HighlightS
MERGER CONTROL - Commission conditionally clears Syngenta's acquisition of Monsanto's sunflower seed business, following phase II investigation ■ French Competition Authority rejects complaint against certain pay TV exclusivity arrangements on grounds of previous merger clearance decision ■ UK Office of Fair Trading launches investigation into Ryanair's acquisition of a minority shareholding in Aer Lingus
CARTELS AND HORIZONTAL AGREEMENTS - Commission fines eleven air cargo carriers more than € 799 million for price-fixing cartel
VERTICAL AGREEMENTS - Paris Court of Appeal rules on termination of dealership contract for the sale of motor vehicles
INTELLECTUAL PROPERTY - ECJ rules that Canon may block unauthorised imports into the EU
Legislative, PROCEDURAL and policy developments - Paris Court of Appeal to review the legality of searches and seizures of electronic documents during dawn raids ■ German Federal Cartel Office publishes minimum quality standards for the submission of economic opinions ■ Polish Competition Authority fines mobile network operator € 30 million for obstructing inspections during a dawn raid
MERGER CONTROL
EUROPEAN UNION LEVEL
Commission conditionally clears Syngenta's acquisition of Monsanto's sunflower seed business, following phase II investigation
On 17 November 2010, the European Commission cleared Syngenta's proposed acquisition of Monsanto's sunflower seed business, subject to conditions.
The transaction, which did not meet the EU notification thresholds, was initially notified to the Spanish and Hungarian competition authorities. Following a referral request by these authorities, the case was subsequently referred to the Commission for review pursuant to Article 22 of the EC Merger Regulation.
Following an in-depth review, the Commission found that the concentration, as initially notified, would raise competition concerns in relation to the commercialisation of sunflower seeds in Spain and Hungary, where the parties were leading suppliers. In order to address these concerns, Syngenta agreed to divest, among other things, the rights to develop, commercialise and licence certain of Monsanto's hybrid sunflower seeds. Interestingly, some of the divested rights covered not only the EU but also Russia and the Ukraine or Turkey, because the Commission found that the extension of the divested rights to these geographic areas was necessary to fully ensure the long term viability of the divested business.
Commission conditionally clears Unilever's acquisition of Sara Lee's household and body care business, following phase II investigation
On 17 November 2010, the European Commission conditionally cleared Unilever's proposed acquisition of the household and body care business of Sara Lee, following an in-depth phase II investigation.
The Commission held that the concentration, as initially notified, would give rise to competition concerns in the deodorant markets in several Member States, where the parties had particularly strong and directly competing brands (such as Axe, Dove and Rexona for Unilever; and Sanex for Sara Lee). In order to address these concerns, the parties agreed to divest the Sanex brand and related businesses in Europe.
MEMBER STATE LEVEL
FRANCE
French Competition Authority rejects complaint against certain pay TV exclusivity arrangements on grounds of previous merger clearance decision
On 16 November 2010, the French Competition Authority rejected an antitrust complaint directed against certain exclusivity arrangements concluded by Groupe Canal Plus on the French pay TV markets, insofar as these arrangements were "ancillary" to the French Minister of Economy's Canal Plus/TPS merger clearance decision.
In particular, the French Competition Authority held that the exclusivity agreements between Groupe Canal Plus and TF1, M6 and Groupe Lagardère, which had been notified together with the Canal Plus/TPS concentration, were ancillary to the Canal Plus/TPS concentration, which had been approved in 2006 (see, VBB on Competition Law, Volume 2006, No. 9).
The concept of ancillary restraints under EU competition law provides that restrictive agreements that are directly related and necessary to a notified concentration are to be deemed approved once the concentration is approved. Although at the time of the Canal Plus/TPS decision there was no French rule providing that ancillary restraints are automatically covered by the clearance decision, the French Competition Authority held that – on the basis of the principle of legal certainty – the complaint against those arrangements should be rejected. Since the entry into force of the French law on modernisation of economy (see, VBB on Competition Law, Volume 2008, No. 7), French Competition Authority merger clearance decisions are now deemed to cover ancillary restraints.
