Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
The pass-on defence is recognised under Belgian law. As such, the defendant in an action for damages may rely on the fact that the claimant has passed on, in full or in part, the additional costs caused by the infringement of competition law, as a defence against a claim for damages. Although this defence already results from general Belgian tort law and is therefore not specific to competition damages cases, specific legal provisions reaffirm it explicitly for this type of cases.
In general, Belgian law provides that the claimant bears the burden of proof and must demonstrate both the reality and the extent of his claim. As such, the claimant would in principle have to prove that damage was not passed on. Similarly, where an indirect purchaser alleges that it has a claim because the damage was passed on to it, that indirect purchaser will have to prove that damage was indeed passed on.
However, Articles XVII.83 to XVII.89 CEL implemented the Damages Directive 2014/104/EU and introduced a system of double presumption aimed at encouraging actions for damages by both direct and indirect purchasers. Indeed, when the action is brought by a direct purchaser, it is for the defendants to prove that the additional cost has been passed on. Conversely, if the action is brought by an indirect purchaser, the latter bears the burden of proof of the passing on of the damage, but is deemed to have provided this proof when he has demonstrated the infringement, the damage for the direct purchaser, and its own purchase of goods or services concerned by the infringement. This is a rebuttable presumption, since the defendant can still demonstrate that the damage was not passed on to the indirect buyer.
A second defence that is specific to competition damages claims is available to certain SMEs or recipients of immunity from fines, against claims that are brought against them and other infringers for joint and several liability. This defence enables them to limit their exposure to the losses suffered by their direct or indirect customers or suppliers (see above, question 4).
Legislation does not provide for any limitation concerning which defences can be raised in a private action. Therefore, in theory the parties are free to submit any allegations they choose to eliminate liability, including a “passing-on” defence.
As a rule, the burden of proof is born by the Claimant. The claimant must prove the facts that support the claim - which includes providing sufficient evidence supporting (i) the existence of an anticompetitive conduct, (ii) that resulted in specific damages (iii) suffered by the claimant. The defendant, by its turn, must prove the facts that impede, modify or extinguish the claimant's claim, as raised. However, considering the particular needs of a specific case – and particularly the access of parties to evidence –, the Court may shift the burden of proof completely or partially to the defendant.
The AML and relevant regulations or judicial interpretations do not mention any unique defences for competition damages actions. According to Art. 1 of the SPC AML Interpretation, both direct purchasers (e.g., dealers) and indirect purchasers (e.g., consumers) who have suffered loss due to monopolistic practice would have standing to bring a civil lawsuit. Therefore, it seems that the passing-on defence may also be applicable in this regard.
The “passing on” defence exists whereby the defendant in an action for damages can invoke as a defence against a claim for damages the fact that the claimant passed on the whole or part of the overcharge resulting from the infringement of competition law. The burden of proving that the overcharge was passed on shall be on the defendant, who may reasonably require disclosure from the claimant or from third parties.
Since competition damages cases are subject to the general provisions under ECC, the person who claims damages has the burden to prove his case as to fault, harm and causal link, failing which may result in her/his claims being inadmissible.
The defendant however, has all possible means to defend her/himself. This include economic analysis and business regulations affecting the activities of the defendant. In theory, Pass-on defence may be accepted by courts however, in practice there is no precedence in courts that this defence has been used.
Aside from the traditional defences available to defendants in all civil cases (e.g. lack of standing, time limitations, lack of causal link between the competition law infringement and the alleged damage, etc.), defendants in competition damages cases may plead that the claimant passed on the whole or part of the alleged overcharge resulting from the infringement of competition law (pass-on defence).
Depending on when the infringement of competition rules occurred, the burden of proof of the pass-on lies either on the claimant or the defendant. In fact, the new provision introduced into French law as part of the implementation of the Damages Directive (article L. 481-4 FCC) reversed the burden of proof of the pass-on:
- For all claims based on infringements of competition law that occurred prior to the entry into force of article L. 481-4 FCC (i.e. prior to 11 March 2017), it is for the claimant to prove that it has not passed on the overcharge (see Cour de cassation, Commercial chamber, judgment of 15 June 2010, Ajinomoto Eurolysine, No. 09-15816);
- For all claims based on infringements of competition law that occurred after the entry into force of article L. 481-4 FCC (i.e. after 11 March 2017), the burden of proving the pass-on lies on the defendant.
