We invite you to read the column by our associates from the Public Law and Regulated Markets Group, Constanza Delgado and Felipe Giovanazzi, on the evidentiary standard in cases of indemnity.
The compensation claim filed by Papelera Cerrillos originated from the highly publicized collusion involving CMPC Tissue S.A. and SCA Chile S.A., an agreement condemned in 2017 by the Court for the Defense of Free Competition (“TDLC”). The main purpose of this collusion was to set and maintain market quotas, as well as to stabilize prices in the tissue paper market between the years 2000 and 2011.
Papelera Cerrillos was a small competitor in this market and did not participate in the collusive agreement. Contrary to what might be assumed – that the collusion indirectly benefited other suppliers due to price hikes – Cerrillos argued that the practices employed by the colluding companies to maintain their agreement, such as abrupt price reductions, incentives for retailers, monopolization of sales floors or shelves, and strict control of prices and sales volumes, among others, had adverse effects that ultimately led to its exit from the market, resulting in a bankruptcy request in 2008.
Sentence No. 188-2023 TDLC
Although the Court rejected all of Papelera Cerrillos’ allegations and evidence regarding causality and the existence of damages, the reasons for these rejections allow us to clarify the TDLC’s standard for proving these elements.
Indeed, beyond the methodological criticisms of the report and the inaccuracies detected by the Court, the judgment made clear that the TDLC: (i) requires consistency between the facts considered to prepare the report and those actually sanctioned in the infringement decision, (ii) believes that it is not possible to assume that collusion is harmful per se in general terms, but rather that the specific way in which these damages occurred and their effectiveness must be proven.
The Supreme Court accepted the claim of Papelera Cerrillos
The Supreme Court begins its ruling by stating that the fundamental purposes of free competition are: to protect efficiency in markets, to ensure the welfare of consumers, and, ultimately, pertinent to the case, to ensure that no economic agent uses their position to distort the rules of the game.
Collusion – considered one of the most serious offenses against free competition – affects legal goods of both economic and social nature. In this regard, the Court emphasized that the objective of competition law is not only to protect consumers but also economic agents (whether producers, traders, or consumers) who, acting in accordance with the law, are harmed by anticompetitive practices.
It is important not to lose sight of the Supreme Court’s starting point, because, in our view, it largely explains the differences between this ruling and the TDLC’s decision.
Conclusion
The Supreme Court ruling reinforces the idea that competition law not only protects consumers but also economic actors who are displaced from the market or financially harmed by anticompetitive practices.
Regarding the estimation of damages, the Supreme Court gave primacy to the principle of full compensation for the harm over more technical considerations, recognizing that, although the bankruptcy of Papelera Cerrillos was multicausal, the effects of the collusion did contribute to its insolvency.
The precedent set is, therefore, especially relevant for complex scenarios where the effects of the cartel may coincide with other causes that lead to different damages. In these cases, the Supreme Court’s message was clear: those harmed by collusive agreements must be compensated, in whatever proportion or percentage it may be.
Thus, our highest court sought to compensate the plaintiff in the proportion corresponding to the damages attributable to the harmful effects that cartels have on the competitive structure of markets, which it determined to be 10%, both of the actual damages and of the lost profits.
Finally, regarding the quantification of damages, we highlight that the Supreme Court set as a standard the objective determination of damages, considering the global effects of collusive agreements on the markets.
Column written by:
Constanza Delgado | Associate, Public Law and Regulated Markets Group | cdelgadov@az.cl
Felipe Giovanazzi | Associate, Public Law and Regulated Markets Group | fgiovanazzi@az.cl
