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Article: The English Court of Appeal Decision in Toshiba Carrier May Lead to More Private Antitrust Actions in England

December 01, 2012
Business Litigation Reports


A recent decision by the English Court of Appeal may lead to more private antitrust actions in England. This decision confirms that English courts have broad jurisdiction to maintain antitrust actions against UK defendants who are not addressees of European Commission (EC) cartel decisions. It also confirms that such UK defendants can be “anchor defendants” that establish jurisdiction over non-UK defendants who are associated with cartels.

The Use of “Anchor Defendants” in Antitrust Actions
In Europe, private antitrust claims are often brought against a defendant who was an addressee of an EC cartel decision. These “follow on” claims generally must be brought in the country where the defendant is domiciled. However, when multiple defendants are addressees of the EC cartel decision, claims may be brought in any country where one of the defendants is domiciled so long as the claims are sufficiently connected.

English courts have gone even further and established jurisdiction when private antitrust claims were brought against UK-domiciled subsidiaries of companies who were addressees of the EC’s cartel decision, even though the UK-domiciled subsidiaries were not subject to the EC decision. These UK-domiciled subsidiaries are often referred to as “anchor defendants.”

Toshiba Carrier Expands the Use of Anchor Defendants
The European Commission Action: In December 2003, the EC found three companies violated Article 81(1) of the EC Treaty for participating in a price-fixing and market-sharing cartel in the industrial copper tubes sector. The Commission found the three non-UK companies—Outokumpu Oyj of Finland, Wieland-Werke AG of Germany, and the KM Europa Metal group (KME Group) of Germany—liable for operating a secret cartel between May 1988 and March 2001 in the copper tube market. The three companies appealed the EC’s decision and their appeals were dismissed in May 2009.

The “Follow On” Action: In December 2009, Toshiba Carrier UK Limited and various associated companies (the claimants) brought a damages action before the High Court in England. These companies each bought substantial quantities of copper tubes, or goods incorporating such tubes, during the period of the cartel. They sought damages resulting from the infringements established in the EC’s decision.

The damages action was brought against three companies domiciled in the UK, including KME Yorkshire Limited, who were not named in the EC’s decision (the UK Defendants). The damages action was also brought against several companies who were the addressees of the EC’s decision but who were not domiciled in the UK (the non-UK Defendants). The UK Defendants sought orders striking out the claim against them on the ground that there was no reasonable ground for bringing it or alternatively summarily dismissing the claim on the ground that no claimant had a real prospect of succeeding on the claim against them.

In October 2011, the High Court denied the UK Defendants’ requests. The High Court found that the claimants’ pleadings sufficiently alleged that each of the UK Defendants was part of the undertaking and engaged in the same economic activity as the non-UK Defendants. The High Court also found that the pleadings sufficiently alleged that the activity undertaken by the non-UK Defendants infringed Article 101 of the TFEU and the UK Defendants implemented the unlawful arrangements. The non-UK Defendants also sought an order declaring that the courts of England and Wales did not have jurisdiction to try the claims against them, but that too was dismissed. The defendants appealed this decision to the Court of Appeal.

The Court of Appeal Decision: In September 2012, the English Court of Appeal affirmed the High Court’s decision. KME Yorkshire Ltd and others v. Toshiba Carrier UK Ltd and others [2012] EWCA Civ 1190. The Court of Appeal found that the claimants’ pleadings sufficiently alleged that the UK-domiciled subsidiary had participated in, and implemented, the cartel arrangements, with knowledge of the cartel agreement.

The main issue before the Court of Appeal was whether the High Court should have dismissed the action against the only remaining UK Defendant, KME Yorkshire Limited (KME UK). If the claim against KME UK was not dismissed, the parties agreed that the High Court would have jurisdiction over the non-UK defendants.

KME UK argued that an essential element of conduct that infringes Article 101 is a meeting of minds or concurrence of wills between rival parties to conduct themselves on the market in a specific way that gives rise to an unlawful agreement. On this basis, implementation of an unlawful anti-competitive agreement reached between others is not enough, even if the implementation is with knowledge of the agreement. KME UK claimed that the claimants’ pleadings did not contain an allegation against KME UK of that essential element.

The Court of Appeal did not accept KME UK’s arguments. The court noted that well-established case law holds that “concerted practices” which fall short of a complete agreement can constitute infringement of Article 101. Case 48-69 ICI v. Commission [1972] ECR 619. Further, even indirect and isolated instances of contact between competitors may be sufficient to infringe Article 101, if their object is to promote artificial conditions of competition in the market. Case C-49/92 P Commission v. Anic Partecipazioni SpA. [1999] ECR I-4125. The court also found that acts of implementation alone were capable of amounting to concerted practices where they are carried out pursuant to an anti-competitive agreement made between others and with knowledge of that agreement.

Under this legal backdrop, the Court of Appeal found that it was “perfectly clear” that the claimants’ allegations provided sufficient grounds for a cause of action against KME UK for infringement of Article 101 and a corresponding breach of statutory duty. The court also found that there were clear allegations of unlawful conduct by KME UK, including that it refrained from selling or offering certain products to customers to allow other members of the cartel to secure the business and/or that it exchanged confidential information with competitors in order to monitor and implement the cartel arrangements. These allegations presupposed knowledge of, and an intention to implement, the cartel agreement and concerted practices described in the Commission’s decision. They also amounted to a stand-alone claim for conducting concerted practices contrary to Article 101.

The Court of Appeal was also satisfied that KME UK’s knowledge was sufficiently pleaded to constitute a valid allegation of infringement of Article 101 by KME UK. In the particular circumstances of the present case, these allegations were sufficient to survive the defendants’ application to dismiss the claim and for summary judgment. The Court of Appeal also noted that anti-competitive cartels are by their very nature “shrouded in secrecy,” and therefore it is difficult until after disclosure to assess the strength of an allegation that a defendant was a party to or aware of anti-competitive conduct by members of the same corporate group.

This decision is a significant development likely to expand the ability of claimants to bring actions against UK defendants—as “anchor defendants”—and against non-UK defendants (addressees of cartel decisions) in the High Court. The Court of Appeal’s willingness to allow the Toshiba Carrier action to proceed will provide antitrust claimants with a higher degree of confidence that their claims will survive an early application to strike out or summary judgment and therefore encourage the filing of more private antitrust damages actions in England.