Private Cartel Damage Claims – Step-by-Step

To companies either being sued as cartelists or claiming compensation as allegedly injured parties, private cartel damage claims are of major economic relevance. While certain steps and processes on the way to claiming damages are prominently on companies’ radars, various other aspects are less known – even though they are just as important. Here is a summary and chronological overview of the various steps that claimants and defendants typically go through and need to consider when bringing or defending against private cartel damage claims.

What gets the ball rolling

Generally, courts are bound to a certain extent by the cartel decisions of the competent regulators. Therefore, private cartel damage claims are regularly set up as so-called “follow-on” damage claims: Claimants (often supported by litigation funders) typically bring their private cartel damage claims to court once a regulator has published its final decision (or even only when all legal appeals of the cartelists against a regulator’s decision have been exhausted).

However, many companies and litigation funders if well advised start to monitor the potential for bringing private cartel damage claims much earlier. What typically triggers attention are dawn raids or statements of objections to companies who a potential claimant has business relationships with and/or who operate in the same markets, be it as a customer, supplier, or competitor.

First “steps” towards claiming damages might already be taken at this early stage:

• Alleged cartelists sometimes find themselves approached by potential claimants. The nature of such initial contact can vary greatly. It can take the form of a mere initial inquiry as to what the allegations are all about (which will most likely either be ignored completely or answered by a short response stating that an ongoing proceeding will not be commented on) or include the request to conclude a statute of limitation waiver agreement with respect to potential damage claims resulting from the alleged anticompetitive conduct.
• Contact with claimants might not necessarily be purely bilateral: In particular in more high-profile cases, companies under investigation might find themselves confronted with class actions (e.g., in the US) quickly after an investigation became public.

The curse and blessing of statute of limitation waiver agreements

The typical initial scenario are still direct negotiations between claimants and (alleged) cartelists. These can become hectic towards the end of a year, when there might be a risk that certain claims could become time-barred. To address this risk, claimants have two options – take their claims to court or agree on a statute of limitation waiver agreement with an (alleged) cartelist:

• In very simple terms, the purpose of statute of limitation waiver agreements is that a party (the alleged cartelist and potential future defendant) commits not to raise the defense of the statute of limitations for certain claims directed against it. Agreements to waive the statute of limitations, and this is important to bear in mind, do technically not suspend the statute of limitations (unlike, for example, the filing of a damage claim), but only constitute a waiver by the opposing party.
• Statute of limitation waiver agreements can be of advantage for both the future defendant and the future claimant. For future defendants, statute of limitation waiver agreements can have the advantage that they are not “overrun” by claimants all at the same time. It “buys” them time, enables to postpone certain claims to a later point in time and allows to better allocate resources (that might be limited and needed to handle the case). On the other hand, for future claimants, statute of limitation waiver agreements may have the advantage of being able to better prepare and in some cases to observe (and learn from) the progress of other parallel pending cartel damage claims, in particular concerning damage calculation, theory of harm, decision practice etc. before bringing their own claim to court prematurely.
• The downside is that statute of limitation waiver agreements are regularly only valid for a limited time. For this reason, mostly at the end of a year, all potential claimants whose waivers of the statute of limitations are about to expire will approach their counterparties and request an extension/renewal of the waiver. For defendants this often makes for a busy end to the year. All the while alleged injured parties must be prepared to file their cartel damage claim as otherwise the claims may be time-barred.

How things develop further

Before private damage claims are taken to court, both sides will regularly enter into out-of-court negotiations, discussing if and how the case could be settled. Such negotiations will often already take place with the involvement of not only lawyers but also economists. In parallel, both sides will internally conduct extensive and laborious data collection processes to further investigate the facts of the case and to provide their own economists with data on the basis of which they will prepare economic expert reports to analyze whether and, if so, which damage may have occurred. Until companies find themselves in this situation, many underestimate how time-consuming this process of processing the facts can be, for example because certain people might have left the company in the meantime or because data can no longer be recovered or only with considerable effort.

If out-of-court discussions fail, claimants will have to consider bringing their damage claims to court. Depending on the respective circumstances of the case, there might be various courts (sometimes in different countries) that have jurisdiction:

• Potential claimants are well advised to carefully analyze which court (in which country) might be the best to place their claim with, as there can be significant differences in how courts deal with, for example, requests for the disclosure and handover of documents, apply damage estimates and damage presumptions or interpret other procedural rights.
• Once a claim is taken to court, cases will sooner rather than later turn into a “battle of the economists”, presenting expert reports, rebuttals, re-rebuttals and so on. Courts nowadays try to limit these expert opinion battles. However, this is not always successful and sometimes even ends in the preparation of a further, court-commissioned expert opinion that analyzes the respective party expert reports, which the party experts are then allowed to comment on again…

How things come to an end

In practice, it is not uncommon that private cartel damage proceedings end – after years – with a settlement between the parties.

In particular the defendant(s) will regularly have an interest in not ending the proceeding with a final judgement of the highest instance as this could have (in case of negative outcome) a negative knock-on effect on all other pending proceedings, and potentially even on claims that have not yet been brought before the courts.

At the same time, ending the proceeding with a settlement might also be beneficial for claimants as (obviously depending on how the court would have decided) they can save themselves further expenses for consultants and, due to the defendant’s interest in avoiding a judgment at the highest instance, in certain cases achieve a greater financial advantage than in case of a court judgment.

To summarize these, these are the typical five steps of cartel damage claims when things indeed go to court:

1. Monitoring of cartel investigations by potential claimants and/or litigation funders
2. Dawn raids/cartel investigations/decision regarding anticompetitive conduct
3. Bilateral negotiations between the parties, including statute of limitation waiver agreements
4. Court proceedings, including a “battle of the economists”
5. Settlement between the parties

Photo by Connor Betts on Unsplash