On November 10, 2014, the European Council formally adopted the long-awaited EU Directive on rules governing private antitrust damage actions (the Damages Directive). This requires Member States to align their procedural rules for antitrust damages actions and is part of a package of measures aimed to facilitate antitrust damage actions in the EU. These measures are combined with a number of safeguards, which, among other things, aim to minimize the risk of frivolous claims and offer protection to successful immunity applicants as regards disclosure.
The European Commission originally proposed the legislation in June 2013 and, after much debate, representatives of the European Parliament and Member States’ governments agreed the text in March 2014. The approval of the European Council was the final stage in the EU legislative approval process. The Directive’s provisions now need to be implemented in the laws of the Member States before December 26, 2016.
The Directive introduces a number of profound changes to the laws of Member States as regards both litigation and enforcement of competition law in the EU.
Member States are required to introduce rules that will allow national courts to order from a claimant, defendant, national competition authority or third party disclosure of reasonably available facts and evidence to support claims. In order to protect defendants against excessively broad disclosure requests, such disclosure must be proportionate and the court will examine the extent to which the claim (or defense) is affected by available facts and evidence justifying the request for disclosure and the scope and cost of disclosure.
The Directive distinguishes between different types of documents. First, it protects both settlement submissions and the text of leniency statements from disclosure in civil actions, in order to maintain the effectiveness of the settlement and leniency regimes. Second, the Directive provides that evidence prepared specifically for the purposes of a proceeding before a competition authority, or information drawn up by the authority and sent to the parties is in principle accessible in civil actions only after the authority has closed its proceedings. Third, the Directive specifies that Member States must ensure that any documents not falling within the first two categories can be disclosed at any time.
The provisions relating to disclosure are arguably the most controversial, though they will at least address some of the profound differences that exist among the Member States’ systems in this regard. It should be noted, however, that the Damages Directive will not lead to the complete harmonization of disclosure rules since the requirements are stated to be a minimum, and some Member States may choose to adopt (or may already have) wider disclosure rules.
Infringement decisions taken by national competition authorities in one Member State will be usable as prima facie evidence in damages actions in any other Member State where an infringement of competition law has occurred and will be treated as providing legally binding proof of liability in damages actions before national courts in the same Member State.
Joint and Several Liability
Undertakings that have infringed competition law through joint behavior will be jointly and severally liable to all those harmed by their infringement; however, undertakings that have received immunity from fines will be liable to compensate only their own direct/indirect purchasers unless the other undertakings involved in the same infringement are unable to fully compensate the remaining claimants. At present, it is not clear how or when the ability of co-infringers to compensate remaining claimants will be determined.
Courts will apply an automatic presumption that a claimant has suffered harm from cartel infringements and the defendant will bear the burden of rebutting that presumption.
The Directive will require a limitation period of at least five years, and will also provide for a suspension of that period for the duration of any investigation by a competition authority (restarting no earlier than one year after any infringement decision has become final or proceedings are otherwise terminated) or for the duration of any consensual dispute resolution process (thus encouraging consensual settlement). This limitation period will not begin to run until the competition law infringement has ceased and the victim of the infringement knows or can reasonably be expected to have knowledge of the infringement, the harm suffered and the identity of the infringer. Victims will have at least one year to claim damages once a competition authority reaches a final infringement decision.
The Passing-On Defense
The Directive confirms that a defendant can invoke the passing on defense, thereby excluding compensation being paid to those that have passed on to others the whole or part of the overcharge resulting from the infringement of competition law, such as their own customers. The burden of proving that the overcharge has been passed on will rest with the defendant, who can require disclosure from the claimant or third parties. To avoid overcompensation, Member States must ensure that the compensation does not exceed the overcharge suffered at that level, and national courts will have the power to estimate the amount of the overcharge passed on.
The Directive requires each Member State to ensure that full compensation (including loss of profit and payment of interest) may be recovered by victims of competition law infringements where there is a causal relationship between the harm and the infringement. This includes compensation for actual loss and loss of profit, together with payment of interest, which will be particularly important in long-running cartels.
In many Member States, the changes will have a significant impact and, as a consequence, the overall number of follow-on damages claims in competition cases, which has already proliferated in recent years (in particular in the UK, the Netherlands and Germany), is anticipated to increase considerably. It should be noted that a number of Member States are considering additional changes in relation to damages actions, such as the Consumer Rights Bill in the UK and a legislative proposal for collective claims in the Netherlands, which go significantly beyond the minimum requirements of the Damages Directive.
Despite encouraging the harmonization of Member State enforcement regimes, material differences among Member States will continue to exist, which means that antitrust damages claimants are likely to continue to forum-shop for the most litigation friendly jurisdiction. Furthermore, it remains to be seen how these changes will impact Member States in practice; for example, national courts may not, in fact, give much weight to infringement decisions of national competition authorities in other Member States and it is uncertain how national courts will apply the proportionality principle in the context of disclosure requests.
Taken as a whole, the provisions of the Damages Directive are ostensibly claimant friendly and undertakings will be more significantly exposed to risk following a finding of infringement in the EU given the long limitation period.
Directive 2014/104/EU of the European Parliament and of the Council of November 26, 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union: