Calculation of Damages in Antitrust Cases in Community Competition Law

Abstract: The right to damage in antitrust cases within the European Community arises from the case Francovich decided by the ECJ. The case established that the individual's right to compensation could be based on Community law. The case also established that the national courts are required to apply the right to compensation regardless of the position of the national law. The first case to follow the principle established in Francovich was Banks. The Advocate General argued that the principle founded in Francovich should be applied also in this case. However, the ECJ was of another opinion and did not apply the rules of the Treaty in the case. In the case Factortame III, the principle was further elaborated. The first case where remedies for breach of antitrust rules were raised was Courage v. Crehan. The ECJ held that Article 81(1) and 82 EC creates a direct effect between the individuals as well as rights the national courts must protect. The individual can rely on the breach of Article 81(1) EC in national courts even if he is part of a contract liable to restrictions or distortion of competition. In the English Court of Appeal, the judges followed the line of the ECJ and based its decision on previous decisions made by the ECJ together with general Community principles. The Commission has published a Green Paper on damages actions for breach of the EC antitrust rues. The aim of the Paper is to find ways to improve the facilitation of damage actions in national courts. In a study commissioned by the Commission obstacles to successful damage actions are identified. The conclusion of the study is that the actions of damages in the Member States are undeveloped and that there is diversity in the approach taken to damage actions in antitrust cases. In the Green Paper three different questions regarding damages are mentioned&semic firstly the definition of damages, secondly the quantification of damages and thirdly split proceedings. One of the largest problem when calculating damages is to establish the counterfactual scenario&semic how would the situation been but for the violation of competition. Factors affecting this ''but for'' scenario, such as demand, range and competition, must be taken into consideration. A number of different calculation methods have been identified to calculate damages. The methods should not be seen separately but complements each other. The more simple methods can be used as cross checks to the more complex methods. The methods identified are the before-and-after method, the yardstick method, the cost-based method, the market share method, econometric modelling and theoretic modelling. When calculating lost profit, accounting, finance and economic methodologies are used to estimate the difference between the profit made and the ''but for'' profit. Three different methods can be used for this calculation&semic the earning-based method, the market-based method and the asset-based method. In cases of exclusion, it is natural to calculate the damage by calculating the profit the undertaking would have made without the violation. If the violated part is a rival to the violator, it can be more relevant to calculate the lost profit due to the anti-competitive conduct. This calculation is normally based on the accounting of the undertaking. Some general problems can be related to calculation of damage. The time-period aspect and the information availability are issues that must be recognised. When reviewing national damage cases, some general points can be made. Only a few Member States have rewarded damages in antitrust cases, no Member State is prescribed to use a certain calculation method and all calculation methods used have been simple and with no relation to econometric modelling. None of the methods is superior to the others. The choice of method must be made from the information and data available in the specific case.