Territorial limits on the application of EU competition law

In Iiyama Benelux BV v Schott AG [2016] EWHC 1207 (Ch) (23 May 2016), Mann J struck out competition law damages claims for around 1 billion euros because, among other things, he found that the claims brought were outside the territorial limits of EU competition law.

This judgment indicates that, having regard to the requirements of international law and comity, the English courts will adopt a cautious approach to asserted competition law damages claims where there is only a relatively slight connection to the EU/EEA (see a similar approach, for different reasons, by the Court of Appeal in the Air Cargo case).

Background

The substance of the case concerns cathode ray tubes (CRTs) used in TVs and monitors prior to the development of flat panel displays. The claimants sell (or sold) such computer monitors.

In a 2011 decision, the European Commission found that there was a cartel (infringement of Art 101 TFEU) operating between certain manufacturers of glass supplied to CRT manufacturers.  In a 2012 decision, the Commission found that there was also a cartel operating in the CRT market.

Basing themselves on these decisions, the claimants sought damages claiming broadly that the cartels had caused them to pay too much.

The supply chain was a problem

The problem for the claimants was the supply chain.  They did not purchase from the glass or CRT manufacturers and only one step in the chain of supply (from glass to eventual sale of the monitors) involved the EU/EEA.

The entire manufacturing process (which involved a series of sales between specialist manufacturers) took place outside the EEA.  The completed monitors were sold to a Japanese company (associated with the claimants) which then sold them to one of the claimant companies. The claimants then sold the monitors within the EEA.

The judge concluded that these facts were outside the territorial limits of  Article 101 TFEU

First, the judge considered whether the global cartel activities relied upon by the claimants were “implemented in the EEA” (the test originating in the 1988 Woodpulp case which involved a cartel organised outside the EEA). He concluded that they were not and that Art 101 could not apply on this basis.

“The mere fact that, even if true [proved at trial], there is some end of the road effect in the pricing of [the claimants’] … purchases in Europe does not mean that the cartel was implemented there. … balancing of the principles of Article 101 and principles of international law and comity require a closer connection than that …”

Next the judge considered whether the “qualified effects” test (derived from the 1999 Gencor case) would assist the claimants; i.e. whether the offending behaviour had an immediate, substantial and foreseeable effect in the EU/EEA.  It should be noted that the test is controversial but, for the purpose of the strike out application, the point was not argued.

Relying on the remoteness of the effect in the EU/EEA (“plainly a knock-on effect”) the judge concluded that the qualified effects test was not satisfied and that Art 101 could not apply on this basis either.