First German judgement against truck cartel - Hanover District Court rules on follow-on action
On July 19, 2016, the European Commission ("EC") concluded a five-year investigation and imposed record-breaking fines of over € 2.9 billion on five major truck manufacturers (MAN, Daimler, Volvo/Renault, Iveco and DAF) for antitrust infringements — the so-called "truck cartel." The antitrust infringements related to trucks weighing between 6 to16 tons and over 16 tons. Its geographical scope extended to the entire European Economic Area (i.e. the 28 EU Member States plus Iceland, Liechtenstein, and Norway).
According to the EC, the antitrust infringements lasted at least over a 14-year period, from January 17, 1997 until January 18, 2011 (in the case of the leniency applicant MAN until September 20, 2010). The EC held that the conduct in question amounted to a single and continuous, "by-object" infringement of Article 101(1) TFEU, consisting of agreements/concerted practices as follows:
- Collusive arrangements on pricing and gross price increases.
- Agreements as to the timing and passing-on of costs for the introduction of emission technologies.
- Exchanges of other commercially sensitive information, such as their order intake and delivery times.
The truck cartel keeps courts throughout Europe busy. In Germany alone, a double-digit number of follow-on damages suits are pending. On December 18, 2017, the Hanover District Court ("Court") issued the first judgment of a German court – and presumably the first decision in Europe – against the truck cartel in a damages suit brought by a German municipality — the City of Gottingen (the "City") – against a truck cartel member. In this judgment, the Court made findings of wider implication with respect to cartelist liability, the presumption of damages, and the passing-on defense. In addition, it is the first published ruling in which a court was asked to apply recently introduced provisions on the disclosure of evidence in cases in Germany. This article will discuss the City of Gottingen suit and its implications.
The City of Gottingen Suit
The City sued a subsidiary of MAN ("defendant") for damages of € 335,000. The City had purchased trucks from the defendant between March 2001 and December 2010 through public tenders. Part of the bidding contracts accepting the tenders were clauses according to which the defendant would have to pay liquidated damages in the amount of 5% or 15%, respectively, in case of participation in any anticompetitive conduct in relation to the tender. However, the clauses stipulated that defendant could show that the harm was lower or nil. According to the findings of the EC, the defendant had not taken part in the cartel during the entire cartel period, but only between May 2004 and September 2010.
The defendant requested the court to dismiss the action in its entirety, or in the alternative to compel the City to disclose numerous documents and other information allegedly necessary for the defendant's defense, in particular regarding the passing-on of any possible cartel overcharge.
Findings of the Court
The Court found the defendant liable for damages with respect to the acquisition of trucks during the period of the defendant's direct participation in the cartel, i.e., May 2004 until September 2010. The court did not rule on the quantum of damages at that stage of the proceeding because the defendant had offered evidence that the damages were lower than the requested amount or even nil. If the parties so request, the suit will be continued, confined however to the question of the amount of damages.
The Court dismissed all claims relating to damages caused through truck purchases prior or after defendant's direct participation in the cartel. This was mainly due to the fact, however, that the City had neither argued pertinent law or facts for defendant to be held liable for such damages.
The Court arguably could have come to a different result given the case law of the Court of Justice of the European Union ("CJEU") and the German Federal Court of Justice (Bundgesgerichtshof, "GFCJ"). From both courts' jurisprudence it follows there is a rebuttable presumption of a causal connection between an anticompetitive practice and the effects of the undertaking on the market. Therefore, a cartel may be deemed to cause effects even after the anticompetitive conduct has ceased. The sole conditions for the application of this presumption are that there is an antitrust violation and that the defendants continued to operate on the market. To rebut the resumption, the defendants need to publicly distance themselves from the cartel.
