In 2014 the European Commission fined producers of high voltage power cables for engaging in cartel activity between 1999 and 2009. Subsequently, the owners of BritNed – the Anglo-Dutch interconnector venture that operates a 1000MW electricity interconnector between Great Britain and the Netherlands – brought a claim for damages against engineering company ABB in the UK High Court.
BritNed sought compensation from ABB of approximately €180 million, in the first follow-on damages claim stemming from a cartel decision to proceed to full trial and judgment in the UK. The actual price paid by BritNed for the interconnector was in excess of €280 million.
Frontier Director Zoltan Biro acted as expert economic witness for ABB in the first stage of the proceedings. In 2018, Justice Marcus Smith awarded BritNed just over €13 million in damages. This was based on: (i) project related inefficiencies being passed-on to BritNed and (ii) ABB’s savings from not competing with other cartelists (arising from lower tendering and production planning costs).
ABB successfully appealed the second source of damages and, as a result, BritNed was ordered to repay approximately €5 million to ABB.
- We assessed the extent to which the cartel led to prices being higher than they would have been in a competitive environment.
- Given the regulatory regime to which the BritNed interconnector is subject, we analysed the extent to which any loss due to the operation of the cartel may not have been suffered by BritNed.
- We responded to BritNed’s claim that, absent the infringement, it would have commissioned a higher capacity interconnector and therefore earned higher profits.
An alternative approach to overcharge analysis
The characteristics of the high voltage submarine power cables market, and in particular the highly bespoke nature of the product in question, meant that we had to develop alternative approaches for assessing whether the cartel had an effect on prices. Zoltan provided the judge with a “teach-in” session on his expert economic evidence and the relevant statistical concepts in order to understand the empirical overcharge analysis undertaken in his report.