Background

On June 11, 2013, the European Commission (Commission) released a proposal for a directive on private damages actions for infringements of EU and national competition law (the Directive).1 The Directive was accompanied by a practical guide on the quantification of harm and a recommendation on collective redress.2

This initiative was driven by the Commission’s desire to encourage private antitrust enforcement in Europe, and maintaining effective public enforcement of the competition rules by EU and national competition authorities. It represents the culmination of a decade‐long process of debate, consultation, and Commission guidance papers on actions for damages for antitrust infringements.3

Although not as far reaching and ambitious as when the initiative was originally announced, the Directive should bring more legal certainty to the interplay between public and private competition enforcement in the EU, and could help level the European (uneven) playing field regarding actions for damages, making it easier for businesses and consumers to bring antitrust damages claims in the 28 EU members states.

Currently, national rules on private actions are widely diverging across Europe, and the vast majority of antitrust damages claims are brought in only three member states – the United Kingdom, Germany and the Netherlands – where the procedural rules have been perceived by some observers to be more claimant friendly.4

Of the instruments issued by the Commission, only the proposed Directive would be binding on the EU member states. If adopted, member states will have two years to implement the provisions of the Directive into their legal systems.

Of course, it remains to be seen whether the proposal will pass the normal EU legislative procedure without major changes.

Objectives of the Proposal for a Directive

The general principle underpinning the proposal is that private enforcement actions under national civil law and public enforcement by competition authorities, are complementary tools serving the objective of an effective enforcement of EU competition rules.

On this premise, the main objectives pursued by the Commission are twofold:

  1. To ensure that all victims of infringements of competition law – be they consumers, undertakings or public authorities – have access to effective mechanisms for obtaining full compensation for the harm they suffered;5 and
  2. To limit the disclosure in private litigation of documents acquired in the context of competition authorities’ proceedings, in order not to jeopardize the effectiveness of public enforcement.

The directive’s most relevant provisions

Access to Evidence

Chapter II (Arts. 5‐8) of the Directive is devoted to access to documents. The general principle set out in the proposal is that national courts should order defendants and third parties to disclose evidence when a claimant has presented reasonably available facts and evidence showing plausible grounds for suspecting that he/she has suffered harm caused by the infringement, provided that such evidence is relevant to the claim and that the disclosure request, subject to the scrutiny of the national judge, is proportionate and narrowly tailored.

Rules on disclosure vary on the basis of the categories of evidence involved, with an enhanced protection for documents from the file of a competition authority. Notably, the Commission proposes the following distinctions:

  • Pre‐existing information, existing independently from investigation competition authorities, is disclosable without limits (White list);
  • Documents referred to or related to any proceeding of investigation taken by a competition authority might be revealed only after the end of the investigation (Grey List); and
  • Leniency corporate statements and settlement submissions are always deemed to be confined to secrecy (Black List).

The ban on disclosure of leniency corporate statements and settlement submissions suggested by the Commission aims at addressing the position taken by the EU Court of Justice in the Pfleiderer decision. 6 The court ruled in that decision that, in the absence of regulation under European Union law on the subject, national courts should decide the disclosure of documents held by national competition authorities on a case‐by‐case basis (including leniency statements), balancing the diverging interests at stake. This decision, according to the Commission, generated legal uncertainty, and potentially affected the willingness of cartel participants to cooperate with the competition authorities under the leniency programs.7

It remains to be seen whether the Commission’s rigid approach to disclosure of certain “sensitive” documents will lead to any revision in the Court of Justice’s position. In Donau Chemie, it recently confirmed the stance it adopted in Pfleiderer, ruling against a de facto absolute ban on disclosure of leniency documents provided for under Austrian competition law.8

Effect of National Competition Decisions and Limitation Periods

Pursuant to Article 9 of the Directive, the finding of an infringement in a final decision of a national competition authority cannot be disputed before a civil court. This will ensure that defendants will not be able to re‐litigate the same issues during a subsequent damages action, by putting national authority decisions on the same footing as those of the EU Commission, as provided for by Article 16 of Regulation 1/2003.

Article 10 sets out special provisions with regard to limitation periods. From the moment a victim has the possibility to discover that he or she suffered harm from an infringement, that victim will have a period of at least five years to bring a claim. This period is suspended if a competition authority starts proceedings, so that the injured party can decide to wait until the public proceedings are over before bringing a claim.

Joint and Several Liability: For Many, But Not for All

Undertakings infringing competition law would be jointly and severally liable for the damage caused. However, pursuant to Article 11(2) of the Directive, undertakings which have been granted immunity under leniency programs are elevated to a special position: they will be liable only vis‐à‐vis their direct or indirect purchasers or providers, and will be liable to other injured parties only if the latter show that they are unable to obtain full compensation from the other companies that were involved in the same infringement.

Passing on Defense and Presumptions

The Directive provides some clarification of the legal consequences of the “passing on” of overcharges, declaring that a defendant should be entitled to invoke as a defense the fact that the private litigant passed on the overcharge caused by the alleged infringement. It is clear that to deny this defense could result in unjust enrichment of purchasers who passed on the overcharge, and can result in undue multiple recoveries for the illegal overcharge by the defendant. The burden of proving that the overcharge was passed on rests with the defendant.

