On June 11, 2013, the European Commission published a proposal for a directive on private damages actions for breaches of EU competition law. If adopted, the directive will facilitate private damages actions in the national courts of the EU's Member States and allow consumers to more easily exercise their right to seek compensation for losses resulting from EU competition law infringements.
Key Points Addressed in the Proposal
Rules Allowing for Disclosure of Evidence. At the heart of the commission's proposal is a plan to allow national courts to order the defendant and third parties to disclose to the plaintiff evidence that might support its claim for damages, including evidence that is held on a competition authority's file. The proposal attaches three limitations to that principle: the first is absolute, the second temporal, and the third relative.
First, national courts may not order, at any time, the disclosure of corporate statements made by the immunity applicant or other leniency applicants.
Second, until such time as the competition authority has closed its proceedings, national courts may not order disclosure of information either submitted or gathered as part of that agency's investigation.
Third, in all cases, the claimant (or other party making the request) must satisfy the court that the evidence is relevant to the substantiation of its claim—the claimant must specify either "pieces" or "categories" of the evidence "as precisely and as narrowly as he can on the basis of reasonably available facts"—and the court must only order disclosure that is proportionate.
Limitation Periods. The commission's proposal would lay down a new harmonized pan-European limitation period of at least five years. This period would not begin until the injured party knew or could reasonably be expected to know of the behavior constituting the infringement, the qualification of such behavior as an infringement, the fact that the infringement caused harm, and the identity of the infringer. Where a competition agency has started an investigation, the period would be suspended until at least one year after the infringement decision had become final (i.e., once all rights to appeal have been exhausted) or proceedings are otherwise brought to an end.
Joint and Several Liability. The commission seeks to introduce a measure that would exclude companies that have been granted immunity (but not other leniency applicants) from joint and several liability for the damage caused to all claimants. Under the carve-out, a whistleblower would be liable for damages only to its direct and indirect purchasers, unless other injured parties are unable to obtain full compensation from the other members of the cartel.
Establishing and Quantifying Harm. If adopted, the commission's proposal would introduce a rebuttable presumption, in the case of a cartel, that an infringement caused harm. Moreover, in order to ensure that an aggrieved party's right to compensation is effectively guaranteed, the proposal requires Member States to grant national courts the power to estimate (rather than determine) the amount of harm suffered.
Impact of Pass-on. On the sometimes-thorny question of pass-on, the commission proposes that a defendant that pleads the pass-on defense should bear the burden of proving that all or part of the overcharge resulting from the illegal behavior (which the plaintiff seeks to recover) was passed on. The proposal would also introduce, under certain circumstances, a presumption that indirect purchasers have suffered from pass-on.
For several years, aggrieved plaintiffs have argued that European law has failed to support the victims of cartels and other antitrust infringements in their quest for reparation. Anxious to protect and develop the integrity of its immunity program, the European Commission has moved forward at a measured pace. This proposal arguably constitutes the most concrete step in a process that started over 10 years ago and has proven to be controversial.
The commission's proposal attempts to draw the line in a long-running debate as to whether allowing the disclosure of leniency documents, which is key to ensuring effective enforcement through private damages actions, is compatible with robust public enforcement through leniency programs. The proposal, in granting unqualified protection to corporate statements, clearly leans toward the latter and, in so doing, conflicts with the case-by-case (but therefore unpredictable) approach advocated by the Court of Justice in its Pfleiderer ruling in 2011, confirmed as recently as June 6, 2013, in Donau Chemie.
If adopted, the proposal is likely to result in legal uncertainty and financial risk for defendants, who could find themselves defending private damages claims 10 to 15 years after the competition authority first opened its investigation. Moreover, the rules that the commission wishes for Member States to adopt on pass-on impose a high evidentiary burden on cartel members that invoke the defense and may amount to a probatio diabolica. However, the rules are carefully designed to protect the indirect purchaser who, in many instances, also happens to be the end-consumer.
The commission's aim is to have the directive adopted by the Council and the European Parliament before elections in May 2014. While some Member States have been grappling with the legal and practical issues surrounding private damages actions for several years, for others, the issues are novel and, in some instances, controversial. The deadline may therefore prove ambitious.
Notwithstanding the legal and political hurdles to adoption, there is no doubt that the proposal has the potential to be a game-changer. In several EU jurisdictions, the lack of rules forcing defendants to disclose damaging evidence has made it extremely difficult for claimants to mount successful private damages claims. That obstacle, at least, will be removed with implementation of the directive.