On 17 April 2014, the European Parliament adopted a directive intended to strengthen the private enforcement of competition law by removing a number of practical and procedural obstacles to damages actions before the national courts.
On 11 June 2013, the European Commission adopted a proposal for a directive on certain rules governing actions for damages under national law for antitrust violations (click here to read the article). The directive adopted by the European Parliament last week aims to strike a balance between public and private enforcement. It needs now only to be officially approved by the Council before publication in the Official Journal of the European Union. Once the directive enters into force, the Member States will have two years to adapt their national laws accordingly.
The directive provides for (i) easier access to evidence, (ii) rules on limitations periods, (iii) the right to full compensation, (iv) a presumption that cartels cause harm, (v) clarification of the passing-on defence and its consequences for direct and indirect purchasers, (vi) clarification of the joint and several liability of infringers (vii) measures to facilitate consensual dispute resolution and settlement and finally, (viii) that decisions of the national competition authorities constitute proof of infringement.
Access to and disclosure of evidence
Disclosure by the parties to proceedings
The directive provides that the national courts should be able to order the defendant or a third party to disclose evidence further to a reasoned justification by the claimant with a plausible claim for damages. The disclosure request should concern specified items or relevant categories of evidence, described as precisely and as narrowly as possible. At the defendant's request, the national court can order the claimant to disclose evidence as well.
The national court will rule on the proportionality of the request, taking into account the plausibility of the claim, the scope and costs of disclosure, whether the information requested is confidential and, if necessary, the arrangements to protect confidentiality. The proportionality test should prevent non-specific searches for information or so-called "fishing expeditions".
In addition, the national court can impose penalties in the event of failure or refusal to comply with disclosure orders, the destruction of evidence, failure to protect the confidentiality of information and violations of the limits on the use of evidence.
Access to documents held by the competition authorities
The directive sets clear limits on the types of documents in a competition authority's file which claimants can access and divides these documents into three categories: (i) a black list (documents which may never be disclosed by the authority), (ii) a grey list (documents which may only be disclosed after the competition authority has closed its proceedings), and (iii) a white list (documents which may be disclosed at any time).
Documents which are protected from disclosure at all times (the "black list") include:
- leniency corporate statements in which the undertaking or a natural person describes to the competition authority its knowledge of a cartel and its role therein, in order to obtain immunity from or a reduction in fines; and
- settlement submissions, in which an undertaking acknowledges an antitrust violation to the competition authority and its liability for the violation with a view to an expedited procedure.
Certain documents can be disclosed after the competition authority has closed its proceedings (the "grey list"), i.e.:
- information prepared by a natural person or legal entity specifically for the purpose of proceedings before a competition authority, typically documents prepared for the defence (e.g. a response to a request for information or a reply to a statement of objections);
- documents drawn up and sent to the parties by the competition authority in the course of its proceedings (e.g. requests for information, statements of objections, etc.); and
- withdrawn settlement submissions.
Once the competition authority has closed its case, these documents can be made available to claimants, even pending an appeal against the authority’s decision.
Documents in the competition authority's file which are not covered by either the black list or the grey list can be disclosed at the claimant's request in an action for damages (the "white list") (e.g. pre-existing information, or information that would exist regardless of the competition authority's proceedings).
It should be noted that certain documents are protected from disclosure. Such protection is crucial in order not to discourage companies from requesting leniency and seeking settlements, especially since the leniency programme has proved to be the most effective tool in uncovering cartels.
In addition, a request for the disclosure of documents held by a competition authority is subject to a proportionality test, which takes into account the specificity of the request, whether disclosure is requested in the context of an action for damages before a national court, and the need to safeguard effective public enforcement of competition law. The competition authority may submit observations to the national court on the proportionality of the disclosure request.
The national courts can only request the disclosure of evidence by a competition authority where a party or a third party is unable to reasonably provide the requested information.
In our view, claimants cannot circumvent these limitations by requesting defendants or third parties to disclose documents which would appear on the black list or grey list.
It should be noted that, as far as Commission cases are concerned, the directive does not affect Regulation (EC) No 1049/2001 regarding public access to European Parliament, Council and Commission documents. Requests to access these categories of documents on the basis of Regulation (EC) No 1049/2001 are therefore still possible.
The directive clearly leaves less leeway than that provided for by the Court of Justice in a number of recent cartel cases involving access to evidence. In Pfleiderer and Donau Chemie, the Court held that the national courts should, when confronted with a request for disclosure of documents relating to a leniency procedure, weigh the interests of damage claimants to such access against the interest of ensuring the efficacy of leniency programs. However, in view of the differences in procedural and access rules between the Member States, a case-by-case approach of weighing conflicting interests can result in significantly different outcomes, not to mention legal uncertainty. Hence the need for a common set of rules in order to strike a balance between safeguarding the effectiveness of public enforcement tools and allowing private damages claims.
