Under the Consumer Rights Protection Act, a supplier could only be held liable for damages to the extent that there is a direct contractual relationship with end consumers.
Collusion between companies is one of the most serious infringements of competition law. These practices, which include price fixing, market division and production limitation, cause serious harm to consumers, who are forced to pay higher prices or are excluded from access to certain products.
In this scenario, the right of consumers to be compensated has become increasingly relevant in the public and legal debate. However, achieving adequate redress for damages poses significant challenges, both legal and economic.
From an economic perspective, one of the main challenges is the quantification of the damage. Determining the price premium paid by consumers as a result of collusion requires establishing a hypothetical -or counterfactual- scenario in which the infringement would not have occurred. This analysis requires the use of advanced econometric models, which present their own challenges, such as the correct specification of the models and the availability and quality of the data. The absence or insufficiency of any of these elements can lead to inaccurate estimates, further complicating the achievement of a fair remedy for those affected.
Another important challenge is the identification of affected consumers. Not everyone suffers the damage homogeneously: some paid the overprice, while others could not even access the product due to the high costs. This considerably complicates the choice of a compensation mechanism that is fair and equitable. In addition to this, since 2018, the possibility of compensating consumers for moral damage has been recognized, which, due to its immaterial nature, presents serious difficulties both for its verification and for its adequate reparation.
In the legal field, one of the most recently discussed obstacles is the determination of active and passive standing in these lawsuits. This arises, in part, due to the definitions contained in the Law for the Protection of Consumers’ Rights (LPDC) on the concepts of “consumer” and “supplier”. Some interpretations have led to the legal position that only those companies that have a direct contractual relationship with end consumers can be passively legitimated. This interpretation considerably restricts the possibilities of legal action against companies involved in anti-competitive practices that do not interact directly with the consumer, but that affect the market nonetheless.
Thus, in its most recent ruling in July 2024 on collusion in the tissue paper market, the Supreme Court confirmed that, under the LPDC, a supplier could only be held liable for damages to the extent that there is a direct contractual relationship with end consumers. Therefore, it acquitted SCA Chile by determining that it did not have this link, since the defendant company operated exclusively through the wholesale market; not selling its products directly to consumers.
Currently, different Consumer Associations have filed a new claim for damages, this time in the antitrust courts, where the Court for the Defense of Free Competition will determine whether or not the desired damages will be awarded in this case.
Source: Industria Legal Magazine, Issue 20. See here
For more information on these topics, please contact our Public Law and Regulated Markets group:
Antonio Rubilar | Partner | arubilar@az.cl
Gonzalo Bravo | Senior Associate | gbravo@az.cl
