdeterrence.
101

Message sent by Commission is confusing and it feels like punitive damages are
unwanted child of EU law. Germanys case and idea to allow double damages in cases
of cartel are contradictory.
102

It is up to EU and us to decide what we want. If we do not want them we need to make
clear statement there is no place for punitive damages in MS which have civil law
systems.

Another issued question in action for damages in EU is price overcharge and passing on
overcharge. We agreed with Commission, direct purchasers should not be only to be
compensated. We should allow all victims of infringement to be compensated,
otherwise direct purchasers will be overcompensated and will be unjustly enriched.
EU does not support that idea, same as punitive damages, therefore we should retain the
same approach in case of indirect purchasers, otherwise we are having contradictory
decisions in same cases.

We have seen it is up to judge to choose a method he believes it is the best regarding
circumstances of the case.
Judges use comparator-based methods more often but they should not favor them.

All methods have their advantages and flaws.
We should not favor comparator-based method and not even trying to apply other
methods to the case because it may be actually shown that other methods suit the case
better than comparator based method.

101
Joshua P. Davis, Robert H. Lande,Defying conventional wisdom: the case for private antitrust
enforcement,(2013), < http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2217051> accessed 3
rd

August 2014
102
CEPS, EUR, LUISS, Making antitrust damages more effective in EU: welfare impact and potential
scenarios,(2007),
<http://ec.europa.eu/competition/antitrust/actionsdamages/files_white_paper/impact_study.pdf> accessed
8
th
August 2014
39

Last, we need to discuss Practical guide completely. As we have seen, Practical guide
gives many solution. Commission has made many efforts to make it complete,
comprehensive guide for judges.

Commission made only one mistake she did not make Practical guide legally binding.
What is the point of a document which is not binding for all MS? How should they
make equal rules and avoid victims being differently treated in same cases if same rules
and procedures are not applied in same cases?

Judges have all the freedom in damage claims when making assessment of damages.
They can choose method they like, they make decision which evidences will be
disclosed and how high will be compensation. There is a question why did Commission
create Practical guide and how should guide help if it is not binding?

Judges do not have to rely on it, they can still hold on the rule of ex aequo et bono
quantification and decide on damages regarding circumstances of case.
Problem is that different cases lead to different solutions. Judges interpreted differently
fairness and equity.

Applying ex aequo at bono quantification instead of Practical guide will not resolve
issues Commission wanted to overcome when she published the guide.
Therefore, Commission should reconsider its decision and make Practical guide
binding.

We have seen that Commission has made many efforts to help both victims and judges
overpass issues which arise in actions for damages.

Still, Commission will have to be more consistent when it comes to her publications.
With such practice she will be able to achieve goals she wants to achieve.
If she avoids solving this issue it will not matter how much time and energy is and will
be invested in the future, she will not be able to surpass it.
Victims of infringement will stay in unenviable positions and all efforts Commission
made will be useless.

We have seen that national courts awarded damages in some cases. ECJ and its case law
acted as their guide and offered them assistance. With consistent practice by
Commission and good will of MS we can build one effective system of private
enforcement which will co-exist with public enforcement of competition law.

Only integrated approach of public and private enforcement will be able to deter
undertakings from further breaches of competition law. They need to know their
behavior will not be tolerated, both by Commission, which will continue to find them
and by private enforcers, who will claim and get compensation for harm suffered.

40

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