One of the very few
1. Overcharge: The English courts continue to use the "broad axe" principle when assessing overcharge. This approach allows the court to adopt an element of estimation and assumption in calculating damages in order to avoid an unreasonable insistence on precision to defeat a justified claim for compensation. This is a pragmatic approach to damages given the inherent evidential limitations often seen in follow-on damages claims.
A similar approach by the
2.
3. Broad Axe: In the calculation of pass-on, an estimation of the rate of pass-on will be made where necessary, taking into account all the available evidence.
4. Applicable Law: The court will look to substance and not to form when considering which country's law should apply to a particular claim. It will assess the significance of factors connecting the case to
Background
Granville v. LG is a follow-on damages claim arising from a cartel in the worldwide market for thin film transistor-liquid crystal display (LCD) panels. LCD panels are used across a range of electronic devices including computer monitors, laptop screens, and LCD televisions. On
Granville was a group of English companies which manufactured and/or sold devices with LCD panels. Granville bought LCD panels indirectly in pre-made parts or products from manufacturers which incorporated LCD panels in their designs. Granville sought damages to compensate them for (1) the overcharge suffered in purchasing products containing these LCD panels and (2) loss of profits to the extent it was held that Granville passed this overcharge on to their customers to account for sales lost due to the alleged overcharge.
Overcharge
In assessing overcharge, the court preferred LG's regression analysis to Granville's extrapolation approach3 finding that this was more reliable as it was able to take key variables into account, such as production costs, rather than simply assuming costs remained static during the relevant period.
Nonetheless, the court only accepted the results of LG's regression analysis to a limited extent, finding different overcharge rates of between 4% and 14% depending on the product market — higher than those advanced by LG. The reason given for this was to avoid under-compensating Granville by failing to take into account the degree of uncertainty in LG's economic analysis.
The key question here was the extent to which Granville passed any overcharge on to their customers downstream. In Granville v. LG, this assessment was highly complex given the lack of documentary evidence and data to explain how Granville reacted and dealt with rises in input costs.
In the absence of such evidence, the court held that a party's evidential burden in demonstrating downstream pass-on can be discharged via reference to "expert evidence based on economic reasoning, coupled with evidence of internal policies and approaches" (emphasis added). The court accepted that a degree of estimation will often be necessary when assessing the question of pass-on. On the balance of probabilities, the court assessed the level of downstream pass-on as 65%, taking into account the economic analyses presented and applying the broad-axe principle. However, the court held that increased prices would have reduced Granville's sales volumes and concluded that the combined effect of downstream pass-on and lost sales resulted in a 30% decrease in damages.
Applicable Law
LG also argued that elements of Granville's claim were subject to foreign laws. Some of Granville's immediate upstream suppliers were located outside of
This line of argument was dismissed by the court on the basis that "the significance of the factors ... which connect the tort to the EU, and, therefore,
Conclusion
Final judgments on the merits of follow-on competition damages claims in the
Footnotes
1. [2024] EWCA Civ. 181.
2. Royal Mail/BT [2024] EWCA Civ. 181, para. 147-8.
3. Granville's economic expert proposed a level of overcharge based on extrapolation from historical data (both court findings and economic studies) in previous cases in other industries. The court rejected this approach at paragraph 59, holding that "the most that can properly be said of this material is that it is capable of providing a limited sense check at the end of the fact-finding process in this case." The court preferred the traditional regression analysis advanced by LG's expert.
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