Reflections on the intersection between economic and legal measures of pass-on in the context of competition litigation

Abstract

The right to compensatory damages and the principle of effectiveness are important legal principles shaping the private enforcement of competition law across the UK and EU. However, the issue of pass-on of loss gives rise to potential tensions in the application of these principles. Where the effect of an infringement is passed on and dissipates broadly across the downstream economy, courts are left with a choice between over-compensating a direct claimant (who has passed on all or some of an overcharge) or waiting for a nebulous group of downstream claims (by final consumers) that may not materialize. Pass-on also creates problems of consistency between claims at different levels of the same value chain in which different information may be available, different methods of calculating loss may be applied, and different answers reached. This article provides some economic reflections on these challenges. It concludes that there is no single economic framework or methodology available that avoids these tensions, and procedural innovations that allow multiple levels of the value chain to be considered in a single process are likely to be needed if the principles of compensation and effectiveness are going to continue to be applied.