The EU Council of Ministers has signed off on the Directive on Antitrust Damages Actions (the Directive). Both the outgoing and incoming Competition Commissioners seem rather pleased with the first piece of EU legislation in the field of private enforcement of competition law. Ex-Commissioner Joaquin Almunia recently commented that the Directive was the most important legal initiative he launched during his term. Commissioner Margrethe Vestager stated in the Commission’s formal press release that she is “very pleased that it will be easier for European citizens and companies to receive effective compensation” as the result of competition law infringements.
The final text does not stray too far from the text that was proposed as part of a package in June 2013 (see our initial briefing). Once the Directive is published in the EU Official Journal, Member States will have two years (and 20 days) to transpose it into national law.
Below, we look at some of the more interesting aspects of the Directive: (a) access to evidence; (b) compensation and passing-on defense; (c) joint and several liability; (d) national decisions; and (e) statute of limitations.
A. Access to Evidence
One of the major hurdles for plaintiffs in antitrust damages actions is access to evidence. Antitrust claims often require disclosure of large amount of facts and economic data that are most commonly held by defendants, i.e. the companies accused of collusion or abusing their preeminent market positions. The Directive, taking into account the Court of Justice’s ruling in Pfleiderer, provides that as a general rule, national courts must conduct a proportionality test when they decide whether to rule in favor of a plaintiff’s request that certain evidence be disclosed by (a) defendant(s).
According to the Directive, the proportionality test must take into account, among other things:
- How well the claim is supported by available facts and evidence
- The scope and cost of disclosure
- Whether the requested evidence contains confidential information, and what can be done to protect such information
- The existence of legal professional privilege
- Whether the request focuses on specific evidence given to a competition authority
As the above factors suggest, plaintiffs, relying on all of the available evidence, will need to come up with a well-articulated claim that they have suffered harm as a result of an antitrust wrong committed by the defendant(s). They will need to limit the scope of any request for disclosure to what is necessary to prove their claims and judges will need to take appropriate steps to protect business-sensitive information and legal privilege. If the requested evidence cannot be produced by the defendants or a third party and has been collected or received by a competition authority (e.g., in the context of prior infringement proceedings), the court may request the investigating competition authority to disclose that evidence from its administrative file.
The Directive then defines categories of evidence and puts limits to its accessibility. In particular, the following information may be disclosed only after the competition authority has adopted a decision or otherwise closed its proceedings:
- Information the defendant prepared specifically for the competition authority’s proceeding
- Information the competition authority has created and sent to the parties involved in its proceeding
- Settlement submissions that have been withdrawn
National courts may never order the disclosure of (i) leniency statements or (ii) settlement submissions. However, if only parts of a document are (i) or (ii), the remaining part of the document may be disclosed. Plaintiffs that question whether a document is truly a leniency statement or a settlement submission may ask the court to confirm that it is one of the two.
B. Compensation and Passing-On Defense
Victims of infringement of competition law should be put in the positions they would have been had competition law not been infringed. Plaintiffs, both direct and indirect purchasers, have the right to be compensated for their actual loss and loss of profit, plus interest. The Directive is quick to state that plaintiffs should be fully compensated but not overcompensated, particularly through punitive or multiple (such as treble) damages. As part of its attempt to prevent overcompensation, the Directive permits a defendant to invoke a passing-on defense. The defense is that the plaintiff passed on part or the entire overcharge to the next party in the supply chain.
C. Joint and Several Liability
The Directive’s final text includes a provision in the article on joint and several liability that makes an exception for small or medium-sized enterprises (SMEs). If an SME infringes competition law, it is liable only for damages suffered by its own direct/indirect purchasers and not by other cartelists’ direct/indirect purchasers if:
- The SME’s market share was less than 5% the whole time that it was infringing competition law
- Applying the normal rules of joint and several liability would jeopardize the SME’s economic viability and cause its assets to lose all their value
The above exception does not apply if: (i) the SME was the cartel’s ringleader; (ii) it coerced other undertakings to join the cartel; or (iii) the SME has previously infringed competition law.
Under EU and national competition laws, the companies who are the first to confess and provide details of their participation in cartels are entitled to immunity from fines. The Directive provides a bonus to immunity recipients by carving them out of joint and several liability. Specifically, while immunity recipients are jointly and severally liable for damages suffered by their own direct/indirect purchasers, they are liable for damages suffered by other injured parties only if those injured parties cannot be fully compensated by the other cartelists.
D. National Decisions
Once a national competition authority (NCA) issues a decision that cannot be or can no longer be appealed, or the NCA’s decision has been through the judicial process to the extent possible, the decision becomes a “final decision.” As a result, any finding that the defendant infringed competition law is final. This means that the question of whether the defendant infringed competition law cannot be re-litigated in that NCA’s judicial system as part of the damages action. The Directive also calls for a certain level of recognition of final decisions among Member States. At a minimum, the national court of a Member State should consider a final decision of another Member State’s NCA as prima facie evidence that the defendant infringed competition law.
E. Statute of Limitations
The statute of limitations to bring an action for damages must be at least five years. The clock does not begin to run until (i) the competition law infringement has stopped and (ii) the plaintiff knows or can reasonably be expected to know:
- The identity of the infringer
- About the infringer’s behavior and the fact that it constitutes an infringement of competition law
- That the infringement of competition law caused him harm
The statute of limitations is suspended/interrupted if competition authorities take action in relation to the infringing behavior. The suspension must last for at least one year after the infringement decision becomes final or the proceedings are otherwise terminated.
EU antitrust law is no longer predominately an administrative affair. It has now clearly entered the court room. Moving forward, every cartel or abuse of dominance defense strategy will need to assess the undertaking’s exposure to civil damages and how to manage them. The Directive includes an article that specifically deals with how out-of-court settlements affect subsequent actions for damages. Among other things, if a defendant settles its claims with a plaintiff, non-settling defendants will not be able to recover contribution from that settling defendant for the remaining claim. Therefore any defense strategy will need to include:
- The potential additional benefits that may flow from leniency and/or settlement with competition authorities (e.g., limiting the scope of the infringement)
- The potential additional benefits from immunity status, which puts limits on joint and several liability
- An identification of where affected sales were made and to whom
- Whether there is scope for out-of-court settlement, including global settlements