Italy: Italy Implements EU Directive On Private Antitrust Damages

On January 19, 2017, the Italian legislature passed Legislative Decree No. 3/2017 (the "Decree") to address private damage actions arising from competition law violations. This law, effective as of February 3, 2017, implements the EU Directive 2014/104/EU (the "Directive") to establish standard procedures and remove practical obstacles for compensating victims of antitrust violations. The Directive applies to both individual and collective damages actions throughout the EU. Moreover, the Directive fine-tunes the interplay between private damages actions and enforcement of antitrust rules by the Commission and domestic competition authorities.

The Decree encompasses the following key principles:

Burden of proof. Claimant's burden of proof for antitrust damage claims is reduced (Directive, Art. 9; Decree, Art. 7). Indeed, final decisions rendered by the Italian Competition Authority (the "Authority") or by national courts reviewing such decisions are deemed irrefutable evidence of the antitrust infringement found therein. In other words, there is an absolute presumption that antitrust misconduct occurred. This means that claimants would only have to prove to a civil court the nexus between the infringement and the alleged damages suffered, but not the nature of the infringement. Conversely, final judgments on competition law violations issued by a non-Italian authority or by any Member State's national courts amount to prima facie evidence of infringement only (Decree, Art. 7). Moreover, the Decree introduces a rebuttable presumption about the existence of damages when the wrongdoing involves a hard-core antitrust violation such as a cartel (Decree, Art. 14). This implies that in follow-on actions concerning cartels, the claimant's burden of proof would be further eased and essentially limited to quantifying the damages suffered.

Evidence of wrongdoing. The evidence disclosure mechanism in damage claims following the finding of antitrust infringement is strengthened. Judges are now vested with the power to order the defendant or any third party, including the Authority, to disclose relevant evidence in their control – pursuant to the principles of proportionality, specificity and coherence (without prejudice to the attorney-client privilege) upon either the relevant party's motivated request or where it otherwise would be unable to retrieve such evidence. However, in order to create checks and balances against broader powers of discovery, European and Italian law-makers decided that: a) defendant or any relevant third party may request a judicial hearing to discuss the order of exhibition; b) the order of disclosure must be crafted as precisely and narrowly as possible when specified items of evidence are identified (Directive, Art. 5; Decree, Artt. 3-6). Nevertheless, should any proceedings be pending before the Authority, the competent civil judge may not issue any related disclosure order for the time being, provided certain conditions are met (Decree, Art. 4.6).

Statute of limitations. The ad hoc statute of limitations ("SoL") for damage claims arising out of antitrust infringements is five years. Therefore, any doubt as to the term applicable to the related actionable rights has been dispelled (Decree, Art. 8).

Damages. The principle of full damage compensation for competition law violations has also been endorsed. In particular, compensation can be claimed by anyone harmed by the violation irrespective of whether they are direct or indirect purchasers of the infringer, provided that compensation for actual loss at any level of the supply chain does not exceed the overcharge harm suffered at that level (a.k.a passing-on of overcharges) (Directive, Art. 12; Decree, Art. 10). Yet, defendants may invoke as a defense against such claim the very fact that claimants passed-on all or part of the overcharge and thus did not suffer any harm at all (or suffered limited harm). In such case, the burden rests upon the defendant, who may request evidence from the claimant or any relevant third party (Directive, Art. 13; Decree, Art. 11). In summary, "passing-on" may be employed either offensively, as in the first scenario, or defensively, as in the second setting. This seems to depart from e.g. the U.S. approach to passing-on defense, which is excluded, while it appears in line with Italian case-law so far.

Joint and several liability. Regarding joint and several liability, both the EU Directive (Art. 11) and the Decree (Art. 9) mitigate the abovementioned full damage compensation rule in order to safeguard SMEs and ultimately shelter them from exorbitant damages claims capable of compromising their businesses. In particular, SMEs shall be liable for damages only to their direct and indirect purchasers when a two-prong test is met: a) their respective market share in the relevant marketplace was below 5% at the time of the antitrust violation; b) the application of the conventional rule about joint and several liability would irretrievably jeopardize their economic viability and cause a significant loss of value to their assets. However, to benefit from such a special regime, the relevant SME must not: a) have led to the infringement of competition law or coerced other parties to participate therein; b) be found to have infringed competition laws before (i.e. recidivists).

Alternative dispute resolution. For the sake of completeness, both the Directive (Artt. 18 - 19) and the Decree (Artt. 15 - 16) seek to incentivize consensual dispute resolution proceedings, as opposed to court proceedings.

Implications

All in all, the Decree has correctly implemented all the provisions of the Directive. The only notable difference lies in the checks that have been introduced to limit the misuse of disclosure orders ("fishing expeditions"), which is an investigative tool unknown in the Italian Civil court procedures. As a result of this legislative reform, a significant increase in the number of follow-on antitrust damages actions before Italian Courts should be expected. In fact, this trend is already as visible in Italy as in other jurisdictions across the EU where such actions are now systematically filed by cartel victims after the competition agencies have established an antitrust infringement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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