UNITED KINGDOM
UK Office of Fair Trading launches investigation into Ryanair's acquisition of a minority shareholding in Aer Lingus
On 29 October 2010, the Office of Fair Trading (OFT) announced that it had opened an investigation under the Enterprise Act 2002 into Ryanair's acquisition of a 29.8% stake in rival Irish air carrier Aer Lingus.
The OFT's decision follows a judgment of the EU General Court of 6 July 2010 in which the Court found that Ryanair's minority shareholding in Aer Lingus did not give rise to a situation of "control" for the purposes of EU merger control law and that the European Commission consequently did not have the power to require Ryanair to divest its minority shareholding (see, VBB on Competition Law, Volume 2010, No. 7). However, under UK merger control law, a "relevant merger situation" can come into existence where one undertaking obtains a "material influence" or "de facto control" over another, in circumstances that would fall short of "control" as understood under EU law.
As a first step, the OFT must decide whether it has jurisdiction over the matter. This involves addressing whether the acquisition of the minority shareholding qualifies as a "relevant merger situation" due to Ryanair's ability to exercise material influence over the commercial policy of Aer Lingus. Moreover, the opening of the investigation should fall within the statutory four-month time period available to the OFT under the Enterprise Act 2002 to investigate the acquisition of the minority shareholding – which took place from 2006 to 2007. During this four-month time period, the OFT can make a reference to the Competition Commission for an in-depth review of a merger. This period is suspended where, because of the EU Merger Regulation "or anything done in accordance with it", the reference could not have been made earlier.
Under the EU Merger Regulation, national competition authorities are prohibited from applying their own legislation to mergers that fall under the European Commission's jurisdiction. Accordingly, the OFT was barred from scrutinising the minority shareholding during the European Commission's merger review of Ryanair's proposed acquisition of a majority shareholding in Aer Lingus. What is not clear, however, is whether the subsequent appeal to the General Court also suspended the application of UK merger law.
In a decision of the President of the General Court in 2008 (see, VBB on Competition Law, Volume 2008, No. 3) denying Aer Lingus's attempt to obtain interim measures to prevent Ryanair from exercising its voting rights, it was stated that appeals before the Court do not have a suspensory effect. This is because the European Commission no longer has exclusive jurisdiction after it has cleared a concentration, in which case national competition authorities are not precluded from applying their national legislation. If the OFT takes the same position that suspensory effect ceased once the European Commission handed down its decision on the merger, then it would be time-barred from taking action under its merger provisions against Ryanair's acquisition of a stake in Aer Lingus.
The OFT is set to rule on the matter by 24 December 2010.
UK Office of Communications investigates implications on media plurality arising from News Corp's proposed buyout of BSkyB
On 4 November 2010, the UK Secretary of State for Business, Innovation and Skills instigated an investigation by the UK Office of Communications (Ofcom) into the implications that News Corp's proposed buyout of UK satellite broadcaster BSkyB may have for media plurality in the UK.
The first stage of this investigation requires Ofcom to compile a report by 31 December 2010, which will contain its initial findings and provide the Secretary of State with advice and recommendations on whether he should refer the case to the Competition Commission for further analysis.
In parallel to Ofcom's plurality investigation, the European Commission is investigating the competition law aspects of the proposed buyout under the EU Merger Regulation. The Commission's phase I review period expires on 8 December 2010.
However, the EU Merger Regulation allows Member States to take appropriate measures to protect legitimate interests, such as the plurality of media, even vis-à-vis concentrations that fall under the European Commission's exclusive jurisdiction for merger review. This means that, even if the transaction is cleared by the European Commission, any remedies required by the UK authorities to protect media plurality would still be binding.
