The Kone Decision

Abstract

Price fixing cartels do not always involve all members of an industry. To the extent that the nonconspiring industry members set their prices under the price umbrella of the cartel, the customers of the nonconspiring firms suffer overcharges just like customers of the conspiring firms. Similarly, in a buyer cartel, sellers to the nonconspiring buyers would suffer underpayments just like sellers to the conspiring buyers. In the European Union, price fixing is prohibited under Article 101 of the Treaty for the Functioning of the European Union (TFEU). A recent Court of Justice (CJEU) ruling has allowed the opportunity for umbrella plaintiffs to have standing and prove damages. In this article, we review the Kone decision and discuss the economics of umbrella pricing and umbrella damages. We analyze the issue of partial conspiracy among sellers and among buyers. Additionally, we discuss the estimation of damages both theoretically and in practice. We also identify some possible complications that may arise in damage estimation. We find that the CJEU’s economic reasoning is clearly correct and umbrella plaintiffs should have their chance to prove damages but will face the similar hurdles as nonumbrella plaintiffs.