On December 12, 2019, the ECJ clarified in a preliminary ruling that entities which are not active as customers or suppliers in the markets affected by a cartel are entitled to claim damages under Article 101 TFEU.
The case arose from the Supreme Court of Austria’s reference for a preliminary ruling in a case involving a damages action brought by the Province of Upper Austria (“Upper Austria”) against five companies that had been fined by the Austrian NCA for their involvement in a cartel for the installation and maintenance of lifts and escalators.
Upper Austria, which had not been a (direct or indirect) purchaser of the products affected by the cartel, claimed that it had suffered a financial loss in its capacity as a body granting subsidies to purchasers of lifts and escalators. These subsidies had been granted in the form of low-interest loans for the financing of construction projects, with the amount of the loan calculated based on loan recipients’ overall costs of construction.
Upper Austria claimed that the costs connected with the installation of lifts, included in the overall building costs paid by the loan recipients, were higher as a result of the cartel, and that it had therefore granted loans for higher amounts. If the cartel had not existed, Upper Austria would have granted smaller loans, and hence smaller subsidies, to these recipients. The Austrian region could have invested the difference at an on average higher, non-subsidized interest rate.
Figure : Overview of claimant-defendants relationship
Source: CGSH, based on public information
The Austrian Trial Court rejected Upper Austria’s claim, holding that an entity not active in the relevant market affected by the cartel suffers merely indirect loss which does not give rise to a claim for compensation. The Austrian Appellate Court held instead that the prohibition of cartels also serves to protect the financial interests of those who incur additional costs resulting from any direct or indirect distortion of market conditions.
On further appeal, the Supreme Court of Austria first held that under well-established principles of Austrian law, pure monetary losses do not enjoy protection outside of a contractual relationship. However, the Court decided to stay the proceedings and ask the ECJ whether the general principle allowing all injured parties to take action against a member of a cartel applies to persons who (1) are not active as suppliers or customers upstream or downstream in the market where the cartel was implemented; and (2) have experienced only indirect loss arising from a directly affected third party.
By way of reference, the Austrian Supreme Court strongly implied that Article 101 is not “designed” to prevent against loss suffered by entities not active in the markets affected by the cartel, and that Upper Austria’s alleged damages would not have been recoverable under national law.
The ECJ took a different view, and held that Article 101 TFEU confers the right to seek compensation for the damages caused by an infringement upon any harmed persons (without limitations), and that national rules on liability must not interfere with the effective application of EU law, and that compensation for loss caused by a cartel cannot only be reserved to suppliers and customers of the affected markets.
Consequently, the Court concluded that it is not necessary to establish that the loss suffered as a result of a cartel must have a specific connection with the Article 101 objective of protecting the competitive process, and that even an entity other than a purchaser or a supplier must be allowed to seek compensation. The Court nevertheless noted that it is for national courts to assess whether a causal connection exists between the entity’s loss and the Article 101 infringement, as well as whether sufficient proof of material loss exists (i.e., in the present case, whether Upper Austria could have made more profitable investments absent the cartel).
In line with observations on the Skanska judgment, the Otis ruling represents the strengthening of private enforcement by the ECJ from broad interpretation of circumstances in which claimants can directly enforce EU law through damages actions—namely by allowing claims (i) against non-participants in a cartel (Skanska); and (ii) from non-participants in the market (Otis).
There are two noteworthy developments that are likely to follow from the Otis judgment:
First, the ability of claimants—whose claims are not connected to their position as supplier or purchasers from a market affected by a cartel— will likely open the door for more indirect claims of loss by national, federal, and local governments, as well as other state entities. To the extent that these types of entities are more likely to have the resources and inclination to bring damages claims than individual consumers or small and medium enterprises, companies are likely to face increased litigation in the wake of their participation in cartels and other anticompetitive conduct.
Second, the judgment will add to the chilling effect invoked by private antitrust damages litigation on leniency applications, which only protect whistleblowing companies against fines from authorities. Damages claims (and their related litigation expenses) can often vastly dwarf even the heaviest cartel fines. The increased prospect of such actions, especially with indirect claims that will likely require significant legal and economic advice to litigate the causation and quantum of any alleged harm, will almost certainly further disincentivize companies from cooperating with authorities and exposing anticompetitive conduct.
The Commission’s and NCA’s leniency programs have been crucial and arguably indispensable tools in allowing authorities to uncover and eliminate cartels and other instances of anticompetitive behavior. With the growing cloud of litigation risk facilitated by the ECJ’s judgments in this field, the time may be right for the Commission to reassess the balance between leniency and follow-on damages, including by extending immunity to leniency participants through new legislation.
 See Otis GmbH and Others (Case C-435/18) EU:C:2019:1069 (“Otis”).
 See Courage and Crehan (Case C-453/99) EU:C:2001:465, Manfredi and Others (Cases C-295/04 to C-298/04) EU:C:2006:461, Kone and Others (C-557/12) EU:C:2014:1317, and Skanska Industrial Solutions and Others (C-724/17) EU:C:2019:204.