European Union: Private Antitrust Litigation In The EU: Levelling The Playing Field

Introduction

Historically the number of private antitrust actions in the EU has been low compared with the United States, with procedural differences across EU Member States and lack of legal certainty concerning the right to compensation often cited as the main deterrents for would-be litigants. For a number of years the European Commission has recognised the important role which private antitrust enforcement can play in an effective antitrust regime. In 2005 it initiated a consultation on how to stimulate private actions across EU Member States.¹

On June 11, 2013 the Commission published its proposal for a Directive² (the draft Directive) which would provide for a standardised EU approach across a number of policy areas relating to private antitrust actions, including disclosure of documents, follow-on actions and the treatment of leniency recipients.³ With the draft Directive, the Commission is aiming to achieve a level playing field by reducing the differences in procedural rules across Member States while improving conditions for consumers to exercise their right to compensation for breaches of EU competition law.

Increasing private antitrust actions across the EU

There appears to be a growing consensus across EU Member States that private antitrust actions should be encouraged. For example, in parallel with the Commission's proposals from Brussels, the UK Government has also recently put forward a draft UK Consumer Rights Bill which aims to facilitate more private-sector challenges in the United Kingdom.⁴ The main elements of the United Kingdom's proposed reforms are the introduction of a limited opt-out collective redress regime, as well as proposals to make it easier for businesses to take private actions to the Competition Appeal Tribunal in London. The Bill is currently being debated in the UK Parliament and is likely to be in force by end the end of 2014. Similarly, the Belgian Government has recently submitted a draft Bill to its Parliament that would introduce a procedure for collective redress. The Belgian Parliament's approval is expected before national elections in May 2014.⁵

While companies have been subject to both European Commission cartel (art.101 TFEU) and abuse of dominance (art.102 TFEU) sanctions for many years, the new EU and Member State proposals to encourage private actions mean that follow-on private actions for breaches of European competition law in national courts in EU Member States are likely to become more prevalent. Businesses adversely affected by breaches of European competition law will welcome the increased opportunities which these developments will afford them for recouping loses suffered as a result of others' antitrust infringements in Europe.

Political disagreement on the draft Directive

As the draft Directive has begun to move through the EU legislative process, it has stoked heated debate among Member States and some in the European Parliament, in particular surrounding proposals on the disclosure of documents relating to whistle-blowers, compensation for indirect purchasers, and the lack of provisions for collective redress.

Before becoming law the draft Directive must be approved by the European Parliament and the Council of the European Union.⁶ The likelihood of the draft Directive becoming law was given a significant boost in December 2013 when the Council adopted a "common approach" to the draft legislation and agreed on a compromise text. A final Parliament plenary vote on the draft Directive is scheduled for April 2014, with trilogue discussions on a final text between the Parliament, the Council and the Commission due to take place beforehand.⁷ Even slight delays in the Parliament's process could delay the adoption of the final Directive significantly, given that the current Parliament's term expires in April 2014 and elections are set for May 2014. The new Parliament will only meet briefly in July before the summer recess in August 2014.

Main elements of European Commission's proposed Directive

Disclosure of evidence

Disclosure rules vary considerably across EU Member States. The United Kingdom and Ireland have a well-established disclosure procedure where parties have an obligation to produce all relevant documents to a claim. However, this is quite different in many other EU Member States, where parties have only limited rights to request the court to order the production of certain identified documents. The draft Directive proposes that disclosure should be under strict court control and that courts should be able to order the disclosure of documents where the applicant has shown plausible grounds for suspecting that he has suffered harm caused by the defendant's infringement of competition law.⁸

Under the draft Directive, national courts would be able to order the disclosure of documents that were prepared by a national competition authority (NCA) during the course of an antitrust investigation "only" after the NCA has found an infringement of competition law or has closed the proceedings.⁹ Essentially, if parties obtain evidence during the access to file stage of an antitrust investigation, that could not be used in a private damages claim in a national court until after the NCA has closed its proceedings. The draft Directive also provides that refusal to comply with a disclosure request or the destruction of evidence by a defendant should be sanctioned by Member States, but the method of sanction is left to each individual Member State to decide.¹⁰

Some Member States, and some in the Parliament, have raised concerns that such broad disclosure rules could lead to extensive document requests or "fishing expeditions" by plaintiffs. In an attempt to alleviate this concern, the Parliament's Justice Committee has suggested adding provisions that would oblige courts to be mindful of such fishing expeditions when dealing with extensive document requests.

In recent years, London has become one of the main forums for follow-on competition claims. This is because it is home to the specialist competition court (the CAT) which handles follow-on damages claims and also because the disclosure rules are more favourable in the United Kingdom than in other Member States. The Commission's proposals on disclosure are an attempt to standardise disclosure rules across the EU and remove the scope for forum shopping by claimants wanting to initiate damages claims in Member States, like the United Kingdom, which have more favourable disclosure rules.

