Damages

The estimation of damages is not only an essential part of many commercial disputes - it is also increasingly important in anti-competitive conduct cases. The effect of the anti-competitive conduct may influence the size of the fine, and will be critical in determining the quantum of possible claims from third parties.

A key issue in many commercial litigation disputes is the assessment of the damages resulting from the actions of one of the parties. Similarly, in cases involving anti-competitive conduct, assessing the effects of the conduct (typically on customers) is an important step - not only to help determine the size of any eventual fine, but also to provide an indication of the quantum of possible claims from third parties.

In the future, the likelihood and frequency of third party claims will increase as the European competition authorities encourage private antitrust actions. Empirical economic analysis will play a major role in assessing the damages arising from a particular action or event.

The general approach to damages assessment is to compare the actual outcomes that are observed in the market affected by the particular action (i.e. actual prices, sales and profits), with an estimate of what these outcomes would have been "but-for" the particular action. The difference between the actual and the but-for outcomes provides an estimate of the damages caused by the action in question.

Estimating the but-for market outcome requires an understanding of how the action may affect prices, sales and profits, and what other factors influence these outcomes. In some cases it may be possible to use relatively simple empirical analyses to estimate the but-for outcomes. More typically this requires an econometric estimation in order to be able to control for all factors that can influence market outcomes and that may have been changing over the period that the behaviour in question took place. Various econometric techniques can be used to do this and the resulting estimates need to be accurate and consistent.

CRA has been involved in numerous cases where we have estimated the damages resulting from a particular action. For example, we acted for the plaintiffs in Provimi and Nutreco v Aventis and others, a case that concerned the vitamins cartel which operated between 1989 and 1999. In that case (and in subsequent work), CRA used a range of empirical techniques to estimate the excess pricing caused by the cartel on various vitamins.

Other examples of recent CRA work include assisting the National Irish Bank during an investigation by the Irish High Court by estimating the customer overcharges that may have resulted from certain fee-charging practices of the Bank, and assisting the Swiss Canton of Ticino by estimating the damage caused by of a road paving cartel operating in the canton.

Recent European cartel cases where we have examined what effect (if any) a cartel had on prices and sales include cases related to rubber chemicals, synthetic rubber, methionine, elevators, gas-insulated switchgear and air freight services sectors. In several of these cases we have also been involved with the subsequent private litigation.

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