The Spanish paper envelopes cartel: Compensation over 40 years later

In 1977, Spain celebrated its first democratic elections in the aftermath of the transition from dictatorship to full democracy. The leading five paper envelope producers used the occasion to create and establish one of the most harmful cartels in Spanish Public Procurement history. Before the elections took place, the transition government were required to buy envelopes in massive amounts for the polls. The envelope manufacturers took the opportunity to rig all bids not only for the first election but also for all other national and regional elections from 1977 until 2011. During that time, the cartel had a peaceful existence, and the price-fixing schemes and client allocations affected not only public procurement but also the main envelope types used by companies for more than three decades. In 2013, the Spanish Competition Authority, the CNMC, sanctioned all five producers. This decision was confirmed by the Courts.

In the last three years, 11 companies represented by the same law firm filed eight claims in Barcelona and three claims in Madrid. The first instance resulted in full success in Barcelona and complete loss in Madrid. (see for all Barcelona, ECLI:ES:JMB:2018:2727 and Madrid ECLI:ES:JMM:2018:1232)

The Regional Courts of Barcelona and Madrid will issue their second instance decisions in the coming months.

The Commercial Court in Madrid recognised the right to compensation of the victims and the binding effect of the decision of the Spanish Competition Authority. Notwithstanding this, the Commercial Court rejected the claim concluding that the damage had not been proven by the claimants. According to the Court, the calculation made by the expert was inconsistent because the purchases used to determine the overcharge and the reference price were not equivalent to those made by the claimants.

In contrast, the Court in Barcelona, being aware of the new regime after the Damages Directive and the mass litigation caused by the trucks cartel, has used this landmark case to produce rulings that confirm the well-known sugar cartel jurisprudence and clarify several questions about follow on claims derived from decisions of the Spanish Competition Authority.

The rulings from the Commercial Court of Barcelona contain the following aspects that we would like to highlight:

First, the Court refers to the Supreme Court decisions in the sugar cartel case of the 2012 and 2013. The Supreme Court had determined that the difficulties in calculating the sum should not preclude the victims from receiving damages and that in their expert report, defendants must not only question the claimant’s report but also must offer an alternative amount.

Additionally, the Barcelona Court accepted the calculation of the claimant’s expert based on a comparison of purchases of pre-printed envelopes by small customers with the prices applied by the cartel on tenders organised by large clients for white envelopes and those used for elections.

The rulings acknowledge the simulation of the overcharge through real comparable scenarios, based on the homogeneity of the market and the unique nature of the infringement. In fact, the Court recognises that the claimants can use the sources from the decision of the Spanish Competition Authority that concerned envelopes for elections and large customers after recognizing that there was no appropriate reference to compare the prices of the products purchased by a small NGO, which was a small client, with a non-cartel situation.

Second, the rulings also recognise the liability of leniency applicants, excluding the liability limitation foreseen in the Damages Directive since its provisions do not apply to this case.

As of today, four decades later, 8 NGOs, a retailer and a small regional bank are finally obtaining redress for the damage caused. Curiously the Spanish Administration, the initial victim of the cartel, has not asked for damages.

By Julia Suderow

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