Phil James

The claim for compensation against the big six European truck manufacturers for agreeing gross list prices for new vehicles over 7.5 tonnes sold between 1997 and 2011 has reached a crucial point, as the Competition Appeal Tribunal (CAT) will decide early in 2019 which of the competing class actions it will select to go ahead.

Phil James, pictured, is a partner and head of the transport and logistics team at Weightmans LLP, one of the law firms that is seeking to act for the class representative. Weightmans’ client, UK Trucks Claim (UKTC), has filed an application at the CAT seeking appointment as the class representative on behalf of the truck purchasers and lessees. He outlines what operators need to know about the cartel claim and what their options are.

“The background to this is that for around 14 years the major truck manufacturers colluded to collectively fix list prices of certain categories of vehicle,” he says. “Following whistle-blowing by MAN, the European Commission (EC) launched an investigation and concluded that the manufacturers had indeed illegally colluded to fix gross list prices for their vehicles.”

As a result, in July 2016 MAN, Volvo/Renault, Daimler/Mercedes, IVECO and DAF were fined a record €3.6bn (£3.24bn) by the EC, and in September 2017 Scania was fined although it is still contesting the charges and is appealing against its €880m fine.

The origins of the cartel case can be traced back to an investigation by the Office of Fair Trading into restrictive practices among Mercedes-Benz truck dealers in the north of England between 2008 and 2010.

A raid on Mercedes-Benz’s headquarters revealed that the anti-competitive behaviour went far wider than the UK and that encouraged MAN to blow the whistle in return for its fine being reduced to zero.

“The Commission’s findings of anti-competitive behaviour create an environment in which individual operators are given a foothold in litigation, safe in the knowledge that the findings are binding proof of liability in the courts of EU member states,” says James. “These damages claims are taking place in civil courts all across Europe.

“All the operators have to do now is to establish that the cartel caused them losses and to quantify the extent of those losses. Even the most sophisticated purchaser who would carry out a price comparison exercise will likely have suffered losses because the gross list prices had all been agreed by the manufacturers.”

Euro 6

One justification put forward by the manufacturers for increasing truck prices during this period was the huge investment in technology they say they had to make to meet the EC’s ever-tougher emissions standards.

Weightmans is investigating, with industry experts, the extent to which this technology was widely available across all the major European truck manufacturers and so in fact was capable of being incorporated into new trucks far more cheaply than the manufacturers gave their customers to believe.

The claim against the manufacturers can also include purchases and leases of trucks of other manufacturers who were not a part of the cartel, because the prices of those other trucks will likely have been inflated due to the operation of the cartel.

Operators do not need to claim against the particular manufacturer from whom they purchased or leased trucks between 1997 and 2011. They are free to pursue any company that has admitted being part of the cartel, as it was the anti-competitive behaviour of all the cartel members that caused the financial loss.

“Truck buyers and lessees can claim against any of the parties to the price-fixing activity,” says James.

“The ultimate objective of the CAT will be to identify a figure that claimants are entitled to recover collectively from all of those who participated in the cartel activity. So it doesn’t matter which truck an operator bought – each member of the cartel will be required to contribute a sum of money to a collective pot from which each claimant will be entitled to withdraw a set amount per vehicle.”

Haulier or own account

It does not matter whether the operator was a haulier or own account, nor whether the operator bought the vehicle or ran it under a lease agreement, as the effect of the cartel would have been to inflate prices of both purchasing and leasing costs.

The EC’s decision included a finding that the manufacturers also collaborated on the release of trucks complying with a series of emissions control standards, from Euro-3 through to Euro-6, restricting supplies and further increasing the prices paid by truck buyers and lessees.

One fleet buyer active in the market throughout this period says: “When we tendered we would always go to at least three manufacturers, and the same one would nearly always win on price. The others would be close but not quite there.

“And if we were either looking to retain an old engine for longer or move to a new one sooner, we were always limited on where we could go because they were colluding on the timing of the release of those engines.”

Truck buyers and lessees can go direct to their suppliers and seek to negotiate their own compensation package but this option could prove prohibitively time-consuming and expensive for any but the very largest operators; it also means that truck buyers and lessees do not benefit from the ‘safety in numbers’ aspect of being part of a collective action.

Furthermore, truck buyers and lessees seeking a ‘discount’ from their suppliers (or compensatory sum) are likely to receive less by way of compensation than via a claim process which benefits from having an expert economist on board.

Euro 6 group

Operators are free to pursue their own claim through the High Court or the CAT. Some very large fleets such as BT and Royal Mail have chosen the High Court route. However, the claimants will have to prove their individual losses to the court and the legal bill for doing that could be high.

“Whether you are on your own in the High Court or part of a collective in the CAT you have to fight a really difficult battle against companies with some of the deepest pockets in Europe but the CAT route is different as individual claimants are part of a collective,” says James.

“The availability of a remedy via the CAT is made even easier by application of an opt-out scheme. We are not looking for operators to join in to our action as we are proposing the opt-out scheme whereby all claimants are automatically part of the collective action unless they choose to opt out of it.

“But the easiest option for most operators is to avail themselves of one of the class actions before the CAT, as each operator will not have to prove its own individual losses in order to claim a share of any damages awarded.”

The issue to be decided by the CAT is not whether the truck manufacturers fixed prices but rather what the level of compensation payable should be, based on how much truck buyers and lessees were overcharged over the 14-year period.

Previous cartel cases in other markets have found that prices are typically inflated by between 15% and 25%, meaning that the average compensation payable to UK truck buyers and lessees could be anywhere between £8,000 and £20,000 per vehicle.

“The CAT will endeavour to identify a compensation formula to apply across each sub-class of claimant,” says James. “The benefit of the CAT process is that there are no upfront costs for the operators to pay and they should not have to wait for years for compensation.

“Such a collective case is pursued on behalf of all members who come within the definition of the collective and all the claimants take the benefit of the findings of the CAT. The fundamental point we anticipate the CAT will focus on is that, whatever price was ultimately paid, through whatever finance arrangement, it was rendered higher than it would otherwise have been.

“The CAT may break down the compensation sum into different sub-classes, for example categories of user and/or vehicle, but the overriding principle will be the same - the price paid was higher than it should have been.”

There are three class action claims before the CAT, and the CAT will choose what it regards to be the most suitable claim with which to proceed based on a number of factors. When a similar approach was adopted in Australia, operators who joined any of the unsuccessful claims were permitted to transfer to the successful action, and operators who have not taken part in any action to date will then be able to join that class action. The expectation is that the same approach will be adopted by the CAT in this jurisdiction in this litigation.