Michelin, among others, is using U.S. tactics (and U.S. lawyers) to sue supply cartels for overcharging. It's a change of mindset
Antitrust cops around the globe have moved aggressively against price fixers in recent years. But while businesses victimized by such actions have long pursued compensation in the U.S., they've rarely done so in Europe. Along with legal barriers on the Continent, a clubby culture makes many executives reluctant to go after suppliers.
That's beginning to change. European countries have made it easier for cartel victims to sue, a trend that has prompted a growing number of U.S. law firms to set up shop in London and Brussels with an eye to pursuing cases. More important, European companies are starting to go after suppliers for compensation. Laurent Geelhand, European general counsel for Michelin Group, says such actions increasingly are viewed as a corporate responsibility. "You need to educate your people that this is the best way to proceed," he says. "We tell them that this is not a declaration of war, but there is a duty to the shareholders to be compensated."
Michelin has hired Dickstein Shapiro, a Washington (D.C.) law firm, to help it recover excess payments to suppliers of chemicals used to make synthetic rubber. The case is being argued in London courts. A defendant, Royal Dutch Shell (RDS) of the Netherlands, recently settled without admitting liability. The others include Bayer (BAYRY) of Germany and Michigan-based Dow Chemical (DOW). Both declined to comment. Says Geelhand: "Today, each time we see that some of our suppliers have engaged in cartel activities, we determine if there are grounds to be compensated."
Indeed, Michelin has also hired Michael Hausfeld, a veteran plaintiffs' antitrust laywer in the U.S., to explore two other potential price-fixing cases in Europe. He says Volvo (F) and retailer H&M have retained his firm to look into cartel claims. And Washington (D.C.)-based Crowell & Moring is representing a group of German, French, and U.S. manufacturers seeking damages in a London court from companies found by the European Commission to have fixed prices. Morgan Crucible, a supplier of carbon products, is the suit's principal defendant. Having blown the whistle on the cartel, it escaped an EC fine. (It declined to comment.) The plaintiffs include Emerson Electric (EMR), Valeo, and Bosch Group. Meanwhile, a Brussels company called Cartel Damage Claims has bought the right to sue from some business victims of price-fixing and is pursuing those cases in German courts. German chemical maker Evonik Industries (formerly Degussa) says it's settling claims in a case involving a hydrogen peroxide cartel.
"I've been warning clients for a number of years that this would happen," says Marc Hansen, an attorney working in London and Brussels whose U.S.-based firm, Latham & Watkins, defends companies in price-fixing cases. The growing number of claims, he says, "has really gotten people's attention."
Even so, the barriers in Europe remain high. There's no tripling of damages, as in the U.S., giving companies less incentive to pursue cases. The fact that business operations are usually spread across different countries raises complex jurisdiction issues. But the biggest obstacle, lawyers say, is the absence in Europe of U.S.-style discovery, the process that gives litigants access to each other's documents and witnesses. Without that, there may be no way to prove a claim.