Competition Law and Consumer Compensation – Indirect Purchasers and Passing-On

By Barry J. Rodger - Posted on 6 April 2023

I was delighted that my article ‘Let’s talk about consumers: competition law compensation for indirect purchasers’ losses – a United Kingdom perspective’ published in the Antitrust Law Journal in 2022, was voted as the winner in the Academic Article- Private Enforcement Category in the recent Antitrust Writing Awards 2023. Sadly, I couldn’t attend the awards event in Washington, as I had review class teaching to do in the School, but thankfully Prof Andrew Gavil (editor of the ALJ), agreed to collect the award on my behalf. This blog post gives an overview of the key issues raised by the article and provides a brief updated perspective. 

This article sought to reflect on the availability of competition law damages for indirect purchasers in the UK, considering the statutory and legal context, including the relevant provisions of the EU Antitrust Damages Directive as implemented in the UK. The article was part of a special issue focusing on the issues of indirect purchasers and the passing-on defence. However, my article title ‘let’s talk about’ reflected my intention to concentrate in particular on consumer collective redress, given the emphasis and frequency in litigation practice in the UK until relatively recently, on business-related claims for competition law infringements.

Unlike the position with respect to other collectivized consumer claims for mass torts where the direct victim may be a consumer (for instance, in product liability/environmental damage claims), in competition law the losses relating to claims with respect to cartelized products are often (though not always) mediated through intermediate parties in the production or supply and distribution chain with final consumers various steps away from the infringing party. In general, the standard requirements in damages actions to prove causation and quantification of damages can be problematic. Moreover, in competition law claims additional potential complications are faced, as follows: how should the calculation of losses suffered by parties at different levels of the supply chain take into account whether and, if so, to what extent overcharges have been passed on by suppliers (that is to say, passed on to customers).  

Accordingly, the flip side of the right of indirect purchasers to sue is the availability of a passing-on defence to defendant companies in damages claims brought by persons who claim to have suffered losses due to the infringement of competition law. Such a defence would operate on the basis that the alleged amount for which the claimant was overcharged was passed-on to the claimant’s customers. In effect, the defendant may assert that the claimant did not actually suffer a loss. As the article discusses at length, the availability and scope of the two related mechanisms in any legal system depends to a great extent on the value attached to the respective goals of deterrence and compensation.

The article highlights a significant divergence between the rationales and practice in the EU and the US on the objectives of private enforcement and how this plays out in relation to the specific rules on indirect purchasers. The key CJEU case-law of Courage and Manfredi confirmed that the doctrine of direct effect requires that it should be “open to any individual to claim damages for the loss caused to him by a contract or by conduct liable to restrict or distort competition.” Accordingly, the complete exclusion of redress for indirect purchasers would be in direct conflict with those key principles and the underlying rationale of “full compensation’ of all victims of infringements of EU competition law. Such an exclusion can be found under US federal law, and can be justified by efficiency and effectiveness considerations.

The article’s analysis of the EU and UK legislative and case-law background allows us to see the trajectory followed by competition law private enforcement in the UK, in that a competition litigation culture has developed following the establishment of institutions, rules, processes and mechanisms at both the EU and UK level. It appears that the developing culture and jurisprudence in the UK has some similarities with the US system, although at a much earlier developmental stage. There are a range of mechanisms that facilitate private antitrust lawsuits in the US, inter alia, the availability of treble damages, an opt-out class action mechanism, discovery, and contingency fees. Essentially, the US legal system has, for a considerable period, been viewed as promoting access to the courts for consumers.

The introduction, under the Consumer Rights Act 2015, of the opt-out collective redress mechanism allowing for applications for Collective Proceedings Orders (CPOs) has clearly facilitated access to justice for consumers in the UK. Although applications for CPOs have been raised by business parties (notably re Trucks and Interchanges Fees (Visa/MasterCard)), there is also evidence of increasing resort to the collective redress mechanism in a range of final consumer-based claims.  The article highlighted that the majority Supreme Court ruling in 2020 in Merricks with its purposive emphasis on the vindication of consumer rights, and in particular its broad-brush approach to the level of detail required on the quantification of passing-on at the certification stage for consumer claimants, is a helpful step on the way to providing an effective consumer redress scheme  for competition law infringements.  It concluded that the existence of indirect purchaser rights and passing-on rules (for a full analysis see Antonio Robles Martin-Laborda, ‘Indirect Purchasers and Passing-On’ Chapter 10 in Research Handbook on Private Enforcement in EU Competition Law (eds B Rodger, M Sousa Ferro and F Marcos, Edward Elgar 2023), combined with a developed, workable, and viable collective redress mechanism may allow the United Kingdom to ensure justice and redress for consumers harmed by competition law infringements. Indeed, in recent months we have witnessed two subsequent and related significant developments in this context. First the CAT has recently issued its first post-Trucks damages award in 1284/5/7/18 (T) Royal Mail Group Limited v DAF Trucks Limited and Others, involving the specific calculation of the overcharge taking into account the passing-on element (for a full analysis, see Francisco Marcos, ‘Cutting the Baby in Half – The First Decision of the UK Competition Appeals Tribunal on Damages in the Trucks Cartel’, Kluwer Competition Law Blog, March 31, 2023). Finally, there have been numerous successful CPO applications before the CAT involving consumer collective opt-out claims, and it appears that post-Merricks, the UK private enforcement system may finally be on the cusp of delivering effective consumer redress in a competition law context.