On 26 November 2014 the EU adopted a Directive on certain rules governing actions for damages under national law for infringements of competition law1. The Directive seeks to harmonize the relevant laws across the EU by setting the procedural framework under which such actions can be brought in any of the EU Member States. The Member States must transpose the Directive's provisions into their own legal systems and, thus, adopt relevant national laws by the 27 December 2016.
Background
The Directive is the culmination of a long process that was triggered by a seminal judgment rendered by the EU Court of Justice in 2001. In Courage and Crehan2, the highest Court of the EU ("CoJ") ruled that the right to seek compensation for loss caused by infringements of competition law rules is open to any individual. Such compensation is foreseen for all antitrust infringements, that is both for abusive conduct by dominant companies and for cartel-like behavior.
In the EU, damages actions for antitrust infringements have been (and arguably still are) the exception. Competition law enforcement had traditionally been considered as an administrative task and, hence, the fines imposed by the competent author around the world) were seen as the only threat for companies involved in anticompetitive conduct. Moreover, elements such as the diverse legal systems around the EU (that is comities (which are amongst the highest mon law and civil law systems), or the lack of knowledge on the part of the potential claimants of their rights rendered such actions scarce. In recent years, such actions have increased but they remain at a very low level, with only 25 percent of antitrust infringements being followed by such actions according to the Commission.The Commission has estimated that because of ineffective private enforce3 ment, antitrust victims forgo up to an estimated EUR 23 billion in compensation every year.4
The Commission considered that the introduction of private damages actions is an important element that would complement its enforcement powers against illegal antitrust conduct. However, the Commission recognized that its plan to encourage such actions faced both difficulties and complexities. On the one hand, it had to bring together the very different legal traditions of its 28 Member States and deal with an array of process issues, such as limitation periods and the quantification of the harm caused by the contested antitrust conduct. On the would not undermine the effectiveness of existing tools in the fight against cartels, such as the Commission's leniency program or the settlement procedure, which could be compromised by litigation discovery rules. More precisely, the Commission's leniency programme requires that a member of a cartel makes statements, often self-incriminatory, in exchange for full or partial immunity from fines. Similarly, settlements are based on such statements. If these self-incriminatory docuother, the Commission has to ensure that such actions ments were discoverable through litigation, there was serious concern that companies would be unwilling to make such statements. The Directive appears, at least at first sight, to have made all ends meet. The key provisions are listed below.
Compensation
The Directive establishes the right to compensation for victims of antitrust infringements. In this regard, it provides for full compensation for the actual harm suffered by the claimant. It explicitly rules out overcompensation whether by means of punitive, multiple, or other types of damages.5
At the same time, mechanisms other than litigation are identified to obtain compensation such as out-of-court dispute resolutions (arbitration, mediation, settlements) and to this end the Directive provides for the process issues that would help such mechanisms to be successful.6
Easier Access to Evidence
Under the Directive, national courts have the power to order defendants or third parties to disclose evidence containing confidential information where they consider it relevant to the action for damages brought before them. Such disclosure can occur upon request of the claimant and shall be granted if it is legitimate interests of all parties involved and of third parties concerned.justified and proportionate, taking into account the 7 National courts will also have the power to impose penalties on the parties concerned and on their legal representatives in the event that they fail or refuse to comply with a disclosure order or they destroy relevant evidence.8
Currently, disclosure rules in litigation are diverse around the EU, with the UK being recognized as the jurisdiction with the most generous disclosure regime (though still not as generous as the US system). This asymmetry to access to information at best leads to forum shopping and at worst discourages potential claimants from bringing an action. Under the Directive access to evidence is clearly established with consistent disclosure rights around the EU and specific limitations to such rights.
The only type of evidence under the Directive that enjoys unequivocal protection from disclosure concerns certain categories of documents produced in the context of competition law proceedings, such as leniency and settlement statements.9 To date, the protection of such documents from disclosure was left at the discretion of the national judge who was expected to conduct a balancing of interests exercise on a case-by-case basis prior to ordering such disclosure.10 This situation arguably created uncertainty as to the protection of leniency documents and raised fears that it could hamper the incentive of infringers to cooperate with the competition authorities. By expressly shielding such documents from disclosure, this concern has been specifically dealt with in the Directive.
