In Otis II, the Court of Justice of the European Union (‘Court’) reaffirms that any party can claim damages for loss caused by an EU competition law infringement. More specifically, persons not active on the market affected by a cartel, but who provide subsidies to buyers of the products offered on that market, must be able to claim damages for loss resulting from the fact that those subsidies were higher than they would have been without the cartel and they were therefore unable to use that difference more profitably. Otis II can be perceived as a clear and straight-forward judgement. A closer reading, however, shows that the Court missed the opportunity to clarify the law surrounding the private enforcement of EU competition law, especially the element of causality. Consequently, it left this area of EU law in the mist.
Can non-market participants claim damages?
In 2007, several elevator manufacturers were fined by the European Commission for infringing Article 101 TFEU. Before the Austrian courts, the Province of Oberösterreich (‘Oberösterreich’) is currently claiming damages resulting from those infringements. It is claiming that it, as a body granting subsidies to customers active on the market affected by the cartel, has suffered damages. Oberösterreich granted promotional loans for building projects which were based on the total construction costs of a building. It is alleging that the costs connected with the installation of elevators caused the overall building costs to increase, since the former were included in the latter. It therefore granted higher loans. If it were not for the cartel, Oberösterreich would have granted smaller loans and it would have been able to invest the difference at the federal loan interest rate.
The Oberster Gerichtshof, however, is confronted with the issue that under Austrian law a person is only entitled to compensation when a provision is infringed and where that person belongs to the particular group whose interests are protected by that provision. One must fall within its protective scope, i.e. its Schutznorm. In the Austrian court’s view, Oberösterreich cannot claim compensation. Its loss falls outside the protective scope of Article 101 TFEU, which covers only suppliers and customers active on the market(s) affected by the cartel. As part of the proceedings, the Oberster Gerichtshof asked the Court whether such a party in those circumstances may claim damages.
‘Everyone’ can claim damages! Needed: an infringement, damages and causation
The Court ruled that persons who are not suppliers or customers on the affected market must be able to request compensation for loss resulting from the fact that, due to the cartel, they were obliged to grant subsidies which were higher because of the cartel and were therefore unable to use that difference more profitably. Any person can claim compensation where there is a causal link between the harm and a breach of Article 101 TFEU. The full effectiveness of the cartel prohibition and the effective protection against adverse effects of an infringement thereof, are impaired if only those active on the market affected by a cartel can claim compensation. Potential victims would be systematically deprived of claiming compensation. Any loss which has a causal connection to an infringement is therefore capable of giving rise to a right to compensation. There is no additional requirement of a specific connection between the loss and the ‘objective of protection’ of Article 101 TFEU. However, in the national proceedings Oberösterreich must adduce the evidence necessary to prove a causal connection between its loss and the cartel at issue exists.
Otis II firmly cements the three prerequisites for a cartel damages claim: an infringement, damages and a causal relationship between those two. It is not necessary to analyse whether one falls within the Schutznorm of Article 101 TFEU.
From a dogmatic perspective it is interesting to query whether the protective scope of Article 101 TFEU is absent or, instead, very broad. The Court, in that regard, refers to the Opinion of AG Kokott. The AG argues that the Schutznorm of Article 101 TFEU covers any damage that is causally linked with an infringement of Article 101, i.e. ‘everyone affected’ by a cartel. She therefore considers an application of the Schutznorm irrelevant. This supports the view that although there is a Schutznorm (i.e. anyone is protected against damage that is causally linked to an infringement of Article 101 TFEU), it is so wide that its application will not make a difference and hence its application becomes irrelevant.
