On January 28, 2020, the German Federal Court of Justice (“FCJ”) handed down another judgment concerning the Rail Cartel (“Rail Cartel II”).[1] In line with its earlier judgment concerning the Rail Cartel (“Rail Cartel I”)[2], the FCJ confirmed that claimants cannot rely on prima facie evidence to prove causal damages; at least in price, quota and customer sharing cartels. At the same time, it further aligned the requirements under German tort law with the European Court of Justice’s (“ECJ”) case law and in this context partially overruled its judgment in Rail Cartel I.
Background
Under German law, claimants can base their follow-on damages claims on Sec. 33(3) GWB (now Sec. 33a(1) GWB) if they are affected by the infringement. The relevance and scope of the requirement of being affected has caused controversy among German legal scholars and practitioners.
In its Rail Cartel I judgment, the FCJ overruled the Karlsruhe Court of Appeal. The Karlsruhe Court of Appeals had relied on prima facie evidence that the cartel affected plaintiffs’ purchases and that plaintiffs had suffered a damage. The FCJ raised the evidential bar for plaintiffs and held that prima facie evidence was not applicable. Due to the diversity and complexity of agreements restricting competition, it rejected the assumption that a cartel per se affects the purchases in the relevant time frame. Instead, the court allowed plaintiffs to rely on a factual presumption, which requires an overall assessment of the circumstances and therefore requires plaintiffs to satisfy a higher burden of proof to show that they are affected. Lower courts immediately criticized the FCJ and either continued to rely on prima facie evidence or based their findings on both prima facie evidence and a factual presumption.[3]
Being Directly Affected Is No Longer A Requirement
In Rail Cartel II, the FCJ reversed its position and held that an evidential requirement to show that each individual purchase was affected would unduly limit the right to claim compensation. Instead, it suffices to show that the anticompetitive conduct is capable of causing directly or indirectly damage to the plaintiff. The regular standard of proof applies, i.e., the judge must be convinced to a degree of certainty which silences doubts without necessarily ruling them out entirely.[4] Applying this new rule, the FCJ held that the requirement was readily satisfied because the plaintiff had purchased goods from the defendants that were subject to the rail cartel.
Change Of Course Followed ECJ Otis Judgment
The FCJ’s change of course was likely caused by the ECJ’s Otis[5] judgment concerning the elevators and escalators cartel, delivered six weeks before the Rail Cartel II judgment on December 12, 2019.[6] The ECJ clarified that, according to the case law of the ECJ, any loss which has a causal connection with an infringement of Article 101 TFEU can give rise to compensation.[7] National law limiting the scope of persons to claim compensation is incompatible with EU law. Instead, a national court is limited to examine whether damages are factually attributable to the competition law infringement under domestic procedural rules.
No Prima Facie Evidence For Causal Damage
The FCJ confirmed its ruling in Rail Cartel I insofar as it squashed a prima facie evidence for a causal damage at least in price, quota and customer sharing cartels. Instead, plaintiffs may be able to rely on a factual presumption which, in contrast to a prima facie evidence, requires an overall assessment of all circumstances of the case.
Economic Expert Opinions Do Not Replace Overall Assessment By The Judge
The FCJ provided additional guidance on the necessity of court expert opinions in cartel damage litigation. To establish a causal damage, e.g., an overcharge as a result of the infringement, plaintiffs usually rely on circumstantial evidence because the hypothetical prices in absence of the cartel are unknown. Economic reports can approximate such a hypothetical competitive price but cannot replace the overall assessment by the court. According to the FCJ, judges are not obliged to appoint a court expert if it is sufficiently likely that the infringement caused damages based on the available circumstantial evidence. Judges must consider parties’ expert opinions, taking into account the accuracy and validity of the factual observations on the cartelized market and on comparative markets. However, the submission of a party expert opinion does not require a judge to appoint a court expert to validate the party expert’s observations.
Likely End Of Declaratory Judgments (“Grundurteile”)
Notably, the FCJ has likely terminated the lower courts’ practice to issue declaratory judgments without quantifying the amount of damages to be awarded. Between 2014 and 2019 alone, German courts have issued 55 declaratory or interlocutory judgments. The FCJ now clarified that declaratory judgments equally require an overall assessment of all circumstances of the case. Thus, splitting the damages claim into a procedure on the causal damage and a separate procedure for the quantification of damages will in most cases lead to an unjustified delay of the proceeding.
Conclusion
The FCJ aligned the requirements for the claim of compensation under national law with EU law principles. Arguably, this was already overdue since the ECJ’s Kone[8] ruling in 2014. In Kone and Otis, the ECJ made it relatively clear that the only relevant criterion to claim compensation is a causal relationship between infringement and damage.
[1] Rail Cartel II (KZR 24/17), FCJ decision of January 28, 2020, only available in German here.
[2] Rail Cartel I (KZR 26/17), FCJ decision of December 11, 2018, only available in German here.
[3] See German Competition Law Newsletter March – April 2019, p. 3 et seq., available in English here.
[4] (III ZR 139/67), FCJ decision of February 17, 1970, only available in German here.
[5] Otis and Others (Case C-435/18), ECJ decision of December 12, 2019, available in English here.
[6] Otis and Others (Case C-435/18), ECJ decision of December 12, 2019, available in English here.
[7] Otis and Others (Case C-435/18), ECJ decision of December 12, 2019, para. 30; available in English here.
[8] Kone AG and Others (Case C-557/12), ECJ decision of June 5, 2014, available in English here.