Short Reads

European Commission publishes study on the passing-on of overcharges

European Commission publishes study on the passing-on of overcharges

European Commission publishes study on the passing-on of overcharges

05.12.2016 EU law

On 25 October 2016, the European Commission published a long-awaited study on the passing-on of overcharges (the "Study"). The Commission commissioned law firm Cuatrecasas, Gonçalves Pereira and economic consultancy firm RBB Economics to conduct the Study. The initiative is part of implementing Article 16 of the Directive on Antitrust Damages Actions (the "Directive"), which requires the Commission to provide national courts with guidelines on "how to estimate the share of the overcharge which was passed on to the indirect purchaser". 

In many antitrust damages cases, pass-on plays a crucial role, either as a "defence" or as substantiation of a claim. According to economic theory, if a purchaser pays an inflated price (an "overcharge"), it will often respond by raising its own prices. The initial 'overcharge' is then 'passed-on' to the next level of the supply chain, which reduces (in part) the (direct) purchaser's initial loss. To quote the Study: "the overcharge effect at one level in the supply chain and the passing-on effect at the previous level are two sides of the same coin. Hence in terms of overall, aggregated damage, these components cancel each other out."   
 
The Study features contemporary views on the issue of pass-on, reviews national and EU case law, as well as insights from the US, and a fairly detailed analysis of relevant economic theory. It also goes into alternative approaches to quantifying the relevant loss (components). In addition, the Study provides a 39 step checklist with practical advice to national courts on issues such as the managing of expert evidence and use of quantification methods, avoidance of inconsistent decisions and application of the disclosure provisions of the Directive, which are to be implemented in national laws of the EU-Member States by 26 December 2016.
 
The Study is intended to assist judges in better understanding the crucial role of pass-on in private antitrust litigation, and to promote economic or factual analysis with an adequate focus from the outset. As an example of such inadequate initial focus, the authors mention a perceived lack of attention for "volume-effects" (i.e. loss incurred as consequence of a decrease in sales volumes, due to the overcharge leading to higher production costs).
 
The Study provides many useful insights from both legal and economic perspectives. For example, one may intuitively assume that a buyer's bargaining power will automatically counter suppliers' attempts to pass-on an overcharge to them. However, whether this (intuitive) restraint on passing-on effectively occurs, depends on several circumstances. Therefore, "a detailed analysis of the characteristics of specific negotiations and the context in which they take place is required to establish pass-on implications."  
 
Further, the Study aims to assist judges in evaluating whether economic experts have followed the (prevailing) opinions regarding the applicable legal and economic principles, i.e. whether the experts' evidence is fit to base a proper judgment on. For example, the Study explains that estimates resulting from any economic quantification exercise should be tested for their sensitivity against the very assumptions they are based on. The Study suggests that "[f]or instance, the expert may evaluate how results vary if plausible adjustments to key assumptions are made". 
 
In future private antitrust litigation, it is expected that parties and judges will seek guidance on the extensive framework provided by the Study.

This article was published in the Competition Law Newsletter of December 2016. Other articles in this newsletter:

1. Legislative Proposal introducing class actions in the Netherlands before House of Representatives 
2. Belgian Competition Authority closes investigation into Most Favoured Nation clauses in Immoweb contracts 

Team

Related news

20.09.2022 EU law
Launch of Metaverse blog series

Articles - Stibbe launches a new blog series focusing on the legal challenges of the Metaverse. In our upcoming blog posts, we will discuss the legal challenges of NFTs, crypto-assets, Metaverse platforms, crypto exchanges, DAO, and many more.

Read more

28.07.2022 NL law
Zuiver commercieel belang ook gerechtvaardigd belang: Raad van State laat zich er niet over uit

Short Reads - Op 27 juli 2022 heeft de Raad van State bevestigd dat de Autoriteit Persoonsgegevens onterecht een boete van € 575.000 aan VoetbalTV heeft opgelegd. De hoop bestond dat de Afdeling antwoord zou geven op de vraag of de AP terecht of onterecht meent dat een zuiver commercieel belang géén gerechtvaardigd belang kan zijn in de zin van de Algemene Verordening Gegevensbescherming. Het antwoord op deze vraag blijft echter uit.  

Read more

03.08.2022 EU law
Gotta catch ‘em all? Upward referral of ‘killer acquisitions’ upheld

Short Reads - Companies involved in intended or completed M&A transactions falling below EU and national merger notification thresholds should beware that their deals may still catch the European Commission’s eye. The General Court has upheld the Commission’s decision to accept a national referral request regarding Illumina’s acquisition of Grail: a transaction not triggering any of the notification thresholds within the EEA.

Read more

28.07.2022 NL law
Purely commercial interest also a legitimate interest? Council of State leaves the question unanswered.

Short Reads - On 27 July 2022, the Council of State confirmed that the Dutch Data Protection Authority wrongly imposed a €575,000 fine on VoetbalTV. But the Council did not answer the question whether the AP rightly or wrongly believes that a purely commercial interest cannot be a legitimate interest within the meaning of the General Data Protection Regulation.

Read more

06.07.2022 NL law
Highest Dutch court: the postman may still ring twice?

Short Reads - The Dutch Minister of Economic Affairs and Climate Policy was wrong to unblock the ACM’s prohibited merger between postal operators PostNL and Sandd on grounds of public interest. According to the Trade and Industry Appeals Tribunal (CBb), the Minister cannot substitute the ACM’s assessment for its own when considering public interest reasons. Since the Minister did do so in this particular case, the CBb annulled the Minister’s merger clearance.

Read more