Frank Maier-Rigaud, Ulrich Schwalbe, Nov 27, 2013
Damages caused by violations of Article 101 and 102 Treaty on the Functioning of the European Union are viewed as an important private enforcement complement to the public enforcement of competition law by the European Commission and National Competition Authorities in the European Union. There is an increasing amount of claims for damages, in particular as follow-on claims. When a claim for damages is presented in court, and compensation for the harm suffered is sought, quantifying the level of the damage suffered becomes necessary. In the last few years several theoretical and applied studies investigating the fundamental economic principles and empirical-econometric methods to determine damage have been presented with the aim to guide the courts on how to quantify damages and what amount of damages to ultimately award. This debate has been further fuelled by the EC’s proposed Directive with the aim of facilitating such claims that would provide for a common framework within which damage claims should be treated by National Courts.
As is generally accepted under EU law, and has been stated by the EC, “[c]ompensation for harm suffered aims to place the injured party in the position in which it would have been had the infringement of Article 101 or 102 TFEU not occurred: the actual position of the injured party has to be compared with the position in which this party would have been but for the infringement.”
This mandate comprises three aspects, the price effect (damnum emergens), the quantity effect (lucrum cessans), and interest on the damages. Using the example of a cartel, the price effect is the harm suffered by a purchaser of the cartelized product due to the effect of the price increase on its margin. It is related to the concept of overcharge, which is simply the quantity that the purchaser continues to buy multiplied by the price difference. The price effect is the overcharge adjusted for pass-on. The quantity effect, in turn, denotes the loss of profits of the purchaser of the cartelized product due to a reduction in sales resulting from (partial) pass-on.
Both price and quantity effect combined make up the harm that conceptually is equivalent to the difference in profits (or utility if final consumers are concerned) between the situation that would have prevailed in the absence of the infringement and the factual situation. Therefore, if the entire harm suffered from competition law infringements is to be claimed, then the calculation of damage should not be just a quantification of price effects, but also needs to quantify harm deriving from quantity effects.
In addition, while the discussion has generally focused on harm emanating from cartel infringements, the quantification of damage in abuse of dominance cases remains largely unexplored. The purpose of this article is to shed some light on the important role of quantity effects as part of the damage, and the particular challenges for the calculation and the assessment of harm in the context of Article 102 TFEU.
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