Many cartels arise in intermediate goods industries that feed into a chain of buyers before reaching the final consumer. Direct buyers of the cartelised product pay the overcharge (i.e., the difference between the higher price charged by the cartel members and the lower price that would prevail in the absence of the cartel). But the buyers will pass through either all or a portion of the overcharge to their own customers, so that the direct buyers’ net loss may be less than the amount of the full overcharge. The indirect buyers (i.e., the customers of the direct buyers) may also be able to pass through some of the overcharge and this process will continue until the overcharge filters through to the final customers. Thus, an unknown proportion of the overcharge may be passed along each successive link in the supply chain.

The new EU Antitrust Damages Directive allows infringers to defend themselves against a damage claim by invoking a ‘passing-through defence’ – that an overcharge levied on a direct buyer was passed through, at least in part, to an indirect buyer (i.e., that the direct purchaser did not absorb the full overcharge). The passing-through presumption affords infringers the opportunity to limit claims provided they can demonstrate that cartel overcharges were passed along a chain of buyers. Defendants will need to prove that cartel overcharges (or underpayments in the case of a buyers’ cartel) were (partially) passed through by the claimants to their own customers. At the same time, however, the passing-through will make it easier for those indirectly affected by cartels to pursue damages claims. Claimants will be able to recover losses even if they did not directly transact with any of the cartel members. An indirect buyer will need to prove the extent of the overcharge that was passed through and the loss suffered.

Apr-Jun 2015 issue

The Brattle Group