ABUSE OF DOMINANT POSITION
MEMBER STATE LEVEL
FRANCE
French Competition Authority accepts and makes binding Google's Adword's commitments
On 28 October 2010, the French Competition Authority accepted the commitments proposed by Google to remedy competition concerns in connection with its AdWords online advertising service (for further details, see VBB on Competition Law, Volume 2010, No. 7).
The commitments initially proposed by Google were modified following comments from interested third parties. Among other things, Google committed itself to make the functioning of its AdWords service concerning devices aimed at evading road traffic speed cameras in France more transparent and predictable for advertisers. In light of these modifications, the Competition Authority closed the investigation by accepting the proposed commitments and making them binding upon Google for a period of three years. It should be noted, however, that Google still faces a damages claim launched by Navx, the original complainant, in proceedings brought before a commercial court in Paris.
Cartels and horizontal agreements
EUROPEAN UNION LEVEL
Commission fines eleven air cargo carriers more than € 799 million for price-fixing cartel
On 9 November 2010, the Commission announced its decision to fine eleven air cargo carriers a total of € 799,445,000 for their involvement in a worldwide price-fixing cartel in the airfreight services sector. Air cargo carriers provide their services to freight forwarders, who arrange the carriage of goods including associated services and formalities on behalf of shippers.
While the Commission's decision has not yet been published, a press release describes the Commission's main findings: Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, SAS, Singapore Airlines and Qantas were found to have coordinated various elements of their pricing policies from December 1999 to 14 February 2006. According to the Commission, the cartel comprised numerous contacts between the carriers aiming at coordinating their pricing policies with regards to surcharges for fuel and security. The Commission also found that, in order to ensure that the surcharges would not become subject to competition through the granting of discounts to customers, the carriers agreed that they would all refuse to pay a commission on such surcharges to their clients. The Commission however dropped several allegations of collusion originally made in the Statement of Objections for lack of evidence. Those allegations originally concerned two other surcharges and freight rates. For the same reasons, the Commission also dropped its allegations against another eleven carriers and one consultancy firm, which had previously received the Statement of Objections.
According to the Commission, the cartel had a worldwide dimension and covered flights from, to and within the European Economic Area (EEA). In setting the fines, the Commission took account of the cartel members' sales in the market concerned, the serious nature of their infringement, the geographic dimension of the cartel and its duration.
The highest fines were imposed on Air France-KLM (€ 182,920,000 on Air France, € 127,160,000 on KLM). The Commission also increased the fine imposed on SAS by 50% due to its previous involvement (between 1998 and 2001) in a market-sharing agreement in the same sector. Without precisely identifying the cartel members concerned, the press release indicates that the Commission had to reduce the amount (before possible leniency considerations) imposed on two of them, as the fines would have otherwise exceeded the legal ceiling of 10% of their 2009 turnover. All the cartel members received a reduction of 15% on account of the general regulatory environment in the sector, which could be regarded as encouraging price coordination. Four cartel members were also granted a 10% reduction for their limited participation in the infringement.
The Commission finally took account of the cartel members' cooperation under the Leniency Notice. Lufthansa (and its subsidiary Swiss) was accordingly granted full immunity, as it was the first to bring the cartel to the Commission's attention and to provide valuable information. Martinair obtained a 50% reduction and Japan Airlines obtained a 25% reduction. Air France-KLM, Cathay Pacific, LAN Chile and Qantas all obtained a 20% reduction. Air Canada, Cargolux and SAS obtained a 15% reduction and British Airways, 10%.
OTHER DEVELOPMENTS
AUSTRIA: In a decision of 4 October 2010, which was published recently, the Austrian Higher Cartel Court upheld the Austrian Cartel Court's decision of April 2010, fining four groups of companies active in printing chemicals € 1,519,000 for price fixing, customer allocation and exchange of information on contract conditions, cash discounts and rebates (see VBB on Competition Law, Volume 2010, No. 4). The decision of the Austrian Higher Cartel Court is binding.
