NTN Corporation v Stellantis N.v

Hearing date: Tuesday 14 December 2021

Approved Judgment

A. Introduction

The issue

Where a supplier has, in breach of duty (tortious, contractual or otherwise), charged a purchaser too much for supplies (“the overcharge”), can the supplier seek to defeat a claim for compensation brought by the purchaser by pleading that the purchaser has mitigated the overcharge by neutralising the sum in question by securing commensurately increased discounts on supplies to it from other suppliers (“ off-setting”)? In particular is it permissible to plead such a defence without any actual evidence that the claimant did in fact mitigate its loss in this manner but only upon the hypothetical basis that it is a “ reasonable” inference that can be drawn that the purchaser would have mitigated in this manner. This is, in a nutshell, the issue arising on this appeal.

The Commission decision

On 19 ^th March 2014 the EC Commission issued a decision (“ the Decision”) under Articles 101 TFEU and 53 EEA which prohibit agreements which have as their object or effect the restriction of competition. The Decision found that the defendant and 5 others had engaged in a collusive tendering cartel which spanned a 7-year period between 8 ^th April 2004 and 25 ^th July 2011. The agreement was implemented beyond the territory of the EU and EEA but, for the purpose of the Decision, it sufficed that it affected trade between the Member States of the EU and EEA. It is common ground that, as of the date when these proceedings were commenced, Articles 101 TFEU and 52 EEA conferred private law rights which could be enforced in the domestic courts in claims for damages. The claimant pleads that the infringement amounts to a breach of statutory duty.

The agreement involved the exchange between suppliers of commercially secret information about customers' procurement processes and agreement as to how to collude to defeat attempts by customers to impose competitive tendering upon suppliers by means of Requests For Quotations (“ RFQs”). The agreement related to bearings for automotive applications which were supplied to original equipment manufacturers (“ OEMs”) who produced components for vehicles. Each cartelist admitted participation and fines were imposed. Because of the admissions, the central issue before the Commission was mitigation and fines. As is now relatively common, in such cases the Commission issues a short-form decision which records at a high level the infringements but does not descend into either the evidence or the effects. These decisions predicate liability upon the object of the cartel which, according to well established case law which I do not need to address, is sufficient to trigger liability without proof of effect which is the alternative condition for liability.

In light of the Decision the defendant has admitted liability, which is therefore not in issue. However the probative value of the Decision is still limited. The fact that the Decision is in short form inevitably complicates the follow-on proceedings, even if they are (as here) limited to quantum, because there are no findings about the actual effects of the cartel on the market in question. For instance, there is no finding that the cartel succeeded in raising prices by “ x”% above the competitive level, a finding which, had it been made, would have short-circuited a great deal of fact finding by the court hearing the quantum claim.

The claim for breach of statutory duty

On 18 ^th March 2019 the claimant (“ FCA”) commenced proceedings in the Commercial Court (which were subsequently transferred to the Competition Appeal Tribunal (“ CAT”)) claiming damages for breach of statutory duty arising from breach of Articles 101 TFEU and 52 EEA in the approximate sum of €100million (including interest). The primary defence of the defendants (“ NTN”) is that no loss at all was caused by the cartel. This is because, so it is argued, FCA was successful in using the RFQ system to prevent price increases for inputs. This might appear counterintuitive given that the defendant, and fellow cartelists, colluded for about 7 years, at exceptionally high risk of severe regulatory sanction if they were discovered, with the express object of seeking to defeat their customer's competitive RFQ tendering strategies. The aim of NTN and others was to limit price competition and raise prices above the competitive level. According to the Decision, the cartelists exchanged information about RFQs and agreed who was going to bid in response and at what level so as to avoid undercutting each other. As such, the cartelists tailored and structured the cartel so as to counter attempts by the customers to use their negotiating powers to wrest better prices from suppliers. On one view, bearing in mind these decided facts, NTN would not have accepted the ever present risk of detection or whistleblowing, over such a period, absent some significant degree of confidence that they were in fact benefiting materially from the operation of the cartel.

The defence of mitigation by off-setting

Nonetheless, it has become the customary starting point for many defendants in damages follow-on claims to aver that there was no loss. This is the position taken by NTN. A secondary aspect of the no-loss defence is that, if there was an overcharge, then it is alleged that the claimant off-set any increase in prices by reducing prices elsewhere i.e. from suppliers other than the defendant. It is important to be clear as to what is and is not averred. The defence is not that FCA failed to off-set and, as such, acted unreasonably and in breach of its ordinary common law duty to take reasonable steps by way of mitigation (see paragraphs [18ff] below). It is not even that there must have been off-setting by FCA because the primary defence is that there was no overcharge at all, and therefore nothing to counter through mitigation. NTN's case is based upon the conditional hypothesis that if there was an overcharge the claimants would have mitigated the overcharge by off-setting. However, this averment is not advanced upon the basis that NTN has any actual knowledge or evidence that FCA, actually, mitigated by off-setting. Instead, NTN pleads only that it can infer (it says reasonably) that FCA would have engaged in off-setting if there was an overcharge.

FCA applied to the CAT to have the off-setting defence struck out upon the basis that the pleaded defence was theoretical, lacked realism and was implausible and that to permit such a speculative defence would add disproportionately to the burden of the trial. NTN sought to rely upon voluntary further particulars of the defence. The defence was struck out and permission was refused to NTN to amend the pleading by reference to the voluntary particulars.

Permission to appeal

Appeals from rulings of the CAT lie to the Court of Appeal on points of law only. The issue for the Court is whether the CAT, in refusing to permit the defence to be advanced, made errors of law.

This matter comes before this Court as an application for permission to appeal and, if permission is granted, for the appeal to be heard thereafter. We received full and careful oral and written argument on the issue. For my part, I would grant permission to appeal given the arguments raised, the significance of the issue, and the fact that this is the first occasion upon which the implications of the judgment of the Supreme Court in Sainsbury's Supermarkets Limited v Visa Europe Services LLC [2020] UKSC 24 (“ Sainsbury's”) on mitigation by off-setting have been considered at the appellate level. The issue has added significance given that a differently constituted CAT, which included the then President, in Royal Mail Group Limited v DAF Trucks Limited & Ors [2021] CAT 10 (“ Royal Mail”), interpreted Sainsbury's in a restrictive manner, with which the appellants disagree, and this was then followed by the CAT in the present case.

B. The EC Commission Decision

The present claim is a follow-on claim which rests upon findings in the Decision. That instrument is relied upon therein for certain facts, including that the defendant, NTN, has admitted unequivocally its liability for breach of the competition rules.

It is helpful to set out briefly the background relating to the regulatory proceedings which give rise to this claim. An investigation into suspected price fixing was initiated by the Japanese Fair Trade Commission (JFTC) who conducted on-site inspections on 25 ^th July 2011. The EC Commission also conducted inspections between 8 ^th and 10 ^th November 2011 in Europe. Applications for leniency were lodged with the Commission by various of the investigated parties (not however including NTN). Formal proceedings were initiated on 22 ^nd January 2013 with a view to engaging in settlement discussions with the parties. These took place and culminated in December 2013. The Commission sought “ settlement submissions” from all parties, an integral component of which...