On 11 June, the European Commission (“Commission”) published its long-awaited package of proposals on private antitrust litigation. The package is divided into three sets: (1) a Draft Directive on actions for damages (2) a Draft Recommendation on promoting group claims (3) and a Draft Communication and Draft Guidelines on estimating the amount of loss suffered by victims of cartels.
The Commission’s package of proposals has to be seen in the following context: While there is a harmonized EU antitrust law, all EU Member States (“Member States”) have their national civil and procedural law. As a consequence, so far, no common rules exist on private damages actions for antitrust infringements in the EU. In fact the national laws vary significant on the possibility to claim damages for such infringements.
The proposals are the result of a long consultation period over several years. They are less far-reaching than originally announced. In particular, only the proposed Directive will be binding; the other proposals are recommendations or interpretation tools, and while they may be of some persuasive value, they are not binding. In addition, it remains to be seen whether the proposed Directive will pass the normal EU legislative procedure unchanged as the proposal will now go to the European Parliament and Council. After the proposed Directive has been adopted it will have to be implemented by all Member States into national law. The proposed Directive currently sets a deadline for implementation in national law of two years after adoption. Consequently, the Draft Directive, which was published today, will certainly not become binding law before 2016.
1. Draft Directive on Actions for Damages
The proposed Directive contains five main parts governing damages actions. Besides setting out the general principles governing damage actions, it contains provisions on access to documents, limitation periods, joint and several liability as well as the passing-on of overcharges and the assessment of harm suffered.
1.1 General Principles
In line with the case-law of the European courts the proposed Directive sets out the principle that any person who has suffered harm as a result of an antitrust violation has the right to full compensation for that harm. This right must be implemented effectively and any case arising out of violations of EU competition law must not be discriminated vis-à-vis cases arising out of violations of national law.
1.2 Access to Documents
The proposed Directive provides that national courts should decide whether to order a defendant in private litigation or a third party (such as a competition authority, to include the Commission) to disclose documents to the claimant. In terms of the normal disclosure process, this power is, however, subject to several constraints such as, among others the likelihood that the alleged violation occurred; the cost of disclosure; and whether the sought-after documents contains confidential information, especially that of third parties.
The proposed Directive distinguishes between three categories of documents:
National courts cannot at any time order leniency corporate statements and settlement submissions to be disclosed.
Information that was prepared by a natural or legal person specifically for the proceedings of a competition authority as well as information that was drawn up by a competition authority in the course of its proceedings can only be disclosed after a competition authority has closed its proceedings.
All other documents may in principle be disclosed.
It remains to be seen whether this is in line with the Court of Justice’s recent judgement in Donau Chemie (C-536/11) where, in the context of a leniency process and other action by the Austrian Competition Authority, the Court stated that a provision of national law which places a de facto blanket restriction on access to the file in competition proceedings is incompatible with EU law. The Court also seemed to suggest that a court must perform the balancing exercise between the right to claim damages and the public interest in preserving the integrity of a leniency programme for each individual document before deciding whether to order its disclosure.
Additionally, the proposed Directive allows national courts to impose sanctions for, among other things: non-adherence with a disclosure order and destruction of relevant evidence. Sanctions must be effective, proportionate, and dissuasive.
1.3 Limitation Periods
The proposed Directive will harmonize the rules on limitation periods in the Member States, which currently are quite diverse, ranging from 1 to 30 years. It sets the statute of limitations for private damages actions at at least five years. It also clarifies when time can be said to “run” or when the limitation period should start. This has been set to the date when the maligned person knew of the infringing conduct; knew that it was illegal; knew that it caused him harm; and knew the identity of the infringer. In the case of continuous infringement, time begins to run only once the continuous infringement has been brought to a definite end. Presumably, in follow-on actions, this will be the case when a competition authority takes a decision against an antitrust infringement. In stand-alone actions, this will be much more difficult to determine.
The limitation period is suspended if a competition authority takes action for the purpose of the investigation or proceedings in respect of an infringement to which the action for damages relates. The suspension shall end at the earliest one year after the competition authority’s decision in the investigation proceedings.
