On 30 January 2014 Advocate-General Kolkott delivered her opinion in Kone AG and Others (C-557/12). The case concerns the question of whether a cartelist can be liable to compensate third parties for damage caused by the so-called “umbrella effect” i.e. where a party that is not a member of the cartel, benefiting from the protection of the cartel’s practices, knowingly or unknowingly sets their own prices higher than they would have been able under competitive conditions.
In this case the Claimant was Austria’s rail network, and the Defendants were a group of elevator manufacturers. The Defendants argued that claims for damages based on the “umbrella effect” were precluded by Austrian law. The AG disagreed, opining that such national laws are not in line with EU law and are thus impermissible. Although in principle this means that cartelists are liable for damages brought about by the “umbrella effect”, the AG noted that there would need to be a “comprehensive assessment” as to whether the “umbrella effect” was actually in play and that there were “high hurdles in terms of the burden of proof”, particularly in the establishment of a causal link between the cartel and the umbrella pricing. As such she cautioned would-be Claimants to weigh up the pros and cons of any such action. This caveat may have been made with a view to allaying the concerns of a number of national governments who had suggested that allowing such claims might overwhelm the Courts.
It will be interesting to see what, if any, impact the Advocate General’s opinion will have on the ongoing debate between EU institutions concerning the text for a Directive on Damages actions and in particular the proposed cap on the liability of cartel whistleblowers. As it currently stands, there appears to be unanimity on the general position that competition law infringers should be jointly and severally liable for damage caused, subject to the caveat that cartel whistleblowers should only be liable to the extent that full compensation cannot be recovered from other joint infringers. However, there is some disagreement about whether or not the liability of whistleblowers should be capped. The Commission had initially proposed that whistleblowers’ liability should be limited to the amount of harm caused to its own direct and indirect purchasers. The Council has subsequently proposed that this cap on liability be removed (for more on the Directive see here).
In the absence of such a cap and assuming that the Advocate General’s opinion is followed by the CJEU, a cartel whistleblower could arguably become liable in all EU Member States for damage caused not only to downstream purchasers within its own supply chain, but also for loss caused to victims of the so-called “umbrella effect”, some of which may have been difficult to foresee at the time that the leniency application was made. Despite the Advocate General’s suggestion that such claims will be the exception rather than the rule, this possibility may need to be factored into the decision-making processes of would-be leniency applicants.