It remains to be seen whether French courts will change their approach and decide to apply the presumption to current cases. Indeed, application of the Ajinomoto Eurolysine principle even to infringements of competition law that occurred prior to 11 March 2017 would raise the question of compliance with the EU principle of effectiveness even if article L. 481 4 FCC is not yet applicable. Indeed, one of the main stated objectives of the Damages Directive is to facilitate compensation of victims of infringements of competition law and it could be argued that the current approach adopted by French courts is too severe on claimants.
Furthermore, for claims based on infringements of competition law that occurred after 11 March 2017, indirect purchasers alleging that an overcharge was passed on to them are deemed to have proven this passed-on overcharge if they establish that:
- The defendant committed an infringement of competition law falling within the scope of article L. 481-1 of the FCC (see above the answer to Question 1);
- The infringement of competition law resulted in an overcharge for the defendant’s direct purchaser;
- The indirect purchaser has purchased the goods or services that were the object of the infringement of competition law or has purchased goods or services derived from or containing them (article L. 481-5 FCC).
On 1 July 2019, the Commission published the final version of its Guidelines for national courts on how to estimate the share of overcharge which was passed on to the indirect purchaser. These guidelines are meant to provide practical guidance to national courts on the relevant parameters that can be taken into account when dealing with economic evidence (provided in particular by economic experts) for assessing the passing-on of overcharges, including the relevant economic theory and methods for the purpose of quantifying the passing-on effects.
Under German law, the alleged cartel members may invoke the passing-on defence, ie argue that the claimant is not entitled to damages insofar as the cartel overcharge was passed on to its customers. The BGH allowed for the passing-on defence in its ORWI decision (decision of 28 June 2011, case ref KZR 75/10, para 55 et seq (juris)) under general principles of German law on damages, namely the setting-off of benefits (Vorteils¬aus-gleichung). The defence is now codified in section 33c GWB.
For claims that have arisen until 26 December 2016, the BGH held in its ORWI decision that the defendants bear the burden of proof for the defence. Whether or not surcharges were actually passed on depends on a number of factors, including the type of costs, the competitiveness of the market, the elasticity of demand and the market coverage of the cartel. In addition, the cartel members need to show that the claimant, when passing on surcharges, did not suffer a decrease in demand, which set off any benefits received through higher prices charged to the indirect customers (volume effects).
Given that the relevant facts to determine the extent of pass-on are usually inaccessible for the defendants, it would be hardly possible for the defendants to ever meet the burden of proof. However, as the BGH underlined it its OWRI decision, the defendants can usually not rely on a special procedural instrument - the so-called ‘secondary burden of allegation’ (sekundäre Darlegungslast) - in cartel damage cases in order to force claimants to disclose the relevant information. According to the BGH, placing a secondary burden of proof on the claimant requires a comprehensive assessment of necessity and reasonableness. There is regularly no need to grant the defendant such a special right to disclosure because the indirect purchasers will also have to prove the extent of pass-on if they decide to sue the defendant, and thus the relevant information is made available to the defendant. If the indirect purchasers decide to refrain from bringing a claim, the defendant cannot complain that he is being held liable to the full extent by the direct purchaser. In addition, a defendant can resort to third-party notices (Streitverkündungen) to avoid being held liable twice for the same damage by indirect and direct purchasers. Only if the defendant is unable to do so, the court could consider carefully to allow him to rely on a secondary burden of allegation (in particular including whether the injured party can be required to disclose circumstances that have an impact on competition and that are covered by a particular interest of confidentiality).
