On 11 June 2013, the European Commission published a proposal for a Directive facilitating claims for damages in national courts by victims of infringements of EU competition law including anti-competitive agreements between competitors, such as a price-fixing cartel, and abuses by individual companies of their dominance in a market. The proposal is designed to remove some of the practical difficulties which victims of anti-competitive behaviour face when they try to obtain fair compensation for the damage they have suffered. Whether the proposal will ultimately be enacted and, if so, in what form remain open questions, given the level of debate on this issue.

The two main objectives of the proposed Directive are:

  1. to optimise the interaction between the public and private enforcement of competition law; and
  2. to ensure that victims of infringements of the EU competition rules can obtain full compensation for the harm they have suffered.

Why are there so few private actions for damages for breaches of EU competition law?

EU law already recognises the right of all victims of antitrust infringements under EU competition law to be fully compensated for harm suffered. However, due to procedural obstacles, legal uncertainty and shortcomings in national legal frameworks, few of these victims actually obtain compensation. This is very much the case in Ireland where there have been very few damages actions in the Irish Courts. Only 25% of all antitrust infringement decisions taken by the Commission in the past seven years have been followed by civil actions from victims of the infringements. Moreover, national rules diverge widely across Europe (e.g. in relation to access to evidence) and, as a result, the chances of victims obtaining compensation greatly depend on which Member State they happen to live in. The proposed Directive aims to remove practical obstacles and level the playing field by making it easier for those harmed by antitrust infringements to obtain damages throughout the EU. Its provisions would apply to the legal rights of redress which are available in Member States (such as Ireland). In conjunction with the proposed Directive, the Commission has also adopted a recommendation encouraging Member States to set up collective redress mechanisms to improve access to justice for victims of violations of EU law in general, including competition rules. There is currently no mechanism for collective redress under Irish law in this area. Also part of the overall package is a Communication adopted by the Commission on quantifying antitrust harm to provide guidance to Courts and parties in EU antitrust damages actions.

What Measures are suggested under the Proposed Directive?

When companies behave anti-competitively (e.g. by fixing prices or abusing their dominant position on the market), it harms consumers who may face higher prices, companies that comply with antitrust rules who may lose profits (e.g. by being foreclosed from a market), as well as the economy which is made less efficient and less competitive. Anti-competitive behaviour is estimated to cost Europe's economy several billion euros a year. Under EU antitrust law, anti-competitive practices are banned and victims are entitled to compensation e.g. if companies collude to increase prices, customers can claim compensation for the higher prices they have paid. However, in most EU countries (including Ireland), bringing a successful compensation case to court is difficult. Competition authorities (EU and national) investigate and prosecute anti-competitive practices, but that is separate from civil compensation cases – and it's not always clear whether victims can rely on the authorities' findings to support their claims. The proposed Directive (and associated measures) would do the following:

  • Protect leniency/immunity statements and other submissions. Leniency statements, as well as submissions admitting responsibility in the context of a direct settlement, would not be used in civil actions against the companies who made them. Other documents can be produced, such as responses to information requests and Statements of Objections once the competition authority has closed its proceedings.
  • Clarify the deadline for bringing compensation claims. A claimant would have at least five years to bring a claim from when it became possible for the claimant to discover that it had suffered harm.
  • Provide full compensation for victims i.e. both for the loss suffered and for lost profits. Victims of EU antitrust infringements should be able to claim full compensation where there is a causal relationship between the harm and the antitrust infringement. The compensation includes actual loss and loss of profit.
  • Provide that decisions of national competition authorities finding an infringement will automatically constitute proof before national courts of all Member States that the infringement occurred in subsequent compensation cases. This allows a finding of breach of EU antitrust rules by a national competition authority to be presented in damages proceedings as proof that the breach occurred;
  • Presume that cartels cause harm. It is for the infringing company to rebut this presumption and use the evidence at its disposal to prove that the cartel did not lead to an overcharge.
  • Provide non-binding guidance in a communication on quantifying harm in actions for damages based on breaches of EU antitrust rules.
  • Clarify the liability rules in cases where price increases due to a breach of the EU antitrust rules are "passed on" along the distribution or supply chain. In practice, this will ensure that those who suffered the harm in the end will be the ones receiving compensation. The burden of proving that the overcharge as a result of the breach of EU antitrust rules was passed on rests with the defendant.
  • Have the result that infringers are jointly and severally liable for the harm caused by anti-competitive behaviour. Any party granted immunity from fines through a leniency program shall be responsible only for its own share of the harm caused by the infringement.
  • Encourage compensation through out-of-court settlements;
  • Simplify the way the amount of damages is calculated;
  • Clarify what types of damages can be claimed and who can claim them; and
  • Make it easier for indirect victims to claim compensation – in situations where a company illegally charges higher prices to a business customer (direct victim), which then passes on the increased prices to its own customers (indirect victims).

Next Steps

The proposed Directive will be discussed by the European Parliament and the Council. If it is adopted by these institutions, Member States will have two years to implement the provisions in their national legal systems.

Comments

The adoption of legislative measures on antitrust damages actions by the Commission remains controversial and the exact shape (if any) of the final package remains to be seen. The previous 2005 package was ultimately rejected by a number of parties, in particular due to the possible damaging effect of proposed collective damages actions. Collective redress continues to be the subject of much debate and so the Commission has confined itself to adopting a "Recommendation" on measures to improve collective redress while proposing other less controversial measures. The focus of the proposed Directive is on removing obstacles to damages actions at the national level. However, the Recommendation is effective immediately. Member States are urged by the Commission to implement collective redress mechanisms within two years and, if not, then possible future legislation will require Member States to align collective redress mechanisms. Despite the likely intense debate over the proposed Directive and the Recommendation as well as the on-going difficulties and cost of litigation in the Irish Courts, there is likely to be an overall increase in civil antitrust litigation and damages awards for EU antitrust breaches in the coming years.