European Commission Takes Step Toward Expanding Private Enforcement of Competition Law But Stops Well Short of Adopting the U.S. Model
After many years of public and private debate, the European Commission (EC) has released a Draft Directive1 aimed at ensuring “that throughout Europe, victims of infringements of the EU competition rules have access to effective mechanisms for obtaining full compensation for the harm they suffered.” At the center of the Draft Directive is the disclosure of evidence (i.e., discovery). If adopted as law, the Draft Directive would grant private claimants access to a minimum amount of evidence necessary to pursue damages actions in national courts, with exceptions for certain information in the files of the EC and National Competition Authorities (NCA). This would be a meaningful change given the significant variance across the Member States in terms of the availability of the disclosure of evidence. In Germany, for example, disclosure from defendants is limited. UK judges, on the other hand, commonly allow disclosure from alleged cartel members. In addition to disclosure, the Draft Directive seeks to harmonize and clarify several key areas of competition law that have been a source of confusion and uncertainty for private litigants, including issues related to statutes of limitations, joint and several liability, and the pass-on defense. Finally, and perhaps equally significant, the Draft Directive avoids the issue of collective redress (i.e., class actions) completely.
The Draft Directive will have no effect unless and until it is adopted by the EU Parliament and the Council of the EU. If adopted, EU member states will then have two years in which to implement the law.
Although the Draft Directive does not reflect a sea change in EU competition law, companies with operations in Europe should be mindful of its implications in the event it is adopted. Specifically, companies may face an increased risk of private litigation in the event they are accused of a competition law violation, or in EU parlance, an infringement. To minimize this risk, companies should implement regular training to avoid and detect possible violations worldwide and have plans in place for responding to an alleged violation should it arise. The immunity and leniency regimes in the EU, even more than the amnesty program of the DOJ in the United States, provide significant economic incentives to early corporate disclosures of misconduct.
A. Minimum Disclosure of Evidence
The Draft Directive seeks to “ensure that in all Member States there is a minimum level of effective access to the evidence needed by claimants and/or defendants to prove their antitrust damages claim and/or a related defence.” Subject to the specific exceptions for information in a competition authority’s file (discussed below), under the Draft Directive, a national court may order disclosure of information “where a claimant has presented reasonably available facts and evidence showing plausible grounds for suspecting that he, or those he represents, has suffered harm caused by the defendant’s infringement of competition law.” In deciding whether to order disclosure, the court must also consider the legitimate interests of all parties involved.
B. Prohibition on Disclosure of Certain Information and Documents
To balance the needs of private claimants with the interests of effective public enforcement, the Draft Directive provides specific rules on the availability of information that is in the possession of defendants or the EC or an NCA. These rules are significant because this information may be some of the most valuable information to a private claimant, and conversely, some of the most damaging information to a defendant. In particular, the Draft Directive provides for:
- Absolute protection from disclosure of leniency corporate statements and settlement submissions.
- Temporary protection of documents that parties have prepared in connection with public enforcement proceedings (e.g., a party’s reply to a request for information) or that a competition authority has prepared in the course of a proceeding (e.g., statement of objection). Disclosure of this information is available only after the competition authority has closed its investigation.
- Documents falling outside of these categories (such as business records obtained in the investigation) can be disclosed by court order at any time, but in deciding whether to order disclosure, the Draft Directive counsels courts to consider whether the disclosure of such documents would deter public enforcement activities.
C. Collective Redress Omitted
Of particular note is the Draft Directive’s omission of collective redress. Instead, the EC decided to issue a non-binding Recommendation to Member States.2 If the Recommendation ultimately becomes law, the form of collective redress contemplated is much more favorable to defendants than its U.S. counterpart. Specifically, the Recommendation provides for an opt-in system, prohibits contingency fees and punitive damages, and encourages a loser-pays model.
D. Other Key Aspects of the Draft Directive
The Draft Directive also seeks to harmonize a number of other issues relevant to private damages actions: • When a national competition authority or reviewing court rules on infringement under either EU or national competition law, the decision is not subject to challenge by national courts in subsequent damages actions.
- The statute of limitations is five years from awareness of the infringing activity, the harm caused by the activity and the identification of the infringer. The limitations period is suspended if a competition authority in the EU initiates an investigation.
- If multiple defendants jointly violate EU competition law, they are jointly and severally liable. However, immunity recipients will generally be relieved from joint-and-several liability for the entire harm and their contribution will not exceed the amount of harm directly attributable to their conduct.
- Defendants may invoke the pass-on defense where the overcharge has been passed through to the next level of the supply chain.
- Indirect purchasers may recover damages.
- There is a rebuttable presumption that the infringing activity has caused harm.
Recent Opinion by EU Court of Justice Is Consistent with Draft Directive
A recent opinion from the EU’s highest court—the EU Court of Justice—implicitly endorses at least some of the Draft Directive’s proposals as they relate to the disclosure of evidence. In Bundeswettbewerebsbehorde v. Donau Chemie AG et al.,3 the Court held that Member States may not impose rules that effectively prohibit the disclosure of cartel evidence to claimants in price-fixing cases. In that case, a €1.5 million fine was imposed on certain distributors of printing chemicals. Under Austrian law, access to the file of the court is only allowed if the parties consent, which is highly unlikely. The Court held that a systematic refusal to grant access to documents hinders the “effectiveness” of EU competition law. Each nation’s courts must evaluate the interest of the requesting party and the actual harmful consequences that may result from the disclosure. Only “if there is a risk that a given document may actually undermine the public interest relating to the effectiveness of the national leniency programme” should the disclosure be stopped.
The Draft Directive, if adopted, would represent a small step in support of private competition law enforcement, an arena in which the EU clearly does not want to promote the U.S. model of private antitrust litigation. The Draft Directive is a reminder that companies subject to the EU’s jurisdiction must be mindful of the changing landscape of EU competition law. The potential for increased private competition law claims is made more problematic for defendants because the standard for a competition law infringement in the EU is in many cases lower than the standard for an antitrust violation in the United States. As a result, companies should monitor the progress of the Draft Directive and remain vigilant to avoid competition law infringements.