Opportunities and challenges for businesses defending claims in Asia, Europe and the US
Co-ordinated multijurisdictional antitrust litigation: the new normal?
Last year saw continued growth of multijurisdictional – often global – antitrust litigation, fuelled by the introduction of new laws and the emergence of potent new class action regimes.
The number of jurisdictions giving rise to a credible threat of antitrust enforcement or damages claims continues to rise, with regions such as Eastern Europe and South America – previously blind spots to many potential defendants – having increasingly mature systems.
The established multijurisdictional plaintiff firms are increasingly working alongside local firms in these jurisdictions to bring test bed claims – for example to probe the disclosure that may be obtainable from the defendants – as precursors to larger actions in more established venues.
And increasingly, those bringing claims are arbitraging between potentially available jurisdictions and applicable laws, targeting those courts where wide or early disclosure can be obtained, or applicable laws that confer an advantage on limitation or other grounds.
These trends increase the importance of assessing at an early stage the merits of running jurisdiction challenges (including ‘torpedo’ actions seeking to seize the courts in a more favourable jurisdiction, thereby barring actions in other places) or limitation arguments, including arguments that may arise by pleading the applicability of a foreign law. More than ever, the mindset of the antitrust litigator must be truly international.
Continued rise of class actions
Antitrust class actions are expanding globally beyond the traditional common law jurisdiction strongholds of the US, Canada and Australia.
The most high-profile new system is the UK’s antitrust-claims-only class action regime, introduced in late 2015. While restrictive transitional rules meant that a number of waiting claims had to be redrawn, litigation is now starting to flow. The most eye-catching claim, an opt-out interchange fee consumer claim against Mastercard for over £14bn, is the largest damages claim ever brought in the UK courts. According to public statements by claimants, further large claims are expected in relation to the trucks cartel that was recently sanctioned by the European Commission. These early claims will test the scope of the regime, in particular on the extent to which potentially disparate claims share sufficient common issues to be certified as a class action, and on what funding arrangements will be deemed acceptable.
A potentially important new Dutch opt-out class action regime, global in scope, is being debated by the Dutch parliament, which would accompany the significant mass settlement regime already in place in that country. And in European jurisdictions, such as France, Belgium, Italy and Austria, where existing formal class action mechanisms exist but are limited, claimants are increasingly using creative approaches to bring claims, such as by collecting clients through claims websites.
Israel continues to be a class action-heavy jurisdiction, with multiple antitrust class actions filed in ongoing global cases, in parallel with similar claims in other jurisdictions. Where claims are brought on an opt-out basis on behalf of end consumers, the potential exposure value of these claims can be eye-watering.
Implementation of the EU Antitrust Damages Directive will encourage European claims
After a two-year wait, the EU Antitrust Damages Directive was to be implemented into the national laws of all 28 EU member states by the end of 2016, although some countries are late in doing so. The Directive is designed to facilitate antitrust damages litigation by providing minimum standards on a range of matters such as the availability of document disclosure, limitation rules, and the treatment of arguments concerning the pass-through of losses and the disclosure of whistle-blower leniency materials.
There are likely to be a number of questions as to the interpretation of the Directive’s provisions, which will give rise to national litigation and references to the Court of Justice of the European Union (CJEU). In combination with the growing number and global reach of plaintiff firms, the increasing recognition by corporates of the existence of a duty to consider bringing antitrust claims, and pressure from regulators on regulated entities to do likewise, it is likely that there will be a further upturn in antitrust litigation. This will be fuelled by the rapidly increasing range of litigation funding options, which are now at the cutting edge of sophistication in Europe.
Even though the EU Directive and any member state law transposing it into national law may not have retroactive effect, courts might still be guided by it to some extent as far as the interpretation of current law is concerned. This, in combination with ever more claimant activity in Germany, will mean that the legal landscape might look very different next year. We will have to watch that space.
Tobias Klose, Partner, Rhineland
US courts will continue to wrestle with the application of US antitrust law to foreign conduct
Sherman Act damages claims were excluded in In re Refrigerant Compressors Antitrust Litigation on the basis that the cartelised product was purchased overseas, incorporated into a finished product overseas, and only then sold into the US as a finished product. However, in In re Capacitors Antitrust Litigation the same claims were allowed to proceed. Such discernible splits between courts in different circuits are likely to result in increased forum shopping by claimants until the Supreme Court squarely addresses the issue of which claims are in fact excluded from private damages actions by the Foreign Trade Antitrust Improvements Act.
International ‘comity’ emerged as a potential defence in cartel claims when the Second Circuit Court of Appeals vacated a $147m award against Chinese vitamin C manufacturers on the basis of statements made by China’s regulator, MOFCOM, in an amicus brief. However, the US courts are likely to apply this defence narrowly.
Meanwhile, the availability of private damages to financial services claimants has been the subject of recent decisions. Following the Second Circuit’s reversal of a district court decision dismissing LIBOR claims, courts have allowed financial services claims to proceed, resulting in very material settlements. The often very significant sums transacted in financial services areas create risks to the defendants, such that in some cases settlements have occurred soon after, and in some instances before, courts have ruled on motions to dismiss.
Although the attractiveness of trebled damages and broad global discovery will maintain the US courts as a popular choice for claimants’ counsel, the limited scope of extraterritorial claims in the US courts requires global risk assessment and strategic planning before the first claims are filed.
Richard Snyder, Counsel, Washington DC
The impact of political challenges on antitrust litigation
Broader geopolitical developments will inevitably impact on the evolution of antitrust laws, including antitrust litigation.
Post-Brexit, whenever that may be, the strong view of antitrust plaintiff firms is that they will continue to bring claims in the UK for pan-European losses, and that there is no legal or other barrier to doing so. However, it is likely that, over time, EU and UK competition litigation procedures and laws will begin to drift apart, leading to a greater likelihood of parallel litigation.
In the short term, there appears to be a rush by claimants to bring EU-wide damages claims in the UK before the rules on jurisdiction and the binding effect of EU Commission decisions may change. But claims will be able to be brought on the basis of such EU decisions for many years, given the delay until Brexit takes effect and the lengthy UK limitation period after that. And even in the event of a ‘hard’ Brexit, the common law rules on jurisdiction and recoverability of non-UK losses that would come into play are if anything wider in scope than the current provisions. Claimant firms are well aware of this, and firmly intend to continue bringing claims in the UK.
Mark Sansom, Partner, London
Looking ahead in 2017
As antitrust litigation continues to increase, the key focal points in 2017 are expected to be:
- EU: the meaning of provisions in legislation implementing the Damages Directive will likely be subject to early challenge across the EU. Suggestions for a collective redress mechanism at EU level may see their revival;
- UK: far from signalling a decrease in competition damages claims in the UK courts and Competition Appeal Tribunal, including in respect of EU losses, Brexit may even increase them. The new collective actions regime will be tested, shedding light on how any certification criteria are to be met for claims to proceed on a collective basis; and
- US: application of antitrust laws to foreign conduct will remain a key concern in many cartel matters and it may not be resolved until a Supreme Court ruling on the issue.