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Intel, Iiyama and indirect effects in the EEA – when does Article 101 bite?

Julia Dodds
22/02/2018
At the end of last week, the Court of Appeal handed down its judgment on interim applications in the appeals related to damage claims arising from the CRT and LCD cartels. The Claimants, Iiyama, had been on the receiving end of two conflicting judgments at first instance, one in which the Defendants' application to strike out their claim had been successful, and one a few months later where it had not. The appeals were heard together in December.

At the end of last week, the Court of Appeal handed down its judgment on interim applications in the appeals related to damage claims arising from the CRT and LCD cartels. The Claimants, Iiyama, had been on the receiving end of two conflicting judgments at first instance, one in which the Defendants' application to strike out their claim had been successful, and one a few months later where it had not. The appeals were heard together in December. The cases dealt with whether or not cartel activity which originated outside the EU and had only an indirect effect on the European market could be capable of satisfying the jurisdictional test for the application of European competition law.

Establishing European jurisdiction

The EU competition rules can apply where anticompetitive conduct is implemented in Europe, as established in the case of Woodpulp. The General Court in Gencor also first set out the idea of a "qualified effects" test, an alternative ground under which EU jurisdiction could be established if the conduct complained of lacked implementation in Europe but had a foreseeable, substantial and immediate effect on the European market. However, the qualified effects test has, until the CJEU's ruling in Intel in September last year, remained a relatively untested area of law, since the General Court ruling was not appealed to the ECJ (as it then was).

The CJEU's Intel ruling was one of the most eagerly anticipated rulings of recent times, bringing with it clarity on the application of the competition rules to dominance cases and rebates, as well as confirming the use of the qualified effects test to establish EU jurisdiction. This was the first time that the English courts had considered Intel's impact, and surely marks the first of many cases which will rely heavily on its outcome and reasoning.

The significance of the Intel ruling

Both of the first instance judgments in Iiyama were handed down before the Intel ruling. The Claimants argued that this was significant, because Intel's confirmation of the qualified effects test had materially changed the landscape with regard to territorial application of the European competition rules.

The Defendants on the other hand argued that Intel had no impact on the understanding of the territorial scope of the European competition rules. The qualified effects test in itself was nothing new, having been foreshadowed both in Gencor and in the Advocate General's opinion in Intel. The Defendants argued that, as a result, the CJEU ruling had little impact - they had already assumed the qualified effects test to be good law, but simply did not consider it to be fulfilled.

The Court of Appeal's approach in Iiyama

However, as expressly acknowledged by the Court of Appeal, the legal test for strike out plays a significant part in this case. The Court may only grant reverse summary judgment where it considers there is no real prospect of the claim succeeding and there is no other compelling reason for it to go to trial – importantly, there can be a "real" prospect of success even if that "real" prospect is improbable.

Perhaps unsurprisingly in this context, the Claimants emerged the victors, with the cases continuing to trial. Echoing the repeated reference in Intel to the need to take account of offending conduct "as a whole", the Court of Appeal found that there needed to be an overall assessment in light of the offending conduct viewed as a whole in order to establish whether or not the qualified effects test has been satisfied. Such an assessment could only be carried out "in light of the full facts as they emerge and are assessed at trial [and] is not one suitable for summary determination on the basis of assumed facts".

The Court went on to make some specific observations with regard to indirect effects and their relationship with the qualified effects test. The Defendants had argued that the lack of direct impact on the European market of the offending conduct meant that the qualified effects test could not be satisfied, and therefore that the claim should fail at this early stage. The Court of Appeal disagreed, finding that directness of effect should not be treated "as an additional requirement to immediacy of effect".

Conclusions

With the Court of Appeal's ruling, the Iiyama cases will now proceed to trial. Although the ruling is fairly emphatic with regard to the requirement for a full trial (and as such could be seen as making it harder for claimants to be dismissed at an early stage in proceedings), the Claimants' likelihood of success should not be overstated at this stage – the Court of Appeal has merely found that the low bar of a more than fanciful prospect of success has been reached.

There remain significant questions with regard to the LCD and CRT cartels and their effects on the European market, not least with regard to the requirement to show a compelling case on causation and the risk of issues such as double jeopardy and double recovery. When these are thrown in with political and policy considerations concerning the continued attractiveness of the English courts as a forum for competition litigation in a post-Brexit world, it is easy to see why these cases will be closely followed by competition practitioners in the coming months.

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