Applicable law in competition infringements: Deutsche Bahn

The recent judgment of Barling J in Deutsche Bahn AG v MasterCard offers important guidance on determining applicable law in competition actions. Practitioners dealing with competition infringements which stretch back prior to the entry into force of Rome II in 2009 should take note – particularly when dealing with limitation issues, which are governed by the applicable law of the tort. The court held that where the 1995 Act regime applies (broadly, between 1996 and 2009) the applicable law is that of the country where the restriction of competition took place. This begs the question: what law applies if the claimants have not defined the geographical market which is affected along national lines?

Background

This judgment is the latest in the interchange fee saga following the Commission’s infringement decision in 2007. It relates to an action brought on behalf of some 1,300 retailers operating in 18 European countries. The retailers claim that Mastercard infringed European and national competition laws by centrally setting interchange fees payable by acquiring banks (and other rules) which in turn inflated the ‘merchant service charge’ paid by retailers whenever they accept payment by Mastercard credit/debit cards.

The claims span nearly three decades, dating back to 1992. As a stepping-stone to determining limitation issues, the parties asked the court to determine the applicable law and nominated test claims relating to 4 countries (Germany, Italy, Poland and the UK).

The three regimes

The resulting judgment is a helpful ready reckoner on applicable law for those faced with claims of long-running competition infringements. The three regimes can be broadly divided as follows:

• 11 January 2009 to date: where the “events giving rise to damage” occurred on or after 11 January 2009, Rome II applies (see Article 31). Although what constitutes the relevant ‘event’ for the purposes of drawing this temporal dividing line in competition cases was left unanswered ([26]).
• 1 May 1996 to 10 January 2009: where the “acts or omissions giving rise to a claim” occurred on or after 1 May 1996, the Private International Law (Miscellaneous) Provisions Act (the “1995 Act”) applies (see section 14). This is concerned with the acts and omissions of the Defendant, irrespective of the date of the resulting damage.
• 22 May 1992 to 30 April 1996: English common law principles will apply.

The parties were in agreement on the import of Rome II: under Article 6(3) the applicable law is the law of the country “where the market is, or is likely to be, affected”. In the present case, it was agreed that this translated to a test of where the claimant was based at the time of the relevant transaction which attracted the merchant service charge ([22]). However, the application of the 1995 Act was heavily contested.

The 1995 Act: place where the restriction of competition occurred

The general statutory test for applicable law under section 11(1) of the 1995 Act is where “the events constituting the tort or delict in question occur”. Where elements of those events occur in different countries, the test outside of personal injury and property damage cases is where “the most significant event or elements of the events occurred” (section 11(2)).

The Defendants argued that that the place where the most significant event occurred was the place where the merchant was based when they paid the inflated service charge, thereby aligning the test with that under Rome II.

The thrust of the claimants’ argument was that ‘the most significant event’ in each claim was not the Claimants’ payment of an inflated service charge – rather, it was the Defendants’ actions in deciding to adopt the relevant interchange fee. The Claimants argued that those actions took place in Belgium (although this was subject to some dispute).

Mr Justice Barling found that the court must make a ‘value judgment’ about the significance of each of the English law constituents of the tort in question and that judgment should be taken in light of the facts of the particular case ([40]-[41]).

In the present case, he found that the most significant element of the cause of action was the restriction of competition. This, he found, was a factual event which could be geographically pinpointed and was not, as the claimants had argued, merely a legal/economic phenomenon without a country of occurrence. In practical terms, Barling J’s approach pointed to the national law of each of the markets where each claimant operated its retail business ([55]).

Beyond national markets?

Mr Justice Barling’s test of where the restriction of competition occurred seems a neat solution on the facts of the MasterCard case. MasterCard relied heavily upon the way in which the particulars of claim had been pleaded by reference to national markets and national laws (see the court’s discussion at [49] and [54]).

Yet the test may not produce such a neat answer for claims in which the relevant geographical market has not been defined along national lines. Claimants might allege a restriction of the pan-European market or even fail to define the geographical market at all in their pleadings. When faced with the argument that claims may plead restrictions by object rather than effect, the Judge observed that in such cases a restriction of competition is presumed to have occurred “on the relevant market”. Yet this begs the question – what is that relevant market? Can it always be neatly mapped on to a single country?

There is therefore considerable scope for future litigants to argue that ‘where the restriction occurred’ cannot be the ‘one size fits all’ solution in all competition claims reaching back prior to 2009. The seeds for such an argument may well have been sown in Mr Justice Barling’s finding that the significance of the different elements of a tort may differ even as between cases involving the same cause of action (see [118]).