VERTICAL AGREEMENTS
MEMBER STATE LEVEL
FRANCE
Paris Court of Appeal rules on termination of dealership contract for the sale of motor vehicles
In a judgment of 2 September 2010 which has recently become available, the Paris Court of Appeal gave its ruling in legal proceedings between a supplier of motor vehicles, Subaru France, and one of its former dealers. It appears that after Subaru France terminated the dealership agreement by giving 6-months notice as required by the agreement, the former dealer brought an action against Subaru France claiming, inter alia, that the termination was unlawful since Subaru had not complied with the conditions of the 2002 Motor Vehicle Block Exemption Regulation (which stipulate a notice period of 2 years if the agreement is concluded for an indefinite period).
The Paris Court of Appeal rejected the arguments put forward by the former dealer. In so doing, the Paris Court of Appeal explicitly relied on the fact that, in view of Subaru's (and the dealer's) low market share on the market for the sale of motor vehicles, Subaru could benefit from the Commission Notice on Agreements of Minor Importance (the so- called De Minimis Notice). According to this Notice, vertical agreements will not appreciably restrict competition within the meaning of Article 101(1) TFEU if the market shares held by each of the parties to the agreement do not exceed 15% and the agreement does not contain hardcore restrictions.
Although the Paris Court of Appeal did not explicitly rule on this point, it should be noted that the fact that a dealership contract does not fulfill the conditions of the 2002 Motor Vehicle Block Exemption Regulation does not imply that the contract is necessarily anti-competitive (even in circumstances where the De Minimis Notice cannot be relied on). Indeed, the only consequence of this is that the agreement will not be able to benefit from the block exemption. However, this does not prejudice the analysis as to whether there is a restriction of competition within the meaning of Article 101(1) TFEU and whether such a restriction can be justified under Article 103(3) TFEU under an individual assessment.
INTELLECTUAL PROPERTY
EUROPEAN UNION LEVEL
ECJ rules that Canon may block unauthorised imports into the EU
On 28 October 2010, the Court of Justice of the European Union ("ECJ") ruled that Canon Kabushiki Kaisha ("Canon"), a Japanese manufacturer of copying machines, cameras, optical and other products, could prevent a Bulgarian trader from importing ink cartridges from Hong Kong into the EU if it were proven that these were intended to be placed on the market in the EEA.
In 2008, the Bulgarian customs authorities seized a shipment of Canon ink cartridges. The shipment came from Hong Kong and was addressed to a company in Bulgaria, namely, IPN Bulgaria OOD ("IPN"). Canon subsequently brought proceedings in Bulgaria against IPN, claiming that the importation of the cartridges into the EEA, which took place without its consent, infringed its exclusive rights conferred by the Canon trademark. For its part, IPN claimed that the cartridges were in fact destined for Serbia, not Bulgaria, and that as a result there had not been any importation of the goods into the EEA. The national court in Bulgaria referred to the ECJ the question whether Article 5 of the EU Trade Mark Directive should be interpreted as meaning that the trade mark holder has the right to prohibit the importation of original goods without the trade mark holder's consent in cases where the latter's rights have not been exhausted within the meaning of Article 7 of the EU Trade Mark Directive.
The ECJ noted that the national court in Bulgaria would first have to determine whether IPN was about to place the cartridges on the market within the EEA or offer or sell them to an operator who would do so. If this was confirmed then, in accordance with its well-established case-law on the issue, the ECJ held that this would amount to a first placement on the market in the EEA of goods without the trade mark owner's consent and could therefore be blocked.
In accordance with Article 104(3) of its Rules of Procedure, the ECJ handed down a reasoned order in this case. This Article provides for such an order in the event that the answer to a preliminary question referred to the Court may be clearly deduced from existing case-law.