For claims that have arisen after 26 December 2016 (current law), section 33c GWB now contains particular rules on pass-on, clarifying that damage of the direct customer is not excluded per se if the cartel affected goods were resold. Yet, unlike the previous legal situation, section 33c para 2 GWB provides for a presumption in favour of indirect customers: it is presumed that cartel surcharges were passed on to the indirect customer if (i) there is a cartel infringement within the meaning of section 1 or 19 GWB or Article 101 or 102 TFEU, (ii) the infringement caused a price increase for the direct customer and (iii) the indirect customer has acquired goods or services that were affected by the cartel infringement, either directly or as products made from or containing cartel affected goods or services. However, this presumption may be rebutted pursuant to section 33g para 3 GWB if the respective party can credibly show that the surcharges were not or at least not completely passed on to the indirect customer. In addition, the parties can make use of the information and disclosure claims stipulated in section 33g para 2 GWB to gather information needed to defend themselves with the passing-on defence (defendant) or rebut the presumption (claimant) respectively.
No unique defences are provided for competition damages cases under the Competition Ordinance. As at the time of writing, there are no competition damages cases in Hong Kong. However, given that the Competition Tribunal has considered overseas cases (particularly EU case law) to be of considerable reference value to public competition law enforcement cases in Hong Kong, it is expected that the Competition Tribunal would also draw reference from analogous principles in overseas competition damages cases, including a “passing on” defence. However, the extent to which such defences will apply in Hong Kong competition damages cases remains to be seen.
As at the time of writing, there are no competition damages cases in Hong Kong. However, proceedings before the Competition Tribunal generally follow the same principles in civil proceedings in Hong Kong. As such, the party who commences a claim would bear a general burden of proof to establish its claim. The opposing party who raises a defence would in turn bear the burden of proof in establishing its defence.
As competition damages cases are considered as civil claims in Hong Kong, the standard of proof is expected to be the civil standard, i.e. balance of possibilities.
A defendant in a tort claim based on violation of the Competition Law can withstand several defence claims. Inter-alia, the defendant may claim to apply a type exemption under which he acted; the defendant may claim that the claim was filed in bad faith; or a pass on defence.
Recent case law in Israel indicates that the courts are allowing indirect purchasers to claim damages for violation of the Competition Law and recent attempts of defendants to claim that the suit could not be brought by indirect purchasers were rejected.
Regarding the pass-on claim, there is no binding precedent in Israel regarding the defendant's ability to raise a pass-on defence against claims brought by direct purchasers. In the only relevant case in which the Supreme Court referred to the passing-on defence, its position was sympathetic to the claim, but the suit was dismissed on other grounds, so the court did not have to decide on the matter.
Another possible defence which is available to a defendant in Competition Law cases is the defence of an antitrust injury. According to this claim, an antitrust injury only occurs if the damage caused to the plaintiff is the damage that the antitrust laws were intended to prevent, while in other cases such a plaintiff cannot bring action for violation of the competition Law.
The concept of passing-on defence per se has not been introduced into Japanese competition law. However, if a defendant (cartelist) is successful in proving the fact that some or all of the overcharges were passed on to down-stream companies or consumers, the defendant may argue that the amount of damages should be reduced accordingly.
In addition, in the cases of bid-rigging at the initiative of public officers, the court allows the amount of damages to be reduced by taking into account the negligence of the public officers (contributory negligence, Article 722 of the Civil Code).
Defendants in competition damages cases may argue that the injured party has passed on its damage downstream (to its customers) and thus did not suffer any damage. This is codified in article 6:193p DCC after the implementation of the Cartel Damages Act. The burden of proof that passing-on of the overcharge occurred is borne by the defendant. Under the second sentence of article 13 of Directive 2014/104/EU, the infringer may also reasonably require the claimant and third parties to provide access to the evidence, which possibility also exists under article 843a of the DCCP.
The following defences may be invoked against competition damages claims:
(a) Leniency. Under Section 35 of the PCA, the PCC may grant leniency to former or current cartel participants, in exchange for voluntary disclosure of information regarding the cartel. Leniency can be in the form of immunity from suit (which covers immunity from criminal and administrative liability under the PCA and from civil actions for damages) or reduction of administrative fines.
