High Court Analyzes Cartel Damages in Granville Technology Group Case

Citation: [2024] EWHC 13 (Comm)
Judgment on

Introduction

In the case of Granville Technology Group Limited (in liquidation) & Ors v Chunghwa Picture Tubes Ltd & Ors, the High Court of Justice dealt with a “follow on” claim relating to damages for losses caused by the defendants’ participation in a price-fixing cartel, thereby infringing Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the Agreement on the European Economic Area (AEEA). This case analysis aims to dissect the critical legal principles applied by HIS HONOUR JUDGE PELLING KC and elucidate on how these principles were interwoven to reach the final judgment.

Key Facts

The claimants, English registered companies in the computer manufacturing and sales sector, alleged that the infringements by the defendants had caused them to overpay for LCD panels and products incorporating such panels. They also claimed that the overcharges, which they termed as “Overcharge,” led to reduced sales and subsequently lost profits. In addition to the overcharges, they sought recovery for the interest including compound interest on the overcharge and on damages for lost sales.

The court navigated through several key legal principles, including:

  1. Breach of Statutory Duty: As a starting point, the court recognized the claims as tortious claims for breach of statutory duty.
  2. Assessment of Overcharge: Judge Pelling KC had to determine the degree of overcharge caused by the cartel, distinguishing between price increases resulting from cartel activity and those due to other legitimate market factors.
  3. Pass-on: Central to the case was the concept of “pass-on,” the process by which overcharges are transferred from one party to another, potentially offsetting damages.
  4. Loss of Profit on Lost Sales: The court considered the additional loss claimed for a reduction in volume of sales allegedly resulting from increased selling prices due to the Overcharge.
  5. Limitation Period and the Effect of Insolvency: The court tackled the defence of limitation, particularly considering the impact of the claimants’ status of insolvency on the standard limitation period.
  6. Applicable Law and Territorial Scope: A significant discussion was had on the applicable law for the claims, specifically whether non-EEA laws governed any part of the claims, or if EU law was applicable throughout.
  7. Interest on Claims: The determination of the appropriate interest rate for compensation was discussed in light of statutory provisions and common law principles.

Outcomes

Judge Pelling KC concluded that:

  1. The Overcharge attributable to cartel activity was estimated, applying a balance between expert economic evidence and legal principles.
  2. Downstream Pass-on was assessed to be at 65%, meaning that the claimants had passed on a proportion of the Overcharge to their customers.
  3. Loss of Profit on Lost Sales was calculated using the price elasticity of demand, with a diversion ratio, implying a certain percentage of customers would opt for an alternative product offered by the claimants, set at 25%.
  4. On the limitation defence, despite the defendants’ argument for a time-barred claim based on the issuance of a Statement of Objections by the European Commission, the court did not accept this due to the claimants being in administration and liquidation, impacting reasonable diligence in discovering the claim.
  5. The court found the territorial scope of EU law to be applicable, thus applying English law—as integrated with relevant EU law—to the claims.
  6. The claimants were entitled to simple interest under s.35A Senior Courts Act 1981 at a rate of base plus 2.5%.

Conclusion

In Granville Technology Group Limited (in liquidation) & Ors v Chunghwa Picture Tubes Ltd & Ors, the court reinforced the application of established legal principles to a complex economic tort of cartel infringement. Applying both EU competition law within its territorial scope and the impact of insolvency on limitation periods, the court offered a nuanced approach to calculating damages and interest. The judgment demonstrates the court’s commitment to ensuring that claimants are fairly compensated for infringements by taking into account the full range of consequences, while also balancing the needs for judicial caution and avoidance of overcompensation. This case reflects the English judiciary’s pragmatic application of legal principles to contemporary challenges presented by complex commercial litigation.