Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & others

JurisdictionEngland & Wales
CourtChancery Division
JudgeTHE HONOURABLE MR JUSTICE LEWISON
Judgment Date19 October 2007
Neutral Citation[2007] EWHC 2394 (Ch)
Docket NumberCase Nos: HC05C00468,HC05C00467,
Date19 October 2007

[2007] EWHC 2394 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Lewison

Case Nos: HC05C00468,HC05C00467,

HC05C00465, HC05CO1309,HC05CO0046

Between
1)devenish Nutrition Limited (claim No. Hc05c00468)
(2) Faccenda Group Limited (claim No. Hc05co0046)
(3) G W Padley Poultry Limited (claim No. Hc05c00467)
(4) Moy Park Limited(claim No. Hc05c00465)
(5) Castlemahon Food Projects(claim No.hc05co1309)
Claimants
and
(1) Sanofi-aventis Sa (france)
(2) Aventis Animal Nutrition Sa (france)
(3) Rhodia Limited
(4) F. Hoffmann-la Roche Ag (switzerland)
(5) Roche Products Limited
(6) Basf Ag (germany)
(7) Basf Plc
(8) Frank Wright Limited
Defendants

Mr Alexander Layton QC and Mrs Jennifer Skilbeck (instructed by Irwin Mitchell) for the Claimants

Mr Thomas De La Mare and Mr Brian Kennelly (instructed by Ashurst) for the 1 st, 2 nd and 3 rd Defendants

Mr Mark Hoskins (instructed by Freshfields Bruckhaus Deringer for the 4 th and 5 th Defendants

Mr Mark Brealey QC (instructed by Mayer Brown International LLP) for the 6 th, 7 th and 8 th Defendants.

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Hearing dates: 2 nd, 3 rd, 4 th October 2007

Approved Judgment

THE HONOURABLE MR JUSTICE LEWISON Mr Justice Lewison

Mr Justice Lewison:

Introduction 2

The cartels and the EC Commission's findings 3

Taxonomy 6

Damages for breach of Article 81 7

Compensatory damages 8

Community rules 15

Non bis in idem 15

Allocation of responsibility between national court and competition authorities 18

Exemplary damages in domestic law 19

Common ground 19

Double jeopardy 19

Multiple claimants 22

Amendment of pleadings 23

Restitutionary award 25

Account of profits 34

Result 36

Introduction

1

As Adam Smith said in The Wealth of Nations:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

2

In the present case the conspiracy against the public, which resulted in a contrivance to raise prices, was the so-called vitamins cartels. By a decision dated 21 November 2001 (“the Decision”) the EC Commission adopted a decision that found that certain vitamin manufacturers had entered into worldwide cartels in respect of various vitamins in breach of Article 81 of the EC Treaty. The manufacturers to whom the Decision was addressed included F. Hoffmann-La Roche AG (“Roche”), Aventis SA (“Aventis”) and BASF AG (“BASF”). The Decision (article 3) imposed fines on these companies (which were record fines at the time) as follows:

i) Roche: €462 million;

ii) Aventis: €5.04 million; and

iii) BASF: €296.16 million.

3

The fine imposed on BASF was subsequently reduced on appeal to €236.845 million by the Court of First Instance ( Case T-15/02 BASF AG v Commission [2006] 5 CMLR 2). The fine imposed on Aventis was commuted because of its activities as “whistleblower”.

4

The current proceedings are what are known as “follow on” proceedings; that is to say they claim compensation for damage suffered as a result of the unlawful cartels. The claimants are all purchasers of vitamins, either directly or indirectly (in the form of animal feed containing the vitamins) from one or more of the defendants. Two claimants have been selected as representative. Devenish is a producer of animal and poultry feedstuffs. It purchased vitamins supplied by the three undertakings and incorporated them at the relevant times in its products which it sold on to third parties. The other claimants, of whom Moy Park is a representative example, are poultry producers and processors which purchased vitamins supplied by the three undertakings indirectly as part of animal and poultry feedstuffs for feeding to poultry. They sold on chickens and chicken products to supermarkets and others.