Special consideration is devoted to indirect purchasers (usually consumers) who can rely on the rebuttable presumption that the illegal overcharge was passed on to them if certain conditions are met. Indeed, while as a general rule, the burden of proving the existence and scope of the damage suffered by the claimant/indirect purchaser rests with the claimant, the claimant will be deemed to have proven that a passing‐on to him/her occurred when he/she has shown that:

  1. The defendant has committed an infringement of competition law;
  2. The infringement resulted in an overcharge to the direct purchaser of the defendant; and
  3. The claimant purchased the goods or services that were the subject of the infringement, or purchased goods or services derived from or containing the goods or services that were the subject of the infringement.

Regarding the quantification of the passing‐on, the proposal provides that national courts should have the power to estimate which share of the overcharge has been passed on to the level of indirect purchasers in the dispute.

When injured parties from different levels of the supply chain bring separate actions for damages that are related to the same competition law infringement, Article 15 sets out that national courts should take “due account” of parallel or preceding actions (or judgments resulting from such actions) in order to avoid under and over‐compensation of the harm caused by that infringement, and to foster consistency between judgments resulting from such linked proceedings.

Moreover, Article 16 refers laconically to Article 30 of Regulation No 1215/2012, which should ensure coordination between private actions pending before the courts of different member states. According to that provision, any court other than the court first seized may stay its proceedings or decline jurisdiction if the court involved in the first action has jurisdiction and its law permits the consolidation of the actions.

Presumption of Harm for Cartel Conduct

The Directive introduces a rebuttable presumption, in the case of cartels, that an infringement causes harm. This is a key‐provision, in the Commission’s view, aimed at facilitating compensation for the victims of the cartel. However, the proposal sets out clearly that quantification is a matter for national rules and national courts.

The Communication and the Practical Guide on the Quantification of Antitrust Harm

These non‐binding documents aim at providing practical guidance to litigants and national courts on various methods for quantifying harm in antitrust cases by providing detailed explanations of comparator‐based methods (e.g., comparing prices before or after the infringement, or comparing prices in other markets), economic simulation models, cost‐based models, etc.

The Recommendation on Collective Redress

The Commission’s recommendation on collective redress concerns all breaches of EU law,9 and thus is also relevant to harm suffered by victims of breaches of EU competition law‐‐ in particular victims who individually suffered low‐value damage.

The purpose of the recommendation is to facilitate access to justice and to enable injured parties to obtain compensation in “mass harm situations” caused by violations of rights granted under EU law, while ensuring appropriate procedural safeguards to avoid abusive litigation. To this aim, the Commission recommends that member states should have a system of collective redress that allows natural and legal persons to seek court orders ceasing infringements of their rights granted under EU law (injunctive relief), and to claim damages for harm caused by such infringements (compensatory relief).

Besides the obvious conceptual similarities, the Commission has set out a set of principles aimed at shaping a sort of “European class action,” distant from U.S.‐style class action law suits. In particular, the Commission recommends “opt‐in systems” of collective redress, considering “opt‐out systems” as an exception. Entities representing claimants have to be of non‐profit making character or public authorities empowered to bring representative actions, and strict limitations are provided for third‐party funding. In order to avoid excessive compensation for damages, the Commission proposes that punitive damages shall be avoided. With respect to the lawyers’ remuneration and the method by which it is calculated, the Commission recommends that member states do not permit contingency fees; lawyers’ fees shall not be calculated as a percentage of the compensation awarded.

The Commission emphasizes that collective redress actions should not jeopardize public enforcement. Thus, member states are encouraged to ensure that collective redress actions only start after the public authority has found an infringement (collective follow‐on actions).

Even if not‐binding, member states are asked by the Commission to implement the principles set out in this recommendation in national collective redress systems within two years from its publication. A decision on whether further action (including legislative action) is needed would then be taken by the Commission within a further two years.

Observations

The Commission’s “package” on private enforcement is a welcomed initiative. Citizens and businesses need better and clearer rules, especially with respect to access to evidence and the interplay between private enforcement actions under national civil law and public enforcement by competition authorities.

If adopted, the Directive will introduce a set of basic uniform rules that will ease legal uncertainty, especially in cross‐border cases.

Some provision contained in both the Directive and the recommendation, however, are already included in most national legal systems,10 while others raise a number of issues relating, for instance, to the presumptions of injury contained in the Directive as compared with damages actions underpinning various civil legal systems, and to the practical application of such presumptions vis‐à‐vis different categories of claimants (direct/indirect purchasers).

More generally, beneath the surface and beyond the “diplomatic language” of the Commission, the proposal seems to have affirmed the supremacy of public enforcement over private enforcement, on one side limiting significantly the liability of leniency applicants, and on the other facilitating compensation for victims only after a public authority has found and sanctioned an infringement ‐‐ follow‐on actions rather than stand‐alone actions.

Time will tell whether the Commission’s proposals will be the foundation for a new vogue of private litigation in the European Union. In the meantime, private damages actions will continue in national courts on the basis of applicable national law.

Francesco Mazzocchi