The directive provides that the Member States however remain free to maintain or introduce rules which would lead to broader disclosure of evidence, provided that the documents included on the black and grey lists are never disclosed.
Other rules facilitating damages claims
Effect of national decisions
The directive provides that final decisions of a Member State's competition authority (i.e. decisions which can no longer be appealed) are deemed irrefutable proof of a violation of competition law for the purposes of an action for damages before the national courts of that Member State.
Final decisions of another Member State's competition authority should constitute at least prima facie evidence of a violation of competition law before the national courts. The defendant, however, can still demonstrate that the decision does not prove a violation in the Member State where the claim is brought.
This rule should facilitate claims for damages in cases brought solely before the national competition authorities (and not before the European Commission).
Limitation periods for bringing an action for damages should be at least five years, starting from the time the injured party could reasonably have known of the violation and the fact that it constitutes a breach of antitrust law, the identity of the party (or parties) to the violation, and the harm caused. Further, the limitation period is suspended during an investigation by a competition authority until at least one year after the authority’s decision becomes final and appeal is no longer possible.
Joint and several liability
The Member States must ensure that the parties to violations of competition law are held jointly and severally liable for the loss caused by their actions. Hence, an injured party may seek full compensation for its loss from any infringing party, which need not necessarily be its direct contracting counterparty.
However, in order to encourage leniency applications and prevent leniency applicants from becoming easy targets in damages actions, the directive provides that parties which have been granted immunity from fines by a competition authority can only be sued by injured parties other than their direct or indirect purchasers if the potential claimant is unable to obtain full compensation from the other parties to the violation. Moreover, in the context of a contribution claim, the immunity recipient shall only be liable for the harm caused to its own direct or indirect purchasers.
In addition, small and medium-sized enterprises (SMEs) may under certain circumstances only be held liable for their own direct and indirect purchasers.
Quantification of harm
The directive provides for a rebuttable presumption that a cartel causes harm. With respect to quantification of the harm caused by a cartel, the burden of proof may not be excessively difficult or practically impossible to meet. The court will have the power to assess (or have an expert assess) the harm caused. National competition authorities may, where so requested by the court, assist the national courts with the quantification of damages.
By shifting the burden of proof to defendants, the Commission hopes to facilitate damages claims, since claimants in private damages actions often find it difficult to prove actual harm stemming from a violation of competition law. It should be noted that this presumption of harm does not apply to cases involving abuse of a dominant position.
The passing-on defence and the indirect purchaser presumption
The directive provides that anyone who has suffered harm, both direct and indirect purchasers, should be entitled to compensation.
However, if a direct purchaser claims damages, the directive allows defendants to raise the passing-on defence, if they can prove that the claimant has passed on all or part of the overcharge resulting from the antitrust violation to its customers.
In the case of an indirect purchaser, there is a presumption that the overcharge has been passed on to him or her (and that s/he has been harmed by the overcharge). This presumption shall apply when the violation results in an overcharge for the direct purchaser and the indirect purchaser subsequently acquires goods or services that formed the object of the violation or that derive therefrom.
If damages actions are initiated by claimants from different levels in the supply chain, overcompensation should be avoided. Therefore, the compensation for actual loss at any level of the supply chain may not exceed the overcharge at that level. However, even if the overcharge has been passed on entirely, the direct purchaser may still have suffered a loss, e.g. in the form of lost sales and profits due to the overcharge and the resulting price increase.
These rules are intended to bring indirect purchasers into the equation in damages actions and facilitate damages claims by them.
Consensual dispute resolution
The directive aims to foster consensual dispute resolution (e.g. settlement and remediation) by providing for suspension of the limitation period to bring an action for damages for the duration of the consensual procedure. In addition, the directive provides that, once a settlement has been reached, the claimant can only exert the remaining claim against the settling infringer if it is unable to recover from the other non-settling co-infringers damages corresponding to the remaining claim. In addition, the non-settling co-infringers cannot recover contributions from the settling co-infringer.
The directive aims to ensure the effectiveness of the right to obtain compensation for harm caused by a violation of competition law while optimising the interaction between public and private enforcement. The directive is intended to improve the chances of successful damages claims by the parties harmed by antitrust violations in many Member States.
However, it should be borne in mind that the directive does not contain detailed procedural rules to be adopted in order to guarantee the intended results. Hence, many unforeseen complexities could arise, especially regarding the interplay with existing procedures in Member States, relations between various injured parties and parties to violations and situations arising (e.g. limitation periods) or decisions taken in other Member States.
In any case, the implications of the directive should be carefully assessed, as the violations that are currently under investigation could fall under the new rules in a few years’ time. Companies may therefore wish to already take these rules into account, for instance in assessing whether to request leniency or modify their document-retention policy.
The directive provides that measures transposing the directive into national law shall only apply to damages actions brought before the national courts after its entry into force.
The text of the directive can be found by clicking here.