5

The present trial is of certain issues which Master Moncaster ordered to be tried as preliminary issues. They are:

“on the facts as pleaded in the Particulars of Claim and as found in the Commission Decision of 21st November 2001 (OJ 2003 L6, p.1) … whether the Claimants would be entitled to all or any of the following heads of relief as pleaded in the Particulars of Claim (including any subsequent amendments thereto):

a) an account of profits

b) restitution of unjust enrichment

c) exemplary damages”

The cartels and the EC Commission's findings

6

The size of the vitamins market can be seen from the following extracts from the Commission's decision:

“(13) The total world bulk vitamins market (1999) is estimated at some EUR 3,25 billion.

(14) In volume terms, worldwide production of vitamins for animal feed … is around 60000 tonnes per year; pharmaceutical/food tonnage totals around 65000 tonnes.

(15) The EEA market for the products which are the subject of the present Decision was worth around ECU 800 million, at ex-producer prices, in 1998.

(16) Vitamins A and E together comprise half the total market for vitamins. In 1998, the last full year of the cartel for these products, the vitamin E market in the Community was worth ECU 250 million; vitamin A sales aggregated some ECU 150 million.

(17) Sales of bulk vitamin C, which in 1995 had accounted for ECU 250 million in the Community, came to ECU 120 million, the price having more than halved since the ending of cartel arrangements at the end of 1995.”

7

The cartels which the Commission found to exist fixed prices for the different products, allocated sales quotas, agreed on and implemented price increases, issued price announcements in accordance with their agreements, sold the products at the agreed prices, set up a machinery to monitor and enforce adherence to their agreements, and participated in a structure of regular meetings to implement their plans. The cartel arrangements permeated the vitamins industry and were mostly conceived, directed and encouraged at the highest levels of the undertakings concerned.

8

On the basis of the Commission's findings, Roche and BASF were the ringleaders.

9

The Commission concluded that the cartels were “very serious infringements of Article 81(1)”. As the Commission found:

“(664) The arrangements affecting vitamins A, E, C, B2, B5, D3, beta-carotene and carotinoids constituted deliberate infringements of Articles 81(1) of the Treaty and 53(1) of the EEA Agreement. With full knowledge of the illegality of their actions, the leading producers combined to set up secret and institutionalised systems designed to restrict competition in a major industrial sector.

(665) The cartel arrangements permeated the vitamins industry and were mostly conceived, directed and encouraged at the highest levels of the undertakings concerned. By their very nature, those agreements lead automatically to an important distortion of competition, which is of exclusive benefit to the participating producers and to the detriment of their customers and ultimately the general public.”

10

In determining the amounts of the fines to be levied on each of the undertakings the Commission said:

“(678) Within the category of very serious infringements, the proposed scale of likely fines makes it possible to apply differential treatment to undertakings in order to take account of the effective economic capacity of the offenders to cause significant damage to competition, as well as to set the fine at a level which ensures it has sufficient deterrent effect. The Commission notes that this exercise seems particularly necessary where, as in the present case, there is considerable disparity in the size of the undertakings participating in an infringement.

(679) In the circumstances of this case, which involves several undertakings, it is necessary in setting the basic amount of the fines to take account of the specific weight and therefore the impact of each undertaking's offending conduct on competition.

(680) For this purpose undertakings can be divided into groupings according to their relative importance in each of the relevant vitamin product markets concerned. The placement of an undertaking in a particular grouping is subject to adjustment, where appropriate, to take into account in particular the need to ensure effective deterrence.

(681) The Commission considers it appropriate to appraise the relative importance of an undertaking in each of the vitamin product markets concerned on the basis of their respective worldwide product turnover. This is supported by the fact that each cartel was global in nature, the object of each was, inter alia, to allocate markets on a worldwide level, and thus to withhold competitive reserves from the EEA market. Moreover, the worldwide turnover of any given party to a particular cartel also gives an indication of its contribution to the effectiveness of that cartel as a whole or, conversely, of the instability which would have affected that cartel had it not participated. The comparison is made on the basis of the worldwide product turnover in the last complete calendar year of the infringement.”

11

The Commission proceeded to set basic fines and then said:

“(697) In order to ensure that the fine has a sufficient deterrent effect the Commission will determine whether any further adjustment of the starting point is needed for any undertaking.

(698) In the cases of BASF, Roche and Aventis, the Commission considers that the appropriate starting point for a fine resulting from the criterion of the relative importance in the market concerned requires further upward adjustment to take account of their size and their overall resources.

(699) On the basis of the foregoing, the Commission considers that the need for deterrence requires that the...

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