Individual litigants in many Member States (“MS”) currently face a number of procedural obstacles and practical difficulties in seeking compensation at national level for breach of the EU antitrust rules. In June 2013, the European Commission (the “Commission”) proposed a draft Directive specifically aimed at removing these existing barriers and facilitating the private right of aggrieved parties to seek and obtain compensation for such breaches (the “Draft Directive”).
Almost one year later, on 17 April 2014, the European Parliament adopted a compromise text, in substantively the same form as the Draft Directive, which will now be subject to the formal approval of the other EU co-legislator; the European Council. Once officially adopted, the MS will have two years to implement the provisions of the Draft Directive into their national law.
This article briefly considers the background to the Draft Directive and discusses some of the more salient measures adopted by the European Parliament in April, as well as their likely consequences.
The right of private enforcement
The legal right of private individuals (which includes both citizens and undertakings) to seek damages for breach of the EU antitrust rules stems from the fact that Arts. 101 and 102 of the Treaty of the Functioning of the European Union (“TFEU”) are ‘directly effective’, and thus create rights that can be directly enforced by individuals before the national courts of the MS. It follows, therefore, that any individual has the right to claim compensation for harm caused as a result of breach of the EU antitrust rules.
Such damage claims for breach of Articles 101 and 102 constitute an important part of the so-called “private enforcement” of the EU antitrust rules.
Background to the Draft Directive
Back in 2008, the Commission’s White Paper on damages actions for breach of the EU antitrust rules established a number of concrete policy proposals which were founded on the assumption that the overall enforcement of the EU competition rules is best guaranteed through “complementary” public and private enforcement.
The awarding of compensation for damage by means of private enforcement lies exclusively within the domain of national courts and of national civil law and procedure (and thus outside the field of competence of the Commission and national competition authorities
(“NCAs”)). This dichotomy has given rise to a number of issues which have somewhat frustrated the private enforcement of the EU antitrust rules at national level, including:
- the existence of significant differences between MS regarding the private enforcement of the EU antitrust rules, which risks giving rise to an uneven playing field for undertakings in the Internal Market and encourages the practice of “forum shopping”; and
- the existence of various procedural shortcomings in the national rules of MS, including rules concerning evidence/disclosure, the status of decisions of the NCAs, and applicable limitation periods.
These systemic weaknesses have meant that, prior to now, Arts. 101 and 102 TFEU have not had their intended effect of providing an appropriate redress mechanism for aggrieved parties that have suffered harm as a result of anti-competitive practices or behaviour in all MS.
Summary of the main principles of the Draft Directive
The Draft Directive will apply where an NCA or national court finds a simultaneous breach of both the EU and national competition law rules.
Set out below is a brief summary of some of the key provisions of the compromise text adopted by the European Parliament in April 2014.
A. Disclosure (Arts. 5, 6 and 7)
The Draft Directive facilitates easier access to evidence that is considered necessary to prove a claim or defence in actions for damages. The disclosure of precise and narrow categories of evidence will also be possible, subject to the principle of proportionality and the need to ensure the protection of confidential information.
In order to ensure that the disclosure of evidence does not jeopardise the public enforcement of competition rules, the Draft Directive also establishes the following EU-wide exceptions to such disclosure:
- the disclosure of leniency statements; and
- the disclosure of settlement submissions.
In addition, the Draft Directive provides that certain specified information produced in public enforcement proceedings may only be disclosed after the corresponding investigation has been closed.
Paradoxically, the Draft Directive will actually have the effect of limiting the application of the law of disclosure in England and Wales. As noted above, the Draft Directive proposes to exempt from the mandatory disclosure requirement those corporate statements submitted by an undertaking availing of the leniency procedure. However, courts in England and Wales are currently granting disclosure in respect of material forming part of leniency proceedings. For example, the High Court recently ruled in favour of disclosing limited extracts of the documents considered to be leniency materials, despite observations made by the Commission to the High Court tending towards not disclosing such leniency materials.
B. Probative effect of national decisions (Art. 9)
The Draft Directive provides that a final infringement decision of an NCA will constitute full proof before civil courts in the same MS that the infringement occurred, and will constitute at least prima facie evidence of such infringement before the courts of another MS.
C. Clear limitation period rules (Art. 10)
Under the Draft Directive, aggrieved parties are granted at least 5 years to bring damages claims at national level, starting from the moment when they knew or would reasonably be expected to have known that they had suffered harm from an infringement. This period will be suspended or interrupted if an NCA commences infringement proceedings, so that aggrieved parties can decide to wait until the public proceedings are over. Once the decision of an NCA becomes final, an aggrieved party will have at least one year to bring appropriate damages actions.
D. Legal consequences of “passing-on” of harm (Arts. 12 – 16)
The Draft Directive expressly provides for the offending party to invoke the defence of “passing-on”. This allows for the amount of compensation payable by an infringing party to its “direct” customers to be reduced by the amount of loss that these customers may have, in turn, “passed-on” to their customers (the “indirect” customers of the infringing party).
The Draft Directive also establishes a rebuttable presumption that such pass-on actually occurred. Such a presumption aims to take account of the commercial practice that price increases are actually passed on down the supply chain and address the difficulty that indirect customers face when seeking to prove that it actually suffered such pass-on.
The Draft Directive also creates a presumption that cartel infringements cause harm and provides that the actual amount of loss suffered by an indirect customer is to be estimated by the national court, rather than being quantified by the indirect customer. However, this perceived advantage may be of little practical value since it may be assumed that the process undertaken by a court to quantify the indirect customer’s loss will, to at least some degree, require the indirect customer to elicit satisfactory evidence of such losses.
Further, the establishment of a rebuttable presumption of loss may lead to the taking of multiple actions for damages by parties with conflicting interests at different levels of the supply chain. While the Draft Directive does refer to the need for national courts to “take due account” of related actions for damages by such parties, this does not preclude the possibility of courts in the same or different MS handing down irreconcilable judgments in separate proceedings.
In consequence, the Draft Directive fails to adequately address the risk that the infringing party may be faced with the prospect of over- compensating injured parties for the harm actually caused, despite the requirement that MS establish “appropriate procedural rules” to prevent any such over-compensation. There is also a theoretical probability that neither the direct nor the indirect purchasers are fully compensated if, for instance, one court finds that the overcharge was passed on and the other finds that it was not.
The Draft Directive will remove some of the practical obstacles currently faced by aggrieved parties when pursuing private enforcement actions. Its enactment by the EU legislator is therefore likely to lead to an increase in the number of successful private actions seeking compensation for breach of the EU antitrust rules.
Concerns do, however, exist with regard to the practical impact of a number of the provisions of the Draft Directive, including the following:
- the provisions on the disclosure of evidence for private enforcement actions will have the paradoxical effect of actually limiting the application of the law of disclosure in England and Wales, where courts are currently granting disclosure in respect of material forming part of leniency proceedings; and
- the significance of the rebuttable presumption that loss is passed- on down the supply chain could be limited by the requirement that indirect customers establish that the infringement in question actually occurred, as well as elicit satisfactory evidence to assist the national courts in quantifying the loss suffered.