Germany is commonly mentioned as one of the three preferred jurisdictions for cartel damages actions in Europe, next to England and the Netherlands. The level of private enforcement is indeed quite high in Germany, and its growth is accelerating.
Up until the end of 2018, there had been 119 judgments by German courts concerning cartel damages actions— 91 by district courts (i.e. first instance courts), 24 by regional courts (i.e. second instance courts), and four by the Federal Court of Justice. Many more lawsuits are currently pending—there is no public record, but the author counts approximately 650 pending cases in district courts alone.
This article, available here, takes a closer look at the practical approach adopted by German courts to cartel damages claims by conducting a statistical analysis of these 119 judgments.
Section I looks at the history of cartel damages actions in Germany.
Cartel damages actions in Germany can be filed before 27 district courts. Seventeen higher regional courts deal with the appeals, and the Federal Court of Justice serves as the final decision-making body. All courts have specialised divisions for competition matters. Thus, plaintiffs often have various venues from which to choose, leading to the geographic dispersion of the 91 district court judgments issued thus far.
This number reflects a recent and exponential increase in the number of judgments concerning cartel damages. The historic development is characterised by two waves.
A first one covers the first decade of the century. Plaintiffs brought the first cartel damages cases in 2002. The district courts rendered their decisions concerning these initial claims from 2003 to 2005. Eight out of the nine judgments issued during this period were dismissed, mostly because the district courts denied plaintiffs standing to sue. Only one judgment granted damages. Not a single district court judgment was issued between 2006 and 2010.
The second wave arrived in 2011. Since then, the number of district court judgments per year has kept increasing. Between 2011 and 2017, the number roughly doubled every two years, and more than doubled from 2017 to 2018, when the number jumped from 16 to 34 judgments. This has been largely the consequence of the rail and truck cartels, which cover 60% of all judgments. The remaining 40% of the judgments relate to 17 different cartels.
The impact of this increase in private enforcement on public enforcement is yet to be determined. In some cases, the level of damages is significantly higher than the imposed fines—the most drastic example is the Drugstore Articles (KWR) case, where the damages amounted to 654% of the imposed fines.
Section II looks at the likely outcome of proceedings and claimants’ chances of success.
There is a general perception that Germany is a plaintiff-friendly forum. This seems to be borne out by the data. Between 2014 and 2018, plaintiffs succeeded in 78% of cases (56 out of 72 judgments).
The most frequent ground for a claim being unsuccessful was that a plaintiff had not proven causation — either because the plaintiff failed to demonstrate that its purchases were affected by the cartel (Kartellbefangenheit) or that prices were inflated by the cartel (Schadensentstehung). Several cases were dismissed because indirect purchasers were not able to prove a causal link between the cartel and inflated prices at their market level.
Interestingly, German courts have a noticeable preference for issuing judgments on liability only, and for not deciding on the level of damages. The district courts have passed only one judgment awarding damages between 2014 and 2018. All other 55 judgments were interlocutory or declaratory judgments, or a combination of both types.
Section III looks at claims by indirect purchasers.
The European Damages Directive of 2014 is based on the principle of full compensation for any person who has suffered harm. It therefore allows claims from victims operating at all market levels, including indirect purchasers.
In Germany, the Federal Court of Justice paved the way for indirect claims with its ORWI decision of 2011, well before the Directive was adopted. Since then, indirect purchasers regularly claim damages, and have so far succeeded in the majority of cases. Between 2014 and 2018, 14 claims by indirect purchasers were registered — sometimes in combination with claims by direct purchasers – leading to nearly a fifth of all 72 judgments in that period
As already noted above, the main challenge for indirect purchasers is proving the causal link between a potential overcharge at the first market level and prices at “their” market level. In five cases, the claim failed because the indirect purchasers were unable to establish causality – i.e. failed to prove that the price increase was passed onto them. In nine cases, the courts established liability, but did not award damages. As a result, the key practical issues around indirect claims, namely the estimation of pass-on rates and the risk of duplicative damages awards, have not been addressed yet.
Section IV looks at damages awards, and how overcharges are estimated.
As already pointed out above, judgments awarding damages are rare in Germany — there have been only eight in total, three by district courts and five by higher courts.
The overcharge rates identified in these decisions differed significantly. The highest overcharge (33.5%) were awarded by the District Court of Dortmund in a very early judgment (2004) related to the vitamins’ cartel. Three rulings were based on contractual clauses with liquidated damages (one ruling identified an overcharge rate of 15%, and two rulings an overcharge of 5%). The remaining rulings identified overcharges averaging 6.5%.
In addition to the overcharge, the cartelists need to pay interest. The interest rates in Germany are high— 4% for all claims prior to July 2005, and 5% above the ECB base rate from then on. This results in the following interest sums, as a rule of thumb: after ten years, a further 50% of the damages amount is owed in the form of interest; if as much as 20 years elapse, the accrued interest doubles the damages amount.
Sections V to VII look at which economic sectors and courts have had more private enforcement, and how long cases last.
Public institutions – which are exempt from court costs – have initiated the highest number of proceedings. Most of the plaintiffs against participants in the rail and fire engines’ cartels cases are public institutions, which are also amongst the claimants against participants in the trucks’ cartel. Construction companies are the second most active plaintiff group.
These cases have been brought in different district courts, fifteen of which have rendered judgments. The three district courts that have issued the most judgments are the District Courts of Mannheim (15 judgments), Hannover (15 judgments), and Dortmund (13 judgments). However, the majority of claims related to the trucks’ cartel are pending at the District Courts of Stuttgart and Munich, so their case numbers will soon match those figures. On appeal, most judgments were rendered by the Higher Regional Courts of Karlsruhe (eight judgments), Düsseldorf (six judgments), and Berlin (three judgments).
The average duration of proceedings at each instance from the date a party files the action or appeal, respectively, until the date the court adopts its decision is relatively similar for all three instances: it varies between one year and eight months, and one year and 11 months. Accordingly, a claim that makes its way through all three instances in Germany takes five to six years on average.
However, proceedings are getting longer. The average duration of proceedings at each instance has more than doubled from 2014 to 2018—from one year and two months in 2014, to over two and a half years in 2018. The expansion of judicial capacities apparently has not kept pace with the steep increase in case numbers. According to the current judicial resource plan (which was last updated in 2014), a court is supposed to decide a cartel damages matter within 20 hours— which will not suffice most of the time.
This is a comprehensive analysis of cartel damages claims, looking at it from a variety of angles. It is mainly descriptive, and I cannot fault it for that.