Why the success of cartel damages proceedings lies in mastering litigation.

An interview with Dr. Karl Wach and Dr. Arno Riethmüller.

Dr. Wach, why does a boutique law firm specializing in dispute resolution lists the provision of advice in cartel damage litigation among its core competencies, despite not having a separate antitrust practice?

It is quite simple. At its core, cartel damages litigation is not about antitrust law but about liability and procedural law. The underlying antitrust violation does not have to be proven by the plaintiff in a lawsuit. Instead, it is the antitrust authorities which establish the antitrust violation in their decision and this finding is legally binding on courts in subsequent civil proceedings. Therefore, the chances of success in cartel damages litigation depend to a large extent on mastering the challenging tasks of strategically planning the trial and dealing with the complexity of facts typical of such claims and the large number of parties or claims. This falls within our core competence.

Notwithstanding, we also have colleagues who are knowledgeable in antitrust law, such as Dr. Riethmüller, who has a doctorate in this subject.

Dr. Riethmüller, would you mind elaborating on this?

In my dissertation, I have delved into the forensic aspects of antitrust law which are crucial for the success of cartel damages litigation, and for which Wach und Meckes has the perfect setup. Our team consists of internationally-experienced lawyers with many years of experience in complex dispute resolution. We represent our clients before state courts, arbitral tribunals, in mediations and in out-of-court negotiations. In addition, our partners regularly act as arbitrators in national and international arbitration proceedings.

Analyzing the conflict, securing and examining what are often extensive facts and developing and implementing an individual dispute resolution strategy based thereupon are among our core competences. This also includes advising on mass actions, which are becoming increasingly common in cartel damages litigation and require a great deal of planning and structure in order to remain manageable for the courts.

Dr. Wach, the expertise outlined above is also true for international law firms. What unique value do you offer cartel victims of cartels and cartelists?

Complex multi-year cartel damages litigation do not require an army of lawyers. Rather, it is important to have a select team of experienced litigators with partners who are intensively involved in the handling of the case and are always present for the clients and the team on a day-to-day basis. The modular structure of our teams allows us to easily adjust their size depending on the stage of the proceedings. With this structure, we successfully represent our clients in a wide variety of large-volume legal disputes.

What experience does Wach und Meckes have in cartel damages litigation?

The current partners of our firm, previously part of the international law firm Ashurst, have been active in the field of cartel damages litigation from the very beginning of the current legislation and have defended cartelists as well as accompanied and represented financing banks and plaintiffs in mass litigation.

In 2004, we were responsible for the German section of the Ashurst-Study on the preconditions for damages resulting from EU competition law infringements for the Directorate-General for Competition of the European Commission. On this basis, the European Commission in its Green Paper on Damages Actions for Breach of the EC Antitrust Rules developed proposals for a more efficient enforcement of civil claims for damages for breach of EU competition law, which until today has a decisive influence on legislation and has evolved into the current statutory provisions.

At that point in time, we had been involved in several actions for damages in connection with the „Vitamin Cartel“ and were engaged in numerous other cartel damages proceedings on the defendant’s side in the years that followed.

On several occasions, we were also involved in structuring and implementing mass litigation. For example, we advised a major international bank in connection with the financing of the bundled enforcement of a large number of cartel damages claims in the hundreds of millions of euros and came up with measures to increase the prospects of success of the lawsuit.

Furthermore, we advised one of the largest commercial providers for the enforcement of cartel damages claims on optimizing its litigation strategy and on bundling claims in various cartel damages cases.

Recently, we dealt intensively with the challenges of mass litigation by bundling claims into one litigation vehicle.

What are the key issues in cartel damages litigation, Dr. Riethmüller?

In theory, a claim for damages can be quickly established, especially since the civil courts are bound by the antitrust authorities’ findings of a cartel violation.

In practice, however, there are considerable hurdles to overcome. The core issues are whether there is cartel involvement (Kartellbetroffenheit), whether it can be proven that the cartel caused damages, and the amount of damages. These issues have little or nothing to do with antitrust law, but a great deal to do with liability and procedural law, in which we have our core competence.

With regard to your first point, how do the courts determine whether there has been cartel involvement?

While in the past this element was highly contested, new case law provides that in order to prove cartel involvement, the plaintiff only has to provide evidence that it purchased goods or services which formed part of the cartel agreement. Through this the plaintiff substantiates its standing to bring a claim for damages against the cartelists whose anti-competitive behavior may have affected the plaintiff.

