Spain: CNMC works on a guide on quantification of damages for Competition Law infringements

The Spanish Competition Authority ("CNMC") is working on a comprehensive Guide on the quantification of damages resulting from Competition Law infringements. The purpose of this Guide is to complement the European Commission’s guidelines on this matter and to facilitate the process to quantify this kind of damages. Practical experience has proved that this generally constitutes a very controversial matter.

The CNMC has opened two public consultations so far seeking the views of anyone interested in this Guide (the first was opened in October 2021 and the last one in September 2022). On 25 January 2023, the CNMC published a summary of the main highlights of the latest contributions received.

Context and background

Since the issuance of the Damages Directive of 2014 (Directive 2014/104/EU), which was transposed into Spanish law in May 2017, private enforcement of Competition Law has significantly increased.

The Directive, together with the European Commission practical guidelines[1], has been key to the drive of private enforcement of Competition Law. For national courts, it has shed some light on quantifying this kind of damages and estimating the share of overcharge which was passed-on to the indirect purchaser (which is commonly known as “passing on”).

In Spain, national courts have been particularly active in addressing these types of claims over the last few years. However, the quantification of such harm is not always a straight-forward endeavour and there is still no consistent approach in this regard.

Therefore, the CNMC’s Guide is expected to both complement and clarify the European texts on quantification of damages by bringing together all this rich experience and providing some solutions to the most problematic issues found in practice.

Draft Guide’s salient points and main contributions

The CNMC has received a number of contributions from very different backgrounds (including academic profiles, economic consulting firms and even from a regional competition authority), which make clear the need to provide additional practical guidance regarding such a complex issue as the quantification of damages.

The current version of the Draft Guide points out some general aspects that have been found relevant in practice to the quantification of damages, such as the following:

• It clarifies that both collusive agreements (regulated in Arts 101 TFEU and Art. 1 Spanish Competition Law or “LDC”) and abuses of dominance of (Art. 102 TFEU and Art. 2 LDC) may give rise to compensable damages.
• The CNMC also distinguishes between damages caused by a price increase - which usually produce vertical effects - from damages caused by exclusionary conduct - which are less common in practice and normally lead to horizontal effects.
• The Guide evaluates the possibility for defendants to avoid liability against claims for damages by arguing that such damages would have been passed to downstream retailers and consumers.
• The CNMC states that the parties tend to have asymmetric information and it is, therefore, necessary to correctly regulate access to this information, by establishing adequate and proportional limits to that access in order to protect, among other things, confidential information.

In relation to the expert reports, the CNMC highlights the importance of carrying out its own independent study of the magnitude of the effects of the damage, comparing the facts with the hypothetical situation that would have arisen if the damage had not occurred. In particular, the CNMC points out that expert reports must describe precisely how the anticompetitive conduct would have led to the specific harm, based on a thorough knowledge of the infringement, the sector and the market affected. These reports are also required to construct the counterfactual scenario on the basis of transparent, reasonable and technically founded hypotheses based on reliable and verifiable data.

This Draft Guide specifically refers to the most common methods used in practice to quantify damages, which are generally complementary to the extent that they refer to different analysis perspectives. Actually, it explains that it is often possible to apply several methods to the same case, and the conclusions extracted are reinforced by similar results obtained under the application of different methods. However, the use of different methods can also lead to very different or contradictory results. In those cases, the CNMC recommends not to make an arithmetic average of the compensations, nor to directly invalidate any result, but to look for the causes of such contradictions, whenever possible. The most used damage quantification methods are mainly:

• Comparative methods: compare the affected market or product with a similar market or product not affected by the infringement;
• Cost and financial analysis methods: calculate a reasonable and likely value of the variable of interest that would have resulted in the absence of an anticompetitive infringement and compare it with the real value; and
• Simulation models: based on real data, seek to simulate and predict the functioning of the market under effective competition.

The CNMC considers that quantifications of damages exclusively based on damage estimates from previous judgments in similar cases, or on the automatic application of an average percentage of other cartels, do not necessarily serve to correctly quantify the damage caused. Each situation has different particularities that must be considered on a case-by-case basis.

The Guide also includes, inter alia, a practical checklist to verify the reliability of the quantification of damages. Particularly, the CNMC suggests verifying whether:

• the expert report reflects the most important characteristics of the affected market;
• the theory of harm has been correctly described for the specific case (i.e., if it reflects the type of infringement and harm suffered, as well as the mechanism through which the claimant would have been harmed);
• the counterfactual scenario has been transparently and accurately explained;
• the criteria taken into account to select the variables used in the study are justified;
• the design of the database used in the study is explained in detail.

In any case, the CNMC will continue to analyse the different contributions received in order to present the final version of this Guide in the coming months, which we believe may help judges to apply a uniform criterion when quantifying damages and to provide some legal certainty regarding this matter.

For more information, please contact Candela Sotes.

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[1] For further information, see the European Commission’s Practical Guide on damage quantification (2013) and Guidelines on passing-on (2019).