The formal adoption of a European Union directive on antitrust damages claims paves the way for harmonizing procedures for antitrust damages actions and could bring new cases to light. Roschier Partners Gisela Knuts and Niko Hukkinen say that the directive constitutes a potent tool to strengthen enforcement of competition law by upping the financial stakes of potential infringements.
Adopted in November 2014 by the European Parliament and the Council, the Directive on Antitrust Damages Actions primarily aims to eliminate roadblocks that stand in the way of compensation for victims of antitrust infringements. EU member states will be compelled to implement the directive in their national legislation by December 2016.
“The directive will provide claimants with easier redress for antitrust actions and it will also increase the negative consequences of potential infringements,” observes Niko Hukkinen, Roschier Partner specializing in EU & competition law.
"The directive will also harmonize divergent national practices in Nordic countries and has the potential to level the playing field in terms of the number of antitrust damages actions," notes Gisela Knuts, Roschier Partner specialized in commercial dispute resolution.
“The scene for antitrust damages actions has been very active in Finland but not as much in Sweden, Norway or Denmark. The directive will open up new jurisdictions that previously were not as active in terms of antitrust damages actions, such as Sweden,” Knuts adds.
For example, the directive will make it harder for the public to obtain access to certain documents from Swedish authorities, but easier for claimants to obtain access to documents from defendants in court. "That change will certainly increase the incentive to seek redress in Swedish courts," says Kristian Hugmark, Partner in Roschier's EU & Competition practice.
As part of the preparatory work involved in developing the directive, the European Commission called for a comparative study (*) of damages actions in the region and found that apart from immense variations in national practice, there had been few cases in which national courts awarded damages for breaches of EU competition law.
“In general, the study concludes that damage actions for breach of competition law are underdeveloped in Europe,” the Commission concluded in a Green Paper press release in 2005 (**).
At the time the Commission also acknowledged that even in collaboration with national competition authorities, it did not have sufficient resources to deal with all cases of anti-competitive behavior.
“The EU is not capable of directly enacting criminal law. So this is another way to fight against competition law infringements and cartel behavior and to increase the potential negative financial impact on infringers,” Hukkinen observes.
Ten years in the making, the Commission’s directive on antitrust damages actions seeks to address that state of affairs and to ensure that affected parties have access to private actions to promote more effective and more uniform enforcement of competition rules across the region.
Directive highlights: Burden of proof, limitation period, estimating damages
The directive clearly establishes that a final infringement decision by a national competition authority or a review court constitutes irrefutable proof in a civil court of the same country that an infringement occurred. In a civil court of another EU member state, it will provide prima facie or initial evidence of an infringement.
One of the directive's most important features is the presumption that cartel infringements cause harm (based on research that has shown that cartels inflate prices). Knuts says this is a clear departure from established legal practice in the Nordics.
“Previously in the Nordic legal culture the burden lay on the claimant to prove that damage had been suffered. This is now being overturned specifically in the case of cartel damages,” she observes.
However, infringers retain the right to refute the presumption and present evidence showing that no damage has been caused. Local courts will have the authority to estimate the amount of damage in cases where it would be excessively difficult or impossible to quantify the harm on the basis of available evidence.
“The complementary practical guide on quantifying antitrust harm in damages actions issued by the Commission provides guidelines for national courts on quantifying damage. The question is basically a complex estimate of what the world would have looked like but for the infringement. No one can know for certain and thus this is often the most disputed question in the process.” adds Hukkinen.
The directive further aims to ease potential claimants’ path to redress by providing that national legislation must provide a limitation period of at least five years to ensure sufficient time to bring damages actions.
The national limitation periods may begin only when the infringement has ended and victims of the infringement know or can at least be reasonably expected to know of the infringement, responsible undertakings and of the damage caused by the infringement.
Further, the limitation period must be suspended if a competition authority launches infringement proceedings. Once a final infringement decision is rendered or the infringement proceedings are otherwise terminated, potential claimants shall have at least one year to bring damages actions. According to the Roschier Partners, the extension of the limitation period could have the effect of increasing damages actions in the region.
The directive also attempts to clarify rules regarding the “passing on” defense, where infringers may seek to reduce compensation payouts by showing that claimants passed on inflated prices to their customers (indirect purchasers). In such cases the directive allows for indirect purchasers to claim compensation for the overcharge passed on to them.
However, since proving passing-on is difficult, the directive contains a rebuttable assumption that the indirect purchaser has proved passing-on where it has shown that the defendant has committed a competition infringement which resulted in an overcharge to the direct purchaser and that the indirect purchaser has purchased goods or services that were affected by the overcharge. Further, since the harm suffered by indirect purchasers is difficult to estimate, the directive gives national courts the authority to estimate the amount of overcharge passed on.
Directive likely to stimulate actions
Roschier’s legal experts point out that prior to the adoption of the directive, major players in competition litigation tended to focus their attention on markets where the legal framework favored this type of activity.
“We know for a fact that an industry has developed around buying claims from victims of competition law infringements. The players shop around and seek information to find favorable enforcement climates for damages actions,” Knuts explains.
That has had the effect of excluding certain jurisdictions and contributing to the uneven prosecution of damages claims among EU member states.
Regardless of the previous level of activity in individual jurisdictions, all EU member states will now have to bring their legislation in line with the directive.
In the Nordics, Denmark, Finland and Sweden are obliged to conform to the directive as full EU members. Norway and Iceland are also under a duty to comply as members of the European Free Trade Area, EFTA, which is in turn part of the EU single market.
According to Roschier Partner Hukkinen, Finland now appears to be ahead of its Nordic peers in terms of implementation of the directive.
“A draft act and government bill was published during the summer and put out for comment. A new draft is due out in the autumn based on the consultation and public comments. The process may not be as advanced in Sweden, Denmark or Norway,” Hukkinen adds.
“One reason for the disparity may be enforcement activity. Enforcement in Finland has been more active, so the legislation is more significant,” he adds.
Other Nordic and EU countries still have just over one year to bring their national legislation in line with the directive.
How quickly EU member states move to ensure compliance remains to be seen, but there can be little debate that private actions for damages are a useful instrument to help deter potential competition infringements, support stronger enforcement of competition law and to provide redress for the losses suffered by victims of anti-competitive behavior.