England may become an increasingly attractive forum for follow on damages claims, particularly those involving indirect cartelised product purchases initially acquired outside EEA the in wake of iiyama decisions.
The English Court of Appeal has held iiyama’s two claims against cathode ray tube (CRT) cartelists and liquid crystal display (LCD) cartelists, may proceed to trial. iiyama is involved in the manufacture, distribution, and sale of electronic goods including televisions and computer monitors which originally contained CRTs and now contain LCDs.
This decision has overturned two High Court findings that indirect purchases of cartelised products outside of the European Economic Area (EEA) do not fall within the territorial scope of EU antitrust law.
The final outcome of these two claims will be of great interest to both claimants and defendants.
The European Commission decisions
On 8 December 2010, the European Commission (the Commission) decided certain entities — including the first and fifth defendants in both claims — had entered into a worldwide price fixing cartel for LCDs and had implemented the cartel in the EU and EEA. The Commission determined this infringed European antitrust law (the LCD Decision).
On 5 December 2012, the Commission decided certain entities — including the first and fifth defendants — had entered a worldwide cartel for CRTs and had implemented the cartel in the EU and EEA. This was also contrary to EU antitrust law (the CRT Decision, together with the LCD Decision, are the Decisions).
The English claims
iiyama’s claims for damages in both the CRT and the LCD actions are each based upon the Decisions. iiyama alleges entities in the iiyama group paid inflated prices for certain cartelised products as a result of the CRT and LCD cartels. The majority of the products that are the subject of the claims were initially purchased outside of the EEA. iiyama’s Asian subsidiary purchased CRTs and LCDs in Asia, incorporated them into other products, and sold the assembled products to iiyama’s European subsidiaries (directly and indirectly). As a result, iiyama alleges, “substantial loss was suffered […] because the conduct complained of resulted in an increase in the price of CRTs and LCDs”. This accounted for (according to the claimants) approximately 70% of the costs of the computer monitors ultimately sold to iiyama and others.
First instance judgments
In the CRT action, the High Court held the defendants were entitled to summary judgment and/or to have the claim against them struck out because the cartel activities — in part due to the lengthy supply chain — were outside the territorial scope of European antitrust law. Mann J found that the cartel was implemented outside of the EU. He also considered the cartel did not have immediate, substantial, and foreseeable effects in the EU — referred to as the “qualified effects” test.
In the LCD action, Morgan J held the LCD cartel fell outside the territorial scope of EU antitrust law. However, he did not strike out iiyama’s claim, and instead allowed iiyama to replead. This was on the basis that “but for” the LCD Cartel being implemented in the EEA, LCD products would have been available at a non-cartelised price, which iiyama could and would have bought.
Both iiayma and the defendants appealed.
The Court of Appeal judgment
One of the key questions for the Court of Appeal was whether indirect purchases of cartelised products, subject to a worldwide cartel, from outside of the EEA, which were subsequently re-sold in the EEA, fell within the territorial scope of the EU antitrust law.
To answer this question the Court of Appeal first considered the European Court of Justice’s (ECJ’s) decision in Woodpulp I, which the Court of Appeal stated was authority for at least two propositions:
- The territorial scope of the relevant EU antitrust law was not confined to anti-competitive agreements formed within the EU
- Regardless of where the agreement is formed, it falls within the scope of EU antitrust law if the agreement is implemented in the EU
The Court of Appeal then considered the ECJ’s decision in Intel and stated the ECJ has clarified “beyond argument, that the qualified effects test provides an alternative basis for grounding the territorial jurisdiction of the Commission”.
The Court of Appeal held Intel “provides substantial support for the argument that a worldwide cartel which was intended to produce substantial indirect effects on the EU internal market may satisfy the qualified effects test for jurisdiction”.
The Court of Appeal additionally found if the intended effects within the EU of a worldwide cartel are, “substantial and of a systemic nature”, they “may properly be characterised as immediate effects”. The Court stated that “directness of effect” is not an “additional requirement to immediacy of effect” and the “mere existence of even one prior sale to an innocent third party outside the EU at an early stage of the supply chain” would not automatically bar a determination of immediacy. The Court of Appeal stated to decide whether the qualified effects test is satisfied in this case requires a “full examination at trial of the intended and actual operation of the cartel” as a whole.
However, the Court of Appeal was wholly unpersuaded by iiyama’s submission the territorial limits on the scope of EU antitrust law can be circumvented in private damages claims merely by showing an infringement and a causal link on a “but for” basis to the loss sustained.
The outcome of these cases may result in England becoming an increasingly popular forum for follow on damages claims that involve indirect purchases of cartelised products initially acquired from outside of the EEA.
The case also highlights that interim strike out applications and/or summary judgment applications are not an appropriate way to address such potentially complex issues. These issues may be better suited to preliminary hearings or left until trial.
This post was prepared with the assistance of Daria Les in the London office of Latham & Watkins.
 Case C-413/14 P: ECLI:EU:C:2017:632.
 Joined Cases C-89/85 and others: ECLI:EU:C:1988:447.