Even if a defendant succeeds in rebutting the presumption, German case-law acknowledges a further presumption that cartels cause "run-off effects" in the form of inflated prices at least for one year. Thus, either the trucks cartel could have been deemed to continue to influence the defendant's market behavior even after its direct participation, or the truck cartel could have been considered to have caused "after-effects". In any event, the defendant might have been held liable also for purchases after its direct participation in the cartel.
In the City of Gottingen case, the Court did not apply either of the two presumptions, although the City had referenced the EC's decision concerning the truck cartel. This alone should, however, have sufficed for the Court to apply one of the two presumptions or even both, given the very low threshold. All the more so because under German law, where the allegation of the relevant facts suffices for a claim to be adequately substantiated. A claimant does not need to present the law to the court. By not applying the presumptions, despite the City's reliance on the EC's decision, the Court may have applied too strict of a standard with respect to the burden of production. In any event, the City of Gottingen decision is a clear reminder for claimants to pay particular attention in drafting a claims form.
2. Presumption of damages
As to damages, in accordance with the case law of the GFCJ and the majority of German courts of appeals, the Court in the City of Gottingen case applied two (rebuttable) presumptions: the first consists of a presumption that cartels lead to higher market prices; the second establishes that each transaction with a cartelist is affected by the cartel. The Court confirmed that the presumption of a cartel leading to higher prices does not only apply in case of quota cartels, but also in price fixing and price exchange agreement cases, such as in the case at hand. The Court needed to address this issue because to date the GFCJ had considered the question only in the context of quota cartels.
The Court rejected defendant's argument that the truck cartel affected only gross list prices and therefore did not influence retail prices. The Court did not address the fact that the cartel also related to net prices. However, in line with the case-law of the EU Courts, the Court found that agreements on gross prices ultimately distort retail prices, since they are the starting point for price negotiations and rebates.
The Court also clarified the scope of application of the second presumption, i.e., that transactions falling within the scope of the antitrust violation are presumed to be affected by the cartel. According to the Court, only those parts of a transaction that were subject to the cartel agreement fall within the ambit of the presumption. For the case at hand, this meant that the City could request compensation for the truck chassis but not for non-cartelized components such as, for example, truck superstructures.
3. Legality of liquidated damages-clauses
The defendant in the City of Gottingen case argued that the liquidated damages-clauses in the public tender contracts were not proportional and should therefore be declared illegal. Without any further ado, and in line with the case law of most Courts of Appeal, the Court held such clauses to be valid under German law. Interestingly, regarding the adequacy of the amount of the lump-sum payment, the Court referred to the much-cited Oxera study commissioned by the EC. According to this study, cartels lead to a median price increase of 18%. The Court apparently regarded this amount as helpful guidance for assessing a typical cartel overcharge and therefore also considered a liquidated damages clause providing for damages of 15% of the contract value to be proportional.
4. Passing-on defense
According to the Court in the City of Gottingen case, the passing-on defense – while generally accepted by the German courts – was not applicable to the case at hand. The Court stated that ─ based on its reading of the GFCJ's case law ─ a precondition for the passing-on defense would be the existence of a cartel after-market, i.e., that the City supplied the cartelized goods to its own customers. Given, however, that the City used the trucks itself to provide public services ─ such as waste disposal and fire services ─ there was no such aftermarket and accordingly there could be no passing-on.
The fact that the purchaser of a cartelized product used the product to supply goods or services to its customers should not automatically cancel out all harm. From an economic perspective, costs often are passed through to consumers using the goods or services. Of course, this is not necessarily always the case. It is also possible that buyers of cartelized products respond to price increases either by reducing investments or other costs, e.g., by negotiating down other suppliers. In addition, the passing-on defense is based on a value judgment, just as is the right to compensation for antitrust infringements. Therefore, from a legal perspective, not every possible forwarding of costs can be considered a "passing on," but only those instances in which there is a causal link between the cartel overcharge and the prices charged on the cartel after-market.
