On April 17, 2014 the European Parliament adopted the European Commission’s proposal for a directive on private competition damages actions. The general impetus for the Directive was the paucity of private actions sought following public enforcement actions, as well as the disproportionate private filings of private actions in only a few E.U. jurisdictions, particularly the UK, Germany, and the Netherlands.
While the Directive will certainly facilitate private actions, its impact on the volume of such actions remains to be seen. Historically, the European Union has relied primarily on public enforcement of competition laws. In the last seven years, only 25 percent of competition infringements found by the European Commission have been followed by civil actions for damages.
The Directive, according to the Commission, is meant to regulate and facilitate interaction between public and private enforcement of E.U. competition law to achieve “effective overall enforcement” of the laws. The Commission asserts that the Directive is not meant to displace the role of competition authorities as the primary instrument for punishment and deterrence of those who breach antitrust rules, but rather allows victims to be fully compensated for harms suffered. To do this, the Directive sets out minimum standards for private actions for damages.
Some of the key provisions in the Directive include:
The Directive seeks to provide easier access to evidence by claimants by setting out extensive rights for national courts to order the disclosure of evidence from a defendant or third-party. It also allows a national court to order disclosure of evidence by a competition authority where it cannot be reasonably obtained from a party or third party.
The Directive does, however, provide protection for companies’ confidential documents. First, the Directive requires member states to set forth effective measures to protect confidential information. Second, the Directive prevents leniency statements and settlement submissions from disclosure. Third, the Directive prohibits disclosure of certain information produced in a pending matter before a competition authority until after the investigation is closed.
Member states, according to the Directive, must allow at least 5 years for a claimant to bring an action for damages, starting when the claimant knows, or can reasonably be expected to know, that the particular defendant violated competition laws and caused the claimant harm. This limitation period is suspended from the moment a competition authority starts investigating an infringement and lasts until at least one year after the infringement decision has become final. This gives victims at least one year to claim damages following a decision of infringement by a competition authority.
It should be noted, however, that the Directive also seeks to encourage out-of-court resolutions. The Directive requires member states to suspend the statute of limitations period to allow parties sufficient time to try and reach a consensual settlement without risk of losing procedural rights.
Burden of Proof
Under the standards set out by the Directive, final decisions of a national competition authority will automatically constitute proof before courts of the same member state that the infringement occurred. The Directive does not require recognition of a violation by a national court if another member state finds a violation. However, the national court must find that a final decision by another member state constitutes prima facie evidence that an infringement has occurred.
The Directive states that member states must ensure “full compensation” to those harmed. Full compensation includes actual loss, loss of profits, and payment of interest. In addition, to further facilitate full compensation, the Directive requires member states to allow national courts to estimate harm where it is “practically impossible or excessively difficult to precisely quantify the harm suffered” based on the evidence.
However, the Directive does provide for limits on damages. Full compensation, the Directive states, should not lead to “overcompensation, whether by means of punitive, multiple or other types of damages.” The Directive also requires member states to allow for the passing-on defense, where the defendant can limit claims for damages in whole or in part by showing that a claimant passed the overcharge to its customers.
The Directive is awaiting formal approval by the E.U. Council of Ministers, after which the 28 member states will have two years to implement laws meeting the minimum standards set out in the Directive. Those laws will undoubtedly provide a greater indication of the impact the Directive will have on increased litigation, especially if states exceed the minimum standards.