Cartel price-hike assumptions faulted in top German court ruling

The facts underpinning cartel conduct and its assumed impact on customers are set to emerge as a more prominent battleground in German litigation in the wake of a ruling by the country's top court last month.

In the full text of the judgment, seen by MLex, the Federal Court of Justice pointed to the complexity of antitrust agreements over time, saying this should temper any assumption that prices were necessarily pushed up.

When news of the judgment broke last month, the full extent of the court's reasoning wasn't yet clear. Now the text reveals that judges have put a large question mark over cartel assumptions, and this could mean claimants having to try harder to prove harm.

The case stems from a damages lawsuit filed by Karlsruhe's public-transport provider VBK, seeking compensation from Munich-based rail infrastructure supplier Schreck Mieves.

The federal court has overturned a judgment in favor of VBK by a higher regional court in Karlsruhe, which had said the company should have the right to seek damages. It sent the case back for the regional court to take a second look.

In the ruling handed down on Dec. 11 and not yet public, the federal court said it couldn’t follow the reasoning for the lower court's ruling that there was "prima facie" evidence that VBK suffered damages when purchasing from the cartel. VBK had argued that it suffered damages in relation to purchases made between 2004 and 2011.

— 'Prima facie' evidence —

According to the principle of prima facie evidence, litigants don’t need to nail down all the detailed consequences because there is an assumption of an impact under a typical, uniform course of events.

But the top court has advised caution when applying this principle.

After reviewing the case at hand, it said that the conditions for prima facie evidence weren’t met — a ruling that will likely raise the bar for claimants seeking to prove harm.

The federal court said the higher regional court had based its reasoning on the German competition authority’s investigation, which had concluded that makers of rails and switches had engaged in illegal agreements on prices, quotas and customers since at least 2001 and until May 2011, when the cartel was detected. Such cartel conduct usually results in increased prices, the lower court had concluded, because price competition was eliminated.

But the top court rejected that reasoning. In their ruling, judges acknowledged that companies participating in cartels frequently do enjoy higher revenues. But because of the ‘’diverse forms and complexity of antitrust agreements, their implementation and their effects,’’ the normal approach required for applying prima facie evidence was lacking, the court said.

Whether anticompetitive agreements have an impact on prices depends on many factors, including the number of market players, the number of businesses involved in the cartel and their opportunities to exchange information, the court said.

It added that the impact of these factors can stretch over a longer period and be subject to significant changes, especially in the anticompetitive agreements such as those in VBK’s case.

— Second look —

The Karlsruhe higher regional court will therefore have to look again at arguments by Schreck Mieves which suggested that the agreements led not to price increases, but only to better use of production capacity among the manufacturers involved.

The same court will also have to scrutinize arguments put forward by VBK — backed by a private study prepared by the German Institute of Applied Economic Research — which suggested that the cartel led to significantly higher prices.

It will also have to check in detail whether the anticompetitive agreements did have price-raising effects, and, if necessary, seek further expert input.

The federal court stressed that it couldn’t rule out that a full analysis could show the facts pointing to a different outcome.

The court reference number is KZR 26/17.