The Spanish envelopes cartel: Recent developments in competition damages claims in Spain

(Originally published on 27/09/2018)

Recent judgments of mercantile courts in Madrid and Barcelona, related to the Spanish envelopes cartel, clarify how certain procedural issues should be dealt with and how jurisprudence should be applied to damages claims in Spain

The Spanish envelopes cartel and the claims

In March 2013 the Spanish Competition Authority (SCA) sanctioned several envelope producers for their participation in a price-fixing and market-sharing cartel in Spain from 1977 to 2010.

After the sanction, but before the judgments that declared the decision of the SCA correct, several claimants sued some of the cartelists seeking compensation for damages before the mercantile courts of Madrid and Barcelona. After several procedural hurdles, between May and June 2018 the courts issued the first three judgments (with more to come): two in Madrid and one in Barcelona.

Despite the fact that the Madrid judgments were in favor of the defendants and the Barcelona judgment was in favor of the claimants, the Madrid and the Barcelona judgments give practical insight into how traditional procedural exceptions should be dealt in damages claims actions in Spain from now on.

The interpretation of procedural exceptions

It is clear from the judgments that the defendant’s lawyers tried every procedural trick in the book to paralyze or slow down the claims. The three judgments are very useful for future claimants (especially for stand-alone actions) since they give insight on the applicable procedural standards and confirm the application of doctrine emanated from a historic Supreme Court precedent in the Spanish sugar cartel.

The statute of limitations: The defendants sustained one of their main arguments on the hypothesis that the action was time-barred since the claimants should have filed the claim within the year, following the SCA’s publication in 2010 of the press release announcing the initiation of the investigation. The defendants argued that this was the point at which the claimants had all the necessary information to file a claim.

However, the courts applied the Supreme Court’s doctrine, that the limitation period only starts when a potential claimant: (i) learns that it could be the victim of a competition infringement; (ii) knows the identity of the possible responsible parties; and (iii) is able to correctly calculate the damage suffered.

It, therefore, dismissed the defendant’s hypothesis and found that potential claimants can only learn this information when an official decision sanctioning the cartelists is published by the SCA. Thus, the date of publication of a sanctioning decision is the date when the limitation period to sue starts.

Tort liability (responsabilidad solidaria impropia in Spanish): The defendants tried to convince the judges that: a) the claimants incorrectly built the action, since they did not sue all the cartelists to properly allocate their quota of responsibility; and b) that the claimants should have only sued their suppliers and not other cartelists.

Again, by applying the Supreme Court’s doctrine, the courts dismissed completely these arguments, finding that: a) it is not for the victim of the cartel to allocate the precise quota of responsibility of each cartelist within the cartel; thus, a victim could require the complete compensation from any of the cartelists; and b) joint and several liability is triggered by the competition infraction and not by the contractual relationship between the claimant and one of the cartelists.

Both clarifications are very welcome for claimants since defendants will now need to think twice before wielding these exceptions or they could face the imposition of legal costs by courts when resolving these procedural exceptions.

How the Barcelona and Madrid judgments differ

What will be less welcomed from these judgments is the fact that the same claim and an expert report had different outcomes in different courts.

This analysis is perhaps an over-simplification of the facts since the calculations made by the economic experts based on one of the three different scenarios that the SCA sanctioned within the cartel decision might not fit completely with the facts of the Madrid judgments.

Nevertheless, from a theoretical perspective, the judgments in Madrid seem to depart from the Spanish Supreme Court jurisprudence.

On one hand, the Barcelona judgment, which was drafted by three judges, understands that in cartel scenarios the presumption of damages is valid and allows judges to reverse the burden of proof against the defendants. This, of course, is only the case if the claimants present the court with a feasible and reasonable calculation of damages through a hypothetical counterfactual.

This means that it will depend on the defendants to prove in detail that their actions did not produce damages to the claimant in that specific case; it is not enough to just state that the claimants’ economic report is not exact and precise (which the defendants had attempted to do in this case). So far, this is the doctrine emanating from the sugar cartel precedent.

On the other hand, the approach of the two Madrid judges differed slightly from the Barcelona judgment. It appears to be that the Madrid judges dismissed the economic expert reports because the counterfactual that it contained (the same for all the claims apparently) based its hypothesis on one of the three conducts of the cartel, the price fixing one, and not on the conduct that the Madrid claimants actually suffered, a market sharing conduct.

The Madrid judges argued that in a market sharing agreement there is no arrangement on the level of prices charged to final customers, and since the claim presented did not prove that fact, the expert report as it was, was not enough to award damages.

What was not mentioned, or taken into account by the Madrid judgments, is the fact that no one colludes to share markets for no reason; there are always anticompetitive benefits for those engaged in collusion.

Some takeaways for potential claimants in Spain

Notwithstanding the different outcomes in Madrid and Barcelona, these cases apply and confirm the doctrine of the Supreme Court in relation to procedural exceptions in damage actions in Spain.

This is very positive for potential claimants in Spain, since it will deter defendants from wielding procedural chimeras before courts, and judges will find it very difficult to accede to any of the tactics used in these cases and suspend or complicate the claims unnecessarily.

We will be paying close attention to any developments in relation to the forthcoming judgements in relation to the envelopes cartel and in relation to the 10 years mandatory real state insurance cartel claims (cartel del seguro decenal), which is the other set of claims that is pending to be decided by courts in Madrid and Barcelona.

By: J. Nicolás Otegui Nieto

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