(b) Prescription. Under Section 46 of the PCA, a civil action for damages must be filed within five years from the time the cause of action accrues, i.e., when the PCC has completed its preliminary inquiry on the violation of the PCA that would be subject of the civil action.
The burden of proving the existence of a defence is on the person invoking the same. Considering that enforcement of Philippine competition law is still in the nascent stage, Philippine case law has not provided any further guidance on defences that may be unique to competition damages cases (such as pass on defences) or how these will be applied and appreciated.
 - Rules of the Leniency Program of the Philippine Competition Commission ("Leniency Rules"), Section 3
 - Leniency Rules, Section 1.
 - Leniency Rules, Section 4
 - PCA, Section 45.
A defendant has right to use pass on defence and claim that any damage inflicted by the claimant was in fact recouped by the claimant in the form of overcharge borne by their customers. At the same time, the Polish Private Enforcement Act provides for statutory pass on presumption based on which any competition law infringement resulting in an overcharge for a direct purchaser from the infringer of competition law is presumed to be passed on to the indirect purchaser who bought the products from the direct purchaser. However, this rebuttable presumption cannot be relied on by the defendants. The presumption is rebuttable and subject to prior proof of competition law infringement. As a proof the party may present a decision of a competition authority (i.e., the OCCP, the European Commission or a competition authority of the EU Member State) or by a court’s judgment.
Specific defences that limit the liability of a defendant apply to SMEs and leniency recipients.
The general rule in Polish civil court proceedings is that the burden of proof relating to a fact shall rest on the person who attributes the legal effects to that fact, except in the case of rebuttable presumptions (e.g., in cases of contractual liability, fault is presumed), where the reversed burden of proof is on the defendant.
Law 23/2018 provides for a unique “pass on” mechanism for competition damages claims, consisting in the possibility for the defendant to invoke that the claimant has passed on (partially or totally) any additional costs that resulted from the competition law infringement downstream in the production or distribution chain, in which case the burden of proof lies with the defendant.
In addition, indirect customers may also claim damages based on the repercussion of additional costs resulting from competition law infringements. The burden of proof lays with the indirect customer, although there is a presumption that additional costs are passed on when the indirect customer shows that: (a) the defendant has committed an infringement of competition law; (b) this infringement had an additional cost for the direct customer of the entity involved in the infringement; and (c) that the indirect customer acquired goods or the services affected by the infringement, or goods or services derived from the goods or services affected by the infringement.
Defendants can argue that a claimant is not entitled to claim under the proceeding, as it has passed on the overcharge to indirect purchasers and therefore suffered no loss. This defence must be invoked when replying to the claim.
Burden of proof principle, which states that every party that alleges a fact as a cause for the claim has to prove that fact, is applicable.
There are no precedents so far on passing on defences.
When quantifying damages, the passing-on defence is available in principle. Swedish law only recognises a right to compensation for actual damage. Thus, the compensation should be reduced by an amount equivalent to any overcharge the injured party has passed on to its buyers or any undercharge the injured party has passed on to its suppliers. It is the defendant who has the burden of proof to show that the overcharge has been passed on. An earlier judgment from a Swedish or foreign court addressing the passing-on question will be given evidentiary effect in a case before a Swedish court.
In relation to indirect buyers or suppliers, the Competition Damages Act provides a rule corresponding to Article 14 of the Damages Directive, stating that when calculating the compensation, an overcharge (or a surcharge) will, unless otherwise proven, be considered to have been passed on to an indirect buyer (or supplier) if the infringement caused an overcharge (surcharge) for the direct buyer (or supplier). Thus, an indirect buyer is only required to prove that the defendant has infringed competition law provisions, that the infringement has led to an overcharge, and that the indirect buyer has purchased the goods or services covered by the infringement or goods and services that include goods and services covered by the infringement.
There are no specific regulations that set forth defences that are unique to competition damages cases. One could argue that defences such as passing-on might be raised before the courts, but the courts and the Court of Cassation's precedents have not yet provided insight on this front.
