Damages for infringements of the competition law in Europe: the way forward By Yoichi Shibasaki, Dodo Chochitaichvili and Bertold Bar-Bouyssiere On 26 November 2014, the European Parliament and EU Council of Ministers jointly adopted Directive 2014/104/ EU on certain rules governing actions for damages under national law for infringements of the competition law of the Member States and of the European Union1 . This new Directive aims at achieving more effective enforcement of competition rules in Europe by streamlining the interaction between private damages claims and public enforcement. The Directive reaffirms the right to compensation for harm caused by infringements of competition law and regulates the coordination of the applicable rules in actions for damages in Member States on various matters, such as disclosure of evidence, the effect of national decision, the limitations periods, the joint and several liability, the passing-on of overcharges as well as consensual dispute resolution. Disclosure of evidence The Directive facilitates access to evidence by allowing disclosure of categories of evidence identified via common features such as the nature, object or content of the documents, upon request of the claimant. Evidence may include information submitted by the parties in response to the request by the competition authorities for information in the administrative proceeding other than the protected documents and internal documents of the competition authorities. Safeguards against fishing expeditions and against the disclosure of business and confidential information are however provided by the Directive by granting national judges with the final say on the relevance and proportionality of a request for disclosure. In order to also preserve the incentives of companies to cooperate with the Commission or national competition authorities, the Directive provides that leniency statements and settlement submissions are fully protected from disclosure and use in damages actions. Passing-on of overcharges To implement the principle under which claimants shall receive full compensation for the harm suffered, no more and not less, the Directive is introducing rebuttable presumptions. Those concern the fact that (i) cartel infringements cause harm and that (ii) cartel overcharges are at least partially passed on to indirect purchasers. The defendant can demonstrate credibly to the satisfaction of the court that the overcharge was not, or not entirely, passed on to the indirect purchaser. On the other hand, the defendant can raise the passing-on defense against a claimant, provided he proves the existence and extent of pass-on of the whole or part of the overcharge. However, theoretically, the defendant may face double charges from the direct and indirect purchasers. How to allocate and settle the damages that are claimed by the direct and indirect purchasers has also been a major issue in the private damage actions in the United States because the direct and indirect purchasers compete among them. National courts will be entrusted with the – sometimes difficult – task to quantify the amount of damages based on the basis of reasonably available evidence and economic analysis. The effect of national decision The Directive introduces the possibility for claimants before courts of a given Member State to rely on the “final” infringement decisions of this Member State’s national competition authority or a review court as constituting “irrefutable proof” of the material, personal, geographical and temporal scope of the infringement. The Directive also provides that before courts of a Member State, a final decision rendered by a national competition authority or the review court of another 1 OJ L 349, 5.12.2014, p. 1-19. www.dlapiper.com | 0910 | Antitrust Matters Member State constitutes “at least prima facie evidence” of the infringement. This is designed to prevent infringers to re-litigate the finding of infringement itself in damages actions before civil courts, after the decision has become final. This is expected to reduce delays and costs for the injured parties. The Directive introduces longer period of the statute of limitation during which claimants may bring a damages action in order not to “render practically impossible or excessively difficult the exercise of the right to full compensation”. The statute of limitation is at least at least for five years and will not start running before the infringement of competition law has ceased and the claimant knows, or can reasonably be expected to know (a) of the behavior and the fact that it constitute an infringement of competition law; (b) of the fact that the infringement caused harm to it; and (c) the identity of the infringer. The statute of limitation is suspended or interrupted if a competition authorities initiates its administrative proceedings (investigation) and until one year after the final decision in the administrative proceedings. In addition, where several undertakings infringed the competition rules jointly, they will, in principle, be held jointly and severally liable for the entire harm caused to victims. A co-infringer will nevertheless have in this case the right to obtain a contribution from other co-infringers if it has paid more compensation than its share. Consensual dispute resolution Compensation through actions for damages can be sought before national courts and through other dispute resolution mechanisms, such as arbitration, mediation or conciliation. The new Directive encourages consensual dispute resolution methods. Such methods aim at facilitating a settlement between the parties on compensation for the harm caused by a competition law infringement, in particular to overcome difficulty to quantify the damages. To allow the possibility of reaching such settlement, the Directive provides for the suspension of the limitation periods for the duration of the consensual dispute resolution process up to two years and that the court may also suspend the legal proceedings while the parties are engaged in consensual dispute resolution methods. Moreover, pursuant to the Directive, the payment of compensation as a result of a consensual settlement