Case Notes
| DOI | 10.1177/1023263X1402100305 |
| Date | 01 September 2014 |
| Published date | 01 September 2014 |
| Subject Matter | Case Notes |
464 21 MJ 3 (2014)
CASE NOTES
UMBRELLA PRICING AS A SWORD
Case C-557/12 Kone AG and Others v. ÖBB Infrastruktur AG, Judgment of 5June 2014
G M*
§1. IN T RODUC T IO N
In the eld of competition law, national legal systems in the EU are faci ng what, in
militar y terms, might be descr ibed as a pincer movement. One early user of thi s tactic
was Hannibal i n the Battle of Cannae, during t he second Punic War: he manoeuvred his
troops on both sides of the larger Roman a rmy and prevailed by attack ing on all sides
while the Romans pushed for ward.1 Similarly, national tor t systems are faced wit h an
assault on all anks: the Council ’s Damages Directive on one side,2 and the Cour t of
Justice’s (CJEU) preliminary rul ings on the other, which incrementally desig n liability
rules. In Kone v. ÖBB-Infrastrukt ur, the Court of Justice pursue s this attack relentlessly.3
§2. UMBRELLA PRICING: PROXIMATE LOSS
e claima nt had bought elevators from a rm that had not been par ty to a cartel in the
market for elevators which had been discovered and pun ished by the Commission and
the Austrian compe tition authorities. e claimant said that, as a resu lt of the cartel,
the rms from whom he had bought the goo ds had taken advantage of the ex istence
of the higher prices set by the c artel and themselve s raised prices. He clai med that the
four defendants (the members of the car tel) had caused this loss because, apar t from the
cartel price, the pr ice set by non-cartel members would have been lower.
ere is no doubti ng the economic logic of the claim. In the jargon, the c artel creates
a ‘price umbrella’. So long as competitors price at (or just a shade below) the cartel
* Professor of Compet ition Law, European University In stitute.
1 T. Li vius , e History of Rome Volume 3 (Translate d by G. Baker, Peter A. Mesier et a l., 1823), Book 22.
2 Proposal for a Direc tive of the European Parliament a nd of the Council on ce rtain ru les governing
actions for dama ges under nationa l law for infrin gements of the competit ion law provisions of the
Member States and of t he European Union, COM(2013) 404.
3 Case C-557/12 Kone AG and Others v. ÖBB Infrastruktur AG, Judg ment of 5June 2014.
Umbrella Pricing a s a Sword
21 MJ 3 (2014) 465
price, then they are g uaranteed ext ra pro ts without incur ring the wrat h of the cartel
members. Moreover, the relative stability of a car tel makes this a sustainable str ategy for
non-members. It is also undisputed that proving t hat the cartel had caused thi rd parties
to increase their prices mi ght be tricky; and t hat those who practise umbrel la pricing
are not themselves committing an antitrust o ence. However, the legal question for the
CJEU was whe ther, as a matter of EU law, this k ind of claim shou ld be entertained at all.
At the time, the ca se law of the Austrian courts took the v iew that these kinds of clai ms
were too remote.4
e CJ EU had no hes itati on in s ayi ng tha t the se cl aims could not be barr ed out rig ht.
A er reciting many of t he earlier dicta motivat ing the right to da mages for infringements
of competition law (namely that Article 101 TFEU creates rights for indiv iduals that
must be protected, that ‘any individual’ should be entitled to seek compensation for
harm caused by the ca rtel otherwi se the full e ectiveness of t he Article would be put
at risk; that clai ms by individual s strengthen the work ing of EU competition law by
adding to the deterrent e ects of public enforcement; and that national r ules must not
jeopardize t he e ective applic ation of the comp etition prohibit ions in the Treat y)5 it
added a novel justi cation: ‘the object ive pursued by Article 101 TFEU, which aims
to guarantee e ective and u ndistorted competition in t he internal market, and ,
accordingly, prices set on the basis of free competit ion’.6 It is self-evident why these
reasons militate in favour of cla ims for damages for economic losses, including vict ims
of umbrella pr icing.
At the same time, t he CJEU suggests two considerat ions that national court s
should bear in mind in decid ing if, on the facts of each case , the claimant may seek
compensation in the circumst ances of the case at hand: rst that the cartel wa s ‘liable to
have the e ect of u mbrella pricing being applie d by third par ties acting independently’
and second ‘that those circum stances and speci c aspects could not be ignored by the
members of that car tel’.7 It leaves for national cour ts to determi ne whether, on the fact s,
these were met.
