Cartel Damages: Liability and Settlement

Abstract

This paper relates civil joint and several liability of members of a cartel, contribution claims, liability allocation, as well as the anatomy and effects of settlements with less than all parties. Because the substantive rules of Directive 2014/104/EU (the Directive) do not apply to damages that occurred prior to its implementation, the pre-Directive legal framework will continue to be relevant for years. This work therefore analyses both the old and the new sets of rules and how the changing regimes influence incentives.

Under pre-Directive law, victims of competition law infringements can claim their entire damages from any of the cartelists. Under some pre-Directive national laws, cartelists sued by the claimant might not be able to take effective recourse against members of the cartel that the claimant did not sue. The effect of a partial settlement in terms of claim reduction and liability of the settling cartelist varies depending on the jurisdictions involved and the wording chosen.

Under the Directive, cartelists are also jointly liable for the entire damage caused; however, there are exceptions for the immunity recipient and small and medium enterprises that modify this basic rule. Cartelists do have effective recourse against each other. The effect of a partial settlement is uniform throughout the EU: It always reduces the plaintiff’s claim by the settling cartelist’s share of the harm, and the remaining cartelists can no longer bring contribution claims against the settling cartelist. This facilitates the conclusion of incentive-compatible settlement agreements to cooperate in pursuing the remaining cartelists for damages.

This work discusses a multitude of criteria for liability apportionment amongst cartelists, leading into an assessment of two proposals that have been advanced to make the liability apportionment amongst cartelists more predictable: (A) using the ratio of the cartelists’ relative sales and (B) calculating Shapley values of the cartelists’ contributions to the cartel’s effects. I find that relative sales are a suitable starting heuristic for most cases, but there are constellations in which this method leads to absurd results. Shapley values theoretically provide the perfect metric to measure relative responsibility for the harm but require input that is usually exceedingly difficult to obtain.

The final part briefly contrasts these results to the situation under US federal law and finds that the combination of no contribution rights amongst cartelists, the trebling of damages and pro tanto claim reduction create stronger incentives to settle than in Europe.

Keywords: Cartels, Damages, Private Enforcement, Joint and Several Liability, European Union, 2014/104/EU, Liability Apportionment, Partial Settlement, Limitation, Shapley Value, Relative Sales, Comparative Law, Antitrust, Competition Law, Litigation, Belgium, Germany, England, Spain, France, Luxemburg

JEL Classification: K13, K21, K41, K42, L41