ECJ’s preliminary ruling on claim bundling in cartel damages claims (‘Rundholzkartell’)

The ECJ’s decision deals with the permissibility of ASG 2, a litigation vehicle active in the field of antitrust damages. In 2020, ASG 2 brought a group action before the Regional Court of Dortmund based on claims that had been assigned to it by 32 sawmills. Allegedly, the sawmills overpaid for purchases of round timber, because the Federal State of North Rhine-Westphalia harmonized the prices of round timber in violation of Art. 101 TFEU between 2005 and 2019, the German Federal Cartel Office (“FCO”) claimed.

In 2009, the FCO adopted a commitment decision pursuant to section 32b of the German Act Against Restraints of Competition (“ARC”). Hence, there was no binding prohibitory injunction pursuant to section 32 ARC. Therefore, the ECJ in its recent decision dealt with the admissibility of litigation vehicles in the context of so-called ‘standalone’ damage claim (not ‘follow-on’).

In the legal proceedings, which led to the preliminary reference procedure before the ECJ, North-Rhine Westphalia argued that ASG 2’s lacks legal standing to bring proceedings and also challenged the merits of ASG 2’s claim. North-Rhine Westphalia pleaded that the assignments to ASG 2 were infringing the German law on out-of-court legal services (Gesetz über außergerichtliche Rechtsdienstleistungen, “RDG”) and were therefore null and void. The argument brought forward is that antitrust claims clearly exceed the limit set by the RDG with regard to the admissibility of ‘out-of-court legal services’ of so called ’collection services’ (such as litigation vehicles). This is based on the assumption that cartel damages claims are particularly complex and apt to lead to conflicts of interest and, as a consequence, litigation vehicles generally lack the expertise required by the RDG for providers of legal services (such as collection service providers) to bring proceedings in court.

The ECJ states that it directly stems from the cartel prohibition pursuant to Art. 101 TFEU and Art. 47 Charter of the Fundamental Rights of the European Union, which contains the fundamental right to an effective remedy and to a fair trial, that national law must be disapplied, if it makes antitrust damage claims too burdensome. In this regard, the ECJ refers to its famous Courage judgement dated 2001 (see here) in which the court stated that the full effectiveness of the cartel prohibition pursuant to Art. 101 TFEU would be put at risk if it was not possible for individuals to claim damages for financial losses suffered by a cartel.

With regard to litigation vehicles, according to the ECJ, this

• does neither mean that there is an obligation for national law to contain a mechanism for group actions by litigation vehicles;
• nor does it imply that European law specifies the legal requirements for the validity of an assignment to the litigation vehicle by the allegedly injured party.

However, according to the ECJ, national law must contain the possibility for parties claiming damages suffered by a cartel to assign their claims to a litigation vehicle bundling damage claims, if:

• national law does not provide for any other effective possibilities of grouping together individual claims in a stand-alone damage claim and
• bringing individual actions for damages is, having regard to all the circumstances of the case, impossible or excessively difficult, with the result that those individuals are deprived of their right to effective judicial protection.

To further foster this argument, the ECJ refers to the general principles of equivalence and effectiveness, which, in the absence of detailed EU law in this regard, have to be respected in relation to the right to seek redress for the harm caused by infringements of competition law.

Hence, in essence, the ECJ’s judgement implies that in order to effectively exercise their right to compensation individual claimants must either have the right to effectively bring individual actions before national courts or must have the chance to effectively group together their individual claims in a group action. In short, claim vehicles must be allowed if there is no alternative to bring forward such claims effectively.

In the next procedural step, it is up to the Regional Court of Dortmund to decide whether, having regard to all the circumstances of the specific case, German law either has effective possibilities for individual antitrust damage claims or effective other possibilities to group together individual claims. If this is not the case, the Regional Court of Dortmund will have to disapply the provisions of the RDG prohibiting litigation vehicles to bundle their claims for compensation in order to enable claimants to effectively exercise their rights to compensation. In its referral request, the Regional Court of Dortmund has already indicated that it considers German law not to provide effective alternatives. Hence, it is likely that the Regional Court of Dortmund will come to the conclusion that the RDG has to be disapplied and that in the specific case it must be possible for litigation vehicles to bundle antitrust damage claims assigned by damaged parties and to bring to court those proceedings.

The ECJ’s generous approach which is driven by effectiveness considerations, will make it easier for parties allegedly injured by a cartel to seek compensation for the financial losses suffered. However, it remains to be seen whether the ECJ’s decision will lead to an increase in claims. First, it is the Regional Court of Dortmund to decide.

Furthermore, the ECJ's judgement only relates to so-called standalone damage claims (in contrast to follow-on damage claims), meaning that the claim does not stem directly from a binding decision by a competition authority confirming the infringement.

However, so far, the ECJ has not decided on the question whether the same approach applies for follow-on claims. In the case at hand, the ECJ considered this question inadmissible as it had no relation to the present case.

As even more questions remain, in a first step, the mass claims or litigation vehicles saga will continue before the Regional Court of Dortmund. Although it remains to be seen how the Regional Court of Dortmund will decide, it is likely that it will rather allow such litigation vehicles. Still, claimants face significant uncertainties regarding such litigation models. Not only is it to be expected that the case due to its precedency will be fought ‘through all instances’, but even more legal questions might follow in the next steps. Most importantly, as we have been discussing for a long time, if such litigation models are allowed, the so-called ‘Streuschäden (scattered damages)’-jurisprudence in the context of the ‘passing-on’-defence must be turned back equivalently to balance various procedural interests. As background, it has been argued that the passing-on-defence would be excluded under certain conditions in case of ‘scattered’ damages. This means cases in which the amount of damages would be very low, for example too low to claim and bear the costs of the proceedings which might discourage most claimants from filing a lawsuit. However, this might not be true anymore in the era of litigation vehicles. Otherwise, it would not be proportionate to allow litigation vehicles on the one hand, but not allow the passing-on-defence for the same reasons. Hence, such claims might become an uphill battle for claimants in reality. All in all, companies should not only step up their compliance efforts to prevent antitrust violations even more effectively, but at the same time be prepared for more complex proceedings. In any case, one thing is clear: there is no ‘carte blanche’ for litigation vehicles, but in any case an overall effectiveness approach.