A supply chain where goods, which were the subject of a cartel, were sold by the defendants in Asia and then indirectly resold to the claimants in the EEA did not amount to “implementation” of the cartel in the EEA and so fell outside the territorial scope of EU competition law. An alternative claim, that “but for” the EU cartel the claimants would have bought in the EU at non-cartelised prices instead of purchasing from Asia, was allowed to proceed but faced evidential hurdles. This latter argument potentially gives claimants a new avenue to try to bring worldwide cartel claims before the English courts: iiyama (UK) Ltd & ors v Samsung Electronics Co Ltd & ors [2016] EWHC 1980 (Ch).
The claimants (iiyama) claimed damages for breaches of competition law by the defendants (various companies in the electronics industry) in the Liquid Crystal Display market (the LCD Case). The defendants’ competition infringement in the EU has been the subject of a European Commission decision, on which iiyama relied in bringing their claim.
The defendants had sold LCD products, in Asia, to Asian manufacturers, for use in their products. These products were sold to iiyama’s parent company in Japan which onsold them to its European subsidiaries (ie the claimants). The claimants sought to argue that this Asian supply chain, ending in Europe, amounted to implementation of the cartel in Europe, thus making the claim subject to EU competition law and allowing iiyama to rely on the findings of infringement made by the European Commission. The defendants sought to challenge the jurisdiction of the English court or strike out the claim on the basis that the relevant sales fell outside the territorial scope of EU competition law.
Previous similar claim (relating to Cathode Ray Tubes) had not worked
In May 2016 iiyama’s claim against a different group of cartelists was rejected by the English court on jurisdiction grounds.1 The defendants had been found by the European Commission to be in cartels in the CRT and CRT Glass market (CRTs were common in television and monitor displays before the advent of flat screens) (the CRT Case). The CRT Case involved similar supply chains which started with the defendants in Asia and passed through several steps before reaching iiyama in the EU. The defendants to the CRT Case made jurisdiction challenges and strike-out applications on similar grounds to those raised by the defendants in the LCD Case.
Mann J held that iiyama’s CRT claim fell outside the scope of the European Commission decisions and (even if the claim had not be pleaded as following-on from the Commission’s decisions) fell outside the territorial scope of EU competition law.
This failure perhaps explains why iiyama ran an alternative “but for” argument in the LCD case (see below).
LCD Asian supply chain outside territorial scope of EU competition law
Morgan J held, consistently with the CRT Case judgment, that the LCD supply chains did not involve implementation of a cartel within the territorial scope of Article 101 TFEU2 because the only implementation of the cartel by the defendants was the first sale of the LCDs by the defendants in Asia. iiyama needed to “…show that they suffered harm by reason of the implementation of the cartel in the EU…it is not enough for the Claimants to say that they are indirect purchasers downstream from the implementation of the cartel in Asia...”. While the defendants had implemented a cartel in Europe (as established by the European Commission), iiyama’s indirect and Asian-focused contractual chain could not show loss arising from the European cartel.
Indirect causation argument not struck out
iiyama also argued that, if the cartel had not been implemented in Europe, iiyama could have bought LCDs and LCD products in the EEA at non-cartel prices. Instead, because of the European cartel, iiyama had to buy in Asia at allegedly inflated prices. Alternatively, iiyama argued that the cartel in the rest of the world would have collapsed without the EU cartel. Morgan J held that these claims were arguable and therefore not suitable for strike-out.
Morgan J did note that iiyama’s “but for” case did not have much evidence to support it and the evidential basis would likely be closely scrutinised by the defendants. The defendants had also argued that, in any event, iiyama’s claims were not sufficiently direct or proximate to be recoverable. Mann J held these points of law raised important questions of policy, which might require a reference to the CJEU (once the facts and iiyama’s case on causation are clarified), and were therefore not suitable for summary disposal.
Subsidiaries of cartelists
The Court also considered whether certain defendants, which were not part of the cartel according to the European Commission’s findings, but were subsidiaries of a cartelist, should have the claim against them struck out. The claimants argued that as a matter of law, because the subsidiaries delegated decisions on pricing to their parent companies, the parent companies’ knowledge could be attributed to the subsidiaries as a matter of English law. Morgan J held that the proposition was at least arguable so declined to strike-out the claims against the subsidiaries.
Comment
Together with the CRT Case, Morgan J lays down an important marker concerning the territorial limits of EU competition law. Claimants looking to bring worldwide cartel claims in a single jurisdiction should take note that the English court will not readily take on the role of global policeman. Claimants may instead need to plead their foreign losses on the basis of the relevant foreign law (which iiyama had largely not done, likely due to limitation issues in the relevant Asian jurisdictions).
As for the “but for” counterfactual on which iiyama’s claim survived, iiyama is likely to face an uphill battle to provide the evidence (that they would have bought in Europe but for the European cartel prices) and causation (that overcharges paid by iiyama in Asia were causally linked to the European cartel) that will be needed to support their claim.
iiyama has applied to the Court of Appeal for permission to appeal the CRT Case (as against the defendants who were addressee of the CRT Decision, but not as against the CRT Glass defendants) after Mann J refused to grant permission to appeal. We understand that both iiyama and the defendants intend to seek permission to appeal the LCD judgment in October.
Footnotes:
1 iiyama Benelux BV & ors v Schott AG & ors [2016] EWHC 1207 (Ch).
2 Per the “implementation” test established in the Woodpulp case and the “qualified effects” test in Gencor.
