United States: European Competition Law Newsletter — December 2014

Last Updated: December 5 2014
Article by Matthew Hall

EU Antitrust Damages Directive Ushers in New Era in Competition Litigation

On 10 November 2014, the EU Council of Ministers (representing the EU Member State governments) formally adopted the EU Antitrust Damages Directive. This is a hugely significant event in EU antitrust and is likely to mark the beginning of an era of increased levels of private litigation seeking damages for infringements of EU competition law.

The Directive requires Member States to implement into national law certain procedural and substantive rules concerning actions in their national courts for damages arising out of infringements of EU competition law. This includes damages cases brought by customers following European Commission cartel decisions but is not restricted to such situations. The rules required by the Directive will also cover, for example, actions for damages arising out of an abuse of a dominant position or arising out of an anti-competitive agreement such as an exclusive supply agreement.

Although damages claims relying solely on infringements of national competition law in the EU are not covered, it is inevitable that the Directive will impact those too. Companies would be well-advised once again to ramp up their competition compliance programmes EU-wide so as to take account of the increased risk of private damages claims.

Once formally signed, the Directive will be published in the EU Official Journal and will enter into force 20 days after its publication. EU Member States will have two years to implement it, but its terms are already being heavily referred to and debated before courts in private damages claims across the EU.

Compliance Warning: Your Internal Documents Must Match the Story

Two companies involved in an acquisition in the EU appear to have narrowly escaped a fine for providing misleading information to the European Commission (EC). The case provides a reminder that internal documents are very important in merger (and general antitrust) investigations in the EU. Documents must be carefully managed, and parties need to be prepared for rigorous questioning if their "story" does not match the internal contemporaneous record.

The case arose out of a notification to the EC under the EU Merger Regulation of a transaction under which Ahlstrom Corp. and Munksjö AB transferred their label and processing business to a new company. In February 2014, the EC sent a Statement of Objections (SO, a preliminary statement of case) to the parties indicating that they had provided misleading information in the course of the notification. The alleged misleading information was market share estimates submitted in the notification, which differed significantly from the companies' pre-existing internal documents.

The companies were able to demonstrate that they had valid reasons to reassess their internal market estimates shortly before the notification. The EC accordingly dropped the case and the parties avoided a fine. However, there may well have been other indirect costs — for example, reputational damage and external legal costs, not to mention the internal effort needed to deal with the EC's concerns.

EU Advocate General Provides Guidance on SEP Enforcement

On 20 November 2014, an EU advocate general (AG) provided important guidance on the application of competition law in the EU to the enforcement of standard essential patents through injunctions. The principles outlined in the opinion, in which the AG advised the EU's highest court, the European Court of Justice (ECJ), are relevant to any industry in which standards are used.

The case arose out of an action for infringement of a standard essential patent (SEP) in the telecoms sector, brought by Huawei against ZTE before the Düsseldorf Regional Court, Germany. Huawei sought an injunction stopping the alleged infringement, but ZTE in reply argued that this was an abuse of a dominant position, since ZTE was willing to negotiate a licence. The German court referred the issue to the ECJ for its view, which would be binding on the court.

The AG answered the question by saying firstly that the fact that a company owns an SEP does not necessarily mean that it holds a dominant position. This must be determined on a case-by-case basis. Subject to this, in the AG's view, where the proprietor of an SEP has made a commitment to a standards body to grant third parties a licence on fair, reasonable and non-discriminatory (FRAND) terms, it constitutes an abuse of a dominant positionfor that proprietor to seek an injunction against a company that has infringed the SEP. This assumes that the third party has shown itself to be objectively ready, willing and able to enter into such a licensing agreement.

The AG went on to set out the actual steps that in his view an SEP holder must take before seeking an injunction and the corresponding obligations of the third party. This is a very important case for patent litigation and negotiations concerning SEPs, and the eventual judgment of the ECJ itself will be closely watched.

UK Judgment on Limitation Period in Competition Damages Cases

On 30 October 2014, the UK (English) High Court handed down a judgment considering limitation issues in the context of a competition damages claim. This is the first time the issue has been dealt with by a UK court, and it is now the leading case on the point in the UK.

The case forms part of the UK litigation against Visa for damages arising from breaches of EU and UK competition law in relation to Visa's multilateral interchange fees. Visa had sought strikeout/summary judgment for the part of the claimant's actions relating to infringement of competition law more than six years (being the normal limitation period) before the date on which they brought the actions (in 2013).

Under UK law, where any fact relevant to the claimant's right of action has been deliberately concealed from it by the defendant, the period of limitation does not begin to run until the claimant has discovered the concealment or could with reasonable diligence have discovered it.

The issue was whether the public decisions and pronouncements of the EC and UK Office of Fair Trading (OFT) before 2007 meant that the claimants knew or could with reasonable diligence have identified information sufficient to establish a prima facie case.

The judge decided that indeed various EC and OFT documents and an EC decision relating to the issues provided enough information. He did not agree that the case, being a competition damages claim, deserved special treatment. The judge did, however, distinguish true cartel cases, so the "deliberate concealment" exception is very much alive and well for damages claims relating to those.

Nevertheless, in all competition damages cases (including those relating to secret cartels), it is clear that claimants need to be aware of publicly available (or reasonably available) information, because when this comes out the limitation period could start to run.

Additional European competition law news coverage can be found in our news section.

U.S. Antitrust

We publish a newsletter and bulletins on U.S. antitrust developments, as well as regular publications on numerous other topics.

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