The European Commission's Directorate General for Competition (DG COMP) is finalizing legislative reforms to allow private damages actions to be brought in national courts for antitrust violations. The Commission is likely to publish its final proposal in May 2009. If adopted, the reform will significantly increase the financial risks of infringing the EC competition rules.
Currently in the EU, damages actions are the exception to the rule that government agencies enforce antitrust laws. But if the reform is adopted, any finding of an infringement of the EC competition rules by any antitrust agency in any of the 27 EC Member States could give rise to follow-on damages actions.
Germany already has two recent examples. In 2002, the Federal Cartel Office fined suppliers of cement for participating in a price and quota cartel. The fines amounted to €702 million. Based on the facts that the FCO had uncovered, private plaintiffs sued the alleged cartelists for damages of €113 million. Defendants challenged the plaintiff's standing, but in a ruling in April 2009, Germany's Federal Civil Court found that the claim should be heard. In another case filed in March 2009, suppliers of hydrogen peroxide, who allegedly formed a Europe-wide cartel, were sued for €430 million. The damages action was based on a decision by the EC, imposing fines of €388 million under Article 81 for fixing prices, controlling production and exchanging information. In 2008, the FCO counted over 100 actions involving EC and German antitrust rules.
Germany is one of the very few EC Member States whose national law today facilitates antitrust actions for damages. DG COMP would like to promote "private enforcement" of EC antitrust laws across all Member States. However, as EC Competition Commissioner Neelie Kroes has stated, Europe should avoid "certain excesses" of U.S.-style litigation. Kroes' "balanced solution" has been eagerly awaited since the Commission published a number of controversial policy options in an April 2008 White Paper and the European Parliament endorsed DG COMP's position in March 2009.
At the same time it is preparing a proposal to facilitate private actions for antitrust violations, the EC Commission is considering large scale reform to allow damages actions for any violation of "consumer law." This process is still at an early, pre-legislative stage. In November 2008, the Commission's Directorate General for Health and Consumers (DG SANCO) put forward a Green Paper with several policy options, one of which is class actions.
DG COMP has not been willing to postpone its antitrust litigation reform proposal while DG SANCO's general policy proposals take shape. In a press release following the European Parliament's expression of support for DG COMP's April 2008 White Paper, Commissioner Kroes stated that "the need for a consistent approach does not mean that all areas would have to be dealt with in one single horizontal instrument and that the call for consistency must not unduly delay the development of measures identified as necessary for the full enforcement of EC competition rules."
DG COMP has already prepared a draft proposal on antitrust damages action for review and evaluation by the Commission's Directorates and Services. (The proposal is in the form of an EC Directive. EC Directives have no immediate effect on national law. They set forth a particular result, but give Member States some leeway on the exact rules to be adopted.) The draft EC Directive is confidential but rumored to propose that:
- Claimants be allowed to recoup actual losses and lost profits plus interest.
- "Qualified entities" (i.e., trade and consumer associations) shall have standing, but injured parties shall have the right to "opt out." "Qualified entities" that are certified in one Member State will have the right to pursue their claims in any other Member State. The Commission will maintain a public list of "qualified entities" certified to bring actions.
- Access to evidence shall be improved, but applicants for leniency shall be protected (e.g., corporate statements, settlement submissions).
- Defendants shall be allowed to argue that the plaintiff has passed on the overcharge to its downstream customers and therefore has not suffered any loss that the defendants would have to compensate, with the burden of proof on the defendants.
The exact scope of DG COMP's reform proposal remains to be seen. Whatever is decided, the Directive will mark a major reform of EC antitrust law, with significant effects on any business active in Europe. The Directive will facilitate antitrust litigation in all Member States and also send a clear signal that the Commission encourages parties to seek relief in the courts. As a result, non-compliance with the EC antitrust rules will give rise to a significant risk of damage awards across the European Community, plus litigation costs, in addition to large fines already being imposed by the agencies. Moreover, cartel members will have to carefully consider whether the benefits of seeking immunity by disclosing the cartel to the authorities outweigh the risks in follow-on damages actions once the cartel has been uncovered and fined.