Austria, Austrian Supreme Court, 29 October 2014 7Ob121/14s

Identification of the case

• § 1295 and § 1311 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch ABGB)

• Art. 101 TFEU

Summary of the case

Since the 1980s Kone and others had implemented in Member States a large scale agreement purporting to divide up the elevator and escalator market. The object of the cartel was to ensure for the preferred undertaking a higher price than that which would have been achievable under normal competitive conditions. It distorted the market and, in particular, the price development that would otherwise have occurred under such conditions.

The members of that cartel sought to coordinate their activities in respect of well over half the commercial volume of new machinery in the whole of Austria. More than half of the projects concerned were allocated by mutual understanding, so that at least one third of the market volume was the subject of agreement concerted practice. Approximately two thirds of the projects subject to such concerted practices went ahead as planned. In the remaining one third of cases, the project was awarded either to third undertakings (not party to the cartel) or to a cartel member that did not adhere to the agreed method of allocation but made an offer at a lower price. Allocations effected by a common understanding at a bilateral level had also been established. The result of the conduct of the members of the cartel at issue was that market prices hardly changed, even in the final years before 2004, and their market shares remained essentially the same.

Relying on the ‘umbrella effect’, the claimant files the appellants for compensation for loss assessed at EUR 1 839 239.74, as a result of buying from third undertakings not party to the cartel at issue elevators and escalators at a higher price than it would have paid but for the existence of that cartel, on the ground that those third undertakings benefited from the existence of the cartel in adapting their prices to the higher level.

The court of first instance rejected the claim, but it was upheld by the appellate court. Proceedings having been brought before it by the appellants in the main proceedings, the Supreme Court was considering the conditions for bringing the liability of participants in a cartel into play, in the light of Article 101 TFEU and the case-law of the Court of Justice, in particular the judgments in Case C 453/99 Courage and Crehan EU:C:2001:465; Joined Cases C‑295/04 to C 298/04 Manfredi and Others EU:C:2006:461; and Case C 360/09 Pfleiderer EU:C:2011:389.

• Civil judicial enforcement

Compensation for the violation of the individual’s rights on fair competition (Art. 101 TFEU).

‘Is Article 101 TFEU (Article 81 EC, Article 85 of the EC Treaty) to be interpreted as meaning that any person may claim from members of a cartel damages also for the loss which he has been caused by a person not party to the cartel who, benefiting from the protection of the increased market prices, raises his own prices for his products more than he would have done without the cartel (umbrella pricing), so that the principle of effectiveness laid down by the Court … requires the grant of a claim under national law?’

According to the case-law of the Austrian courts, a person who claims compensation for damages based on non-contractual liability must establish an adequate causal link and a link of unlawfulness, that is the infringement of a protective provision for the purposes of Article 1311 of the ABGB.

According to the adequate causal link criterion, the person responsible for damage must provide compensation for all consequences that he could foresee in abstracto, including accidental ones, but not for atypical consequences. According to Austrian case-law, when an undertaking not party to a cartel takes advantage of the effect of umbrella pricing, there is no adequate causal link between the cartel and the loss potentially suffered by a buyer, since it consists of an indirect loss: a side effect of an independent decision that a person not party to a cartel has taken on the basis of his own business considerations. The view would be taken that the effect on a competitor of market conditions, as are influenced by the cartel, the economic conclusions he draws from those conditions as regards his undertaking and as regards his goods as well as the business decisions he then takes, particularly as regards pricing, are largely determined by a great number of factors completely unrelated to that cartel.

With regard to the question of unlawfulness, the Supreme Court held that, in accordance with the academic writings relating to the protective purpose of the provision, the act of causing pecuniary loss entails an obligation to provide compensation only if the unlawfulness of the loss stems from a breach of contractual obligations, a breach of absolute rights or a breach of protective provisions. According to the Supreme Court, the decisive factor is therefore whether the provision infringed by the person responsible for the loss had as its object the protection of the injured person’s interests. Such is not the case in the practice of umbrella pricing, which involves no relationship of unlawfulness. The unlawful conduct of the cartel members seeks to injure those who buy their goods at the artificially high prices they charge. The loss caused by the umbrella pricing is merely a side-effect of an independent decision that a person not involved in that cartel has taken based on his own business considerations.

The question whether, under EU law, the loss resulting from the effect of umbrella pricing must give rise to compensation was highly controversial in both German and Austrian academic writings. By virtue of the primacy of EU law, the question referred was of decisive importance, owing to the existing uncertainty as to whether denial of the right to compensation is compatible with the principle of effectiveness developed by the ECJ.

Role of the Charter and role of the general principles on enforcement

The request focused on Art. 101 TFEU.

• Right to access a court
• Right to an effective remedy before a tribunal
• Right to a fair trial
• Right to a fair hearing by an independent and impartial tribunal previously established by law.

§ 1295 and § 1311 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch ABGB) provisions on compensation for damage.

• Effectiveness

Articles 101(1) TFEU and 102 TFEU produce direct effects in relations between individuals and create rights for the individuals concerned, which the national courts must safeguard.

The full effectiveness of Article 101 TFEU and, in particular, the practical effect of the prohibition of that provision would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort.

Any person is thus entitled to claim compensation for the harm suffered where there is a causal relationship between that harm and an agreement or practice prohibited under Article 101 TFEU.

In the context of competition law, national rules must not jeopardize the effective application of Articles 101 TFEU and 102 TFEU.

The full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for harm suffered were subjected by national law, categorically and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an undertaking not party thereto, whose pricing policy, however, is a result of the cartel that contributed to the distortion of price formation mechanisms governing competitive markets.

Consequently, the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel, even if it did not have contractual links with them, where it is established that the cartel at issue was, in the circumstances of the case and, in particular, the specific aspects of the relevant market, liable to have the effect of umbrella pricing being applied by third parties acting independently, and that those circumstances and specific aspects could not be ignored by the members of that cartel.

It is for the referring court to determine whether those conditions are satisfied.

Elements of judicial dialogue

• Direct dialogue between CJEU and National court (preliminary reference)

• C 453/99 [Courage Ltd vs. Crehan],
• C-295/04 - C 298/04 [Manfredi vs. Lloyd Adriatico Assicurazioni SpA],
• C 360/09 [Pfleiderer AG vs Bundeskartellamt]

Preliminary reference

Conform interpretation with EU law as interpreted by the CJEU

Disapplication of national law in favor of EU law

Contradiction between Austrian case-law on compensation of damages and ECJ-case-law.

Adaption of national case law (following decision of the Supreme Court of Oct. 29th 2014, 7 Ob 121/14s (affirmation of the ruling of 2nd instance quashing the dismissal of the claim).

Additional notes on the decision