UK Law and Practice Contributed by: Samantha Ward, Ben Jasper, Oliver Carroll and Bethany Downey, Clifford Chance LLP
2.5 Pass-On Defence Damages awarded to a claimant as a purchaser of a cartelised product may be reduced if the defendant can prove that the overcharge was passed on to the claimant’s own customers. In Sainsbury’s v Mastercard [2016] CAT 11, the CAT held that the pass-on defence is only available for identifiable increases in prices by a firm to its cus - tomers. The CAT also held that the defendant must show on the balance of probabilities that there is another class of claimant, to whom the overcharge has been passed on, in the absence of which a claim - ant’s damages should not be reduced. The Court of Appeal upheld the CAT’s finding that Mastercard’s defence failed because no identifiable increase in retail price had been established, let alone one caus - ally connected to the UK Multilateral interchange fee. In an appeal from the Court of Appeal, the Supreme Court held that the Court of Appeal erred insofar as it required a greater degree of precision in the quanti - fication of pass-on from the defendant than from the claimant. Once a defendant has raised pass-on, there is a heavy evidential burden on the claimant to provide evidence as to how they have dealt with the recovery of their costs in their business. Most of the relevant information about what a claimant has done to cover its costs will be exclusively in the hands of the mer - chant itself, and the claimant must produce evidence in order to forestall adverse inferences being taken against it by a court applying the compensatory prin - ciple. The Supreme Court concluded that the law does not require unreasonable precision in the proof of the amount of the prima facie loss which the merchants have passed on to suppliers and customers. For claims where the loss or damage suffered from an infringement took place wholly on or after 9 March 2017, the claimant is presumed (subject to rebut - ting evidence) to have proved that the overcharge or underpayment was passed on if: • the defendant infringed competition law; • there was an overcharge or underpayment as a result of the infringement; and • the product or service was provided to the cus - tomer by the claimant.
This was applied by the CAT in Royal Mail Group Lim- ited v DAF Trucks Limited and Others , BT Group PLC and Others v DAF Trucks Limited and Others [2023] CAT 6 in which the CAT clarified that the legal test for causation in relation to a pass-on defence required the defendant to prove a direct and proximate causa - tive link between the overcharge and any increase in prices by the claimants. In the case of Granville Technology Group Limited v Chunghwa Picture Tubes Ltd, LG Display Co. Ltd [2024] EWHC 13, the Court addressed the issues of overcharge and pass-on in the context of a cartel’s influence on the prices of Liquid Crystal Display (LCD) panels. The claimants, manufacturers and sellers of desktop PCs with monitors and notebooks, alleged that due to the cartel’s activities, they paid inflated prices for LCD panels, constituting an overcharge. They sought to recover this overcharge as damages for breach of statutory duty. While it was undisput - ed that an overcharge occurred, the extent of it was contested. The defendants argued that the claimants had passed on any price increase to their customers, negating any claim of loss. In assessing the overcharge, the court found it to be necessary to assess what would have happened had the infringement not occurred, leading to the conclu - sion that the overcharge rates attributable to the cartel were 8% for monitors, 4% for notebooks and 14% for TVs. When examining the pass-on to downstream customers, the court found that, in line with compen - satory principles, any loss that had been passed on was not compensable. The court estimated that 65% of the overcharge was likely passed on, consider - ing market competitiveness and the variable pass- on rates during the relevant period. Despite this, the court recognised that the claimants had suffered a significant loss of profit due to reduced sales, which they successfully demonstrated was a consequence of passing on the overcharge to their customers.
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