The European Parliament approved the text on April 17, 2014 of a long-awaited Directive designed to facilitate private actions for damages by victims of infringements of antitrust rules in the EU (the “Directive”). The Directive is based on a proposal by the European Commission (the “Commission”) of June 2013 and is the centerpiece of a package of measures aimed at leveling the playing field for damages claims across EU Member States. Also included in the package is non-binding guidance for national courts on the quantification of antitrust harm and a non-binding recommendation on collective redress mechanisms. The Directive is expected to come into force in the coming weeks. Member States will have two years to implement the Directive into national legislation, but judges may already take it into consideration in pending civil proceedings, to the extent permitted by existing laws.
While the Commission and national competition authorities in the EU (“NCAs”) regularly make headlines by levying record fines on companies for alleged cartels and abuse of dominant positions, private enforcement has long been perceived as underdeveloped in the EU. The number and scope of antitrust actions for damages has lagged far behind the high level of private antitrust litigation in the U.S. In the EU, victims of antitrust infringements must launch their actions in Member State courts, even in the case of so-called follow-on actions concerning infringements for which fines have been imposed at the EU level by the Commission. Rules of standing, procedure, and quantification of damages vary widely between Member States, and claimants have traditionally faced significant legal uncertainty when pursuing antitrust damages actions before Member State courts. Although private antitrust litigation has started to pick up in recent years, it has largely been confined to a small group of countries, including Germany, the Netherlands, and the UK, and judgments awarding damages for antitrust infringements remain rare in the EU.
The Directive is intended to raise victims’ chances of obtaining private compensation for their losses by removing some of the most significant procedural obstacles faced by antitrust damages claimants in many EU jurisdictions today. At the same time, it attempts to strike a balance between public and private enforcement by including provisions designed to preserve the attractiveness of competition authorities’ leniency and settlement procedures.
Disclosure of Evidence
Cartels are by their nature secretive, which often makes it difficult for private claimants to obtain the evidence required to establish grounds for potential compensation. Leniency programs introduced by the Commission and NCAs have been very successful in encouraging cartel participants to disclose evidence of cartel behavior in return for immunity or a fine reduction. In considering private actions, the Commission has been particularly concerned to protect immunity and leniency applications from disclosure so as not to undermine the incentives parties have to participate in leniency programs. The Directive seeks to tackle this issue of the interplay between public and private enforcement by defining disclosure principles as regards evidence in a competition authority’s file.
The Directive draws boundaries between what evidence is and is not disclosable to private plaintiffs, and thereby accommodates the concern of the competition authorities that unlimited disclosure obligations could jeopardize the effectiveness of their leniency and settlement procedures. Corporate leniency statements and settlement submissions may never be disclosed to potential damages claimants. This restriction is remarkable considering that the European Court of Justice (the “ECJ”) held in its much debated Pfleiderer (2011)1 ruling that national courts have the authority to assess the merits of requests for disclosure of documents contained in a competition authority’s file (including leniency statements and settlement submissions) on a case-by-case basis. Subsequently, in Donau Chemie (2013),2 the ECJ dismissed a national provision that amounted to a blanket ban on access by prospective damages claimants to a competition authority’s cartel file on the grounds that such a prohibition would prevent a case-specific balancing of conflicting interests.
The Directive distinguishes three categories of documents within a competition authority’s file. These are referred to as the “black list” (documents which may never be disclosed), the “grey list” (documents which are disclosable after proceedings by a competition authority are closed), and the “white list” (documents which may be disclosed at any time).
Black list documents include leniency corporate statements and settlement submissions, as well as extracts of these documents.
Grey list documents include information prepared specifically for the proceedings, such as the parties’ responses to statements of objections and information requests, settlement submissions that have been withdrawn, as well as information that either the Commission or an NCA has drawn up and sent to the parties in the course of proceedings.
White list evidence includes all types of evidence that do not appear on the grey or black list, such as pre-existing documents.
