Last year ended with a remarkable judgment by the Higher Regional Court of Stuttgart concerning a follow-on damage claim. The case related to the bathroom fittings cartel. The judgment, inter alia, clarifies requirements related to the burden of proof, and endorses an innovative multi‑stage structured assessment for quantifying alleged cartel damages by introducing a cartel overcharge corridor.
Burden of proof
One of the many noteworthy takeaways of the judgement (hence my recommendation to read it in its entirety), are the lowered formalistic requirements set by the court regarding the proof of a claim.
As written above, the judgment relates to a follow-on damage claim based on alleged damages resulting from the bathroom fittings cartel, which was sanctioned by the European Commission in 2010. The damage claim was filed by the insolvency trustee for the Praktiker retail chain against Hansa Metallwerke, one of the cartelists. Damage was claimed for roughly 90,000 individual purchases of bathroom fittings. In the case at hand, the claimant listed these approx. 90,000 purchased items in an Excel file, most of them linked to purchase documents in PDF format. The court found this to be a proper way to substantiate individual “claims/purchases”, as the list included, inter alia, buyer, wholesaler, brand, quantity, article number, invoice number, amount and due date.
According to the court, summarizing the alleged purchases in the statement of claim and referring to electronic documents on a data carrier for particulars can meet the requirements of a sufficiently specific submission. The court highlighted that such structured data might not only be adequate, but even preferable as it can make the submission more comprehensible, verifiable, and processable compared to an exhaustive prose.
The court’s multi‑stage structured assessment
Substantively, the court endorsed an innovative multi‑stage structured assessment to determine the alleged cartel damage. It did so after finding that it would not have been appropriate to gather further evidence, namely appointing an economic expert, because the court saw considerable doubts as to the practical suitability of regression analyses for estimating damages in contradictory court proceedings and because the court considered lengthy, extensive, and costly evidence-taking to be inefficient in terms of procedural economy. Lawyers and economists beware.
The court’s multi-stage methodology proceeds as follows:
- Determination of an antitrust-related price effect: First, the court must determine that the identified infringement led to a noticeable price increase with a high degree of probability.
- Classification to an estimate corridor: Second, if a price effect was found, it shall, according to the court, generally be assumed that the cartel-induced price increase at the first market level typically lies within a corridor of 5 and 25% of the purchase price paid. However, eventually, special circumstances can make a lower or higher price effect appear highly probable. In these cases, the court would assign the price effect to the corridors “up to 5%” or “more than 25%”.
- Precision of the estimate: Once the cartel has been assigned to one of the corridors (up to 5%, 5 to 25%, or more than 25%), the third step of the assessment involves an overall evaluation of all significant evidence, weighing all price-driving or price-dampening effects, to determine a specific price increase within the corridor.
- Passing on damages to the claimant: If the claimant is only an indirect customer of a cartelized product, it must, as a fourth step, be examined whether and to what extent the alleged price increase incurred further upstream was passed on to the claimant.
- Pass-on: Finally, the court must review as to whether – and to what extent – a claimant (itself) eventually passed on the alleged cartel-related overcharge to its own customers.
This multi-stage approach, as the court finds, is designed to ensure procedural economy while at the same time reflecting economic complexities typical in cartel damages proceedings.
Cartel overcharge corridor
A notable innovation is the court’s establishment of an overcharge corridor. The steps two and three described above aim at ascertaining the concrete level of the alleged overcharge. In this respect the court highlighted the necessity of a holistic assessment, focusing on the following factors and aspects:
- Scope and effectiveness of anticompetitive agreement: Breadth of products, geographic coverage, duration, and the intensity/frequency of coordination.
- Organization: Structure and enforcement of cartel, roles of cartelist, and information flows.
- Market conditions: Oligopolistic structure, barriers to entry, product differentiation/substitutability, and procurement architecture.
- Demand response: Customer sophistication, bargaining power, switching possibilities, and purchasing behavior.
According to the court, the inclusion of these elements shall ensure that the estimated overcharge reflects not just abstract averages, but the specificities of the sector concerned. In individual cases this may, as the court notes, also result in damages falling outside the corridor of 5 to 25%. However, it would presumably require very convincing arguments on the part of the respective claimant or defendant to convince a court that damages indeed fall outside of the corridor.
Outlook
The practical implications of the court’s recent judgement could shape the future litigation of cartel damage claims in Germany.
The lowered formalistic requirements regarding the substantiation and proof of claims will likely ease the burden on claimants, especially in large-scale or follow-on litigation involving extensive datasets.
The multi‑stage assessment including the newly introduced cartel overcharge corridor could standardize judicial practice. If so, the debate could shift from “whether there was an overcharge or not” to “where within the corridor the case lands,” incentivizing parties to marshal targeted economic evidence on the specified factors. At the same time, given that the court’s model does in principle not provide for a “zero damage”, defendants might tend to “calculate” a low damage rather than a zero damage.
Overall, if upheld and not overturned by the German Federal Cour of Justice (BGH) following a successful appeal against non-admission (the court only allowed appeal to the BGH with respect to the amount in dispute, but not regarding the grounds of the claim), the decision could foster private cartel enforcement in Germany and the court’s newly introduced multi‑stage structured assessment could become new standard.
Photo by Ross Findon on Unsplash
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