LEGISLATIVE, PROCEDURAL AND POLICY DEVELOPMENTS
MEMBER STATE LEVEL
FRANce
Paris Court of Appeal to review the legality of searches and seizures of electronic documents during dawn raids
Called upon to review the practice of untargeted searches and seizures of digital data by the investigators of the French Competition Authority, a judge delegated by the President of the Paris Court of Appeal (the "President's delegate") recently stayed proceedings and requested an expert opinion on the availability of selective search techniques.
The proceedings before the Paris Court of Appeal concern on-the-spot inspections carried out by the French Competition Authority in December 2009 at the premises of three companies suspected of anticompetitive practices in the hydraulic services sector. The minutes of the inspections indicate that digital data stored on employees' computers, such as electronic mailboxes, were examined. Since these electronic mailboxes contained documents falling within the scope of the investigation, their full content was copied and transferred on to separate drives for deeper scrutiny. However, it subsequently appeared that the electronic mailboxes in question also included correspondence with external lawyers covered by professional privilege as well as unrelated messages of a private nature. The investigated companies therefore challenged the validity of the inspection before the Paris Court of Appeal.
In their appeal, the applicants argued that a blanket seizure of digital data was disproportionate, in that it led to documents being retrieved which clearly fell outside the scope of the investigation. They also claimed that collecting privileged documents impaired their rights of defence enshrined in Article 6 of the European Convention of Human Rights and in the relevant French rules protecting their legal professional privilege. In response, the French Competition Authority argued that the procedure followed duly safeguarded the rights of individuals and complied with the consistent case law of the Paris Court of Appeal relating to searches and seizures of digital data.
In three orders delivered on 2 November 2010, the President's delegate rejected the arguments of the French Competition Authority on the ground that the case law relied upon did not relate to improperly seized privileged documents. Moreover, in the case at hand, the investigated companies put forward an alternative technical method allowing digital data to be searched in a selective manner. The President's delegate also noted that the inspectors' investigatory powers under Article 56 of the Code of Criminal Procedure (which applies to antitrust investigations) had to be reconciled with the companies' rights of defence. The wording of Article 56 of the Code of Criminal Procedure indeed requires the investigators to take all necessary measures to ensure compliance with legal professional privilege and the investigated companies' rights of defence.
As it appeared that more selective techniques for searches and seizures may be available, the President's delegate expressed doubts as to whether untargeted searches and seizures of digital data were proportionate. The President's delegate therefore ordered an expert to further investigate this matter from a technical point of view.
The expert, whose opinion is due by May 2011, will have to examine whether using specific search and evidencing tools, allowing for a selective capture of information stored in mailboxes of personal organizer software, such as Outlook or Lotus, would satisfy the required degree of authenticity and integrity of evidence. The President's delegate also asked the expert to carry out a comparison with the practices in place in the Netherlands, the EU and the US, as well as the standards recommended by the International Competition Network.
Once the expert's opinion has been delivered, the President's delegate will then resume proceedings on the appeal and hand down his judgment on the validity of the inspections.
French Supreme Court annuls judgment for failure to demonstrate breach of rights of defence due to excessive duration of administrative procedure
On 23 November 2010, the French Supreme Court annulled a judgment of the Paris Court of Appeal of 10 November 2009, which had annulled a 2006 decision of the French Competition Council (now the Competition Authority), imposing fines totalling 45.4 million on 13 companies supplying luxury perfume and cosmetics and on 3 national distribution chains for resale price maintenance (see VBB on Competition Law, Volume 2006, No. 3). The Paris Court of Appeal annulled this decision on the ground that the duration of the administrative procedure was excessively long (see VBB on Competition Law, Volume 2009, No. 11).