Limitation periods

The draft Directive provides that the limitation period for bringing an action for damages would be at least five years.¹¹ The period will not begin to run before an injured party knows, or can reasonably be expected to have knowledge of, the behaviour constituting the infringement.¹² The draft Directive also contains provisions for instances in which the limitation period can be suspended: for example, if a competition authority takes action in respect of an infringement to which the action for damages relates.¹³

Follow-on actions

One of the most significant aspects in the draft Directive concerns follow-on actions. While EU national courts are already under an obligation not to take any decisions which run counter to a European Commission decision under arts 101 or 102,¹⁴ the Directive would now extend that concept. The draft Directive provides that all cartel infringement decisions, whether issued by the Commission or by an NCA, will be binding on courts in follow-on actions in any Member State. Therefore an NCA's final decision will not be open for defendants to re-litigate or for the national court to decide differently.¹⁵ This leaves the competent court with sole responsibility for deciding purely on the damages claim. It is hoped this measure will encourage injured parties to bring damages claims since the substantive elements of the competition law infringement will already have been proven.

However, in practice, this provision may prove difficult to implement given the divergence in competition authority powers and procedures across EU Member States. This could, for example, lead to situations where a national court in one Member State is faced with a decision from a national competition authority in another Member State without being familiar with, or being able to question, the underlying law in that decision. This may lead to judiciaries being somewhat reluctant to decide on such claims.

Damages

The draft Directive makes it clear that damages should be compensatory in nature and place the claimant in the position it would have been in had the infringement not been committed.¹⁶ Both actual loss and loss of profit would be covered. By framing damages as compensatory only, and not punitive, the Commission has tried to avoid promoting a litigation culture and the triple damages awards seen for example in the United States.

The draft Directive also introduces a rebuttable presumption of harm in cartel cases.¹⁷ This is an attempt to remedy the information asymmetry which faces plaintiffs in quantifying damages in antitrust cases. The Commission notes that the information asymmetry is particularly evident in cartel cases given the secret nature of cartels, which makes it more difficult for the injured party to obtain the necessary evidence to prove the harm.

The draft Directive provides that infringers would be jointly and severally liable for damages.¹⁸ This gives plaintiffs the option of focusing on one defendant who will be liable for the entire damage caused. The unsuccessful defendant would then have the option to seek contribution from the other infringers. This provision may be particularly significant in damages actions against European-wide cartels, since the claimant can pursue an infringer in one Member State for the entire loss they suffered.

Leniency programmes

In an effort to strike a balance between public and private enforcement, the draft Directive proposes added protection for leniency applicants. The concern is that infringers may be reluctant to co-operate with NCAs and apply for leniency if they face the prospect of their submissions being disclosed and used against them in private actions. To ensure the adequate protection of leniency programmes, the draft Directive envisages that leniency statements and settlement statements should be exempt from disclosure in civil proceedings.¹⁹

This aspect of the draft Directive has proved to be a bone of contention. In Parliamentary discussions it was suggested that the definition should even be extended to include "any" oral or written statements provided by the leniency recipient. However, the Commission may face legal difficulties in introducing a blanket ban on the disclosure of leniency documents, given that the European Court of Justice (ECJ) ruled in Donau Chemie²⁰ that it is for the court to decide, on a case-by-case basis, whether certain documents can be disclosed. In Donau Chemie, the ECJ had to decide, in response to an art.267 reference²¹ from the Austrian Cartel Court, whether a law which only allowed claimants access to the competition authority's case file once the defendants agreed was in line with EU law. It was hoped that the ECJ would provide further guidance on this issue in the wake of the Pfleiderer judgment; however, the court did not elaborate on the criteria for such a case-by-case assessment.²²

The debate over the disclosure of leniency documents is likely to continue given the divergent views on the topic among the trilogue parties. The Commission will be eager to avoid any changes to the draft legislation which could deter leniency applicants from coming forward while the Parliament has yet to agree a common approach on the issue.

The Directive would also confer limited liability on leniency applicants. The leniency recipient would be relieved in principle from being jointly and severally liable for the entire harm and would be liable only for the amount of harm caused to its own direct or indirect purchasers.²³ However, it should be noted that the leniency recipient may become fully liable for the harm caused in situations where the claimants are unable to obtain full compensation from the other infringers.²⁴

Passing on and indirect purchasers

The draft Directive would make the passing-on defence available to defendants.²⁵ So defendants could invoke the defence that the claimant passed on the whole or part of the overcharge resulting from the antitrust infringement to its customers. This provision is included to prevent unjust enrichment where a plaintiff has passed on the increase and therefore suffered limited or no loss but then tries to claim damages from the infringer. The onus will be on the defendant to prove that the overcharge was passed on by the claimant.²⁶

The draft Directive would also introduce a rebuttable presumption that an overcharge has been passed on to an "indirect" purchaser.²⁷ The presumption would apply once an indirect purchaser can show that:

• the defendant has committed an infringement of competition law;
• the infringement resulted in an overcharge for the direct purchasers;
• the purchased goods or services were the subject of the infringement.²⁸

This would alleviate the burden of proving harm by indirect purchasers who did not themselves make any purchase from the infringing undertaking.

