Scottish Wholesale Association, November 2018 - PowerPoint Presentation

Scottish Wholesale Association, November 2018 An A-Z of the RHA’s Collective Claim Against the Truck Cartel Privileged and Confidential

What was European Truck Cartel? European Commission 19 July 2016 decision found that European truck manufacturers operated cartel for 14 years (January 1997– January 2011) Truck manufacturers – at their own admission – engaged in various practices at HQ level: Aligned gross price lists across Europe at start of cartelIncreased gross (and sometimes net) list prices for truck above 6 tonnes Agreed costs to be charged to customers for Euro 3, 4, 5, and 6Delayed introduction of Euro 3, 4, 5, and 6 emission technologiesEuropean Commission imposed largest ever fines totalling €2.93 billion in July 2016:Daimler – €1 billionDAF – €752 millionVolvo/Renault – €670 millionIveco – €495 millionMAN – fine of €1.2 billion reduced to zero as immunity applicantScania, which did not settle the case with European Commission, was fined €880 million on 27 September 2017 for same cartel activitiesEuropean Commission decisions prove liability before UK courts. To obtain compensation, it is necessary to evidence Truck Cartel caused hauliers loss and amount of loss

Further detail on European Truck Cartel Exchanged gross price lists and information on gross prices. Most (but not DAF seemingly) also exchanged computer-based truck configurators Discussed prices and price increases – including using introduction of Euro currency to reduce rebates At times agreed gross list price increases Informed each other about intended gross price increases Before introduction of pan-EEA price lists, discussed gross price increases, specifying application within the EEA, divided by major marketsDiscussed net prices for some countriesAgreed on timing of introduction of emission technologies for medium and heavy trucks required by EURO III to VI standards Agreed on the additional charge to be applied to trucks when introducing new emission technologies Exchanged respective delivery periods and country-specific general market forecasts subdivided by countries and truck categories; also exchanged information on order intake, stock, and other technical information

What is the RHA doing? On 17 July 2018, RHA launched collective legal action in the Competition Appeal Tribunal (CAT) claiming compensation for road haulage operators against truck manufacturers RHA has applied for “opt-in” Collective Proceedings Order (CPO) that will authorise RHA as class representative and certify class Claim is open to members and non-members alike engaged in road haulage (hire and reward and own-account) who purchased or leased medium and heavy trucks during cartel and for period afterwards until prices returned to competitive levels Specialist economic experts have been engaged to assess impact of cartel, how this impacted operators’ costs, and how much compensation is owed Richard Smith is heading up RHA internal team, ensuring:Coordination between legal team, experts, and RHA Cost management of processClear communication at all timesIf truck manufacturers are unwilling to engage in settlement discussions (which will equally apply to individual operators seeking settlement), overall process could take at least three yearsNote: 4,400 road haulage operators have already signed up, with a further 850 who have registered interest and are in process of signing up

Why the RHA? RHA is not-for-profit trade association dedicated to interests of road haulage industry – it represents 7,000 members covering 50% of trucks on UK roads European Truck Cartel is key issue facing haulage sector – truck manufacturers have engaged in serious abuse of EU competition rules and operators deserve compensation Real benefits for operators in joining RHA collective claim: RHA is highly respected within industry – its significant clout and power will help to reach settlement Claimants can “stand behind” RHA which is fronting legal caseRHA acutely aware that operators will continue to have business dealings with truck manufacturers after claim and will conduct proceedings in measured and constructive mannerOperators (many of which are SMEs) cannot afford to take action on their ownRHA has secured third-party litigation funding on very competitive terms and so there is no cost to operators in signing upRHA has appointed first-rate legal team who have worked for organisations such as FIA, FIFA, Google, GSK, Samsung, Sky, and UEFA and have considerable experience of complex, multi-party competition law claimsRHA has put in place multi-million pound insurance with A rated insurers in case claim is lost – insurance protects RHA and individual operatorsRHA will not profit from acting as representative, maximising compensation returned to operatorsRHA has experience, ability, and communication network to promote and deliver on collective claim

What are collective proceedings before CAT? Collective proceedings are a form of procedure that enable a class representative to bring opt-in (or opt-out) proceedings on behalf of businesses and individuals affected by competition law violations RHA as class representative will be responsible for running all aspects of case before Competition Appeal Tribunal (CAT), including those aspects for which claimants would normally be responsible Core notion of collective proceedings is that they group together similar claims that raise common issues (same, similar or related issues of fact or law) – an example of a common issue across the class is the extent to which the cartel had an impact on EEA gross list prices There are four main stages to collective proceedings: (a) applying for CPO; (b) trial of common issues; (c) trial of individual issues; and (d) distribution of compensation to operators Collective proceedings regime, which is designed for this type of case, is flexibleSettlement is possible at any time during process – at moment, truck manufacturers’ collective position is that the 14-year Truck Cartel had no impact on operators. If and when this changes, RHA will lead negotiations on behalf of sector and use its negotiating clout to drive a good deal – it is not likely that time required to obtain CPO will ultimately delay pay-out for operatorsRHA is uniquely well placed to be class representative in the United Kingdom

Who can join RHA’s collective claim? RHA claim is open to: Any person (including legal entities) who between January 1997 and now purchased or leased for road haulage operations (both hire and reward and own-account) trucks of 6 tonnes and over registered in the UK; and Any person who between January 1997 and now purchased or leased for road haulage operations trucks of 6 tonnes and over registered in European countries outside the UK provided that the person belongs to a group of companies that also purchased or leased trucks registered in the UK RHA claim is not open to:Any company engaged in truck manufacturingAny company engaged in purchasing trucks merely then to re-sell or lease them to third parties