The Paris Court of Appeal first deemed the duration of the first phase of the administrative procedure as excessive: seven years from the beginning of the investigation (1998) to the statement of objections (April 2005). According to the Paris Court of Appeal, this duration could not be justified by the complexity of the case. Indeed, in the Court's view, the very short duration of the second phase of the administrative procedure, from the statement of objections to the final decision in March 2006, showed that the complexity of the case was very limited. The Court then noted that the perfume manufacturers were unaware that the Competition Council was investigating their practices for a very long period of time. Finally, the Court considered that five undertakings had sufficiently demonstrated that, as a result of the excessive duration of the investigation, they encountered difficulties in defending themselves against the allegations of infringement. In this respect, the Court observed that, for their defence against the charges raised in the 2005 statement of objections, the undertakings concerned needed a significant amount of commercial documents dating back to 1999 which they could not reasonably have been expected to keep at that time and which, unlike accounting documents, they were not legally bound to keep. Insofar as those documents constituted important exculpatory evidence, the Court concluded that the excessive duration of the investigation irreparably affected the rights of defence of the undertakings concerned. The Court therefore annulled the decision of the Competition Council.
The French Minister of the Economy subsequently appealed to the Supreme Court. Before the Supreme Court, the Minister of the Economy claimed that the Paris Court of Appeal did not assess in concreto whether the investigation was unreasonably long in the present case. The Minister of the Economy also criticized the Court for not having examined the respective situation of each of the undertakings invoking a breach of their rights of defence, and for failing to demonstrate why the difficulties they encountered in defending themselves irreparably affected these rights.
In its judgment, the Supreme Court first confirmed that the first phase of the administrative procedure must be taken into account in order to consider whether there is a breach of the reasonable time principle. However, the Supreme Court agreed with the Minister of Economy that the Paris Court of Appeal did not properly justify its decision. According to the Supreme Court, the Paris Court of Appeal failed to establish why the duration of the first phase of the administrative procedure was not reasonable and could not be justified by the complexity of the case. The Supreme Court also agreed that the Paris Court of Appeal should have examined whether the duration of the investigation procedure caused, for each of the undertakings claiming a breach of their rights of defence, a personal, effective and irreparable harm. Consequently, the Supreme Court annulled the judgment of the Paris Court of Appeal and sent the case back to the Court for a new decision by a different chamber.
GERMANY
German Federal Cartel Office publishes minimum quality standards for the submission of economic opinions
On 20 October 2010, the German Federal Cartel Office ("FCO") published a notice which lays down minimum quality standards for submitting expert economic opinions in the course of competition proceedings. Very generally, the notice requires that the expert economic evidence submitted should be relevant to the competition issue at hand. The evidence should be complete so as to enable it to be understood and its results reproduced. It should also be transparent so that the critical assumptions are clearly evident. Finally, the evidence should be consistent in its analysis. Moreover, there is a clear indication in the notice that the more robust the economic models and analyses used in the evidence are, the more significance will be attached to the evidence in the decision-making process. The notice is also intended to standardise the process by which expert economic opinions are submitted and evaluated in order to make this process more transparent for all concerned. The FCO points out that the results and conclusions of opinions which do not comply with these standards can only be considered to a lesser degree, if at all, when the evidence is being evaluated.
The minimum quality standards in the FCO's notice are very similar to those contained in the European Commission's "Best Practices for the Submission of Economic Evidence and Data Collection in Cases concerning the Application of Articles 101 and 102 TFEU and in Merger Cases". While the European Commission's "Best Practices" document applies more broadly both to the submission of economic evidence (like the FCO's notice) and to the collection of data pursuant to an information request under Art. 18 of Regulation No. 1/2003, the minimum quality standards in both documents are inherently the same.
POLAND
Polish Competition Authority fines mobile network operator € 30 million for obstructing inspections during a dawn raid
On 4 November 2010, the Polish Competition Authority (UOKiK) fined Polska Telefonia Cyfrowa (PTC) € 30 million for obstructing an on-the-spot inspection. It was acknowledged that PTC's employees did not allow the inspectors to enter the company's offices and delayed a search of the premises.
