A first reaction to AG Kokott's KONE Opinion (C-557/12)

AG Kokott's Opinion of 30 January 2014 in case C-557/12 KONE is generating significant debate (see the very interesting criticism in EUTopia) as it deals with a very complicated and controversial issue that could either spur or restrict the scope of damages actions following on from cartel violations (and, more generally, competition law infringements).

 

The case is concerned with the possibility to claim so called "umbrella damages"--that is, as per the description provided by the referring Austrian Supreme Court, whether "any person may claim from members of a cartel damages also for the loss which he has been caused by a person not party to the cartel who, benefiting from the protection of the increased market prices, raises his own prices for his products more than he would have done without the cartel (umbrella pricing)". In my view, the Opinion of AG Kokott deserves some criticism in its support for such claims.

 

As a preliminary point, I think that it is interesting to see how AG Kokott redrafted the issue, and considered that the case concerns "umbrella pricing [which takes place] when undertakings that are not themselves party to a cartel, benefiting from the protection of the cartel’s practices (operating ‘under the cartel’s umbrella’, so to speak), knowingly or unknowingly set their own prices higher than they would otherwise have been able to under competitive conditions. Does European Union law require that customers of undertakings not party to the cartel should be able to claim compensation for the inflated prices charged by those undertakings from the members of the cartel before the national courts? Or, conversely, may such an obligation to award compensation be excluded in national civil law on the ground that the loss suffered is indirect and too remote?" (emphasis added).

 

Already at this stage, I would submit that the framework for analysis is flawed. If the "outsider" to the cartel is fully innocent (i.e. is not aware of the existence of the cartel), its behaviour is indeed reflective of competitive conditions (distorted, but still competitive) and therefore that specific increase in prices should not be taken into account for the purposes of the design of competition law rules and their enforcement.

 

On the contrary, if the "outsider" is not innocent (i.e. knows about the cartel), then the increase in prices makes it guilty of at least a (unilateral?) concerted practice by adhering to the cartelised mechanics of the market and, consequently, the damages derived from the raise in prices should be borne by such "outsider" as the infringer of competition rules--and only by the "insiders" in the cartel if they then incorporate the "outsider's" behaviour as part of the distorted market mechanism.

 

In my view, any extension of this general framework would probably be too remote in terms of causality and the allowance for "umbrella damages" claims would create a system of excessive private antitrust enforcement which net contribution to aggregate welfare would be doubtful [more generally, on the doubtful desirability of an overgrowth of damages claims based on indirect or disperse competition damages, see Marcos and Sánchez Graells, "Towards a European Tort Law? Damages Actions for Breach of the EC Antitrust Rules: Harmonising Tort Law Through the Back Door?": http://ssrn.com/abstract=1028963].

 

For these reasons, I generally disagree with her Opinion on its substance. However, more detailed criticism will require some further thoughts.

Coauthored paper with @pacomarcos: “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard?

There seems to be a clear trend of increased protection of ‘corporate human rights’ and, more specifically, due process rights (or procedural fairness) in the field of enforcement of competition law. To a large extent, that trend is based on the uncritical extension of human rights protection to corporate defendants by a process of simple assimilation of corporate and individual defendants.

 

This new coauthored paper briefly explores the rationale behind the creation of due process rights when the individual is the beneficiary of such protection. It then goes on to critically assess if the same need exists for the extension of those protections to corporate defendants, particularly in the field of competition law or antitrust enforcement. It concludes with some warnings concerning the diminishing effectiveness of competition law prohibitions and of human law protection that can result from an overstretched conception of due process protection in this area of EU economic law.

From a substantive perspective, this paper submits that the extension of human rights to corporations cannot be uncritical and should not be completely symmetrical to that for human beings; but that it rather needs to be necessarily adapted to their circumstances. To put it more bluntly, it is suggested that in the field of the enforcement of economic law, administrative law procedures should be sound and there should clearly be a strong system of judicial review in place, but corporations should not have access to broader constitutional or human rights protections and any perceived shortcomings in the design and application of those procedures should remain within the sphere of regulatory reform.

 

Sánchez Graells, Albert and Marcos, Francisco, “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard? (February 2, 2014). University of Leicester School of Law Research Paper No. 14-04. Available at SSRN: http://ssrn.com/abstract=2389715.

New Paper: A critical assessment of the new health care procurement rules in the UK

The recently adopted UK National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 include an interesting (and somehow unsettling) provision authorising anti-competitive behaviour in the commissioning of health care services by the National Health Service (NHS), if that is in the (best) interest of health care users.

As briefly discussed here, generally, it seems that under the new public procurement and competition rules applicable to the NHS, whatever is considered in the “interest of patients” could trump pro-competitive requirements and allow the commissioning entity to engage in distortions of competition (either directly, or by facilitating anti-competitive behaviour by tenderers and service providers)—as long as a sort of qualitative cost-benefit analysis shows that net advantages derived from the anti-competitive procurement activity. The apparent oddity of such general “authorisation” for public buyers to engage in anti-competitive procurement of health care services deserves some careful analysis, which this new paper carries out.

The paper assesses Regulation 10 of the NHS Procurement, Patient Choice and Competition Regulations 2013 and the substantive guidance published by the UK's health care sector regulator (Monitor) from the perspective of EU economic law (and, more specifically, in connection to public procurement and competition rules). The paper claims that there is a prima facie potential incompatibility between Regulation 10 of the 2013 NHS Procurement, Patient Choice and Competition Regulations and both EU competition law and public procurement law—which are, in principle, opposed to any anti-competitive or competition restrictive behaviour in the conduct of public procurement activities. Consequently, there is a need for an EU law compliant, restrictive interpretation and enforcement of the provision—at least where there is a cross border effect on competition and/or a cross border interest in tendering for the health care contracts, which triggers the application of both EU competition law and public procurement law.

 

Sánchez Graells, Albert, New Rules For Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law (February 2, 2014). University of Leicester School of Law Research Paper No. 14-03. Available at SSRN: http://ssrn.com/abstract=2389719.