The UK High Court ordered Swiss engineering company ABB to pay Anglo-Dutch power-grid joint venture BritNed just over EUR11.5 million in damages in a follow-on action relying on the European Commission’s underground and undersea power cables cartel decision. The amount awarded is significantly smaller than the EUR180 million initially claimed, but the case is important in being one of only a handful of UK court judgments to date that have awarded private damages for harm suffered as a result of a breach of antitrust law: BritNed Development Ltd v ABB AB and ABB Ltd [2018] EWHC 2616 (Ch)

The case stems from a 2014 decision by the European Commission (EC) which found that, between 1999 and 2009, ABB and ten other companies had been involved in a global cartel in the underground and submarine high-voltage power cable sector, by bid-rigging, market sharing and exchanging competitively sensitive information.

BritNed was a customer of ABB during the cartel period, following the negotiation and award of a cable supply contract to ABB for the construction of the BritNed Interconnector, an electricity submarine cable system connecting the UK with mainland Europe.  

In 2015, BritNed issued proceedings against ABB, claiming it had suffered loss and damage in excess of EUR180 million as a result of the cartel and its operation. 

BritNed claimed for three types of loss:

− Overcharge Claim: as a result of the cartel, it had paid more for the cable than it otherwise would have done;

− Lost Profit Claim: absent the cartel, it would have bought a cable with higher capacity which would have generated higher profits than the cable actually purchased; and

− Compound Interest Claim: compound interest on the basis that, as a result of the overcharge, it had incurred higher capital costs in commissioning the Interconnector than would otherwise have been the case under competitive conditions. 

ABB did not deny participating in the cartel but argued that the cartel had had no effect on pricing or the choice of cabling and so BritNed had suffered no loss or damage. Alternatively, ABB argued that any damages fell to be assessed in light of the regulatory cap imposed on BritNed’s earnings (the Regulatory Cap Claim). 

Overcharge claim allowed in part

The court held that an overcharge had to be assessed as the difference between the price actually agreed between the parties and the price that a claimant would have agreed, whether with the defendant or with a rival provider, had the cartel not existed.

On the evidence, the court found that there had been no overcharge. BritNed had been able to put commercial pressure on ABB during the contractual negotiations, for example, through comparing value and costs with previous projects and the threat that the project would not go ahead if the price was too high. It was also important that the ABB individuals involved in the negotiations were unaware of the cartel’s existence. The court found that the costings had been compiled honestly and competently with a view to putting forward a competitive bid. 

“Baked-in inefficiencies” in cable design

Even though there was no “deliberate” overcharge, the court held that ABB’s position in the cartel had allowed it to maintain “baked-in inefficiencies” in its cable design when compared to its competitors and that the cost of these inefficiencies had been passed on to BritNed. 

The court stated that “had there been a properly competitive environment, ABB would have faced technical solutions from others”, which would have resulted in ABB either cutting costs or losing the contract. 

The court found that there was an overcharge to BritNed arising from this inefficiency and ordered ABB to pay just over EUR7.5 million.  

Cartel savings

The court considered the internal savings ABB was able to achieve as a result of not having to compete with its co-cartelists and ordered ABB to pay a further EUR5.5 million for these in respect of the BritNed project.

No lost profits

The Lost Profit Claim was dismissed as the evidence showed that, even in the absence of the cartel, BritNed would still have chosen the same power cable at the same price, thereby achieving the same profit.  

No compound interest

The court dismissed BritNed’s claim for compound interest. As BritNed was funded entirely through shareholder equity, through its parent companies, it had not incurred any additional costs from having to raise the additional capital. Further, the parent companies were not party to the proceedings. The court held it was “fundamentally wrong” to calculate interest by reference to the “hoped-for profit” of the parent companies. BritNed was, however, entitled to simple interest.

Regulatory Cap not relevant to damages claim

The court held that damages did not have to be assessed in light of the regulatory cap on BritNed’s earnings as, following an exemption granted to BritNed in 2007, this cap would only bite after 25 years. The court held that even if, in future, BritNed made profits it would not have made but for the overcharge, in excess of the cap, it would still be entitled to recover the full amount of the overcharge. Under the regulatory regime, excess profits have to be used either to create further capacity expansion or to fund the regulated transmission networks in the UK and the Netherlands. Excess profits were not retained by BritNed and therefore it would not benefit from these damages by way of excess profit. 

However, the court also held that, given the regulators were not party to the proceedings, it was not appropriate for it to determine the true effect of the exemption and so asked BritNed to provide an undertaking to treat damages as if they were subject to the cap in order to avoid over-compensation. Following a refusal by BritNed, the court, in a supplemental judgment, reduced the award for damages by 10% to just over EUR11.5 million.

Comment 

The ruling is a clear reminder that companies granted immunity or leniency from regulatory fines can still, and do, face damages actions by third parties. Companies should therefore consider their potential liability when carrying out a risk assessment of a prospective immunity or leniency application.

With the proliferation of antitrust damages actions being lodged with the UK Courts, the importance of having a robust antitrust compliance programme in place is evident. On the flip side, for companies which believe they have suffered loss as a result of a breach of antitrust laws, the opportunity for redress is not just theoretical. 

The court granted both parties permission to appeal.