In case of a passing on defense, where the plaintiff has already established the existence of an overcharge as a result of cartel conduct, the defendant would bear the burden of proving that the plaintiff passed on the overcharge to other parties and thereby mitigated its losses.
Individuals have a defence to competition damages claims where they act honestly and reasonably and ought fairly to be excused from liability having regard to all the circumstances of the case. There is no similar defence for bodies corporate.
It has yet to be determined authoritatively whether a defendant who is facing a loss and damages claim under section 82 has a defence if it is shown that the claimant has passed on all additional costs occasioned by the contravention of the CCA. Given the Australian High Court's approach to statutory construction, 'pass on' may, in effect, be a defence to liability in a private damages claim to the extent that a defendant can show that the claimant suffered no loss as a result of the contravening conduct. If the defendant cannot do so, amounts which it can demonstrate were 'passed on' may be treated as a matter reducing the loss or damage that can be claimed by the claimant, rather than a defence to liability.
The defendant bears the burden of proof of establishing any defence.
Defendants in competition and other class actions cannot use the defence of passing-on. The Supreme Court of Canada has held that the passing-on defence is contrary to basic principles of restitution, and that any risk of double recovery in hybrid actions brought by direct and indirect purchasers can be managed by the courts.
Section 45(7) of the Act allows defendants to use the regulated conduct defence. In Hughes v Liquor Control Board of Ontario, 2019 ONCA 305, the Ontario Court of Appeal found that the regulated conduct defence is available if the legislation governing the industry in question, in this case the Liquor Control Act, expressly or by necessary implication directs or authorizes the defendant to engage in the impugned conduct.
Section 45(4) of the Act also allows defendants to use the defence of ancillary restraint. This defence provides that a defendant shall not be convicted for an agreement or arrangement that would contravene section 45, the conspiracy offense, if it is ancillary and necessary to give effect to other agreements or arrangements that are not anti-competitive. However, the case law has not commented on the application of section 45(4) in the private action context.
The rules on the burden of proof are the same as any other civil proceedings: the burden lies with the claimant who shall prove the facts on which its claim is grounded whereas the defendant shall provide evidence supporting its objections and/or counterclaims.
The passing-on defence is used in this kind of claims and there are a few court’s decision on this specific objection (especially by the Court of Milan).
The defendant in a competition damages claim can raise the pass on defence (i.e., the fact that the plaintiff passed the alleged overcharge resulting from the infringement in whole or in part to its own direct or indirect customers). The burden of proof rests with the defendant, who may reasonably request disclosure of evidence from the plaintiff or third parties to this effect.
The rule is further adapted for indirect customers. Where the existence/ quantum of a claim depends on whether/ to what extent an overcharge was passed on to the plaintiff (i.e., an indirect customer) – given the economic theory that price increases are passed on down the supply chain – the burden of proof of such passing-on rests with the plaintiff, who may reasonably require disclosure of evidence from the defendant or from third parties.
However, passing-on shall be deemed proven by the indirect customer if the latter proves that:
(i) the defendant has committed an infringement of competition law;
(ii) the infringement of competition law has resulted in an overcharge for the direct purchaser of the defendant; and
(iii) the indirect purchaser has purchased the goods or services that were the object of the infringement of competition law or has purchased goods or services derived from or containing them.
This above is inapplicable if the defendant can prove that the overcharge was not (fully or partially) passed on to the indirect purchaser.
The pass-on defence is often raised by defendants in competition damages cases and is a key feature of such actions. The defence was recently considered by the Court of Appeal in Sainsbury’s Supermarkets Limited and Ors v Mastercard Inc. and Ors  EWCA (Civ) which held that the burden of proof is on the defendant to show that the claimant has passed on any unlawful overcharge. In particular, the Court held that a defendant must show that there is a sufficiently close causal connection between the overcharge and an increase in price. This will be a matter for the court or CAT to decide on the evidence before it in each case, and there is ‘no reason why that increase should not be established by a combination of empirical fact and economic opinion evidence’.