1.4 Joint and Several Liability
Furthermore, the proposed Directive says that each and every infringer of competition law is liable for the full amount of the compensation award to a damages litigant. However, the immunity applicant is only liable to its direct and indirect purchasers. Only in case the litigants show that they can’t get compensation from the other infringers, the immunity applicant may be jointly and severally liable.
The infringers should be able to claim contribution from each other. The amount claimed from an immunity applicant through a contribution agreement shall not exceed the amount that the immunity applicant is liable for the harm suffered by its direct and indirect purchasers or providers. In such an instance the amount of contribution from the company which received immunity, is to be relative to the harm that that company caused.
1.5 Passing-On Of Overcharges and Assessment of Harm Suffered
The proposed Directive lays down that a defendant should be able to claim as a defence the fact that the private litigant passed on the overcharge caused by the alleged infringement. The defendant has to prove that this happened.
In the case of private litigants who claim to have indirectly purchased the goods or services the subject of the infringement, the burden of proving that the overcharge was passed onto them, and what it equates to, rests with them.
In the case of judging the amount of harm suffered, the proposed Directive introduces a presumption that a cartel causes harm, which would aid private litigants in asserting the amount of damages it claims.
2. Collective Redress Actions
The proposals contain the draft of a non-binding Recommendation concerning collective redress. The Draft Recommendation is jointly issued by the Justice, Consumer Affairs and Competition departments of the Commission. Correspondingly, the Draft Recommendation should apply across the board to all areas of litigation and not solely to competition infringements.
It is important to note that the Recommendation does not harmonize national laws and does not oblige Member States to introduce collective redress actions.
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’).
The Commission recommends a number of procedural safeguards to avoid abusive litigation:
Entities which are representing claimants have to be of non-profit making character. In addition, or as an alternative, Member States shall empower public authorities to bring representative actions;
According to the ‘loser pays principle’, Member States shall ensure that the party that loses a collective redress action reimburses necessary legal costs borne by the winning party;
The Commission recommends ‘opt-in systems’ of collective redress, meaning that the claimant group should in principle include only those natural or legal persons who actively decided to join the represented group for purposes of the specific case. ‘Opt-out systems’ are the exception;
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;
In order to avoid excessive compensation for damages the Commission proposed two mechanisms: (i) punitive damages shall be avoided and (ii) compensation awarded to natural or legal persons harmed in mass harm situations shall not exceed the compensation that would have been awarded, if the claim had been pursued by means of individual action.
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. In case the public proceedings only start once a collective redress action has already been brought, national courts shall avoid rendering a judgement that would conflict with the planned decision of the public authority. To ensure this consistency, courts may consider staying their proceedings.
Member States are asked to put in place appropriate measures within two years at the latest. However, it needs to be recalled that the Commission’s Recommendations are not binding. In particular, Member States are not obliged to introduce collective redress actions if they are not available.
3. Commission Draft Communication and Draft Guidelines on Quantifying Harm
One of the main problems in antitrust litigation is the quantification of harm. It is quite difficult and expensive to determine the exact amount of damage suffered by consumers and businesses. An analysis of such requires a comparison of the actual position of claimants with the position they would find themselves in had the infringement not occurred. This will be made up of different elements covering the actual loss, compensation for loss of profit, and entitlement to interest from the time the damage occurred.
The Commission has therefore drafted a Communication and Guidelines to serve as tool with which litigants and judges alike may use to quantify damages. The Guidelines essentially contain economic models and formulas, and could offer some level of consistency across the EU’s numerous courts. In any event, the Communication and the Guidelines are useful reference tools for courts, lawyers and litigants, but they are not binding for judges.
The Commission’s consultation on EU legislation for private antitrust litigation started with the publication of a Green Paper in 2005. This was followed by a White Paper in 2008. The proposals published today are less far-reaching than originally announced, in particular as only the proposed Directive will be binding (in its final version). It remains to be seen whether the proposed Directive will pass the normal EU legislative procedure unchanged and what effect the public consultation will still have on the Commission’s proposed Recommendations on collective redress actions and the quantification of damages.
A number of years will still pass before the proposals published today might become the basis of private antitrust litigation in the EU. In the meantime, private damages actions will continue in front of national courts on the basis of the applicable national law, where the rules are currently developed on a case-by-case basis.