Legislative changes across Europe will encourage and facilitate global civil antitrust litigation. The age of antitrust class actions outside North America has arrived.
The Current Situation
Competition litigation in the European Union (“EU”) is at a crossroads, especially in the UK, with the Consumer Rights Act 2015 (the “UK Act”) that came into force on 1 October 2015. Among other features, the UK reforms will expand the availability of private damages for anticompetitive conduct, provide more authority to the country's Competition Appeal Tribunal (the “CAT”), and introduce new procedures for pursuing collective actions (similar to U.S. class actions) and settlements. A new EU directive, which all EU members must enact by November 2016, also aims to broaden the avenues for private antitrust remedies throughout the EU.1 The EU Directive on Antitrust Damages Actions (Directive 2014/104/EU) (“Directive”) was signed into law on 26 November 2014, and must be implemented into Member States’ legal systems by 27 December 2016. From a potential claimant’s perspective, the UK Act and the Directive are expected to have a profound impact on private damages actions for competition law infringements at UK and EU levels.
The major reform brought about by the UK Act is the introduction of opt-out collective private damages actions before the CAT. New rules for the CAT (“CAT Rules”) have been implemented in tandem with the UK Act to give effect to the reforms. The Directive makes a number of more minor changes which complement the UK Act’s facilitation of private damages actions, such as strengthening the effect of decisions by national competition authorities, and by introducing a rebuttable presumption that cartels have caused harm to consumers.
The UK Act, CAT Rules, and the Directive all share a common goal of facilitating private damages actions for competition law infringements. The new regime will inevitably have a profound impact on antitrust litigation in Europe. What follows is an overview of future developments that those involved in EU litigation will face as these laws develop.
Likely Future Developments
Time Will Tell: Under s.47B of the UK Competition Act 1998 (as amended by the UK Act), collective proceedings will only be permitted to proceed in the CAT once it has issued a collective proceedings order. A collective proceedings order will only be made by the CAT when it considers that a case raises the same, similar, or related issues of fact or law, and is suitable to be brought as a collective proceeding. The CAT Rules provide guidance as to the factors that will be taken into account by the CAT in determining whether a case is suitable for a collective proceeding, including whether to do so would be cost effective, the nature and size of the class, and whether the claims are suitable for an aggregate award of damages. There are many issues that the CAT will need to determine before certifying a group action when deciding whether to issue a collective proceeding order. The CAT’s interpretation of the UK Act and CAT Rules will no doubt become clearer once initial claims have been raised in the CAT and the first collective proceedings orders have been issued.
The Battle of the Final Infringement Decisions: The Directive strengthens the evidential value of final infringement decisions taken by national competition authorities across the EU. Member states will have to honor decisions from other member states. For example, UK courts will have to honor a decision taken by the French Autorité de la concurrence in providing evidence of an infringement. It is unclear at this stage how exactly this requirement will be translated by other member states in practice. How, for example, would it be translated into UK law, and what evidential weight would the UK courts give to decisions of foreign national competition authorities? It is likely to at least shift the initial burden of proof from the requirement that a claimant prove that an infringement took place to the defendant having to establish that the foreign national competition authority came to an incorrect decision.
Passing on the Pass On Defense to other Jurisdictions: The availability of the passing on defense differs across EU Member States. The Directive contains provisions that will ensure that the passing on defense is available to defendants throughout the EU. The defense applies the proposition that direct customers bringing an action did not suffer all, or any, of the claimed loss because they “passed on” the overcharge to their own customers. The defense applies to an action brought by purchasers of goods that have been subject to an anticompetitive overcharge, when the goods have then resold to resellers further down the supply chain, or to end users. Whether the passing on defense will impact the number or identity of claimants, and how, remains to be seen.
Rebuttable Presumption for Indirect Purchasers: Indirect purchasers will have to bring proceedings against alleged infringers directly for the overcharge that was passed on to them. This can, in practice, be very difficult for indirect purchasers to prove. To address this issue, the Directive introduces a rebuttable presumption that, when a claim is brought by indirect purchasers against the cartelists, it is presumed that the direct purchasers of the goods have passed on the overcharge to the indirect purchasers. The shifting of the burden of proof from the indirect purchasers to the defendants could strengthen the position of indirect purchasers not just at trial, but also in settlement negotiations. This is because any finding in favor of claimants, regardless of the amount of damages awarded, opens the defendants up to potentially having to pay the claimants’ costs. The Directive, however, also contains provisions that aim to ensure that there is no overcompensation, in that the compensation due to the indirect and direct purchasers combined does not exceed the level of the overcharge. How this provision will be carried out among claimants in practice (by agreement or with judicial aid) will be a developing area of law.
Presumption and estimation of harm caused by a cartel: The Directive introduces a rebuttable presumption that cartels cause harm. Therefore, once the existence of a cartel has been established, either by the EU Commission or a national competition authority decision, the burden of proof is then on the defendants to prove that the claimants didn’t suffer any loss. The Directive also provides that courts in Member States will have the power to estimate the level of damages caused by anticompetitive behavior. The courts can also seek assistance from their national competition authorities in order to quantify these damages, and the EU Commission should provide guidance on the quantification of damages at the EU level. This will strengthen claimants’ standing in respect of both trial proceedings and settlement negotiations. However, neither the presumption of harm, nor the Commission or a court’s ability to estimate the level of harm caused by an infringement, is likely to provide any substitute for claimants obtaining their own expert economic advice as to the level of harm suffered. From a practical perspective, the EU Commission and courts will still consider economic evidence from both the claimants and the defendants. Defendants are likely to need their own economic evidence to rebut a presumption of an overcharge or, at the very least, to argue that any overcharge was lower than that contended by the claimants. Therefore, in order to ensure that the agency’s or court’s own estimation of damages is not influenced by one-sided expert economic evidence, claimants are still likely to have to incur the costs of obtaining their own expert economic evidence. Whether this will actually streamline a claimant’s burden of proof will only become apparent after considerable litigation experience.
Disclosure of Evidence: Cartels are, by their nature, secretive. As a result, claimants usually are at a considerable informational disadvantage to defendants when it comes to proving the existence or operation of the cartel. The Directive provides that both claimants and defendants can apply to the EU Commission or court to seek the disclosure of specified documents from the other party or from third parties. Certain categories of information, such as defendants’ leniency statements submitted to the EU Commission or national competition authority, are protected from disclosure in order to protect the effective operation of the leniency procedures. These provisions will have a minimal impact on Member States such as the UK, which already have an established disclosure regime, but it will be a major reform for other Member States that have no existing disclosure regimes. Many Member States will have to overcome hundreds of years of precedent against producing such evidence in order to make such disclosures. How such jurisdictions will advance such changes may directly impact claimant actions in the EU.
The Directive, UK Act, and CAT Rules all share a common goal of encouraging private damages actions for competition law violations, and so could all could clearly be characterized as “claimant friendly.” Whether and how these enactments actually make it easier for claimants to recover for antitrust violations remains to be seen. What is certain is that the next five to ten years of antitrust litigation in Europe will be active and formative under the new regime.