Follow-on competition law litigation in Denmark – Cheminova vs. Akzo Nobel

by Martin André Dittmer, Sam MacMahon Baldwin and Søren Elmstrøm Sørensen, Gorrissen Federspiel

In recent years, there has been considerable focus on private antitrust litigation based on a prior infringement decision by either the European Commission or a national competition authority – known as follow-on litigation. In January 2015, the Danish Maritime and Commercial Court awarded damages to Danish Cheminova A/S in a follow-on action against Akzo Nobel.

Cartelists and others who act in breach of competition law are increasingly sued in private antitrust proceedings by companies who claim to have suffered a loss as a result of the anti-competitive behaviour. If such proceedings are initiated after a prior infringement decision has been rendered by a relevant competition authority the proceedings are commonly referred to as follow-on litigation. In January 2015, the Danish Maritime and Commercial Court rendered a decision in favour of the Danish company, Cheminova A/S (“Cheminova”), in a follow-on action against the Dutch company Akzo Nobel. The case is one of few court cases from Denmark concerning actions for damages for breach of competition law. However, the judgment may well increase potential victims’ appetite for suing competition law offenders on the back of infringement decisions from the European Comission or the Danish Competition Council. Also in light of the recently adopted Directive 2014/104/EU on actions for damages for competition law infringements which seeks to make it easier for companies and individuals to claim damages from companies not playing by the rules.

The background of the case against Akzo Nobel

In 2005 the European Commission fined six Akzo Nobel companies together with the companies EKA Chemicals AB, Atofina SA (now Arkema SA), Elf Aquitaine SA, Hoechst AG, Clariant GmbH and Clariant AG for their participation in a European market-sharing and price-fixing cartel for MCAA chemicals (Monochloroacetic acid) which lasted between 1984 and 1999.[1] Akzo Nobel was in total fined EUR 84.38 million by the European Commission for its participation in the cartel.

The Danish company, Cheminova, which produces crop protection products, had bought MCAA-mixture, Azonol, from Akzo Nobel during the cartel period for which Akzo Nobel was fined. In the view of Cheminova, Akzo Nobel overcharged Cheminova for such products due to the cartel, and accordingly Cheminova had suffered a loss for which Akzo Nobel was liable. Cheminova therefore initiated proceedings in Denmark before the Danish Maritime and Commercial Court with a claim for damages against Akzo Nobel.

Prior to the proceedings in Denmark Akzo Nobel had settled the case with some of its American customers by paying 20% of their purchases in damages.

The legal basis for bringing an action for damages under Danish law

Under Danish law claims for damages for competition law infringements are not governed by the Danish Competition Act but are subject to non-statutory torts law. Danish torts law provides that it is for the injured party to put forward and substantiate his case – in particular the basis for liability and the monetary loss sustained as consequence of the wrongdoing. Therefore, it generally falls upon the claimant to demonstrate causality between the wrongdoing and the loss suffered as well as foresee-ability.

During the proceedings before the Maritime and Commercial Court Akzo Nobel only disputed that Cheminova had suffered a loss – i.e. the issue of quantum. Akzo Nobel admitted the basis of liability, causality and foreseeability. Consequently, it was ’only’ for Cheminova to prove that they had suffered a loss and not least the size of such a loss.

Whether there was on overcharge

In order to verify whether Cheminova had suffered a loss – and the potential size of such loss – the parties submitted various economic models to the court. These models were heavily debated during the case by the parties and an expert economist was appointed by the court to assess the applicability and viability of the models.

A rather important issue for Cheminova was to persuade the court of a model which could demonstrate and measure Akzo Nobel’s actual contribution margin during the cartel period derived from the sale of Azonol and Akzo Nobel’s contribution margin if the cartel had not existed, i.e. the counterfactual scenario. Such a model would enable Cheminova to prove the amount which Cheminova had been overcharged by Akzo Nobel for Azonol. Based primarily on the expert report, Cheminova succeeded in persuading the court of accepting such a model – and that Akzo Nobel had received a higher contribution margin than would have been the case in the absence of the cartel. The court applied his model as a starting point when measuring the damages.

