In broad terms, the Court of Appeal’s decision was pro-claimant and, although it sent a number of issues back to the CAT to be determined, it was a victory for the claimant retailers who were bringing the claims.
The appeal judgment confirmed that the default MIFs charged by Mastercard and VISA were unlawful. However, it also made various findings of more general relevance to the assessment of damages in competition law claims. These will be encouraging to claimants in both individual and class action claims.
Quantifying the loss
The judgment confirms the application of the “broad axe” approach to quantifying damages where a precise calculation is not possible, stating that “the broad axe principle is applicable where the claimant has suffered loss as a result of the defendant’s culpable conduct but there is a lack of evidence as to the amount of such loss” . Whilst this was not a specific point under appeal, it is an important principle for claimants since there is often a lack of evidence relating to the precise amount of the loss suffered by a claimant even in a ‘follow-on’ claim – where liability has been established by a decision of the CMA or the European Commission. Defendants will tend to seek to require claimants to prove their loss based on granular and specific documentary evidence whilst claimants will inevitably seek to take a more general and higher level approach.
The Court of Appeal also determined that “the merchants do not bear the burden of proving the lawful level of MIF“. Again this was an important point for the claimants as in the High Court, Popplewell J. had determined that the claimants bore the burden of proof in establishing what the maximum lawful level of the MIF would have been in order to determine their loss (such loss being the difference between the actual MIF and the MIF that could lawfully have been charged). In practice, imposing the burden of proof on the claimants/merchants put them in a very difficult position since they were arguing that the MIFs were unlawful and the determination of the lawful level of MIF is a complex matter which normally must be proved by the party asserting the lawfulness.
The pass-on ‘defence’
As regards the pass-on ‘defence’, the Court of Appeal upheld the CAT decision in Sainsbury’s v Mastercard that the evidential burden was on the defendant to prove pass-on. In particular, they accepted the submissions that “in each case it is a matter for the judge to decide whether, on the evidence before her or him, the defendant can show that there is a sufficiently close causal connection between an overcharge and an increase in the direct purchaser’s price“.
The point under appeal by Mastercard was that the CAT’s decision was inconsistent in that it had ruled that there was no ‘legal’ pass-on in respect of the assessment of damages but that the compound interest awarded to Sainsbury’s should be reduced by 50% to take into account the absorption / pass-on of the overcharge by Sainsbury’s in an economic sense. The Court of Appeal found that “The CAT was right not to have reduced Sainsbury’s damages for ‘pass-on’. There is no inconsistency between the CAT’s findings regarding pass-on at  and - of its decision which concerned loss and interest respectively.” The point being that for a defendant to rely on pass-on to reduce the amount of damages, it must show an increase in the prices charged by the claimant and a sufficiently close causal connection between the overcharge and the price increase.
The Court of Appeal also dismissed the argument that the “broad axe” approach to the assessment of damages should benefit the defendants when the issue of pass-on is considered. The Court of Appeal stated that “There is no scope for the application of any such principle where the burden lies on the defendant to establish a pass-on of the unlawful overcharge in order to reduce the amount recoverable by the claimant“.
Osborne Clarke comment
The court’s approach to the assessment of damages in cartel claims (and other competition law claims) is of huge practical significance. Small variations in the approach can mean the difference between some claims being viable or unviable. The huge collective action claim against Mastercard, brought by Walter Merricks, failed primarily because of the inability to quantify in any meaningful sense the loss suffered by individual consumers. However, that was an extreme case and this judgment of the Court of Appeal shows an intention of the English courts to ensure that claimants have an effective means of redress in relation to competition law claims, as required under EU law.
This judgment will, no doubt, help to cement the English court’s position as a preferred jurisdiction in which to bring competition law claims. However, given the complexity of some of the issues and their arguable public importance, the defendants may well be granted permission to appeal to the Supreme Court.