Some Member States, and indeed some in the Parliament, expressed strong concerns that the proposals relating to indirect purchasers may result in too much compensation being paid. Therefore it is likely the current provisions on indirect purchasers will be modified to some extent in the final text agreed between the parties.

Collective actions

In parallel with the release of the draft Directive the Commission also issued a non-binding Recommendation on collective actions which sets out its views on the implementation of effective collective redress mechanisms in Member States.²⁹ The Recommendation is not specific to competition law and applies to other areas of European law such as consumer protection and environmental law.

The Commission considered that the Recommendation adequately dealt with the topic of collective actions and therefore opted not to include specific provisions in the draft Directive. While the draft Directive did not provide for collective redress, there were calls from certain sectors of the Parliament for specific provisions to be included. However, after being debated in the Parliament, suggested amendments providing for collective redress were rejected.

Next steps

Before being formally adopted by the Parliament and Council, the draft Directive will be the subject of trilogue discussions between the Member States, the Parliament and the Commission. The outcome of the draft Directive is still far from certain given the short time frame and the fact that so far all three parties have voiced differing views on important issues such as the disclosure of leniency documents and claims by indirect purchasers.

If a final text is eventually agreed between the Parliament, the Commission and the Member States, and formally adopted by the Parliament and Council, which could take a year or more, Member States will be obliged to then transpose or implement its provisions into national law within two years of the date of adoption. In short, the changes contained in the new Directive are unlikely to be fully operational before the end of 2016 at the earliest.

Conclusion

It is well established that the number of damages actions in the EU has to date been low except in a handful of Member States, notably the United Kingdom and Germany. The Commission's attempt to level the playing field, increase access to damages for claimants and remove the possibility of forum shopping by litigants is long overdue. However, this attempt to standardise aspects of national judicial procedures across 28 Member States in just one area of law is bound to be controversial among Member States and their respective judiciaries.

Footnotes

1 The Commission's initial consultation in 2005 (the Green Paper) was followed by a document containing certain proposals in the area (the White Paper) in 2008. In 2011, the Commission also held a public consultation on a draft Guidance paper on the quantification of antitrust harm and on a European approach to collective redress. These documents and the Proposal for a Directive are available at: http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html [Accessed February 5, 2014].

2 Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, COM(2013) 404 final—2013/0185 (COD), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52013PC0404:EN:NOT [Accessed February 5, 2014].

3 Directives lay down objectives which must be achieved in every Member State. National governments have to adapt their laws to meet these goals within a specified time-frame, but have wide discretion as to how they achieve these objectives.

4 The UK Government's draft Bill is available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206367/bis-19-925-draft-consumer-rights -bill.pdf [Accessed February 5, 2014].

5 The Belgian Government's proposals would provide for an "opt-out" collective actions system in which a representative would file for collective redress on behalf of a larger group of victims. The cabinet has passed this proposal at its second reading and it will not be sent to the Council of State.

6 The Council of the European Union is the forum in which national governments, represented by their Ministers, meet to adopt EU legislation and co-ordinate policies.

7 At trilogue meetings, the European Parliament, the Council of the European Union and the Commission discuss the draft legislation and agree on a compromise text.

8 Draft Directive art.5.

9 Draft Directive art.6(2).

10 Draft Directive art.8.

11 Draft Directive art.10(4).

12 Draft Directive art.10(2).

13 Draft Directive art.10(5).

14 Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1. Article 16(1) states: "When national courts rule on agreements, decisions or practices under Article 81 or Article 82 of the Treaty which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated. To that effect, the national court may assess whether it is necessary to stay its proceedings. This obligation is without prejudice to the rights and obligations under Article 234 of the Treaty."

15 Draft Directive art.9.

16 Draft Directive art.2.

17 Draft Directive art.16.

18 Draft Directive art.11(1).

19 Draft Directive art.6(1).

20 European Court of Justice preliminary ruling in Bundeswettbewerbsbehörde v Donau Chemie (C-536/11) [2013] 5 C.M.L.R. 19.

21 Article 267 of the Treaty of the Functioning of the European Union (ex art.234 EC) provides that any national court can decide to refer a question on the application of European law to the Court of Justice. The Court of Justice decision is binding on the national court which made the reference.

22 Pfleiderer AG v Bundeskartellament (C-360/09) [2011] 5 C.M.L.R. 7. In a reference for a preliminary ruling under art.234 EC, the Court of Justice held that in the absence of EU law, it is for national courts and tribunals of Member States, on the basis of their national law, to determine the conditions under which such access to leniency documents must be permitted or refused.

23 Draft Directive art.11(3).

24 Draft Directive art.11(2).

25 Draft Directive art.12(1).

26 Draft Directive art.12.

27 Draft Directive art.13(1).

28 Draft Directive art.13(2).

29 Commission Recommendation 2013/396 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under European law [2013] OJ L201/60.

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