Approach

Victims of cartels are in a situation of structural disadvantage

Private enforcement of antitrust law by way of damage actions is said to be in a state of ‘total underdevelopment’ [Ashurst Report (2004)] within Europe. This significant lack of actions for antitrust damages can be traced back to different specific obstacles which deter cartel victims to enforce their claims in practice:

• Factual obstacles. Documentary evidence on the existence, duration and functioning of a cartel is rarely available. Hardcore cartels act secretly by their very nature. Therefore and due to the subjective perception of the market by any individual cartel victim, victims generally lack information on the damaging effects of the cartel. Thus, an individual cartel victim often finds it difficult to furnish evidence to sufficiently back a claim for damages.

• Legal obstacles. The successful enforcement of antitrust damage claims and the investigation of the relevant facts require specific knowledge and know-how. Victims have to demonstrate the damage sustained and proof the causal link with the anticompetitive practice. 

• Economic obstacles. The preparation and management of antitrust damage cases involve considerable efforts in terms of administration, human resources and financing. In addition, should claims have to be enforced in court, fees for courts, lawyers and external economists must be borne. Due to the ‘loser pays’ rule the costs of the defendants must also be taken into account should the legal action be dismissed.

• Obstacles due to corporate policy.  Victims often have ongoing business relationships with cartel members. Damaged companies might therefore – despite good chances of success – refrain from the enforcement of damage claims due to real or perceived economic dependencies. 

CDC approach to overcome the obstacles to enforcement of antitrust claims

Legal approach

CDC offers a range of solutions for the enforcement of antitrust damage claims, from the negotiation of individual or collective settlements to the enforcement in court. In general, a designated company of the CDC group purchases damage claims of a multitude of companies damaged by the same cartel infringement. The transfer of ownership of the damage claims to CDC has the advantage of separating ongoing business relationships from future enforcement activities. All costs and financial risks of the preparation and the enforcement of the claims are solely borne by CDC. The CDC company owning the claims enforces these claims collectively, in its own name and on its own account. The enforcement may take place in or out-of court. At the same time CDC ensures that the equivalent of a large part of the damages recovered will be transferred to the cartel victims.

Together with external economists and lawyers, CDC assesses the factual basis and the evidence for price effects of the cartel and the feasibility of enforcing damage claims. Following this initial assessment, CDC, with the advice of external lawyers, decides on the appropriate way and jurisdiction to enforce its damage claims. In court, CDC is represented by a specialised law firm in the EU Member State concerned.

CDC decides how to enforce the damage claims most effectively on a case-by-case basis. CDC is open to alternative solutions for successfully enforcing cartel-related damage claims and offers flexible models. Of course, CDC always ensures that the legal prerequisites required (for example, state licence) are fulfilled.

Economic approach

The principle of bundling the claims of a large group of different injured parties allows CDC to offer a standardised and comprehensive collection of both company-specific data relating to the purchased quantities affected by the cartel and general market information. The analysis of this data enables CDC to employ sound economic methods and arrive at well-reasoned conclusions as regards the total supply and demand side of the market and the damages caused by the cartel agreements. In this way, CDC can provide the courts with a reliable evidentiary base and unique analysis of the underlying cartel-related overcharges, and, ultimately, the damages to be compensated by the cartel members.

For this purpose, CDC has developed a specific data collection and assessment process called ‘transaction data evaluation based Competition Compliance Check’ (tradebaCCC). The data collection and preparation process provides for a  data base with a a high degree of both breadth and detail. This real market data allows for a substantiated analysis of market developments and cartel-related effects. With the assistance of its business partners – the cartel victims – CDC collects the individual transaction and market data such as prices and volumes data, suppliers and Incoterms) by using special record sheets and internet-based entry masks. In addition, CDC collects data on earnings performance before, during and after the existence of the cartel. In order to meet evidentiary standards, the data is collected in a database, in which all the data points relating to any single transaction can be traced back to the original source document. The source documents handed over to CDC for checking create, together with the dataset, a picture of the market in question that is up to now unparalleled in its breadth, depth, detail and reliability. For example, in the German Cement Cartel case, CDC compiled and assessed no less than 180,000 invoices and credit notes from the different cement producers all of which had been collected by CDC’s business partners damaged by the anticompetitive agreements. The documents contain data on approximately 300,000 transactions in the relevant market. In addition, CDC uses general statistical data which relates to business cycles and market trends, such as demand and price trends. With very few modifications, the transaction-based database approach is applicable to almost every product market.

CDC provides its business partners with any assistance necessary for a swift and sound data collection. During the entire process, CDC closely monitors the collection and assesses the facts of the case with its team of experts specialised in antitrust matters. The permanent staff of CDC consists of, among others, lawyers, economists, mathematicians, and IT experts. If necessary, CDC also consults external experts. For this reason, CDC has established a global network of expert lawyers and economists which allows for early access to documents and findings that also have evidentiary value in Europe. Consequently, CDC can contribute to efficient and coordinated enforcement of damage claims for multijurisdictional cartels.

Creating incentives

CDC creates incentives for all market participants in the private enforcement of antitrust damage claims:

• Cartel victims. By selling their antitrust damage claims to CDC, customers of cartel members need not to enforce their rights on their own. Victims are therefore not exposed to the significant costs and risks inherent to antitrust damage cases. Ongoing business relationships with cartel members remain unaffected; the bundling of claims of a multitude of claimants largely reduces the risks associated with suing business partners. These advantages largely outweigh the efforts of the corporate victims to provide CDC with available data on the purchase of a cartel-affected product.
• Cartel members. In analogy, and complementary to public leniency programmes of competition authorities, CDC offers a bonus programme to individual cartel members interested to limit their exposure to civil liability by facilitating the claims enforcement by CDC against other cartel members (see Leniency PLUS⁺).
• Investors. CDC has developed funding models that ensure that cartel victims do not have to bear costs in relation to the preparation and enforcement of claims. The development of the law, the increased prospective of successful private antitrust enforcement, the fact that cartel members have to pay interest on the damage as of the first day of the infringement, and the high potential of financial returns attracts potential investors. Professional litigation funders as well as private and institutional investors can therefore benefit from cooperating with CDC.

For further information on the incentives created by CDC, see Business Partners.

The collective enforcement of individual claims, the collection of relevant company and market data across a multitude of purchasers, and the balancing of the interests of all parties involved through CDC is an effective trigger for successful enforcement of antitrust damage claims.

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