A right to compensation exists where there is an infringement, damages and a causal link between those two, irrespective of the issue on which market the harmed person is active. This might even be a market unconnected to the one affected by the cartel. This outcome is unsurprising in light of the Court’s case law, for example Kone, in which the Court structurally acknowledges the possibility for everyone to claim compensation. An opposite conclusion would also sit strangely with the ability of indirect purchasers to claim damages as a result of ‘passing-on’ (Article 14 of the Damages Directive). In such a case, the question could pop up whether the indirect purchasers are active on the market affected by the cartel, since they are merely active on a downstream market. Consequently, indirect purchasers could not, contrary to the Damages Directive, be able to claim damages. It follows from Otis II that courts in those national legal systems that recognise the Schutznorm (e.g. Austria, Germany and the Netherlands), must apply it in accordance with the wide scope the Court has given it in the context of Article 101 TFEU.
In addition, Otis II seems to imply that anyone is entitled to any damages, as long as a causal nexus between those damages and the infringement can be proven. Otis II concerns missed investments, i.e. missed opportunities, and could be regarded as building on Manfredi, where the Court ruled that injured persons must be able to seek compensation not only for actual loss (damnum emergens) but also for loss of profit (lucrum cessans) plus interest (codified by Article 3 of the Damages Directive). The Court in Otis II acknowledges that this loss of profit entails missed opportunities. National law excluding a specific type of damages might thus be contrary to EU law, since it is merely required that the damage is causally linked to the infringement.
Still the mist remains…
The judgement may seem clear, yet a more precise reading of Otis II generates or at least refuses to take away some obscurities. The Court considers that anyone who has suffered (any type of) damage must be able to claim those damages where there is a causal link between them and an infringement. However, what damage is causally linked to the infringement and what law determines what constitutes a causal link? Although the referring court tried to draw the Court’s attention to its case law on the issue of ‘a causal relationship’, the Court keeps silent on this subject. It merely concludes that EU law does not warrant an application of a Schutznorm, since – because of its irrelevance following its very wide scope – the only requirements for a damages claim are: an infringement, damages and a causal nexus between those two. Indeed, the Court was not required to go into this in order to answer the question referred. Yet, clarification on this issue would have been very welcome for several reasons.
First, clarification on the question which legal system determines the causal link would be appreciated. It is not sufficiently clear whether the issue of causation is determined directly based on EU law or whether it is, instead, left to national law. The case law on this issue is ambiguous. In Skanska the Court considered that EU law directly determines who is to be held liable for EU competition law infringements (answer: undertakings). AG Kokott, in her Opinions in Otis II and Kone, and AG Wahl, in his Opinion in Skanska, argue that the issue of causation must also be determined based on EU law. The Court, however, in Kone considered that the application of (!) the rules on causation is left to national law. The Court’s reasoning in Otis II lacks such a similar consideration. It is, however, questionable whether this justifies the conclusion that causation is directly determined by EU law. If this were to be the case, the Court has not yet (explicitly) stated so. Hence, a ruling thereon would provide some clarity.
Second, if causality is determined based directly on EU law, clarification on what constitutes this causal relationship would be most helpful. Interestingly, the Court in Kone (par. 34), despite considering that the application of rules on causation is left to the domestic legal systems, stated that:
“the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel […] where it is established that the cartel at issue was, in the circumstances of the case and, in particular, the specific aspects of the relevant market, liable to have the effect of umbrella pricing being applied by third parties acting independently, and that those circumstances and specific aspects could not be ignored by the members of that cartel”
This might indicate that the causal nexus encompasses some kind of foreseeability test, from the point of view of the cartelist and influenced by the circumstances of a particular case, especially by market conditions. Again, if this is so, a more outspoken stance of the Court would be helpful.
A lost chance
All in all, Otis II contributes to the private enforcement of EU competition law. The Court firmly confirmed that anyone must be able to claim compensation for an EU competition law infringement. It again pointed out the required analysis and prerequisites for such a claim and refined this doctrine. Nonetheless, Otis II might also come as a disappointment. The Court had the chance to illuminate its case law on the causal link, but was reluctant to do so. On the one hand, the prerequisites of an EU competition law damages claim are firmly established, on the other hand, the actual substance and composition of those prerequisites is still misty. These prerequisites seem to be the sole framework based upon which a claim for damages should be analysed. Hence, clarification on its substance is called for.