5. Statute of Limitations
The City of Gottingen Court also held the damages claims not to be time-barred. According to the Court, the knowledge based three-year limitation period under German law started to run at the earliest at the end of the year 2016, i.e., the year in which the EC issued its press release regarding its final decision concerning the truck cartel. The Court further found the ten year long-stop limitation period not to have expired yet because it was suspended during the Commission's investigations.
6. Defendant's disclosure petitions
Finally, the City of Gottingen Court rejected all of the defendant's disclosure petitions. Disclosure rules in cartel damages actions were introduced into German law only in mid-2017 following the European Union's Directive on Antitrust Damages Actions. Under the new rules, defendant petitioned the Court to compel the City to disclose evidence and information allegedly necessary for its defense. The defendant in particular requested the disclosure of data and information as to the City's costs, and on the sale of the trucks in question in order to show that the City had in fact passed-on the cartel overcharge.
However, since under the German disclosure regime, only such evidence and information is discoverable that is "necessary" to substantiate the relevant allegations of either party, the Court rejected the petitions. Given that the passing-on defense was not applicable to the case at hand, the Court considered that the requested evidence and information was not "necessary" within the meaning of the law. Furthermore, the Court ruled that the mere allegation of a "passing-on" of the overcharge does not suffice to request disclosure. Rather, the defendant should have explained why and if so how the sale of trucks could have cancelled out the harm suffered.
The judgment of the Court in the City of Gottingen case by and large applies the case law on cartel damages of the GFCJ and the Courts of Appeal. On this basis, the questions of liability, damages, passing-on, and statute of limitations were solved rather easily and without the need to rely on much other evidence than the EC's decisions and some invoices. By contrast, the more fact-intensive question of quantum of damages remains unanswered by the Court. Nevertheless, for litigating parties, the ruling is particularly helpful by clarifying the ambit of the new German disclosure regime. The decision posits that only such evidence is discoverable that is capable of proving legally relevant facts. Hence, likely neither claimants nor defendants will need to fear "fishing expeditions" under the German disclosure regime.
 EC, Decision of 19 July 2016, AT.39824, Trucks. On September 27, 2017, Scania ─ which in contrast to the other five manufacturers was unwilling to enter into a settlement with the EC ─ was fined an additional € 880 million for participating in the truck cartel. EC. Decision of 27 Sept. 2017, at 39924, Trucks.Cartel.
 Hannover District Court, judgment of December, 18, 2017, 18 O 8/17, Truck cartel.
 CJEU, judgment of July, 8, 1999, C-49/92 P, Anic Partecipazioni, para. 121; judgment of June 4, 2009, C-8/08, T-Mobile Netherlands BV; GFSC, judgment of July 12, 2016, KZR 25/14 Lottoblock-II, para. 24.
 CJEU, judgment of January 21, 2016, C-71/14, Eturas, para. 46.
 GFCJ, judgment of June 28, 2011, KZR 75/10, ORWI, para.84
 GFCJ, decision of April 2, 2009, V ZR 177/08, para. 10.
 GFCJ, judgment of June 28, 2011, KZR 75/10, ORWI, para. 26.
 E.g. Court of Appeals Karlsruhe, judgment of July 31, 2013, 6 U 51/12 (Kart), Fire-fighting vehicles, para. 54 f.; Thuringian Court of Appeals, judgment of February 22, 2017, 2 U 583/15 Kart, Rail cartel, para. 64 f.
 CFI, judgment of September 16, 2013, T‑379/10 and T‑381/10, Keramag. paras. 59 ff.
 Oxera, Quantifying antitrust damages: Towards non-binding guidance for courts, Study prepared for the European Commission, December 2009.
 GFSC, judgment of June 28, 2011, KZR 75/10, ORWI, paras. 47 ff.
 To this effect, cf. e.g.: Hanover Shoe v. United Shoe Machinery Corp. 392 U.S. 481 (1968).
*Dr. Alex Petrasincu is a Partner in the Berlin and Düsseldorf office.