First successful UK competition damages claim

On 21 May 2004 the UK Court of Appeal awarded damages of £131,336 plus interest to Mr Bernard Crehan for losses caused by a pub tie agreement which infringed EC competition law. This is the first time that damages have been awarded in a UK claim for damages due to breach of EU competition law and will encourage those wishing to bring claims on the basis of competition law infringements in the future.

The judgment is the latest turn in a series of events dating back more than 11 years. Mr Crehan was the tenant of two pubs and as part of his tenancy signed a "tie" agreement requiring him to purchase his supplies of beer only from the owner of the pub or a supplier nominated by it at the supplier's wholesale list price. Mr Crehan incurred losses due to poor trading. He alleged that these losses were caused by his having to purchase beer at above market prices and that the agreement was unlawful under EU competition law.

During the litigation, the High Court requested the European Court of Justice (ECJ) to rule on the applicability of the English law principle that a party to an illegal contract cannot claim damages under that [illegal] contract. The ECJ held that a party to an agreement which is illegal (because it breaches competition law) is able to claim damages from the other party where he is in a position which is "markedly weaker than the other party such as seriously to compromise or even eliminate his freedom to negotiate the terms of his contract and his capacity to avoid the loss or reduce its extent".

On 26 June 2003 however, the High Court found that the tie agreement did not breach EC competition law, so was not void with the result that Mr Crehan's arguments failed. However, the subsequent Court of Appeal judgment of 21 May 2004 found that the tie agreement did breach EC competition law and so awarded damages to Mr Crehan. The pub owner has indicated that it intends to challenge the Court of Appeal's judgment in the House of Lords.

This judgment is important as it is the first case in which damages for breach of competition law have been awarded by a UK court. Claims have been made in the past on this basis but this is the first of such claims to succeed. The decision in Crehan does of course depend on the particular circumstances of that case and is not a general finding against the beer tie commonly underpinning UK pub tenancies which have been found to operate in a manner fully consistent with competition law requirements.

Enforcement of competition law through the English courts has been facilitated by specific provisions introduced through the Enterprise Act 2002. These provisions include allowing damages claims to be brought directly before the specialist Competition Appeal Tribunal and since 1 May 2004 the English courts may decide whether individual agreements are exempted under EU competition law – previously only the European Commission was able to do this.

Click here for the full text of the Court of Appeal judgment.

For further details please contact Sue Hankey at [email protected] or on +44 (0) 207 367 2960, David Marks at [email protected] or on +44 (0) 207 367 2136 or Richard Taylor at [email protected] or on +44 (0) 207 367 2108.