On 11 June 2013, the European Commission adopted a set of proposals that seek to assist claimants in bringing private damages actions arising out of infringements of EU and national competition law. The Commission also aims to address the interaction between private actions and public regulatory investigations, and to some degree to level the playing field between EU Member States in light of the divergent rules in respect of private damages actions that have developed over recent years.
The Commission's proposals are set out in a draft Directive. After the measures have been adopted by the European Parliament and the EU Council of Ministers, EU Member States will have two years to implement them in their national laws. The Directive will not, however, dictate the way in which the necessary measures are to be implemented.
The key elements addressed by the draft Directive are:
- Ensuring access to evidence, while at the same time providing certain classes of leniency documents protection from disclosure
- Providing that national courts will not be able to take any decision running counter to an infringement decision by a national competition authority or review court, effectively giving such decisions the same probative value as Commission decisions
- Extending limitation periods within which potential claimants must bring their claims
- Confirming the joint and several nature of co-infringers' liability, but limiting the potential liability of immunity recipients
- Confirming the availability of the passing-on defence, unless it is legally impossible for the entity to which the overcharge was passed to claim compensation
- Providing that cartels will be presumed to have caused harm and that national rules in respect of quantification of damages should not be unduly burdensome
- Setting out the effect of settlements on remaining claims.
In addition to the draft Directive, the European Commission has published a non-binding Recommendation that Member States should implement collective redress procedures to assist effective private enforcement in various areas of EU law, including in respect of competition infringements. It has also published a non-binding Communication providing guidance on the quantification of harm in private damages actions, addressing the strengths and weaknesses of various quantification methods.
The adoption of these proposals is the culmination of several steps taken by the European Commission over recent years to provide guidance to national courts and to consumers seeking redress for breaches of competition law. It has been a protracted process, starting nearly ten years ago with a study published by the Commission in September 2004, looking into the level of access to private damages actions enjoyed across the EU. Historically, damages actions arising out of infringements of competition law have been more commonly seen in the United States, where the incentive of triple damages and the availability of class actions and contingency fees have encouraged private enforcement. Conversely, in the EU greater emphasis historically has been placed on the public enforcement regime, looking to investigations by regulators to bring the infringing entities to heel. This is now changing, and this most recent move by the Commission endeavours to encourage private parties to bring damages claims.
Key provisions of the draft Directive
The key provisions of the draft Directive provide that:
- national courts shall be able to order disclosure of evidence by other parties or third parties where the requesting party can show that the evidence is relevant to substantiating its claim or defence, and the requesting party specifies either pieces of the evidence or as precise and narrow categories of that evidence as it can. However, disclosure shall not be disproportionate, and when considering whether to order disclosure the national court shall consider the legitimate interests of all parties concerned.
- national courts shall be prohibited from ordering disclosure of leniency corporate statements and settlement submissions. Other documents that the competition authority or the undertaking being investigated prepared for the investigation, such as responses to requests for information and statements of objections, can only be disclosed after the regulatory proceedings have concluded. That is not to say that those documents will be disclosed, but that national courts can order their disclosure. These provisions apply equally to documents that an undertaking has obtained solely by way of access to the regulatory authority's file.
- decisions of national competition authorities and review courts shall have the same probative effect as Commission decisions. National courts will therefore not be able to take any decision running counter to an infringement decision by a national competition authority or review court of any Member State.
- limitation periods shall be at least 5 years and shall not begin to run before a potential claimant knows, or can reasonably be expected to know, of the relevant behaviour and the fact that it constitutes an infringement of competition law and caused it harm, and the identity of the infringer. Importantly, the limitation period shall be suspended if a competition authority begins an investigation and the suspension will not end until at least one year after an infringement decision has become final (ie after any appeals). Limitation shall also be suspended for the duration of a consensual dispute resolution process. This will result in a considerable extension of the limitation period in many Member States.
- it confirms that entities that participate in collusive infringing behaviour are jointly and severally liable for the damage caused, and an infringing entity has the right to bring contribution proceedings against other infringing entities. However, leniency applicants that are granted immunity from fines are offered some protection and will generally be liable only (i) for harm caused to their own direct and indirect customers; and (ii) to other claimants to the extent that they cannot obtain full compensation from other infringing undertakings.
- it confirms the availability of the passing-on defence, but provides that the defendant will bear the burden of proof. The passing-on defence cannot be invoked, however, to the extent that it is legally impossible for the entity to which the overcharge was passed to claim compensation.
- an indirect purchaser can prove that an overcharge was passed on to it (and so will have a claim) if it can show that the defendant infringed competition law, that the direct customer of the defendant paid an overcharge, and that it purchased the same goods or services that were the subject of the infringement or goods or services derived therefrom. The defendant retains the right to show that the overcharge was not wholly or partly passed on to the indirect purchaser.
- in the case of a cartel infringement, there is a rebuttable presumption that there was an overcharge.
- the burden and level of proof in respect of quantification of damages should not be unduly burdensome such that the right to damages is practically impossible or excessively difficult. In addition, national courts must be allowed to estimate the amount of harm.
- following a settlement, the claimant's claim will be reduced by the value of the settling infringer's share of the harm suffered by the claimant. Non-settling infringers cannot recover contribution from the settling infringer for the remaining claim.
This collection of measures, together with the recommendation for Member States to adopt collective claims, or class actions, has the real potential to encourage more claims. Its impact will be felt more in some Member States than others, but the draft Directive contains significant changes for every jurisdiction. Of particular significance are the provisions about limitation periods, which will effectively give claimants up to 6 years to bring claims from the end of any appeals against Commission or other infringement decisions. The provisions allowing for disclosure of documents will add little to the English disclosure rules, but will be a radical change in countries which do not currently require disclosure of documents.
At the same time as encouraging claims, the Commission has felt the need to provide some protection to leniency applicants, so as not to discourage future leniency applications, on which it heavily depends for its enforcement programme.
The provisions in respect of access to leniency documents follow on from recent European case law. In 2011, the Court of Justice of the European Union ("CJEU") held in Pfleiderer (Case C-360/09) that it is for national courts to determine, on a case-by-case basis, whether to allow claimants access to leniency documents submitted by a defendant to a competition authority. In doing so, the court should undertake a balancing act between the need to protect the leniency regime as an effective tool of public enforcement and the claimant's right to effective redress. Most recently, the CJEU held last week in Donau Chemie (Case C-536/11) that EU law precludes a provision of national law that provides that disclosure of documents from the competition authority's file is subject to the consent of all parties to those proceedings, without leaving any opportunity for the national court to undertake the balancing act laid down in Pfleiderer. The draft Directive seeks to bring certainty to the position in respect of the leniency corporate statement itself, but it is anticipated that the Pfleiderer balancing act will continue to be employed in circumstances where leniency materials are in issue and the relevant documents are not precluded from being disclosed pursuant to the terms of the Directive.
Successful immunity applicants will also receive limited protection from claims, but will still be exposed to claims from its own direct and indirect customers. The intention is to discourage claimants from targeting the immunity recipient, but not to relieve it of liability entirely.
Defendants will no doubt welcome confirmation that the passing-on defence is to be available under the laws of all EU Member States, at least in most cases.
The practical implications of the draft Directive will no doubt evolve in due course and differ from one Member State to another, but the measures certainly have the potential to encourage consumers and businesses to bring claims for breaches of competition law.