In first cartel damages case to reach judgment in UK, BritNed wins damages from ABB

Today, Mr Justice Marcus Smith, a High Court judge, has awarded damages to BritNed in the first cartel damages case to reach judgment in the UK. BritNed 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.

Oxera’s Managing Partner, Dr Helen Jenkins, led the team that advised BritNed on the economic elements of the case.

The BritNed interconnector is a 1,000MW high-voltage submarine cable system connecting the electricity grids of the UK and the Netherlands. Constructed in 2009–2010, BritNed is jointly owned by National Grid and TenneT, the respective owners of the electricity grids in the UK and the Netherlands. ABB supplied the cable element of the system.

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. This is because the cartel insulated ABB from competition, meaning that ABB’s cable was not as cost-efficient as it might have been in a competitive environment.

Justice 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.

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.

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.’

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Posted 09/10/2018