ECJ confirms possible liability of cartelists for umbrella pricing effects

In a preliminary ruling on the case Kone AG et al. vs ÖBB Infrastruktur AG the European Court of Justice in Luxembourg has further strengthened the position of potential cartel damages claimants. Building on their prior Courage and Manfredi decisions, the European judges found that with respect to the amount of damage, the verifiable causal damage resulting due to the excessive prices of companies which were specifically not involved in the cartel is also to be taken into consideration. With this ruling the highest European court has recognized the fundamental possibility of the compensation of parties which have suffered damage due to a cartel for umbrella pricing and knock-on effects. This ruling will further increase the attractiveness of filing claims for damages against cartelists and again underlines the increased role of the private enforcement of cartel law by companies. On the other hand, this ruling again illustrates the immense financial risks associated with infringements of cartel law and the need to develop appropriate minimization strategies in good time.

In terms of competition economics, verifiable “umbrella effects” are usually to be seen as direct consequences of a cartel. The mechanism can be explained in terms of economic theory as follows: buyers look for alternatives to the products which have become more expensive due to the cartel. This shift in demand to products of non-cartelists also causes their prices to rise. The non-cartelists can and will – in certain constellations inevitably – increase their own prices under the protective “pricing umbrella” of the cartelists without themselves being involved in the cartel. The decisive issue in future will be whether this economic connection can in practice be turned into legal proof of causality. The ECJ affirms this fundamental possibility with reference to the European Union law principle of effectiveness. In the individual case, however, this will very much depend on the special characteristics of the relevant market and the requirements relating to burden of proof which still vary under the national law of Member States.