In December 2009 UOKiK carried out on-site inspections at the premises of several companies involved in the mobile-TV business, including the premises of three mobile network operators. Shortly after 10 a.m. on 2 December 2009, UOKiK's inspectors assisted by the police arrived at the reception at PTC's headquarters, presenting a search warrant and requesting to see a member of the board of directors. Despite the request none of the directors showed up within the next 20 minutes and the inspectors asked security guards to let them into PTC's offices to conduct the search. The inspectors were told that only a member of the management could allow them to enter company's premises and that a member of the legal department would soon arrive.
Two members of the legal department arrived 40 minutes after the inspectors had requested entry into the building. After a review of the search warrants and the accompanying documents, they arranged for badges allowing the inspectors to have access to the building, which took another 20 minutes. Moreover, one of the employees made a phone call, despite the UOKiK's inspector clearly prohibiting them from doing so.
Finally, the investigators were asked to wait for a meeting of the board of directors to finish. Left alone in the waiting room, the investigators decided to search the management's offices at their own initiative. They entered the office of the marketing and sales director and noted that apparently a meeting concerning the subject-matter of their investigation – mobile TV – was taking place at the time.
Following these events, on 4 November 2010, UOKiK issued a decision fining PTC € 30 million for obstructing its investigation. The UOKiK justified the high level of the fine due to PTC's blatant violation of its obligations concerning the inspection. It held in particular that the initial phase of an on-site inspection is crucial for its effectiveness and delaying the search for at least one hour might have allowed the company to conceal important evidence.
In that regard, the UOKiK took into account the fact that while its inspectors were kept waiting, a meeting concerning the very subject of the investigation was being held. In the UOKiK's view, this might well have allowed employees involved in the mobile TV project to agree on a common line of conduct during the inspection. In addition, the UOKiK observed that, contrary to the argument put forward by PTC, an on-site inspection begins upon the presentation of documents empowering the authority to carry out searches to any employee of the investigated company, such as a receptionist. It is thus not necessary to wait for a lawyer or a member of the board of directors for the inspection to start.
Under Polish competition law, a fine imposed for obstructing antitrust investigation may reach up to € 50 million. Although the fine does not have to reflect the company's turnover, the UOKiK took this factor into consideration in the present case and levied by far the highest sanction for procedural misconduct ever imposed, which may well exceed any fine later imposed on PTC should it be found to have actually infringed substantive competition rules.
UNITED KINGDOM
English Court of Appeal rejects class action certification appeal in air cargo case
On 18 November 2010, the Court of Appeal of England and Wales issued a judgment rejecting an attempt to create a broad class of claimants in a suit brought by two flower importers against British Airways ("BA") for its alleged role in the air freight cartel recently fined by the European Commission. The two plaintiffs had attempted to use a mechanism provided for under English law to create an "opt-out" representative action similar to US class action suits. In so doing, the plaintiffs claimed that they could represent a group of potential claimants consisting of all parties who had indirectly purchased BA's air freight services through a defined group of intermediaries (primarily freight forwarding and logistics companies) during the life of the cartel. Allowing such a broad representative action for antitrust damages claims would have been a significant development regarding the bar to the creation of a claimant's class, as previous representative actions have been of a much more limited scope.
However, the Court of Appeal agreed with an earlier High Court ruling that the specificities of the case precluded the creation of a class. In particular, the Court of Appeal found that the legal positions of the various claimants were too diverse to allow for resolution in a single action, pointing to the fact that some potential claimants would have passed on the damages resulting from the cartel to customers in the form of higher retail prices, while others would have absorbed the damages. BA could thus have a "passing on" defence against certain claimants, but not against others. As a result, the Court denied the request to create a class, and refused to grant the plaintiffs the right to appeal to the UK's Supreme Court.
While the Court of Appeal stopped short of holding that the class action mechanism under English law could never be applied to cartel damages actions, the fact that the possible existence of a "passing-on" defence was a bar to the creation of a class suggests that there will be few, if any, cartel suits which would qualify.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
