The Passing-On of Price Overcharges in European Competition Damages Actions: A Matter of Causation and an Issue of Policy

TLDR: In this paper, the functioning of the passing-on of price overcharges in damages actions for breaches of EU competition law is analyzed and a critical appraisal of the present regulatory framework in Europe is given.

Abstract: This paper analyses the functioning of the passing-on of price overcharges in damages actions for breaches of EU competition law and aims to give a critical appraisal of the present regulatory framework in Europe. In particular, this paper maintains that the European Directive 2014/104, in order to facilitate the claims of damages caused by the infringement of European competition rules and to provide full compensation for those damages, has adopted a complex set of rules placing the burden of proof on the party that has, assumedly, the best access to evidence on the relevant issue. Moreover, it is noted that these rules give a strict definition of the overcharge harm and of its diffusion through the market chain. In this connection, it is argued that the objectives of the Directive are partly compromised by the fact that this restrictive approach fails to take into consideration a number of other subjects who may potentially be damaged by the passing-on of the overcharge harm.Secondly, this paper maintains that the set of rules laid down by the Directive 2014/104 creates a system of presumptions, which, contrary to its intended purpose, is likely to discourage damages actions. Finally, this paper argues that actions by indirect purchasers based on the passing-on of the overcharge will still need to heavily rely on domestic civil law rules in particular on local principles of causation and evidence.

Full text

Lombardi, Claudio
Working Paper
The passing-on of price overcharges in European
competition damages actions: A matter of causation
and an issue of policy
Discussion Paper, No. 8/15
Provided in Cooperation with:
Europa-Kolleg Hamburg, Institute for European Integration
Suggested Citation: Lombardi, Claudio (2015) : The passing-on of price overcharges in
European competition damages actions: A matter of causation and an issue of policy,
Discussion Paper, No. 8/15, Europa-Kolleg Hamburg, Institute for European Integration,
Hamburg
This Version is available at:
http://hdl.handle.net/10419/125073
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Frequently asked questions

Q1. What is the effect of the passing-on principle on the market?

The passing-on of the price overcharge induces higher output prices that lead to lower demand and, therefore, to a loss of (future and potential) profits. 

Q2. What is the principle of effectiveness in the case of refusal of a national court to award lost?

In particular, the principle of effectiveness may be invoked in cases of refusal of a national court to award lost profits on the basis, for instance, of a lack of causative link. 

Q3. What does the identification of the damage into a token-overcharge do?

The identification of the damage into a token-overcharge, which can be passed on only vertically, fails to show that price changes are transmitted throughout the supply chain, rippling both horizontally and vertically. 

Q4. Why do economists see price overcharges as unavoidable?

19 Economists see these sequences as almost unavoidable in some cases because of the cost-price being embedded in the pricing dynamics (a higher input cost corresponding to a higher output price).