(by ) Several issues come out of the in this area, some of which have been discussed in blog posts by and . Here I focus on the way in which we quantify or measure damages in English private law and ask whether competition law should be treated differently. From a purely practical perspective, differential treatment for one area of law may encourage game playing and attempts to squeeze claims into categories they don’t really belong in order to obtain procedural or substantive advantages. There may of course be good reasons to treat competition cases differently but that needs to be argued and not assumed.

The law provides for three main types of damages all of which have different functions and it is the function of the type of damages that we need to keep our focus on. These functions or types of damage are compensation (compensatory damages) which is derived from the loss incurred by the claimant; restitution (restitutionary or gain-based damages) which focuses on the gains of the cartelist; and exemplary damages which are set by a judge to punish a defendant who has cynically committed a wrong with a view to profit. Taking the first two, it is important to remember that the cartelist’s gain is not necessarily identical to the claimant’s loss. It is conceivable that the cartelist takes the overcharge and invests it in a different area which allows him to reduce his costs there and increase his overall profits further. There may therefore be a further gain causally linked to the initial wrongful overcharge.

There are at least two possible heads of compensatory damages that can be conceived, both of which should be made available by national law after the ECJ decision in Manfredi. The first is the “actual loss”; this is the overcharge itself. In a simplified case, let us assume that I buy vitamins from a cartel at an overcharge of £10 million. The second is my loss of profits. Buying the vitamins at an overcharge means my costs are raised. With my own prices now higher I may not sell as many of my products and, depending on the price elasticity of demand in my own market, I may lose revenue and profits. Let us say my lost profits are £5 million. The law allows me to add these together to obtain a compensation claim of £15 million.

The English case of Devenish raised the additional possibility of restitutionary damages, but the Court of Appeal concluded that this measure of damages is not available. As a matter of English law, this is a dubious conclusion. The question of which wrongs should attract gain-based remedies is a difficult one, but, despite its circularity, the anti-enrichment wrong suggestion embodies something which we should be slow to reject. One of main reasons for breaching competition law is to make additional profits, or at least, which is in legal terms the same thing, reduce losses. By providing for the availability of gain-based damages English law would ensure that the point of engaging in these cartels was defeated (at least in those cases where the cartel is detected). The common law on restitution is moving to a position where there is a principle of remoteness of gain analogous to the longstanding tort law principle of remoteness of loss.

If in our example the cartel’s profits are quantified at £20 million, this does not mean English law will allow me to claim for £35 million. Compensation and restitution are not alternatives – they can be claimed together – but neither are they completely or independently cumulative – if they were I could claim £35 million. This is because the gain-based damages also have an incidental compensatory effect. I can therefore only claim for £5 million on top of the £15 million in compensation (the difference between the cartelist’s profit and my losses). It is important to remember that it simply is not the case that this extra relief on top of compensation somehow punishes the defendant in addition to any public fine. That is not the function of gain-based damages, even if it has such an effect.

What about exemplary damages, designed for no other reason than to punish? Well these and other sorts of damages are independently cumulative, so a claimant can have both! If these are set at £20 million in our example, I could claim £40 million. How do we mesh this with public enforcement? Andreas Stephan that private actions will make the immunity prize in cartel enforcement less enticing, resulting in fewer applications. We know from Devenish that exemplary damages are not available where there has been a fine. The function of a fine and the function of exemplary damages is the same. It is to punish. Consequently barring the availability of both in the same case is reasonable – and not to do so is a violation of the ne bis in idem principle (parties should not be punished twice for the same wrong). A leniency application that ends in no fine must also end in no exemplary damages. Indeed the reduction in the USA from treble to single damages in the analogous case is consistent with this as treble damages are intended to be punitive in nature.

Irrespective of the effect, the function of other types or heads of damage are different and removing private law rights because of a leniency application at the very least runs the risk of breaching article 1 of protocol 1 European Convention on Human Rights that protects possessions. The right to compensation for competition law infringements is absolute. In English law it is a ‘chose in action’ (a property right in something intangible but enforceable through legal action). This right cannot simply be whisked away from the victims of the cartel because their seller chooses to apply for leniency. The easier option is to say that on a successful leniency application, the applicant will not be punished, and given that exemplary damages are the functional private law equivalent of fines, this does in fact reduce possible private law liability. One other way of getting round this is to channel part of the fines to the victims as compensation, but then we should be aware that fines no longer have a punitive but a compensatory function. If the final payout includes an element of both then we are functionally in the same position as if we have a public fine and then a separate decision by the High Court or CAT on compensation.

Breach of statutory duty in this area is a classic example of the “anti-enrichment” wrong that Birks referred to in his early discussions of the availability of such damages in An Introduction to the Law of Restitution.