Effect of National Decisions
Under the Directive, a claimant is able to establish the occurrence of an infringement of competition law based on the final decision of any EU national competition authority (Commission findings are already binding on national Courts). In the context of harmonization, under the Directive a decision adopted by the national competition authority in one Member State shall be binding on the national court of any other Member State. This will make it easier for potential claimants to provide prima facie evidence to build their case.11
Limitation Periods
Under the Directive, the period of time within which victims can bring a damages action shall be at least five years from the moment that the claimant knows or is reasonably expected to know of the infringement and of the harm it suffered.12
For follow-on actions (namely, those that rely on a prior decision by a competition authority), the limitation period of five years would be suspended or interrupted from the moment a competition authority starts investigating an infringement until at least one year after the infringement decision has become final. For stand-alone damages actions (namely, those brought without relying on a prior decision by a competition authority), the minimum limitation period provided by the Directive suggests that existing national rules that provide for longer limitation periods will prevail. This allows potential claimants to choose to bring their action in the EU Member State, where the limitation period is the longest.
It is also worth noting that the limitation periods are suspended for the duration of any consensual dispute resolution process vis-à-vis those parties that are involved in such dispute resolution.13
It follows from the above that it will take several years before a company that is involved in an antitrust will have to deal with, whilest it would have to gather and maintain exonerating evidence in detail to use it in its defense several years after the facts.
Joint and Several Liability
Under the Directive, cartel members are jointly and severally liable for the harm caused by the illegal conduct of the cartel in full. This means that each cartel member is bound to compensate for the total loss suffered by a claimant until the latter is fully compensated.14
There are two exceptions to this rule: the first concerns small companies who under certain conditions are liable only for the harm caused to their own direct and indirect purchasers. The second concerns immunity recipients who are only liable for the harm caused to their direct or indirect purchasers. However, immunity recipients are liable to other claimants only if the claimants have been unable to obtain full compensation from the other cartel members.
On the basis that a culpable cartel member should in principle only be liable for the harm it has caused, but recognizing that the above provisions could result in "overpayment" in damages by a cartel member, under the Directive cartel member will be able to recover a contribution from any other cartel member for the overpayment. The amount of the contribution will be determined based on the relative responsibility of that party for the harm caused. Again, the contribution allocated to immunity recipients will not exceed the amount of the harm caused to their own direct or indirect purchasers or providers.
The complexity in this provision lies in the methodology to be used to calculate the contribution of each infringer. The Directive does not provide any further guidance as to how this quantification shall be made, and thus it remains to be seen how this element will evolve in practice.
Passing On
Under the Directive, the defendant in an action for damages should be allowed to defend itself against a claim by arguing that the claimant passed on the whole (or part) of the higher cartel price (the "overcharge") to its customers.15 The burden of proving that the overcharge was passed on would be on the defendant, who may in its turn require disclosure from the claimant or from third parties of evidence of this passing on. The counter-balance to this defense, however, is that a downstream customer who had paid this passed-on overcharge (the "indirect purchaser") or believes that it has paid an overcharge has a claim for damages, but here the claimant has the burden of proving the existence and scope of such passing-on.
Under the Directive Member States must put in place appropriate procedural rules to avoid situations of overcompensation or under compensation of the victims as a result of the passing on defense. However, detailed guidance is not provided.
Quantification of Harm
Under the Directive a rebuttable presumption exists that cartel infringements cause harm. It also provides that where the quantification of the harm suffered by a claimant is practically impossible or excessively difficult to be undertaken, the national courts shall be able to estimate the amount of such harm.16
However, the Directive does not contain any guidance to national courts as to how to quantify the harm in question. In this regard the Commission has published a separate Communication for the quantification of damages in antitrust infringements17 and a practical guide18 that describes the main methods and techniques available to quantify the harm resulting from antitrust infringements and the underlying basic assumptions. These documents are expected to be used as guidance by national judges and interested parties for the purpose of this exercise.
What Next?