The Directive seeks to address concerns that unbridled disclosure obligations could lead to unreasonably broad access to non-public information for private parties who hope to use such access to “fish” for evidence of potential antitrust claims. To that end, the Directive provides that national courts are only required to order disclosure of evidence if the request for disclosure is proportionate, precise, and narrowly defined. Nonetheless, the new minimum standard of disclosure can be expected to have a significant impact on a number of EU Member States where disclosure rules were traditionally very restrictive. By contrast, traditionally “disclosure heavy” jurisdictions, such as England and Wales, are likely to see little change. The Directive does not prohibit national rules from providing for wider disclosure as long as they do not conflict with the protection of certain types of evidence as set out above.
Other Measures to Facilitate Private Actions
The Directive introduces a number of targeted measures to remove some of the main obstacles claimants face when bringing private actions. Some of the most important features of the Directive are listed below:
The Directive introduces a minimum five-year limitation period, with the clock starting only when the infringement ends and the claimant either knows or could reasonably be expected to know all material facts. The limitation period is suspended during a Commission or NCA investigation until at least one year after a final decision is reached.
The Directive provides for a rebuttable presumption that cartel infringements cause harm. Member States shall ensure that the burden and the standard of proof required for the quantification of harm do not render the exercise of the right to damages practically impossible or excessively difficult. National courts have the power to estimate the amount of damages caused in accordance with national procedures.
The existence of the “passing-on defense” is expressly recognized in the Directive. This provision allows a defendant to argue as a defense that the claimant passed on the whole or part of any overcharge resulting from the alleged infringement to its own customers. However, defendants will bear the burden of proving that any overcharge was passed on. As a consequence, indirect purchasers will be eligible to claim damages on the basis that an overcharge was passed on to them by direct purchasers.
The Directive facilitates follow-on damages claims by establishing the evidentiary value of competition authority decisions. Final decisions of an NCA will be binding on that Member State’s national courts and, while not binding on the courts of other Member States, will constitute prima facie evidence of an infringement in those countries.
Claimants victimized by cartel infringements can pursue any infringing company for the entire loss suffered, as each infringer is jointly and severally liable with the other infringers. Small and medium-sized companies are, however, only liable to their own direct and indirect purchasers provided that certain conditions are met. Successful immunity applicants are only liable to their own direct and indirect purchasers as long as direct and indirect customers of other infringers can obtain full compensation from those infringers.
Companies are encouraged to settle private actions without litigation. Compensation paid as a result of a consensual settlement and prior to a decision by a competition authority may be considered as a mitigating factor by the authority when setting a fine.
The Directive is a step towards the harmonized European private antitrust enforcement landscape envisaged by the Commission. It constitutes a balanced compromise between several competing interests and can therefore be considered a major achievement for the EU institutions. For many Member States, implementing the Directive will mean a significant break with important aspects of their legal traditions.
It remains to be seen whether the Directive will spark a marked increase in private actions across the EU or whether the concentration of claims in certain jurisdictions that are perceived as claimant-friendly will continue. While the Directive will make national procedures more similar on paper, antitrust claimants will still face practical challenges in many EU countries. Among them is the general slowness and unpredictability of proceedings and the lack of specialized courts in many Member States. Moreover, binding measures to establish collective redress mechanisms that were among the essential features of the Commission’s earlier legislative proposals were dropped on the long road to legislation and now form part of the non-binding recommendation on collective redress that complements the Directive. Most European legislators continue to be highly skeptical of anything resembling U.S.-style class actions or treble damages.
Nonetheless, the prospect of fighting a war on two fronts has become more real for companies subject to antitrust investigations in the EU. In addition to draconian fines handed down by the Commission and NCAs, more companies could soon find themselves defending private claims many years after administrative proceedings have come to an end. Costly settlements could become more common. The Directive therefore underlines the importance of having a global plan for antitrust risk management.