Neutral Citation Number
Judgment of the Tribunal in relation to follow-on claims for damages brought by Royal Mail Group Limited (“Royal Mail”) and three companies in the BT Group (“BT”) (together, the “Claimants”) against companies in the DAF Group (“DAF”).
By its decision of 19 July 2016 in Case AT.39824 – Trucks the European Commission determined that five truck manufacturers, DAF, MAN, Daimler, Iveco and Volvo/Renault had carried out a single and continuous infringement of Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the Agreement on the European Economic Area between 1997 and 2011 (the “Infringement”). The Infringement consisted of collusive arrangements on pricing and gross price increases in the EEA for medium and heavy trucks; and the timing and passing on of costs for the introduction of emission technologies for medium and heavy trucks required by EURO 3 to 6 standards.
The Claimants purchased or leased large volumes of trucks from DAF during the Infringement period, and they claimed that the prices and lease payments that they paid for those trucks were higher than they would have been without the Infringement (the “Overcharge”). The Claimants claimed damages in respect of the Overcharge together with other consequential losses.
The main issues which required determination by the Tribunal were:
- Causation – did the Infringement cause the Claimants to suffer loss by way of the Overcharge?
- The Theory of Harm – both sides’ experts opined on whether it is “plausible” that the Infringement caused loss to the Claimants, DAF’s expert maintaining that it was not “plausible”.
- The Overcharge – if loss was caused, what is the quantum of it? Apart from whether it is appropriate to examine separate “before-during” and “during-after” Infringement models (the Claimants’ preferred approach) or “before-during-after” and “during-after” models (DAF’s approach), there were three main areas of disagreement between the experts in relation to their respective regression models, each of which considerably affects the estimated Overcharge: (a) The Exchange Rates – whether the models should be run in Pounds or Euros and what should be the applicable rate; (b) The Global Financial Crisis between 2008 and 2010 – whether this was such a shock that it needs to be controlled for separately from other demand controls; and (c) The Emissions Standards – whether the additional margin achieved on new emission standard trucks was down to the Infringement or other factors, such as willingness to pay;
- The Value of Commerce – this is the amount to which the Overcharge percentage is to be applied, and there was a difference between Royal Mail only and DAF as to whether certain truck bodies should be included in that figure.
- Complements – if there was an Overcharge, DAF contended that the price of bodies and trailers, which are manufactured by third-parties, would have decreased and the savings that the Claimants thereby achieved should be offset against the Overcharge; the Claimants denied any such effect of the Overcharge.
- Resale Pass On – this concerns used trucks sold on by the Claimants; DAF contended that if the price of their new trucks increased as a result of the Overcharge, then the price of used trucks sold by the Claimants would also increase, and that benefit should be offset against the Overcharge.
- Supply Pass On (“SPO”) – if there was an Overcharge, DAF contended that the Claimants mitigated their loss by passing it on to their customers by increases to the prices they charged for their own products such as postage stamps or telephone line rentals; the Claimants denied that there was any such pass on as a matter of law and/or fact.
- Loss of Volume – Royal Mail contended that, if there was supply pass-on, then they suffered a loss of volume in their downstream market sales for which they should be compensated.
- Financing Losses – in addition to the Overcharge, Royal Mail claimed damages for the cost of financing the Overcharge and there was detailed expert evidence on this issue; the main area of disagreement was whether the weighted average cost of capital (“WACC”) is the best measure of converting historic losses to current values or whether alternatively there should be interest based on the cost of debt and the foregone returns on short term investments. DAF contended that any such interest charges should be calculated on a simple basis, whereas Royal Mail argued that interest charges should be compounded. BT, by contrast, claimed simple interest pursuant to s.35A of the Senior Courts Act 1981.
- Taxation – it was common ground between the parties that the claims would need to be adjusted for the effects of taxation and the parties’ respective tax experts were agreed on nearly all issues. The main outstanding issue was dependent on whether the WACC was adopted as the appropriate measure for Royal Mail’s financing losses.
The Tribunal held that:
- The Infringement caused loss to both Claimants in the form of the Overcharge.
- The Overcharge for which DAF is liable is assessed at 5% for both Claimants on their value of commerce over the whole of the relevant period.
- That Royal Mail’s value of commerce is £260,597,683 as assessed by Mr Harvey including bodies and trailers bought from DAF; BT’s value of commerce was agreed between the parties at £44,961,617.
- That DAF’s mitigation “defences”, that is SPO, Complements and Resale Pass-on, all fail. Mr Ridyard agreed with the majority on the overall conclusion to DAF’s SPO “defence” against the damages award, but he disagreed on the reasoning that got the Tribunal to that conclusion.
- Royal Mail’s claim to use the WACC to calculate its financing losses fails; they are to be calculated in accordance with Mr Earwaker’s alternative interest rate based on his weighting of the cost of debt and short-term investment returns and on a compound basis.
- BT is entitled to simple interest on its damages award of base rate plus 2%.
- The tax experts’ agreed modelling is adopted.
The Tribunal invited the parties to calculate the damages including interest and tax based on the above findings. If there are any issues arising that cannot be agreed this will be dealt with at a further hearing after the judgment has been handed down.
This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.