Wednesday, 24 August 2011

Limits claims for competition infringements

The Competition Appeal Tribunal has restricted the scope of "follow on" claims, on a narrow (but perfectly proper) interpretation of Section 47A of the Competition Act 1998, which was added by the Enterprise Act 2002.

This provides a mechanism for “follow-on” claims for damages – following on, that is, from a finding by the authorities that the competition rules had been breached. But in Emerson Electric v Le Carbone (Great Britain) Limited the Competition Appeal Tribunal held that the claim was ill-founded because Carbone had not been an addressee of the European Commission's decision. It did not follow on: it was a new matter, and Emerson would have to go to all the trouble of proving a breach, which is what section 47A tries to short-circuit.

The decision was that there had been an illegal carbon and graphite products cartel which included Le Carbone-Lorraine SA, the GB company's parent. Emerson were not simply naïve in getting the wrong company, though: they based their case on the argument that the two Carbone companies formed a single undertaking and the parent had been named in the decision in a representative capacity.
The British Carbone company applied to strike out the claim, on the grounds that it was not an addressee of the decision. The CAT rejected Emerson's argument about representative capacity, partly because there was nothing in the decision to suggest that the British company had been involved in the infringement. The decision did, it was true, refer to a British subsidiary, but the defendant was not the only one at the time of the infringement. There was nothing to suggest that the Commission meant the defendant, nor was there anything to suggest that the two companies formed a single undertaking. Even if the company was indeed the UK subsidiary referred to, that would not mean that the Commission had found it to be infringing the rules. There might be evidence to support a decision that it too had infringed the competition rules, but that was a completely different matter.

Although the decision to strike out the claim is hardly surprising in the circumstances, it does show us that section 47A has very limited scope. The option of bringing a follow-on claim before the CAT will be available to a very small class of claimants, very different from the High Court's approach (as shown in Cooper Tire and National Grid) which tends to make it the forum of choice for cartel claims.

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