Rapid development continues as Europe moves towards class actions and new regimes emerge in Asia
A year of accelerating change
Amid ongoing uncertainty over the extent to which antitrust damages claims can be brought in US courts in relation to foreign acts, legislative changes across Europe and Asia will further encourage and facilitate global civil antitrust litigation. The age of antitrust class actions outside, as well as within, North America has arrived.
Continuing uncertainty over bringing foreign claims in US courts
In June 2015, the US Supreme Court surprised many by declining to resolve a closely watched dispute on the application of US antitrust law to foreign acts and companies in the Motorola Mobility v AU Optronics and Hsiung v United States cases. Motorola Mobility involved the sale of cartelised components incorporated in products manufactured in Europe and shipped to the US. The ruling means that claims relating to losses allegedly arising from purchases of products containing the components must be brought, if at all, outside the US.
The legal position of foreign claims remains somewhat unclear due to the requirement under the Foreign Trade Antitrust Improvements Act, or FTAIA, that the anticompetitive conduct must have a “direct, substantial, and reasonably foreseeable effect” on US commerce to fall within the reach of one of the principal US competition statutes, the Sherman Act. A so-called “circuit split”, whereby different circuit courts of appeals have provided conflicting rulings, has emerged, leading to a risk of different outcomes in different US states.
By refusing to hear the appeals, the Supreme Court avoided the opportunity to clarify the issue. How far this will act as a deterrent to potential non-US claimants bringing actions in the US remains to be seen. But in global terms, the US still leads the field in antitrust litigation by a wide margin, and it is unlikely that US courts will see any reduction in overall volumes of cases any time soon.
“As the Supreme Court declined to clarify the requirement of a direct and substantial effect on US commerce, the potential for conflicting outcomes, and claimants “shopping” for favourable venues, remains. While the issue might receive Supreme Court guidance at some point in the future, there remains considerable uncertainty for US companies with global operations in the meantime.”
Michael Lacovara, Partner, New York
Even if the US remains the most significant venue for antitrust litigation, the uncertainty over foreign claims has provided additional impetus to a trend that may see increasing numbers of claims asserted in Europe or Asia instead, potentially closer to their centres of gravity. Jurisdictions in those regions have been developing their private enforcement regimes rapidly over the last year to facilitate and encourage antitrust litigation, including by introducing the first European class action systems.
New ground within Europe as the UK launches its class action regime
On 1 October 2015, the competition provisions of the UK Consumer Rights Act 2015 came into force. The Act introduced several long-awaited changes designed to facilitate antitrust litigation in the UK, including a so-called “opt-out” collective actions regime.
Opt-out regimes allow representative claimants to sue on behalf of the whole of a defined class of claimants regardless of whether or not those parties participate in the claim or are even aware of it, provided they have not actively opted-out. The new UK regime allows opt-out claims for any class members domiciled in the UK, and non-UK claimants can also choose to opt-in to such proceedings. The system is accompanied by a collective settlement regime which will allow for the mass resolution of class claims, both before and after the start of litigation.
Combined with other changes aimed at strengthening the UK’s specialist antitrust litigation tribunal, the new regime will have a profound impact on antitrust litigation. The UK courts continue to take a broad approach to jurisdiction in cartel follow-on damages claims, and the costs rules are claimant-friendly, meaning that many claimants in European cases choose to litigate in the UK. They can now do so on an opt-out collective basis. It is no coincidence that more US firms specialising in bringing antitrust class action claims have set up or expanded in London in recent months.
But there is a temporary snag. An unexpected transitional provision in the new rules may mean that many collective actions relating to infringing behaviour that took place before 1 October 2015 cannot be brought for some time. And cases where the conduct precedes that date, but where the regulators reached no finding of infringement, may not be able to be brought at all. It is possible that 2016 will see claimants seeking to find alternative means to bring group actions or, perhaps, to challenge the apparently limiting scope of the provisions.
“Despite the initial growing pain of the transitional limitation rules, it is clear that the UK competition litigation landscape has fundamentally changed. Competition damages actions were already common here, but the introduction of collective proceedings and opt-out actions are game-changers. Expect to see the UK becoming a hub for the bringing of such claims within Europe and for the amount of competition litigation in the courts to surge.”
Mark Sansom, Partner, London
The rest of Europe gets tough too
The UK is not the only European country to have implemented or be planning reforms. Spain and Portugal have opt-out regimes, albeit of a more limited nature than the UK’s. France, Italy and Belgium have recently adopted new opt-in collective redress regimes. The Netherlands, a jurisdiction where many antitrust related civil damages claims are brought through the use of special purpose claim vehicles (SPVs) is also revising its Dutch Mass Settlement Act to make this opt-out settlement regime more attractive for claimants and defendants. (SPVs are companies which may claim damages in their own name and which are often backed by professional investors.)
Moreover, new and tougher legislation will come into force in 2016 that will encourage and facilitate the bringing of antitrust damages actions throughout Europe. Each of the 28 EU Member States has until 27 December 2016 to implement the EU Antitrust Damages Directive into national law. The Directive aims to facilitate the bringing of antitrust damages claims by harmonising some of the rules and imposing minimum standards on matters such as the availability in litigation of document disclosure.
“This Directive has the potential to transform fundamentally the antitrust litigation culture in Europe by requiring many Member States to introduce wide-ranging changes to their domestic legal systems. For example, the Directive will standardise limitation periods, require Member States to introduce disclosure regimes and introduce a rebuttable presumption that cartels caused harm to claimants.”
Onno Brouwer, Partner, Amsterdam and Brussels
The new regime is expected to lead to a significant increase in the number of competition related claims across Europe and claimant antitrust firms have moved quickly to capitalise on the opportunity.
Asia: accelerating enforcement and litigation across the region
The recent introduction of the Hong Kong Competition Ordinance is considered likely to increase the level of follow-on antitrust litigation, adding to an already vibrant antitrust litigation scene in mainland China. With other jurisdictions also having the tools in place to allow claimants to bring antitrust damages actions, Asia looks set to become the next region to transition to a more litigation-centric model (see further Theme 9).
Looking ahead to 2016:
Given the rapid and important developments in 2015, there are many issues to watch in 2016:
- US: In light of the Supreme Court’s reluctance to rule definitively on the issue, companies with overseas operations will face continuing uncertainty as to whether their foreign operations could be considered to have a “direct, substantial, and reasonably foreseeable effect” on US commerce so as to risk facing US claims. Careful analysis will be required.
- UK: The new UK collective proceedings regime will be tested. It is likely that claimant firms will challenge the transitional rules to seek the right to bring “standalone” claims (without the backing of a regulatory infringement decision) where the cause of action arose before 1 October 2015. The first collective actions may be brought, but are likely to become mired in satellite procedural litigation around the class certification process.
- EU: The Damages Directive will be implemented across Europe, but national differences will remain. Although the intention of the Directive is to set out minimum standards, the speed, quality and extent of implementation across the EU will vary. It is likely that those jurisdictions that are popular venues for litigation now (Germany, the Netherlands and the UK, in particular) will remain the most popular locations under the new rules. But the volume of cases will increase, slowly but surely, everywhere.
- Asia: With new laws and tougher enforcement, litigation is likely to accelerate across the region (see further Theme 9).
“In light of fast-moving developments in this area, businesses involved in the early stages of investigations by antitrust regulators will need to assess their damages exposure on an evolving basis. This will involve monitoring developments in more and more jurisdictions and being prepared to defend claims across the globe.”
Jon Lawrence, Partner, London