The Paris Court of Appeal recently ruled on a follow-on damages case further to the so-called "dairy products" cartel that was sanctioned by the French Competition Authority (FCA) in 2015. Supermarkets who claimed to be direct victims of this cartel, had sought compensation for their losses before the Paris Commercial Court, which dismissed their claim in 2020. The Court of Appeal overturned the first instance decision and awarded the supermarkets nearly €2.4 million in compensation for the financial loss they suffered, providing interesting clarifications on the assessment of damages.

Background

On 11 March 2015, the FCA sanctioned the main dairy product manufacturers to the amount of €192.7 million for a cartel aiming to fix prices and rig tenders from supermarkets for the manufacturing of private label products. Following the FCA's decision, two supermarkets brought an action against several cartel members seeking compensation for the damage they suffered. The Paris Commercial Court rejected their claim on the grounds that there was insufficient evidence of a causal link between the anti-competitive practices and price variations of products.

The two supermarkets subsequently appealed the decision and the Paris Court of Appeal overturned the first instance decision, clarifying the criteria for the assessment of damages in follow-on actions (see our previous article in this regard  here). The Court of Appeal held in particular that the supermarkets suffered from an overcharge which (i) varied depending on the different stages of the cartel and (ii) was only partially passed-on consumers.

An overcharge rate varying with the different stages of the cartel

The overcharge is calculated by comparing the price paid during the cartel and the price that would have been paid if the cartel did not occur. Courts generally apply a given overcharge percentage for the whole duration of the infringement. However, in the case at hand, the Court of Appeal set a different overcharge rate corresponding to three periods of the infringement: (i) a first rate for the period during which all cartel members were actively involved, (ii) a second rate during which one cartel member stopped its involvement (this member started a price war which slightly lowered the prices but the cartel nevertheless persisted) and (iii) a third rate for the post cartel inertia period during which prices were still impacted.

The end of a binary approach to the the passing-on of the overcharge

Infringing entities often defend themselves by arguing that the plaintiff (who overpaid for the products as a result of the cartel) did not ultimately bear any overcharge as it passed it on to its own customer and therefore suffered no damage as a result of the infringement. The Court of Appeal's decision introduced two key developments in this respect:

  • As regards the existence of pass-on: French courts usually adopted a binary approach by either finding that an overcharge has been fully passed on, or that it has not been passed on at all. However, in the case at hand, the Court of Appeal considered for the first time the existence of a partial pass-on, finding that supermarkets passed on around 30% of the overcharge.
  • As regards the scope of the pass-on: The Court of Appeal held that the passing on ability of the supermarkets was contained by the price positioning of branded products. The Court of Appeal considered that even though the majority of supermarkets had been affected by the cartel practices, the plaintiffs had nevertheless maintained a price differential between branded products and private label products of at least 20%. Due to this price differential, the supermarkets could only have partially, and not wholly, passed on the overcharge on private label products.

The full decision of the Paris Court of Appeal is available here (in French).

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