The CAT’s specific disclosure ruling addresses the use of licensing to support anticompetitive behaviour.

By John D. Colahan and Calum M. Warren

On 2 March 2018, the Chairman of the UK Competition Appeals Tribunal (CAT) granted an application for further specific disclosure in Peugeot S.A. and others v NSK Ltd and others. The disclosure relates to certain licensing arrangements claimed as central to the claimants’ action for damages arising out of anticompetitive practices, for which the European Commission (Commission) fined the defendants in March 2014. The ruling highlights the potential misuse of licensing arrangements to support anticompetitive behaviour, and is a timely reminder of the need for caution when dealing with counterparties in licensing arrangements.

In February 2016, the claimants — Peugeot S.A. and 18 other companies within the Peugeot Citroën group — brought an action for damages before the CAT. The claim was a so-called “follow-on” action based on a Commission decision of 14 March 2014. The defendants — competing suppliers of components to automotive original equipment manufacturers (OEMs) known as automotive bearings — were found to have coordinated pricing strategy in relation to automotive OEMs in the EEA, and received fines totalling approximately €953 million. In particular, the defendants were found to have coordinated their responses to customers’ (including the claimants’) requests for quotations (RFQ), including which undertakings would submit a quote to a given RFQ.

The claimants’ request for disclosure — which was ultimately directed solely to NTN — related to all licences and associated documents in respect of NTN’s active sensor bearing (ASB) technology, which is required to design and produce certain automotive bearings. The claimants argued that all suppliers (apart from one of the defendants, SKF) needed to obtain licences to the ASB patents in order to supply customers. Furthermore, through granting or withholding ASB licences, NTN was able to control RFQ allocation between cartel members and could prevent them from bidding competitively.

The CAT held that in actions for damages, it is of fundamental importance that the court has a full and comprehensive understanding of the detailed workings of the cartel in question. The CAT noted that the Commission’s infringement decision typically provides the requisite level of detail, whereas, in this case, the Commission only issued a short-form decision under its settlement procedure. On this basis, the CAT found that evidence arising from the parties’ written submissions that the use or misuse of intellectual property rights, including licenses to the ASB patents, formed a part of the cartel’s actual workings and that this evidence is therefore intrinsically likely to be relevant to the level of damages awarded — in this context, known as the “overcharge.” In addition, the CAT found that evidence disclosure might also be relevant to the oral evidence of witnesses of fact, addressing issues including the cartel’s workings, and to the court’s view of these witnesses’ veracity and credibility.

Accordingly, the CAT ordered that NTN disclose the licences in respect of its ASB technology, as well as related documents (for example, all emails relating to the negotiation of such licences). In addition, the CAT granted the parties permission to submit additional expert evidence explaining the relevance of the disclosed materials.

The CAT’s disclosure ruling illustrates the potential misuse of licensing arrangements to both support and disguise anticompetitive behaviour pursued by parties. The ruling serves as a call for heightened due diligence when dealing with counterparties in licensing arrangements.

*This post was prepared with the assistance of Pierre-Axel Aberg in the London office of Latham & Watkins.