The implementation of the Damages Directive has also clarified that (for claims where the infringement started on or after the Implementation Date) a defendant seeking to rely on the defence has the burden of proving the existence and extent of the pass-on. Where the existence of the claim depends on the overcharge having been passed-on, the burden lies with the claimant (but there is a rebuttable presumption that the overcharge has been passed-on to indirect purchasers).
For both individual and collective actions, there are no specific defences that are unique to competition damages cases, beside the precedent of prior decisions. The Colombian regulation includes an efficiency defense that is only applicable to administrative investigations undertaken by the competition authority and according to which, if there is a conduct that despite producing anti-competitive effects, it has more efficiencies on the market and pro-competitive effects, it will not give rise to any sanction.
Furthermore, regarding the burden of proof, for both actions any judge will apply the rule of probable cause. Under this rule, the plaintiff shall demonstrate all the elements of the liability including the damaging event, the damage, the liability attribution factor and the cause.
In a competition damages claim, the following affirmative defenses may be available to the defendants:
- No actual injury to plaintiff, in which the defendant argues that even if all of the claims against him are true, the plaintiff suffered no damages;
- Statute of limitations;
- Speculative damages, in which a plaintiff seeking to recover damages cannot definitively ascertain an amount in lost profits or economic harm. Andrx Pharmaceuticals, Inc v Biovail Corp International, 256 F3d 799, 815 [DC Cir 2001];
- The defendant’s conduct was not the material cause of the plaintiff’s actual or threatened injury. El Aguila Food Products v Gruma Corp, 131 F. App’x 450, 453 [5th Cir 2005]. ‘The required causal link must be proved as a matter of fact and with a fair degree of certainty,’ Alabama v Blue Bird Body Co, 573 F2d 309, 317 [5th Cir 1978];
- Failure to mitigate damages, in which a damages award is reduced when the plaintiff takes no action to avoid or reduce its damages. Litton Systems v AT&T Corp, 700 F2d 785, 820 [2d Cir 1983];
- Plaintiffs cannot seek punitive damages. Brown v Presbyterian Healthcare Services, 101 F3d 1324, 1332 [10th Cir 1983]; ‘Punitive damages beyond the statutory trebled damages cannot be awarded for an antitrust violation. The enhancement of damages in an antitrust case is the damages trebled.’ McDonald v Johnson & Johnson, 722 F2d 1370, 1381 [8th Cir 1983];
Additional affirmative defenses unique to private antitrust claims include:
- Legitimate business justifications. Mozart Co v Mercedes-Benz of North America, Inc, 833 F2d 1342 [9th Cir 1987]. The Supreme Court has recognised that antirust defendants may show a business justification for an otherwise per se illegal arrangement. Id. at 1349. This requires a showing that no less restrictive alternative is available. Id.
- Unclean Hands Doctrine, in which a plaintiff is not entitled to damages due to the plaintiff’s own illegal or unethical behavior. Doe v Deer Mountain Day Camp, Inc, 682 F Supp 2d 324 [SDNY 2010].
- Lack of antitrust standing. In order to establish antitrust standing, a plaintiff must prove:
a. That the plaintiff suffered antitrust injury. This means an antitrust violation caused injury to the antitrust plaintiff. State of Alabama v Blue Bird Body Co, 573 F2d 309, 317 [5th Cir 1978];
b. That the plaintiff’s injury is not too remote. An injury must be direct for a plaintiff to have standing under § 4 of the Clayton Act. Blue Shield of Virginia v McCready, 457 US 465 ;
c. That the plaintiff is not an indirect purchaser. In Illinois Brick Co v Illinois, 431 US 720 , the Supreme Court held that a plaintiff must be a direct purchaser in order to have standing to sue for damages under § 4 of the Clayton Act. 431 US at 720.
Federal antitrust law does not provide for a pass-on defense following Illinois Brick, however, the defense may still be invoked in certain state law antitrust actions in which indirect purchasers are allowed to recover damages.
Affirmative defenses require a showing of facts beyond those claimed by the plaintiff, as the party who asserts an affirmative defense bears the burden of proof.