can be considered by competition authorities as a mitigating factor to determine fines prior to their decision. Unless the defendant disputes the existence or the scope of the infringement, they can elaborate strategy to settle damages claims as soon as possible to reduce its total liability of the infringement and the victims do not have to wait for the final decision of the competition authorities. Finally, Member States will have to ensure that national courts are empowered to quantify the harm suffered by the claimants, in accordance with national procedures. Where appropriate for the determination of the quantum of damages, national courts can ask for the assistance by a national competition authority. Conclusion The Directive makes available for the victims (natural or legal persons) of competition law infringement(s) various specific mechanisms that facilitate them to recover damages from the infringers for their harm. With the purpose of improving the conditions for bringing damages actions and reducing the differences between the Member States as to the national rules governing those actions, claimants can expect that their right to full compensation is protected through minimum European standards defined in the Directive. Member States shall transpose the provisions of the Directive by 27 December 2016.Yoichi Shibasaki Partner T +32 2 500 1695 email@example.com Dodo Chochitaichvili Associate T +32 2 500 6555 firstname.lastname@example.org Bertold Bar-Bouyssiere Partner T +32 2 500 1535 email@example.com Authors www.dlapiper.com | 1112 | Antitrust Matters In Energeticky a prumyslovy holding a.s. and EP Investment Advisors s.r.o. v European Commission (T-272/12), the EU General Court has dismissed the appeal brought by two Czech energy companies against the €2.5 million European Commission fine imposed for their obstruction in a dawn raid and in particular for allowing access to email accounts the Commission had required to be blocked and diverting emails to a server. BACKGROUND In 2009, European Commission officials commenced the inspection of the premises of two energy companies in Prague: Energeticky a prumyslovy holding a.s. (EPH) and EP Investment Advisors s.r.o. (EP). During the dawn raid, the Commission inspectors ordered a senior executive of EP to block the email accounts of four colleagues (including that of Mr M) holding key positions in the company and to re-set the passwords for those accounts. The emails addressed to those four colleagues passed through the group server before being distributed to their accounts. To ensure that the inspectors had exclusive access to those accounts during the entire duration of the inspection, the passwords would only be known to them. After those email accounts had been blocked and the passwords changed, Mr M called the IT desk reporting that he was unable to log into his account from home; upon his request, the IT department reset the password, allowing Mr M to access his account again. The inspectors only became aware of this on the second day of inspection, when they could no longer access Mr M’s email account. On the third day of inspection, the Commission discovered that the IT department had been ordered to prevent incoming emails addressed to the four individuals from being delivered, which meant that the incoming emails would stay on the group server but were not directed to the inboxes of the four individuals. This had in fact only been applied to the email account of one individual, whose inbox did not contain any new emails. Both companies were fined €2.5 million in March 2012 for refusal to submit to an inspection. They lodged an appeal seeking the annulment of the Commission’s decision or a fine reduction. JUDGMENT The EU General Court considered the issues below and dismissed all the applicants’ pleas. Negligently allowing access to a blocked email account The General Court held that the Commission was fully entitled to find that access to a blocked email account had been negligently allowed. The Commission had the burden of proving that access was not granted to the data in Mr M’s s blocked email account, but was not required to prove that the data was manipulated or deleted. It follows that the refusal to submit to the inspection was established when the inspectors did not obtain exclusive access to Mr M’s account. EU court warns businesses: Do not tamper with electronic data during a dawn raid By Fabienne DonyIntentional diversion of emails The General Court held that the diversion of the emails was intentional, in that those employees who carried out the diversion had received the instruction about blocking the email accounts directly from the Commission and clearly thwarted both the instructions given to them and the purpose of the inspection. The European Commission was not required to examine whether the missing data could be found elsewhere in the applicants’ IT system. The fact that the emails were still stored on a group server was therefore irrelevant. The Commission should have been able to access all emails normally, i.e. in the email inbox. Breach of principle of proportionality when determining the fine In considering the absence of guidelines for calculating a fine for a procedural breach, the Commission has a greater discretion to set the amount of the fine for a breach of procedure than it does for an infringement of the substantive law. The General Court held that a fine of €2.5 million could not (in this case) be considered to be disproportionate since it only corresponded to 0.25 percent of the company’s annual turnover; falling far below the maximum ceiling of 1 percent turnover. This is the first case where the European Commission’s powers to fine a company for failing to provide complete electronic information have been considered. Electronic files are much easier and quicker to manipulate than paper files and therefore pose particular difficulties for the effectiveness of an inspection. The Commission’s power to carry out inspections is its primary investigative tool to detect infringements of competition law. The judgement safeguards this detection tool and sends a crystal-clear message to companies that any steps undermining