Cartel damages in the ethylene market: what the Amsterdam ruling teaches us about the plausibility of damages
Companies facing a cartel infringement often face a difficult question: how do you prove that a fine imposed by the European Commission has actually resulted in financial loss? A recent ruling by the Amsterdam District Court shows that the gap between ‘there was a cartel’ and ‘I have suffered loss as a result’ is by no means automatically bridged. For business owners, finance professionals and lawyers dealing with competition law and claims for damages, this case offers valuable lessons on the burden of proof, causation and the limits of the so-called ‘damages assessment’ procedure.
What was the dispute about?
A claims organisation took action on behalf of a number of Spanish and Portuguese chemical companies that produce and sell ethylene. These parties believe they have suffered financial loss as a result of agreements between a group of international chemical conglomerates. These agreements had previously been fined by the European Commission for breaching the European ban on cartels.
The Commission had established that the companies involved had exchanged sensitive commercial and price-related information amongst themselves and had set a price component for ethylene procurement. This price component concerns the so-called Monthly Contract Price (MCP): a reference price that is re-established each month through a negotiation process between buyers and sellers of ethylene.
An important detail: the Commission expressly left open whether the intended effect of the agreements – a lower MCP – had actually been achieved. It was precisely this point that formed the crux of the proceedings before the Amsterdam District Court: had the defendants actually influenced the MCP, and had the chemical companies concerned consequently received too little for the ethylene they sold?
The claim: a declaratory judgement plus referral for the assessment of damages
The foundation primarily sought a declaratory judgement that the defendants are jointly and severally liable for the damage, followed by an order to pay damages, the exact amount of which would be determined in separate proceedings (the damages assessment proceedings)
Three conditions apply to such a referral, which the Supreme Court recently reaffirmed: the basis for liability must be established, the possibility of damage must be plausible, and it must not (yet) be possible to calculate the exact amount of damages in the main proceedings. The unlawfulness of the cartel conduct was not in dispute here – that follows directly from the Commission’s decision. The dispute therefore centred entirely on the second condition: is the possibility of damage plausible?
Applicable law: Dutch law via Rome II
As this was an international dispute – foreign claimants, foreign defendants – the court first had to determine which law was applicable. On the basis of the choice of law provision in the Rome II Regulation, the claimants opted for Dutch law, a choice which the court followed. It is noteworthy that the court deliberately chose not to stay the proceedings pending preliminary questions that the Supreme Court has since referred to the European Court of Justice regarding the precise scope of this choice of law, as this would have led to unreasonable delay.
The crucial question: did the cartel actually influence the price?
This is where the problem lies. The claimants must demonstrate (burden of assertion, and where necessary, burden of proof) that, as a result of the cartel agreements, the MCP actually turned out differently than it would have done without those agreements. This is not automatically assumed: the statutory presumption that a cartel causes damage does not detract from the requirement that the ordinary conditions of liability must first be met
The court even required the parties to provide a detailed statement of facts regarding the precise role of the defendants in the monthly price-setting process. This showed that, whilst the defendants were frequently involved in the price-setting process, their involvement was not exclusive: in 38 of the 51 months examined, at least one defendant was a party, but in a quarter of the cases, only non-defendants acted as buyers. Furthermore, the defendants collectively held only around 15 per cent of the market share in ethylene procurement.
Why the court dismissed the claims
The court concluded that a dominant role played by the defendants in price-setting could not be inferred from the facts, partly because a price agreement (settlement) always requires the consent of a supplier, and the argument that effects from earlier months carried over into later months (‘cumulative effect’) was rejected, as each month it was primarily current cost and market factors that determined pricing
Furthermore, the court pointed out that ethylene suppliers make their own price assessments and simply do not accept an offer that is too low if other buyers are willing to pay a higher price. The conclusion was that, given the way in which the MCP is determined and the role of the various market participants in this process, the likelihood of damage on the supply side is not plausible. Consequently, the threshold for referral to the damages assessment proceedings was not met and all claims were dismissed
The claims foundation, as the unsuccessful party, was ordered to pay the legal costs of all defendants, ranging from just over €10,000 to nearly €13,000 per defendant.
What does this mean for businesses and their legal advisers?
This ruling highlights an important practical point for any business considering bringing a cartel damages claim, or which is itself a party to a cartel investigation: a fine imposed by the European Commission is a necessary, but not sufficient, basis for a successful damages claim. Market share, the exact structure of the price-setting mechanism and the question of whether customers were actually able to ‘switch’ to market participants not involved in the cartel are all factors that the court takes into account when assessing the plausibility of the claim for damages.
For companies considering a claim for damages, the advice is: gather detailed evidence on the actual market dynamics at an early stage of the process – not only regarding the existence of the agreements, but above all regarding their effect on actual pricing. For companies that are themselves held liable following a cartel fine, this case demonstrates that a careful, data-driven substantiation of their own (limited) role in the price-setting process can be an effective defence against claims for consequential damages.
Frequently asked questions about cartel damage claims and this ruling
Is a fine imposed by the European Commission sufficient to claim damages?
No. A Commission decision confirms that there was an unlawful infringement of competition law, but the claimant must separately demonstrate that that infringement actually resulted in damage. In this case, the Commission expressly left open whether the intended price effect actually occurred.
What is a damages assessment procedure and when is a reference made to it?
This is a separate procedure in which only the precise extent of the damage is determined. A reference to it is only possible once the basis for liability has been established, the possibility of damage is plausible, and an exact assessment is not possible in the main proceedings.
Who must prove that a cartel has actually caused damage?
The claimant bears the burden of making the case and, where necessary, the burden of proof that the cartel has actually influenced the relevant price. The statutory presumption that cartels cause damage is rebuttable and does not relieve the claimant of the obligation to meet the ordinary liability requirements.
Which law applies to international cartel damage claims?
Under the Rome II Regulation, the claimant may, subject to certain conditions, opt for the law of the country where the proceedings are pending, provided that market is directly and substantially affected by the restriction of competition. The precise scope of this choice of law is currently the subject of preliminary rulings before the European Court of Justice.
What happens if the claim for damages is dismissed?
As a rule, the unsuccessful party is ordered to pay the other parties’ legal costs, including court fees, costs for procedural documents and the oral hearing, calculated in accordance with the applicable scale of costs.