§3. COMMENTS
A er outlining the practica l challenges in applying the tes t set out by the Court, I turn to
consider the style of reasoni ng that led the Court to its conclusions, so as to explore the
wider rami cations of the Court ’s approach to amending national tort laws .
4 Ibid., para. 14–15. e national court noted in par ticular that the prici ng decision of the non-cartel
members is independent of t he cartel and is possibly determ ined by a range of considerations other
than the pric es set by other rms. It also held that the c artel s eeks to i njure purch asers of it s goods, a nd
the loss caused by t hird-party ac tions is a side-e ect.
5 Case C-557/12 Kone AG and Others v. ÖBB Infrastruktu r AG, para. 20–26.
6 Ibid., para. 32 .
7 Ibid., para. 3 4.
Giorgio Monti
466 21 MJ 3 (2014)
A. PRACTICAL CHALLENGES
A court wil l now have to decide if umbrella pricing was likely to result and then consider
whether the defendants should have foreseen thi s. In this respect, the CJEU seems to be
more circumspect tha n certain passages of Advocate Genera l Kokott’s Opinion.8
When addressing the rst question (is umbrella pricing li kely) what evidence is
needed?9 A competitor who observes a price increase by a good number of the ot her rms
in the market has t wo choices: to follow the price increase, or to undercut it as a mea ns
of securing a higher ma rket share. How can one decide which choice is more likely? One
factor, which is hinted at in the Opinion of the Advocate Gener al, is the market power of
the members of the car tel vis-à-vis non-colluding competitors.10 Applying the ev idence
found in the judgment of the Cour t of Justice here, it seems that the par ties’ market power
was not so signi cant: the ca rtel had only cornered one third of the relevant market and
even within that subse t, only two thirds of the sales were made under c artel conditions.11
is suggest s that while the ca rtel was successfu l in some respects (in part icular the
market shares of the members of the ca rtel remained stable, as did prices),12 it does not
mean that al l sales of elevators were at an in ated price .13
It will also be helpful to examine the competitors’ capacity to compete: if the
competitor can increase product ion quickly and there a re few long-term contracts so
that barriers to ex pansion are low, this will be a n incentive not to raise prices, but to
undercut rivals. Conversely, if this i s a market where cartels are frequent and it is known
that the cartel r ing leaders have strong punishment mechanisms in place when t hey spot
a deviation, then thi s will create an i ncentive for the competitor not to undercut the
higher prices.
8 In the nal part of the Opi nion of Advocate General Kokott in Case C -557/12 Kone AG and Others
v. ÖBB Infrastruktu r AG, delivered 30 January 2014, not yet reported, she sug gests that the claimant
would always have to prove t hat the cartel c aused umbrella prici ng (‘it will always be neces sary to carr y
out a comprehensive assess ment of all the relevant circum stances in order to determine whe ther the
cartel in t he case in question has give n rise to umbrella pricing ’, para. 85), and that is loss is general ly
foreseeable (‘loss re sulting from umbrel la pricing cannot therefore be regarded as bei ng unforeseeable
by the members of a car tel’, para. 83). However, para. 83 does not sit comfortably w ith some of the
earlier disc ussion (see para. 41–52) which suggest s that whether loss i s foreseeable depends on t he
circumsta nces of the case. Likewis e, at para. 75 it seems t he assumption is that umbrella pr icing is
foreseeable.
9 For a m ore de tai led as sess ment o f the e conom ic is sues , see R . Ind erst , F. Mai er-Ri gaud a nd U. S chwa lbe
‘Umbrella E ects’, IESEG School of Manage ment Working Paper Serie s 2013-ECO-17 (2013), www.ieseg.
fr/wp-content/uploads/2013-ECO-17_Maier-Rigaud.pdf.
10 Opinion of Advocate General Kokott in Case C-557/12 Kone AG and Others v. ÖBB Infras truktur AG,
para. 47.
11 Case C-557/12 Kone AG and Others v. ÖBB Infrastruk tur AG, para. 9.
12 Ibid.
13 On the other hand, it w ill be important to d e ne the market correct ly: if the goods in quest ion need to
be tailored to speci c buye rs so that there are large su nk costs, it may be that a pa rticular sel ler is only
active on a port ion of the elevator market, an d not on all of it.
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