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01 March 2011
Campus Oil test
Consideration of issues
In a recent decision of the Competition List of the High Court,(1) Justice Cooke considered whether to grant a series of interlocutory injunctions, the essential purpose of which was to prevent the defendants, pending trial of the action, from selling or offering to sell certain products in the concrete and cement sector at allegedly below-cost prices in breach of Section 4 or 5 of the Competition Act 2002 and Article 101 or 102 of the Treaty on the Functioning of the European Union.
The plaintiff was an unlimited company engaged in the manufacture and supply of materials – particularly ready-mixed concrete and related products – to the construction industry. The first defendant was the holding company of a major commercial group, many of whose subsidiaries were also engaged in the sector. The second defendant was one such subsidiary and was a competitor of the plaintiff. For the purposes of the application, the court treated the first and second defendants as one entity. The third defendant was also engaged in this trade and was also a competitor of the plaintiff. The case primarily involved the production and supply of ready-mixed concrete for building construction. This concrete is supplied in various grades, but particularly in the grade known as '35 Newton' (35N), on which the application focused. The geographic market for that particular product could be defined with some precision, since ready-mixed concrete has to be produced, delivered and used within approximately two hours of its manufacture. Accordingly, the geographic market was defined by a transportation radius from the point of production, which for the parties was effectively the greater Dublin area.
As the basis for the interlocutory relief sought, the plaintiff claimed that it was at imminent risk of having to cease as a competitor in the relevant market as a result of alleged anti-competitive conduct of the defendants. Much of the relevant market – approximately 80% of sales, according to the plaintiff – appeared to be based on supply contracts concluded through tendering processes. Although the defendants might not individually have held a dominant position based on their respective market shares, the plaintiff contended that together they occupied a position of dominance. First, the plaintiff claimed that the third defendant was in fact secretly owned or controlled by the first and second defendants. Second, it contended that a position of joint dominance between the defendants existed, founded on some unspecified form of financial interdependence or assistance between them, which resulted in collusive bidding. Finally, it was alleged that the defendants should be understood as having a 'collective dominance' in tendering for contracts at prices which were anti-competitive because they were well below cost. It was contended that, as a consequence of the deliberate below-cost pricing and exclusionary strategies of the defendants, the plaintiff would be put out of business unless an injunction constraining the defendants from tendering for any new business at prices which were at least not below "average variable cost" were granted.
The defendants categorically denied the allegations, resisted the application and insisted that there was no relationship of ownership, financial interdependence or day-to-day cooperation between them. Rather, they asserted that they operated only as independent competitors or as supplier and customer.
Notwithstanding dispute between the parties on the issues of fact, the legal approach to be adopted by the court in considering the application was clear and involved the application of the well-established test for the granting of injunctions from Campus Oil Limited v Minister for Energy (No 2),(2) in the following terms:
In terms of the first limb of the test, for obvious reasons, the court did not consider it necessary or appropriate to make a detailed determination of whether there was a fair issue to be tried. The court then acknowledged that the second criterion of the Campus Oil test has two aspects to it. First, should the plaintiff succeed at trial, would damages properly payable by the defendants adequately compensate it for any loss suffered in the interim? Second, should the plaintiff fail in the action but have been awarded the injunction in the interim, would damages adequately compensate the defendants for any losses incurred arising from the injunction and would the plaintiff be able to make good its undertaking as to damages to that effect?
The court recognised that the relations between all of the entities were commercial in character and the alleged losses were losses in the course of trade; the damage arising therefrom was primarily, if not exclusively, pecuniary. Ultimately, although such damages may present difficulties in calculation, it was not an exercise which was impossible in the case at hand.(3) Nevertheless, the assertion was made that any such final damages would be inadequate as the plaintiff would have been put out of business by then.
However, the court felt that the affidavit evidence before it did not substantiate the current financial position of the plaintiff or the nature or extent of the financial difficulties it claimed to face. It commented that no explanation had been given to the court as to the alleged resulting drop in turnover, and there was no reference to particular losses incurred or to the overall results of the company in recent years. Moreover, it was not asserted that the plaintiff was, or was about to become, insolvent; no company accounts were exhibited and no detailed affidavit filed by the company auditors or accountants. Ultimately, it found that there was no evidential basis for concluding that damages would not be an adequate remedy for the plaintiff if the injunction were to be refused. The court also identified that the second aspect of this criterion posed a difficulty for the plaintiff. Given the requirement to give an undertaking as to damages in the event that the injunction was wrongly awarded, and given the plaintiff's own evidence as to its precarious financial position, it was not possible for the court to conclude that it would be in a position to make good its undertaking as to damages, in the absence of any indication as to how the undertaking would be secured.
Consequently, as well as noting the practical difficulties of awarding an injunction in the terms sought, the court refused the application for lack of adequate proof that the claimed loss from the alleged conduct of the defendants could not be adequately compensated by damages. As a result, the court did not need to go on to consider the third criterion of the Campus Oil test.
Although this decision does not represent a new departure or development in the law, it usefully serves to reiterate the well-established test applicable to the award of injunctions under Irish law. It also highlights that injunctions will not be granted lightly by the Irish courts, and confirms that a party seeking an injunction needs to put before the court detailed evidence on affidavit on each aspect of the applicable test.
For further information please contact Gearoid Carey at Matheson Ormsby Prentice by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email (email@example.com).
(1) Goode Concrete v Cement Roadstone Holdings PLC, Roadstone Wood Limited and Kilsaran Concrete  IEHC 15.
(2)  IR 88.
(3) "Difficulty, as distinct from complete impossibility, in the assessment of such damages should not… be a ground for characterising the awarding of damages as an inadequate remedy." Justice Finlay in Curust Financial Services Limited v Loewe-Lack-Werk  IR 450.
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