Sunday, 10 January 2010

Follow on actions

Shortly before Christmas, the Competition Appeal Tribunal (CAT) decided the case of Enron Coal Services v English Welsh & Scottish Railway (EWS) [2009] CAT 36; the first follow on action to come to trial in the CAT. This was an action by Enron claiming damages from EWS for abuse of a dominant position in consequence of a finding by the Office of Rail Regulation (ORR) that EWS had abused its dominant position by, among other things, engaging in unlawful price discrimination against Enron (see EWS was, and still is, the major supplier of rail freight services in Britain. Enron was a coal supplier but also offered “end to end” (E2E) arrangements, from the purchase of coal through its shipping and delivery to the customer. Enron claimed that the behaviour of EWS had meant that they had lost a tender for hauling coal by rail to two power stations owned by East Midlands Electricity (EME), which EWS had won, worth around £19.1 million, and also a substantial chance of supplying coal to one of EME’s power stations as well. Enron claimed that EWS had overcharged it for its services and, as a result, it could not submit competitive tenders for EME’s business.

Although EWS accepted that it had acted unlawfully, it defended itself by arguing that Enron had failed to prove that the abuse had caused it to lose the tender.

The CAT took the view, based on Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602, that the claimant needed to show, first, on the balance of probabilities, what it would have done but for the infringement. Then, secondly, where the loss depends on what a third party would have done, the claimant had to satisfy the CAT that there was a real or substantial chance that the third party would have acted in the way asserted by the claimant. In the context of the case, Enron had to show that, but for the infringement, they would have submitted a bid to EME and sought to negotiate an E2E contract with EME and that there would have been a real chance of their being awarded the contract.

The CAT decided that Enron had failed to make its case on either point. On the first point, the CAT felt that the evidence before it was not consistent with the behaviour of a company in pursuit of an attractive business opportunity. On the second point, the CAT found that there was no real chance of Enron being awarded the contract for a variety of reasons, including the past history between EME and Enron and the lack of flexibility in Enron’s offer.

The CAT decision and, indeed, the litigation as a whole, is yet another cautionary tale for those bringing private actions to enforce competition law, even on the back of infringement decisions by competition authorities. To put it simply, it is one thing to show an infringement of competition law; it is another, not necessarily straightforward, thing to show that you have been damaged by that infringement.

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