And what is applicable with regard to the plaintiff´s damages?

According to the most recent decisions of the Federal Court of Justice in the “Rail Cartel” (December 11, 2018 - KZR 26/17 and January 28, 2020 - KZR 24/17), the plaintiff can no longer rely on the easing of the burden of proof to provide prima facie evidence (Anscheinsbeweis) that the cartel caused damage, at least in the case of cartels involving output restrictions and market (customer) allocation. In cartels involving output restrictions and market (customer) allocation, orders and customers are distributed within a market segment according to production capacities or other criteria. According to the Federal Court of Justice, in these cases at least, there is no typical principle according to which participation in a cartel alone gives rise to a high probability that each transaction will be concluded at an excessive price during its term. Rather, this price effect depends on numerous factors, such as the number of market participants and the companies involved in the cartel, market coverage and cartel discipline. This speaks against a typical and uniform course of events. It remains to be seen whether the Federal Court of Justice will also consider these principles to be relevant in the case of other hard core cartels.

Notwithstanding, the presumption recognized by the Federal Court of Justice that the prices achieved by a cartel are higher than those that would have been achieved in the absence of the cartel agreement restricting competition remains valid (tatsächliche Vermutung). This presumption has a strong indicative effect for the courts. However, cartelists still have the opportunity to present arguments to rebut this presumption, so that when evaluating the evidence the judge must consider the specific structure of the cartel, the cartel practice, and other circumstances that speak for or against a price effect of the cartel agreement.

Do these cases create additional hurdles for the plaintiffs to overcome?

Although these cases can make it more challenging for the plaintiff to prove the damages that have been suffered, it should not worsen the plaintiff’s chances of success.

On the one hand, it does increase the demand on the plaintiff to present all circumstances relevant to support the presumption that in a specific case, there was a price effect resulting from the cartel agreement. Plaintiffs can no longer rely on prima facie evidence, i.e. the decision of the cartel authorities that a cartel had been established. It would usually be difficult to prove this convincingly without an expert opinion due to the complexity of the factors determining price.

On the other hand, the evidentiary value of the above-mentioned presumption of cartel-related price increases is not that much lower than that of the prima facie evidence and, from the outset, provides a clear leaning of the courts’ evaluation.

Do you expect lawmakers to improve the law in this respect?

It has already done so through the 9th amendment to the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen – “GWB”) of 2017 where the rebuttable presumption that a cartel caused damage was enshrined in law.

It is then up to cartelists to rebut this statutory presumption by providing evidence, for example, that the cartel agreement was not successfully implemented or had no effect on the price for other reasons. However, the new statutory presumption only applies to claims for damages that arose after December 26, 2016, and has therefore hardly been applied in practice to date.

The 10th GWB amendment, which came into effect on January 19, 2021, also introduced a rebuttable presumption of cartel involvement. Pursuant to this, it is presumed that legal transactions concerning goods or services with cartelists which occurred in the material, temporal and geographical scope of the cartel are covered.

You mentioned the amount of damages as another key issue. Does the plaintiff have to specifically prove the amount of damages?

The above-mentioned presumption as well as the new statutory presumption only apply to the existence of damages and its cause being the result of the cartel agreement. However, until today there has not been a presumption for the amount of damages.

In the 10th GWB amendment, it deliberately refrained from introducing such a presumption and instead referred to the possibility of the court estimating the amount of damages (Section 287 of the Civil Procedure Code, Zivilprozessordnung – “ZPO”). However, this possibility of estimating the amount of damages without the court appointing an expert has so far only been used in isolated cases.

Most recently, the District Court of Dortmund demonstrated „courage to estimate“ in its ruling from September 30, 2020 (8 O 115/14 (Kart)), in which, citing an article by the presiding judge of the 1st Cartel Senate of the Dusseldorf Higher Regional Court, Prof. Dr. Kühnen (NZKart 2019, 515), it rejected the time-consuming and cost-intensive methods of assessing damages which prevailed in case law due to its unpredictability and disadvantages for the cartel victims, and independently estimated a minimum damage. It quantified this as a 15% cartel-related surcharge on the net price, which in the case in question coincided with the contractual penalty in the General Terms and Conditions in the event of a cartel infringement. The District Court of Dortmund was also able to be „courageous“ in this case because, in the event of an appeal against its ruling, it could count on a major advocate for this method of estimating damages, the Dusseldorf Higher Regional Court, which would then have jurisdiction.