Following a four-week trial in the Commercial Court and judgment on
The claim in Granville v
LCD panel cartel
The claimants (which traded under the "Time Computers" and "Tiny Computers" brands in the 1990s and early 2000s but are now in liquidation) brought claims against a number of LCD panel cartelists seeking damages resulting from a worldwide cartel for the sale and supply of LCD panels for use in desktop monitors, notebooks and televisions, as determined by the
In his judgment, HHJ Pelling KC found that the cartel increased the price of LCD panels purchased by the claimants by between 4% and 14% (depending on the product) and that the claimants should be compensated for this overcharge and the resultant loss of sales, subject to a deduction to reflect the proportion of the price increase that had been passed on to customers, known as "downstream pass-on".
Notably, the defendants failed on their arguments that first, the claim was time barred by virtue of section 2 and/or 9 of the Limitation Act 1980; and, secondly, a substantial part of the claim was governed by non-European Economic Area (EEA) law or, alternatively, by the laws of
As regards the disputes over the levels of overcharge, downstream pass-on and lost sales, the judge's findings were somewhere in between the figures proposed by each side's experts. The judge accepted in full the claimants' position that there was 100% upstream pass-on and that the overcharge affected the whole market (including LCD panels made by non-cartelists - the "umbrella damages" claim).
Approach taken to limitation
The case provides useful further endorsement of the approach taken to limitation in cases of fraud or concealment by the
This means in practice that the court - when looking at the question of when the claimants "could with reasonable diligence have discovered" the facts giving rise to a claim (thus triggering the running of the limitation period) - will not expect an insolvency practitioner to be "scanning the business section of newspapers or the Reuters web site for articles that may be relevant to the companies concerned so long after the companies had ceased trading".
The judge in this case agreed and concluded that such an approach would "not [be] realistic" given that insolvency administrators will normally be dealing with a "substantial number of administrations and liquidations of companies trading in a wide variety of different industrial and commercial sectors, where the funds available to carry out investigations may be very limited".
The judge made clear however that had the claimants not been in administration he would have expected them to consider "at least the business sections of main stream newspapers published in at least
Additional defences to limitation
The claimants also raised a further defence to the defendants' limitation arguments in relation to the fourth defendant (
The judge confirmed that he agreed that the claim against the fourth defendant would not have been time barred for that reason. This highlights the importance of deciding precisely which addressees of a regulatory decision to issue against when bringing a follow-on claim where limitation may be an issue between the parties. While, in principle, all addressees of a decision of a competition authority will be jointly and severally liable for the whole loss caused by the cartel, the limitation arguments may differ between defendants.
Territorial scope of EU law
The judge confirmed that he agreed with the claimants case that its claims fell within the territorial scope of EU law and, in doing so, resolved important issues that were left outstanding by the previous
LG sought to argue that a substantial proportion of the claimants' claim fell away on the basis that any parts of the claim which flowed from the purchase of LCDs first put on the market outside the EEA - "non-EEA first sales" - were outside the territorial scope of EU law. In practice, the majority of LCD panels were first sold to LCD monitor manufacturers in
The judge disagreed, holding that to take that LG's approach would have a "chilling effect on the efficacy of EU competition law", because it would effectively mean that defendants could circumvent EU competition law simply by adding a "non-EU" step to the start of their supply chain.
He agreed with the claimants that the correct test was whether the cartelists agreement (in this case to illegally increase the price of LCDs) was either implemented in the EEA or alternatively whether the agreement had immediate, substantial and foreseeable effects within the EEA, or it was reasonably foreseeable that it would have those effects (the "qualified effects doctrine"). This followed the
In this case, HHJ Pelling KC held that the evidence available established that the LCD cartel was a worldwide cartel which was intended to produce and in fact produced substantial indirect effects on the EU internal market. This market included the
The judge, therefore, concluded that the qualified effects doctrine was satisfied and the claim fell within the scope of EU competition law. He also noted the statement of the
Governing law
The judge agreed with the claimants that the governing law in this case was English law.
The test for governing law in this case was governed by the Private International Law (Miscellaneous Provisions ) Act 1995 (PILA) since the events with which the claim was concerned occurred before
The key question was, therefore, in which country the most significant elements of the events making up the tort occurred (the tort being breach of statutory duty and the statute in question being article 101 the Treaty of the Functioning of the
The defendants argued that the most significant element of the events making up the tort was the place where unlawful conduct had occurred - that is, element (a). They argued that this would make the applicable governing law the (various) laws of the "producer countries" (being
The judge disagreed and held (endorsing the approach taken to governing law in
The general rule in section 11 PILA can be displaced (by section 12 PILA) if it is "substantially more appropriate" for the law of another country to apply. While the judge concluded that he did not need to consider this point, given his conclusions on section 11, he held that he would have concluded that the factors connecting the tort to the EU (and therefore
Downstream pass-on and lost sales
Whilst the judge concluded that 65% of the overcharge on the LCD panels had been passed on to customers by the claimants, he agreed with the claimants' arguments that, to the extent any losses were passed on, the effect of the claimants increased prices would have been to reduce their sales volumes and hence profits (the "lost sales" claim).
The practical impact of this was significant and offset about half the effect of the downstream pass-on; the combined effect of the finding on downstream pass-on and lost sales was a reduction to the overcharge figure of about 30%. This illustrates the potential importance of lost sales claims to claimants in situations where downstream pass-on may be significant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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