Whether the overcharge was passed on

During the case Akzo Nobel argued that even if it had overcharged Cheminova during the cartel period, Cheminova in any case had passed this higher price on to its customers and accordingly Cheminova had not suffered a loss. Akzo Nobel partly succeeded on this argument and Cheminova’s claim for damages was reduced with a certain percentage.

However, Cheminova argued successfully that the amount of damages should be adjusted in favour of Cheminova due to the fact that Cheminova had lost revenue since it sold products at a higher price to its customers – known as the ‘volume effect’.

Akzo Nobel then submitted that if Akzo Nobel was liable to Cheminova, the amount of damages should be adjusted for saved tax. The rationale was that the tax rate for companies was higher during the period where Akzo Nobel had overcharged Cheminova than the current tax rate. According to Akzo Nobel this would entail that Cheminova would be overcompensated – if the amount of damages was not adjusted – since Cheminova would only have to pay tax of the awarded damages based on the actual and lower tax rate. This argument was, however, rejected by the court.

In a split decision (3 against 2) the court finally ordered Cheminova damages in the amount of approximately EUR 1.4 million for the period 1986 to 2000. A dissenting minority of 2 judges favoured damages of approximately EUR 1.3 million.

Tendency towards more follow-on litigation

The Cheminova/Akzo case illustrates that it is not impossible to succeed in a claim for damages for breach of competition law and certainly the increasing focus on follow-on litigation – not least at EU-level – means that even more cases should be expected in the future. Therefore, companies have to take into account when assessing their conduct in light of competition law that they might end up in private antitrust proceedings and at the end of the day will have to pay damages to their customers or even worse their competitors.

Denmark has not yet implemented Directive 2014/104/EU on antitrust damages actions. The Directive must be implemented latest December 2016.

[1] Case No COMP/E-1/.37.773 – MCAA.

Martin André Dittmer

Martin André Dittmer

Head of EU & Competition law at Gorrissen Federspiel

Email: [email protected]
Tel: +45 33 41 41 41

Martin André Dittmer has extensive practical experience within competition law including antitrust litigation. Martin André Dittmer handles merger applications to the Commission and Danish competition authorities, advice of clients on horizontal and vertical agreements under article 101 (including cartels), matters of abuse under article 102 and all types of problems within Danish competition law. Furthermore, Martin André Dittmer advises both contracting entities and tenderers in relation to public procurement issues.

Sam MacMahon Baldwin

Sam MacMahon Baldwin

Associate Attorney at Gorrissen Federspiel

Email: [email protected]
Tel: +45 33 41 41 41

Sam MacMahon Baldwin has experience within all areas of competition law including anti-competitive agreements, abuse of dominance, merger control, and state aid. Sam has experience in handling cases before the EU Courts, state aid cases with the European Commission, and cases before the Danish competition authorities. Sam also has litigation experience before the Danish courts. In addition, Sam handles matters on public procurement as well as matters concerning state-owned and privileged companies and undertakings.

Søren Elmstrøm Sørensen

Søren Elmstrøm Sørensen

Assistant Attorney at Gorrissen Federspiel

Email: [email protected]
Tel: +45 33 41 41 41

Søren Elmstrøm Sørensen is assistant attorney in Gorrissen Federspiel’s EU & Competition law practice group. Søren Elmstrøm Sørensen works within all areas of competition law including anti-competitive agreements, abuse of dominance and merger control.

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About Martin André Dittmer

Email: [email protected]
Tel: +45 33 41 41 41
Martin André Dittmer has extensive practical experience within competition law including antitrust litigation. Martin André Dittmer handles merger applications to the Commission and Danish competition authorities, advice of clients on horizontal and vertical agreements under article 101 (including cartels), matters of abuse under article 102 and all types of problems within Danish competition law. Furthermore, Martin André Dittmer advises both contracting entities and tenderers in relation to public procurement issues.