In 2001, a number of companies, including Sanofi-Aventis were found guilty by the European Commission of participating in cartels and collectively fined €855.22 million.
During the existence of these cartels, Devenish, a Belfast-based supplier of pig and poultry feed, purchased vitamins from Sanofi-Aventis at prices which were artificially inflated as a result of the cartel activity.
Following the European Commission's decision, Devenish raised proceedings in England against Sanofi-Aventis seeking a restitutionary award (a sum of money assessed by reference to the gain which the wrongdoer has made as a result of the wrong) in place of compensatory damages, which compensate the claimant for loss suffered as a result of the wrongdoing. The argument submitted on behalf of Devenish was that compensatory damages would not provide an adequate remedy in the circumstances.
The sum sought by Devenish was the amount by which the prices it was charged for vitamins exceeded the price that would lawfully have been charged if there had been no cartel in existence.
A trial of preliminary issues was ordered in order to assess whether Devenish were entitled to the following heads of relief:-
- An account of profits
- Restitution of unjust enrichment
- Exemplary damages
At first instance, the judge rejected Devenish's claims on the above heads.
Devenish appealed. The Court of Appeal also rejected Devenish's
claims. The usual rule is that a Claimant is only entitled to
recover the loss that they have suffered as a result of a wrong
committed by a defendant. There are certain circumstances where a
claimant can recover more than the loss suffered, for example, to
penalise a defendant for wrongful conduct.
Alternatively, there are some circumstances where an account of profits would be appropriate, for example, where a defendant has wrongfully used the claimant's property and made a gain from it.
In the particular circumstances of the claim here, Devenish indicated that they would have some difficulty providing the loss suffered as a result of the cartel's activity and that compensatory damages would be an inadequate remedy.
The Court rejected Devenish's contentions. The Court did not consider this case to be exceptional in any way and they did not consider there to be any reason to depart from the usual rule that a claimant can only recover the loss suffered by them as a result of the wrongful conduct of the defendant.
Of particular significance here was the fact that there the Commission had already made a finding in relation to the cartel and fines had been imposed by the Commission on the participants in the cartel.
This case has far reaching consequences. Small businesses will need to think very carefully before pursuing legal action against companies that breach competition law. The extent of recovery will be limited to losses that a business can prove have directly resulted from the loss incurred and inevitably there will be evidential difficulties in many instances.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.