the effectiveness of inspections will be sanctioned by fines, which includes tampering with evidence – be it stored in paper or electronic form. This judgement follows the Commission’s trend to pursue procedural infringements during inspections set by the E.ON Energie AG v European Commission (T-141/08 and C-89/11P) and Suez Environment (COMP/39.796) cases where the companies were fined €38 million and €8 million respectively for damaging seals during inspections. For assistance during a dawn raid, please contact the DLA Piper 24/7 global rapid response hotline and download the Rapid Response App as set out on page [XY]. Fabienne Dony Associate T +44 20 7153 7971 firstname.lastname@example.org www.dlapiper.com | 1314 | Antitrust Matters The Second-Generation Competition Law Cooperation Agreement between the EU and the Swiss Confederation: Breaking New Ground By Nina Mampaey The agreement between the European Union and the Swiss Confederation concerning cooperation on the application of their competition laws is in force. This agreement, which entered into force on December 1, 2014, is the very first “second-generation” agreement the European Union has concluded with a third country. The EU has already concluded several bilateral agreements with regard to its competition policy, but these were all “first-generation” agreements. The major difference between this second-generation agreement and a first-generation agreement is that the former will enable the contracting competition authorities to actually exchange information, evidence and other documents that are obtained during their respective investigations. This groundbreaking agreement originates from the consideration that a closer cooperation on addressing anticompetitive activities will improve and strengthen the relationship between the EU and Switzerland, especially given the fact that they are two very important economic partners. The economic ties between the two parties have as a consequence Coordinating their competition policies will lead to a sound and effective enforcement of competition law. According to Article 1, the purpose of the Agreement is “to contribute to the effective enforcement of the competition laws of each Party through cooperation and coordination, including the exchange of information, between the competition authorities of the Parties and to avoid or lessen the possibility of conflicts between the Parties in all matters concerning the application of the competition laws of each Party”. The first part of the Agreement holds the same (or at least similar) principles and conditions with regard to the cooperation of competition authorities that can be found in the first-generation agreements the EU concluded with the United States in 1991, with Canada in 1999, with Japan in 2003 and with South Korea in 2009. The principles which both types of agreement have in common evolve around the notification in case of enforcement activities that may affect important interests of the other party (Article 3); the coordination of enforcement activities with regard to related matters (Article 4); and the obligation to carefully consider the important interests of the other party in order to avoid conflicts (Articles 5 and 6). The second part of the Agreement, however, presents us with a set of new principles, which show some similarities to the principles laid down in the Commission Notice on Cooperation with the Network of Competition Authorities within the European Competition Network (Pb. C. 101/43). The principles on the exchange of information and consultation may be found in Articles 7 to 11 of the Agreement. It is to be noted that this information can, in principle, only be transmitted among competition authorities when the undertaking that provided the information has given its express consent (Article 7, (3) of the Agreement). Moreover, the transmission of personal data is only allowed when the competition authorities are investigating the same or related conduct or transaction (Article 7, (3) of the Agreement). At first sight, it seems this is not very different from the first-generation agreements, since they also provide for the exchange of information after an express waiver of the source of information. However, under certain conditions and as opposed to the general rule, information can be transmitted, upon request, for use as evidence without the express consent of the undertaking concerned. This transmission of information will be allowed when the competition authorities are investigating the same or related conduct or transaction; when the request for information is made in writing, including a general description of the subject matter, the nature of the investigation or proceedings and identifying the undertakings subject to the investigation or proceedings; and when it is determined which information is relevant to be transmitted (Article 7, (4) of the Agreement). The important difference from the four first-generation agreements the European Union has concluded is that under the second-generation agreement, the European Commission and the Swiss Competition Commission can exchange confidential information which they have obtained during the investigative process, under certain conditions, in order to guarantee the protection of personal data. Another novelty in the Agreement is Article 10. This provision sets out the principles and conditions under which the information transmitted to the European Commission can be sent to the national competition authorities of the member states. Given the importance of the European Competition Network for the EU’s competition policy, adding this aspect to the Agreement will, from a process-economic and legal certainty view, be very beneficial for the functioning of this cooperation. It is expected the Agreement will provide for an even stronger cooperation between the European Union and the Swiss Confederation, and, given the extent of the Agreement, results and an evolution in the relevant practice should be expected soon. This instrument should significantly reduce the workload and timeliness of crossborder competition enforcement activities between the two competition authorities for the future.