Cases on English High Court Jurisdiction about international cartels

In brief

Iiyama v Schott and others [2016] EWHC 1207 (Ch) and Iiyama v Samsung and others [2016] EWHC 1980 (Ch)

Two recent cases have helped to clarify the murky question of the jurisdictional scope of Article 101 TFEU in follow-on damages actions. The cases give a helpful indication of the territorial limits to claims for breach of European Union competition law. In iiyama v Schott1, Mann J struck out a claim by iiyama, a manufacturer of computer monitors, against members of the Cathode Ray Tubes (CRT) and CRT Glass cartels. Applying the "implementation" and "qualified effects" tests, the court struck out the claim on the basis that the sales by the cartelists to the claimant were insufficiently connected to the European Economic Area (EEA) to breach competition law.

In contrast, Morgan J has allowed iiyama’s claim to proceed in iiyama v Samsung2. This case was in respect of alleged damages from the global Liquid Crystal Display (LCD) cartel. The facts of the case are broadly similar to those of Schott, however in this instance the Commission had previously found that the LCD cartel had been implemented in the EU. The question for the court therefore was simply one of loss. In this instance, iiyama’s case was saved by their argument that if the LCD cartel had not been implemented in the EU, then LCDs would have been made available for purchase in the EU at prices unaffected by the world-wide cartel. The claim has been allowed to proceed.

In detail

iiyama v Schott [2016] EWHC 1207 (Ch)

The claimants in this case sought to rely on two Decisions of the European Commission (Case Comp/39605 - CRT Glass and Case Comp/39437 - TV and Computer Monitor Tubes). The Commission found the existence of a global cartel to fix the price of CRTs and an EU-wide cartel for CRT Glass. The central question that was posed to Mann J in this case was one of jurisdiction. The court found that “the sales of the allegedly cartelised products which ended up in iiyama products sold in the EEA were all made in Asia”3. Neither type of product (CRTs nor CRT Glass) “which ended up in iiyama monitors in the EEA were made or sold by the cartelists in or into the EEA. In each case there were intervening sales”4. An exception to the above was in one supply chain where a manufacturer of monitors that purchased CRTs (though importantly not one of the claimants) was a UK subsidiary of a Japanese group.

iiyama v Schott marks the first instance where the two jurisdictional tests of "implementation" and "qualified effect" (from the Woodpulp and Gencor cases, respectively) were applied to assess a damages claim from an Article 101 TFEU decision. Mann J avoided the question of which test was the correct one to apply, as both tests provided the same outcome - that the sales in question had an insufficient connection to the jurisdiction to constitute a breach of EU competition law. Applying Woodpulp, the court found that these sales could not be an “implementation” of anticompetitive behaviour in the EEA. Even if there was an indirect effect (an end of the road effect) within the EEA from sales outside the EEA, those sales are not deemed to be an implementation of the cartel within the EEA5. Furthermore, applying Gencor (an EU Merger Regulation case), there was found to be no “foreseeable, immediate or substantial effect” to competition in the EU. The court found that, in the Gencor test, the reference to “immediate” could not equate to a “knock-on” effect6. The court accordingly struck out the claim.

The judgment suggested that the claim would also have failed on two other points. Firstly, iiyama pleaded their action to be a follow-on damages claim, proceeding from the original decision of the European Commission in the CRT Glass cartel. As iiyama had not alleged anticompetitive behaviour outside the EEA, any claim that related to sales from outside the EEA could not be classed as a follow-on action, and the claim must ultimately have failed. Secondly, the court found that iiyama’s solicitors had committed an act of material nondisclosure, in that it had failed to disclose to the defendants that the claim originated from sales made outside of the EEA. The court thought this nondisclosure to have been sufficiently serious that the claim would have failed on this basis alone.

iiyama v Samsung [2016] EWHC 1980 (Ch)

In this second case, iiyama was claiming follow-on damages for losses allegedly suffered through the purchase of LCD screens from the LCD cartel. The Commission had ruled against the worldwide LCD cartel in December 2010, finding that it had been implemented in the EEA. In comparison to iiyama v Schott therefore, the court was now only required to rule on whether the claimants had suffered loss from the cartel’s implementation in the EEA. As with its claim in Schott, iiyama’s claim focused on losses it allegedly suffered as an indirect purchaser, downstream of the cartel’s activities in Asia. Morgan J at this point cited the ruling of Mann J in iiyama v Schott, saying that even if sales by a cartel were to have had an indirect effect within the EEA, that did not, in itself, amount to the operation of the cartel within the EEA.

In contrast to the first case however, iiyama included in its Amended Particulars of Claim an argument that the implementation of the cartel within the EEA was evidenced by Iiyama being unable to purchase LCD screens within the EEA at prices that had not been affected by pricing pressure from the worldwide cartel7. “Accordingly, when the LCDs and LCD products were sold outside the EU at an overcharge, the purchasers and indirect purchasers all suffered loss and damage (subject to any defence of passing on)."8 Further, iiyama also argued that if the cartel had not been implemented in the EEA, then the cartel would not have functioned effectively and would have eventually collapsed. Morgan J ruled that the claim could indeed be pleaded on this basis, although noted that at present there appeared to be little factual evidence available to support these assertions.

In allowing the claim to proceed, Morgan J dismissed the argument of the defendants that the losses iiyama suffered were not sufficiently proximate to the cartel’s operations in Asia. In giving his judgment however, Morgan J noted that there were important policy points regarding the use of Article 101 that remained to be clarified, potentially warranting a future referral to the Court of Justice, for interpretation of the scope of Article 101.

It is important to note that both of these cases concerned early applications to strike out claims, after pleadings but before disclosure of documents and trial. Accordingly, the judgment of Morgan J simply allows these issues to proceed to final trial of the action.

Please see our article Actions for damages in antitrust cases for more on this subject.

1_ Iiyama & ors v Schott & ors_ [2016] EWHC 1207 (Ch)
2_ Iiyama & ors v Samsung & ors_ [2016] EWHC 1980 (Ch)
3_ Iiyama & ors v Schott & ors,_ 42
4 Ibid.
5 Ibid.,140
6 Ibid., 148
7_ Iiyama v Samsung & ors_, 49
8 Ibid.