11 October 2018

First follow-on cartel damages case reaches judgment in UK

BritNed wins damages from ABB in €13m overcharging case as judge cites issues of justice, fairness and public policy.

Damages have been awarded to BritNed in the first cartel damages case to reach judgment in the UK. BritNed, a jointly owned by UK National Grid and Dutch TenneT, was found to have paid a higher price for a submarine cable system as a result of a power cables cartel in operation between 1999 and 2009. ABB supplied the cable element for a 1,000MW high-voltage submarine cable system connecting the electricity grids of the UK and the Netherlands. 

Overcharges

ABB had been part of a decade-long power cables cartel, in the form of a market-sharing agreement which allocated high-voltage cables projects among the cartel members between 1999 and 2009. BritNed was found to have paid a higher price than it would have done absent the cartel, because the cartel insulated ABB from competition and was not as cost-efficient. The High Court’s Mr Justice Marcus Smith found that the general operation of the cartel was highly material, and allowed ABB to increase its margins. However, as an exception to this, ABB did not manage to increase its margin on the BritNed project because of the pressure that BritNed applied on ABB as part of the negotiations. The Court therefore ruled that BritNed had suffered an overcharge of €13m, approximately 5% of the negotiated price of €263m.

Cartel inefficiencies

The judgment is important for companies subject to regulation, such as a regulatory cap, that have procured goods from companies that breach competition law. In particular, Justice Smith signalled that, in this case, allowing a cartelist to retain overcharges would be against justice, fairness and public policy. BritNed was advised by European economics and finance consultancy, Oxera Consulting LLP, with Managing Partner, Dr Helen Jenkins, acting as the economics expert for BritNed. Dr Helen Jenkins says ‘in a unique ruling, the first of its kind in the UK, the judgment provides interesting insights into how the UK courts approach the quantification of cartel damages. The Court recognised the argument that cartels can lead to cost inefficiencies.’