European Union: Proposal For Directive On Certain Rules Governing Antitrust Damages Lawsuits

Introduction

The proposal for a Directive on certain rules governing lawsuits for damages under national law for infringements of the competition law provisions of the European Union ("EU") and of the member states ("Proposal for Directive")¹ was adopted by the European Parliament on April 17, 2014 and is expected to be approved in the near future by the EU Council of Ministers. Once the Directive is adopted, member states will have two years to implement the Directive's provisions into their national legal system.

Objective of the Proposal for Directive

The Proposal for Directive seeks to provide the victims of infringement of the EU competition rules full compensation for the harm they suffered. Infringement of competition law is determined as the infringement of Article 101 or 102 of the Treaty of the Functioning of the EU or of national competition law.

Also, the Proposal for Directive seeks to remove existing obstacles in the member states which relate to: obtaining evidence, lack of effective collective redress mechanisms, the absence of clear rules on the passing-on defense, bringing an action for damages, quantifying antitrust harm, etc.

Right to Full Compensation

Since the national rules of member states regarding actions for antitrust damages are diverse throughout the EU, certain legal uncertainty may occur for the parties involved in lawsuits for antitrust damages. In order to remedy this diversity, the Proposal for Directive ensures that the infringement victims of the EU competition rules have access to an effective mechanism for obtaining full compensation for the harm they suffered.

As per Article 2 of the Proposal for Directive, anyone who has suffered harm caused by an infringement of the EU or national competition law shall be able to claim full compensation for that harm.

The full compensation shall include compensation for actual loss and for loss of profit, and payment of interest from the time the harm occurred until the compensation for said harm has actually been paid.

Disclosure of Evidence

The claimants can face some difficulties in obtaining the necessary evidence for damages lawsuits in competition cases where they must establish a causality link between the infringement and the harm suffered. Therefore, certain regulations have been introduced to remedy these difficulties. Pursuant to Article 5 of the Proposal for Directive, where a claimant presents reasonably available facts and evidence showing plausible grounds that he has suffered harm caused by the defendant's infringement of competition law, national courts may order the defendant or third party to disclose evidence.

Also, the Proposal for Directive ensures the opportunity to ask the judge to order the claimant or a third party to disclose of evidence on request of the defendant.

National courts of the member states are able to limit disclosure of evidence when determining whether any disclosure requested by a party is proportionate with the legitimate interests of the parties and any third parties.

Limits on the Disclosure of Evidence

Pursuant to Article 6 of the Proposal for Directive, absolute protection is provided for two types of documents, which are: (i) the leniency corporate statements and (ii) settlement submissions. The disclosure of these documents seriously risks the effectiveness of the leniency program and settlements procedures. Under the Proposal for Directive, a national court can never order disclosure of such documents in an action for damages.

Sanctions

The national courts can impose sanctions on parties, third parties and their legal representatives in the event of failure or refusal to comply with any court's disclosure order, the destruction of relevant evidence, failure or refusal to comply with the obligations imposed by a court order protecting confidential information or abuse of the rights related to the disclosure of evidence.

Limitation Periods

The Proposal for Directive introduces time limits in order to provide harmonization among the member states. As per Article 10 therein, the limitation period shall not begin to run before an injured party knows or can reasonably be expected to have knowledge of the competition law infringement. Therefore, the victims of the competition law infringement are allowed sufficient time (at least 5 years) to bring an action for damages after they know or can reasonably be expected to know of the infringement. When a competition authority conducts investigations or proceedings related to an alleged infringement, which is the subject of a damages lawsuit, the limitation period is suspended. The suspension period shall end at the earliest 1 year after the infringement decision has become final or the proceedings are terminated.

The limitation period shall not begin to run unless the victims of the infringement know or can reasonably be expected to be aware of the infringing behavior, of the qualification of such behavior as an infringement of EU or national competition law and of the fact that the infringement caused harm to them by identified cartel members.

Joint and Several Liability

The Proposal for Directive introduces certain modifications based on a liability regime. As per Article 11 therein, where several undertakings infringe the competition rules jointly, they shall be jointly and severally liable for the entire harm they cause due to the infringement.

Through the Proposal for Directive, an undertaking which has been granted immunity from fines by a competition authority under a leniency program shall be liable to injured parties, other than its direct or indirect purchasers or providers, only when such injured parties are unable to obtain full compensation from the other undertakings involved in the same infringement of competition law.

Quantification of Harm

The proposed Directive provides assistance to victims of infringement in quantifying the harm caused by the competition law infringement. The national courts are empowered to determine and estimate the amount of harm.

Also, the infringers are entitled with a right to rebut the presumption with regards to the existence of harm resulting from a cartel. Therefore, from now on the infringing undertaking can rebut this presumption and prove that the cartel has not caused harm.

Passing-on of Overcharges and Passing-on Defence

Direct purchasers (first purchasers) who are exposed to overcharges resulting from the infringement of competition law may pass-on these overcharges to their purchasers instead of suffering. Therefore, direct purchasers pass-on, in whole or in part, the overcharge resulting from the infringement to indirect purchasers at the next level of the supply chain (such as a retailer or consumer).

As a result of such passing-on of overcharges, the defendant (infringing undertaking) may claim that the claimant (direct purchaser) has not suffered any harm since he passes-on overcharges to his purchasers. Therefore, the Proposal for Directive codifies a defence under Article 12 whereby the infringing undertaking can invoke a defence against a claim for damages that the claimant has passed on the whole or part of the overcharge resulting from the infringement. The burden of proving the passing-on always lies with the infringing undertaking.

As regards the quantification of the passing-on, the national courts are empowered to estimate which share of that overcharge was passed on.

Conclusion

The Proposal for Directive introduces certain conditions and standards in order to ensure that real and legal persons suffering from cartelization obtain compensation by bringing actions damages. Further, with the Proposal for Directive, an attempt is made to harmonize applicable competition law rules among member states, the passing-on defence is clearly codified and obtaining and disclosing evidence, as well as joint and several liability regimes are regulated. Once the Proposal for Directive is entered into force, it will certainly have effects on the Turkish competition law.

Footnote

1. Please see. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0404:FIN:EN:PDF (Access: 29.04.2014)

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