Private enforcement of competition law is still a relatively nascent area in the EU. The Directive should be an encouragement for potential claimants to step forward. Moreover, the Commission encourages collective actions for damages with the view to help particularly small and medium-sized enterprises ("SMEs") and individuals with low value damage claims pursue antitrust offenders. To this end the Commission published a non-binding recommendation that complements the Directive.19
As indicated above, there are already a number of private damages actions introduced in recent years in the EU and in particular in the jurisdictions that are considered to be more claimant friendly, such as the United Kingdom. The compensation amounts so far have not been as eye-watering as those typically awarded in US proceedings (where treble and punitive damages exist) but can still be significant. In any event, the inconvenience caused by resource-intensive litigation and the reputational damage that accompanies it should not be underestimated and the greatest contribution that the Directive might make in ensuring compensation for victims of breaches of competition law is the creating of a strong legal framework that encourages settlement by the infringers.
It remains to be seen whether the litigation landscape in the EU will change shape in the coming years. For the moment, there are still important issues to be decided, such as the amount and details of evidence that a party would need to produce before the national court or the methodology to quantify the harm suffered. A November 2014 ruling of the Brussels Commercial Tribunal, which dismissed the Commission's damages action against members of the elevators' cartel, was a reminder of the obstacles that exist in practice. In that case, the Commission claimed €6 million in damages for elevators it had cartel period. The Brussels Commercial Tribunal dismissed the damages action on the basis that the Commission had failed to provide sufficient evidence to establish a causal link between the cartel and the allegedly higher prices of the contracts it had entered into. In other words, the Commission failed to provide sufficient evidence on the actual harm it sufferedpurchased and installed in its premises during the .20
It is believed that the outcome of this case would have been different if it had been brought to Court under the new regime given that the Directive provides for a rebuttable presumption that a cartel causes harm—but this remains to be seen. In any event, private damages actions for antitrust infringements in the EU are expected to increase. This would not only come as a result of the Directive, but also because of the better education of cartel victims and the facilitation of such claims by specialized litigation bodies (such as litigation funds, or other private litigation organizations) that have made their appearance in the EU in the recent years.
Footnotes
1 Directive 2014/104/EU of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349, 5.12.2014, p. 1–19.
2 Judgment of the Court of 20 September 2001 in Case C-453/99, Courage Ltd v. Bernard Crehan and Bernard Crehan v Courage Ltd and Others.
3 Presentation by Dr. Till Schreiber, CDC Cartel Damage Claims, "Private Antitrust Enforcement", European Competition Day, Vilnius, 3 October 2013.
4 See, Impact Assessment Report in relation to damages actions for breach of EU antitrust rules, accompanying the proposal for the Directive, paragraph 67, page 23, available at: http://ec.europa.eu/competition/antitrust/actionsdamages/impact_assessment_en.pdf ,.
5 Directive, Article 3.
6 Directive, Articles 18,19.
7 Idem, Article 5.
8 Idem, Article 7.
9 Idem, Article 6.
10 See Judgment of the Court of Justice of 14 June 2011 in Case C-360/09 Pfleiderer; see also judgment of the Court of Justice of 6 June 2013, in Case C-536/11, Donau Chemie and Others.
11 Directive, Article 9.
12 Directive, Article 10.
13 Directive, Article 18.
14 Directive, Article 11.
15 Directive, Articles 12 et seq.
16 Directive, Article 17.
17 Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union. OJ C(2013) 3440, 11.6.2013.
18 Commission Staff Working Document – Practical Guide on Quantifying Harm in Actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, SWD(2013) 205, 11.6.2013.
19 See, Commission memo, of 11 June 2013, "Frequently Asked Questions: Commission proposes legislation to facilitate damage claims by victims of antitrust violation", available at http://europa.eu/rapid/press-release_MEMO-13-531_en.htm.
20 Decision of the Rechtbank van koophandel te Brussel (Commercial Tribunal of Brussels) of 24 November 2014, in case A/08/06816 brought by the European Commission against Otis NV, General Technic-Otis Sàrl, Kone Belgium NV, Kone Luxembourg Sàrl, Schindler NV, Schindler Sàrl, ThyssenKrupp Liften Ascenseurs NV, ThyssenKrupp Ascenseurs Luxemboourg Sàrl. The Commission lodged an appeal against this decision.
Originally published 2 March 2015
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