NTN Corporation & Ors. v Stellantis N.V. & Ors.

A defendant alleging that an overcharge was mitigated through reductions in other input costs must establish a legal and proximate causal connection between the overcharge and those reductions. At the pleading stage, the alleged connection must have a plausible factual foundation, carry some degree of conviction and be more than merely arguable.

The existence of an ordinary cost-control or target-setting system does not, without more, justify an inference that an unknown overcharge was offset successfully. The legal burden remains on the defendant throughout. A claimant incurs a potentially heavy evidential burden to disclose how it recovered its costs only after mitigation has been properly raised.

The respondents sought approximately €100 million in damages following a European Commission decision that the appellants and other suppliers had participated in a cartel concerning automotive bearings. Liability was admitted. The appellants denied that the cartel caused loss and pleaded alternatively that any overcharge had been offset by the respondents obtaining lower prices from other suppliers.

The Competition Appeal Tribunal struck out that alternative defence and refused permission to amend it through voluntary further particulars: [2021] CAT 14. The particulars relied on the respondents' cost targets and procurement systems, but contained no evidence that an overcharge had caused reductions in other input costs.

The central issue was whether the Tribunal had erred in law by requiring a plausible factual foundation for the alleged causal connection before permitting the defence to proceed to disclosure and trial.

1. Permission to appeal was granted, but the appeal was dismissed unanimously. The Competition Appeal Tribunal had applied the correct legal test and made no error of law in striking out the off-setting defence.

2. Mitigation by off-setting requires a sufficient legal and proximate causal connection between the overcharge and the claimant's reduction of other costs. The governing common-law principle is that an actual benefit may reduce damages where it results from action arising out of the relevant transaction. An independent or collateral benefit does not necessarily affect compensation.

3. A pleaded defence must have a realistic or plausible prospect of success. The alleged connection must carry some degree of conviction and be more than merely arguable. Broad economic theory is insufficient where allowing the plea would impose a substantial disclosure burden on the claimant. The defendant need not possess documents proving the defence before disclosure, but must identify a plausible factual foundation rather than seek disclosure in the hope of finding one.

4. The Supreme Court's decision in Sainsbury's Supermarkets Ltd v Visa Europe Services LLC [2020] UKSC 24 did not authorise a bare assertion of off-setting. It concerned the pragmatic quantification of mitigation at trial after causation was already a live issue. It did not decide the minimum pleading standard. Whether off-setting occurred remains a question of fact.

5. The legal burden of pleading and proving mitigation remains on the defendant throughout. Once mitigation has been properly raised, the claimant may bear a heavy evidential burden to disclose how it recovered its costs. A failure to provide adequate disclosure may support an adverse inference, but neither the evidential burden nor that possibility transfers the legal burden.

6. The pleaded reliance on cost targets was theoretical. A cost-control system does not establish that its targets were achieved, that an unknown overcharge prompted additional negotiations, or that other suppliers granted sufficient reductions. The secrecy of the cartel, the extremely small proportion of relevant expenditure represented by the alleged overcharge, and the absence of a positive evidential case reinforced the lack of realism. A defendant without a properly pleadable starting point has no right to obtain disclosure merely to search for a possible defence.

1. Court of Appeal (Civil Division): Permission to appeal was granted, but the appeal was dismissed unanimously. The Tribunal's order striking out the off-setting defence was upheld: [2022] EWCA Civ 16.
2. Competition Appeal Tribunal: The Tribunal struck out the pleaded off-setting defence and refused permission to amend it through voluntary further particulars: [2021] CAT 14.