New Danish act on actions for damages for infringements of competition law On 29 November 2016, the Danish Parliament adopted a new act on actions for damages for infringements of competition law. The act implements EU Directive 2014/104/EU, which prescribes rules governing actions for damages for infringements of the competition law provisions of the Member States and of the European Union.
The object of the act
The overall object of the act is to support effective competition by ensuring that the competition law rules concerning prohibitions against anti-competitive agreements and abuse of a dominant position under both national and EU competition law work in practice.
These rules are essentially enforced by the competition authorities (and the Danish Public Prosecutor for Special Economic and International Crime). In order to give the rules full effect, the act seeks to improve the possibilities for consumers, undertakings and public authorities to claim damages before the courts and thereby encourage effective competition. The risk of actions for damages may at the same time have a preventive effect.
Private law enforcement may, however, not take place at the expense of the authorities' public enforcement of the rules. Thus, at the same time the act seeks to ensure that the competition authorities can effectively enforce the competition law rules, inter alia, through information and assistance concerning infringements of competition law rules from natural and legal persons that have taken part in the infringements. Information concerning infringements and assistance from such persons constitute an important tool in connection with the competition authorities' enforcement of for instance the prohibition against cartels, which are often secret and thus difficult for the authorities to uncover.
The underlying directive has been under way for some time, inter alia, due to the balancing of the considerations in respect of public authorities' enforcement of the competition law rules and the injured party's private law enforcement of the rules.
Contents of the act
The act contains both substantive and procedural rules governing actions for damages for infringements of the competition law provisions.
The substantive rules concern the scope of application of the act, the right to full compensation, joint and several liability, passing on overcharges on any level of the supply chain, presumptions that cartel infringements cause losses, the effects of consensual settlements on subsequent actions for damages and limitation periods.
The procedural rules include definitions and rules governing disclosure of evidence, including disclosure of evidence in the file of a competition authority, the significance of the competition authorities' and the courts' final decisions in respect of making up the harm suffered, postponement of the action for damages for up to two years due to consensual dispute resolution in respect of the claim and the possibility of bringing class actions for damages.
The act implies that the same rules apply substantive and procedural to actions for damages for infringements of competition law, regardless of whether the Danish competition law rules or the EU competition law rules have been infringed.
The directive implies that similar rules apply in other EU Member States at least in relation to the actions for damages for infringements of EU competition law and national competition law, when such actions are heard in the same case and in parallel with EU competition law. In the future, it will therefore in connection with actions for damages concerning such infringements be less obvious to "forum shop" based on which Member State's rules are most favourable.
Material changes as a result of the act
The new act on actions for damages for infringements of competition law implies several material changes compared to the present state of law.
The act sets out that any natural or legal person including both direct and indirect purchasers that have suffered harm due to an infringement of competition law is entitled to full compensation for the harm suffered.
As opposed to the basic rule under the Danish Interest Act, interest accrues on the claim for damages already from the time when the damage occurred.
Another change compared to the present rules concerns the burden of proof for making up the loss suffered due to a cartel infringement. According to the new rules, there is a presumption that cartel infringements cause harm, although the infringer has the possibility of disproving this presumption. Under applicable law it is the clear starting point that it rests with the injured party to prove that a loss has been incurred as well as the size of the loss.
The limitation period also changes compared to the previously applicable rules. In the future, the general limitation period will be five years instead of three years. According to the applicable rules, the limitation period would be interrupted, inter alia, if the injured party filed a complaint with the
Side 3 Competition and Consumer Authority and the complaint would be included in the authority's consideration of the case. With the new rules, the limitation period is, inter alia, interrupted for all actions for damages for infringements of the competition law provisions, while a competition authority initiates investigations of, takes steps to investigate or pursues the infringement of competition law that the action for damages concerns. In the future, the interruption will affect all potentially injured parties in relation to the infringement in question and not solely the injured party, who has filed a complaint with the competition authorities. The absolute limitation period continues to be 10 years.
The act implies that it becomes easier for indirect purchasers to prove that an overcharge by the infringer has been passed on by the direct purchaser and that the indirect purchaser has thereby suffered a loss.This is the situation if, for instance, manufacturers of a product participate in a cartel. The manufacturers sell the product to distributors (direct purchasers), who resell it to the consumers (indirect purchasers).
The new act establishes that an indirect purchaser claiming damages, has the burden of proof as to whether and to which extent an overcharge has been passed on to the indirect purchaser, considering that it is commercial practice to pass on price increases to subsequent levels in the supply chain. The indirect purchaser is deemed to have proved that an overcharge has been passed on, if the indirect purchaser has proved that 1) the infringer has infringed competition law, 2) the infringement has implied an overcharge in relation to the infringer's direct purchasers, and 3) the indirect purchaser has purchased the goods or services that are the object of the infringement or has purchased goods or services that derived from or contained them. This rule of evidence, however, does not apply, if the infringer can prove that the overcharge has not, wholly or partly, been passed on to the indirect purchaser. Under previously applicable law it was for the injured party to prove that a loss had been suffered, that the loss was of a certain size and that passing on of an overcharge had taken place.
With the new act a number of other special rules are also introduced; for instance in respect of reduced joint and several liability for small and medium-sized enterprises and immunity recipients. These special rules deviate from the initial basis that the infringer is jointly and severally liable, so that the injured party can claim full compensation from any tortfeasor, until the injured party has been fully compensated for its loss.
The act also introduces, inter alia, special rules governing the effects of settlements in relation to later actions for damages, concerning disclosure of evidence included in a competition authority's file, and concerning the submission of evidence, which has been obtained through access to a competition authority's file.
Entry into force
The act enters into force on 27 December 2016. The substantial provisions of the act do not apply to claims for damages as a result of infringements of competition law committed prior to this date. For such infringements, the previously applicable rules apply. Infringements commenced prior to 27 December 2016 and which continue after this date, will constitute a continued violation, which in its entirety must be processed according to the new rules.
The procedural provisions of the act also apply to actions for damages brought before a court after 25 December 2014, at which date the Directive was adopted.
Significance for actions for damages for infringements of competition law
In recent years, the number of actions for damages brought as a result of infringements of competition law has been increasing. The object of the new act is to render it easier for the injured party to claim damages. Increased focus on this area in conjunction with the act on actions for damages for infringements of competition law is expected to imply an increase in the number of cases.
All EU Member States must implement the Directive governing actions for damages for infringement of the competition law provisions no later than 27 December 2016. It appears, however, that a number of countries have not yet come that far in the legislative process that they will be able to comply with this time-limit.