What can operators claim for? Trucks purchased outright, trucks purchased on finance, leased trucks Second-hand trucksTrucks of 6 tonnes and greater Any brand of trucks, including DAF, Daimler, Iveco, MAN, Mercedes, Renault, Scania, and Volvo but also other brands such as Hino and Isuzu Cartel period was from January 1997 to January 2011, although there will likely be a run-off period before truck prices returned to competitive levels and which can be included in claim – note that operators can include trucks up to the present day in the claimTrucks registered in the UK – it is also be possible to claim for trucks registered in other European countries provided the operator belongs to a group of companies that also purchased or leased trucks registered in the UKCartel might have had impact on fuel costs since truck manufacturers delayed introduction of more fuel efficient emissions technologies – this is included in the claimEconomist is examining whether operators’ costs might have been affected in other waysNote: it does not matter if operators do not have complete records dating back to 1997

How much compensation per truck? Claim will be to compensate operators for difference between (a) costs paid by operators during cartel (and any run-off period) and (b) costs that would have been paid by operators if cartel had not existed In relation to truck purchase or leasing, difference between what trucks should have cost in competitive market as compared with cartel prices – same principles apply to other cost increases (e.g. in relation to fuel) caused by cartel RHA’s significant due diligence to date indicates EU Truck Cartel will have had material impact on prices paid for trucks RHA believes that amount per new truck will likely exceed £6,000 on average, including interest – this figure does not take into account potential compensation for increased fuel costs Approximately 650,000 new trucks sold in UK during cartel – this equates to overall compensation of £3.9 billionRHA is aware that other potential groups and law firms might be suggesting higher level of compensation per truck RHA is adopting cautious and responsible approach mindful that key details about the cartel remain hidden in secrecy and will not be available until later in processEuropean Commission study suggesting historical cartels on average give rise to 19% increase in prices charged to customers (and can be as high as 40%) tells us nothing about Truck Cartel

How much of their compensation will operators actually receive? RHA has negotiated very competitive deal with litigation funder How much compensation owed to operators will actually be paid to operators depends on a number of factors, including:Number truck operators that sign up Amount of compensation owed in aggregate Amount of time claim takes Volume of documents disclosedComplexity of expert evidenceAssuming that 250,000 trucks are included within RHA’s group claim with compensation level of £6,000 per truck:Operators would receive 91% of compensation owed to them – assuming £6,000 per truck, operators would receive £5,460 per truckIf case settles early, operators would receive around 94% of compensation owed to them – assuming £6,000 per truck, operators would receive £5,640 per truck If more trucks are signed up or at high levels of compensation, the percentage return to operators will increase up to 95% (or 96.6%) if the case settles early If less trucks are signed up or at lower levels of compensation, the percentage return to operators will decrease: 70% is starting point but RHA’s conservative case puts percentage return much higher

Current numbers signed up to RHA collective claim Over 4,400 truck operators signed up Over 100 signed-up claimants have fleet sizes exceeding 100 trucks Almost 850 truck operators have registered their interest and are in the process of signing up Truck operators cover all haulage sectors, including retail, food service, wholesale, agriculture, construction, retail, waste, manufacturing, oil/gas, chemicals, removals, general haulage, local authorities, car transport, docks etcClaim already has critical mass, with significant volume effects/economies of scale

Are there any risks for operators in joining RHA’s collective claim? Typically in litigation, losing party pays winning party’s costs As RHA is bringing litigation on behalf of operators, any such order for adverse costs would generally be made against RHAThere are more limited circumstances in which an individual operator might be ordered to pay costs where issues arising in litigation apply only to that operator or if the operator makes individual submissions to CAT RHA is taking out significant level of insurance (multi-million pound) cover to insure against this risk both in relation to RHA itself and in relation to each individual claimantOperators will agree to be bound by the insurance policy wordingOperators’ obligations under the insurance policy are explained in more detail in the Claim Summary document

Benefits of joining RHA group claim RHA is a well-respected industry body within road haulage sector with industry insight RHA is best placed to lead collective action in UKAt present, truck manufacturers appear to be waiting to see potential scope of claims across Europe and at present saying that 14-year cartel did not have impact on operators.  As soon as truck manufacturers are willing to engage in settlement discussions, RHA will be first in line to lead the way with such discussions and will bring significant clout to those negotiations The RHA is taking its obligations to the haulage sector seriously in deciding to bring the collective claim The RHA is cognisant of fact that truck operators will continue to have business dealings with the truck manufacturers after claim Volume effects/economies of scale – claim already has critical massExtremely competitive litigation funding packageSignificant ATE insurance in place. RHA will seek to achieve optimal level of compensation for operators.  This will include the RHA dividing operators into different categories (sub-classes) based on econometric studies and ensuring that different sizes of operators are fairly compensated The RHA does not intend to profit from acting as representative, maximising the level of compensation that will be returned to those affected by the cartel 

Key contacts and links Richard Smith Landline: 01733 261131Mob: 07860 865120Email: r.smith@rha.uk.net Caroline WattleyLandline: 01733 261131Mob: 07860 867909Email: c.wattley@rha.uk.netSteven Meyerhoff at Backhouse Jones Landline: 01254 828300Mob: 07775 763543Email: steven.meyerhoff@backhouses.co.uk David Went at Exchange Chambers Landline: 0113 203 1970 Mob: 07725 240941 Email: went@exchangechambers.co.uk Legal Action Website : www.truckcartellegalaction.com