Passing On, Indirect Purchasers and Loss Allocation between Claimants

This article seeks to answer a frequently asked question in competition law. Where a cartelist sells to a direct purchaser who passes on the loss to a third party, to what extent can the cartelist avail himself of a defence that the direct purchaser has passed on the loss, and can the consumer have a direct cause of action against the cartelist? The paper explores how established principles of tort and unjust enrichment can provide an answer to this without distorting settled principles of substantive law and procedure. A. INTRODUCTION Lately there has been significant interest among the competition law community in the private enforcement of competition law. In the English courts private enforcement is possible as either a follow-on action, where a public enforcement body (the Office of Fair Trading in the UK) has already launched a successful action, 1 or a standalone action in the Chancery Division, where there is no public enforcement. 2 Where an undertaking breaks competition law either under the Treaty on the Functioning of the European Union (“ TFEU”) or the Competition Act 1998, the claimant may bring an action for breach of statutory duty. This is more controversial than sometimes acknowledged, but for our purposes we will accept the proposition. 3 When, therefore, for example, a cartelist sells to the direct purchaser at an illegal anticompetitive overcharge, he breaches his statutory duty under the Competition Act 1998, s.2 or under the European Communities Act 1972, s.2(1) in those cases where TFEU, Art.101 is engaged. The problem with which we are primarily concerned in this paper is where a cartelist (“C”) sells to a direct purchaser (“DP”) who then sells on to an indirect purchaser end user (“ IP”). An important debate takes place around the question whether IP has a cause of action against C. Linked to this is the question whether, if DP sues C, C can claim that DP has passed on its loss and therefore has no recoverable losses, or diminished losses.