Private Actions in Competition Law: Recent Developments

Private damages actions in competition law continue to mature across Europe, with the past few months seeing some significant developments at both a national and supra-national level.  This note summarises the main developments in the UK and EU.

Legislation

EU legislation on private damages actions

As previously reported, the Commission last year proposed a draft Directive introducing fundamental changes to the legislative framework for antitrust damages actions in the EU. The proposal has been the subject of extensive debate among EU Member States, represented in the EU Council, which despite continued disagreement in certain areas adopted a common position on 2 December 2013.

For the first time, the European Parliament has become involved in the legislative process in the antitrust arena. Two separate committees are handling the proposal, which has resulted in conflicting positions within the Parliament. There is considerable pressure on the Parliament, from EU Member States and the Commission, to adopt a common position within the coming weeks. Failure to do so could reduce the Parliament's involvement in future antitrust legislation.

Given these dynamics, the EU institutions – the Council, the Parliament and the Commission – are likely to reach a common understanding and adopt a Directive by May 2014. The Directive will introduce rules to govern the disclosure of evidence in civil claims which will apply across the EU, something that will be new to many civil law jurisdictions. The Directive is also expected to introduce a rebuttable presumption of loss for the purposes of private damage actions i.e. that cartels result in overcharges and that an undefined proportion of the overcharges is passed on to indirect customers. Once adopted, Member States will have two years to implement the Directive by national legislation.

For further reporting on the Directive, see here.

UK Consumer Rights Bill

On 23 January 2014, the Consumer Rights Bill was published and introduced to Parliament, together with responses to suggested amendments contained in a 23 December 2013 report on the Bill by the Business, Innovation and Skills Committee ("BIS"). The Bill, which aims to facilitate private damages actions in the UK, remains broadly similar to the draft version published in June 2013.

The new rules give the specialist Competition Appeal Tribunal (“CAT”) the power to hear stand-alone as well as follow-on damages actions, and the power to grant injunctions.  The Bill also provides for revisions to the limitation periods for bringing damages actions in respect of infringements of competition rules and provides for the introduction of a “fast-track” procedure for SMEs.

The Bill also introduces opt-out collective actions and opt-out collective settlements.  Conditional on the CAT making a collective proceedings order, any CAT authorised representative could bring a collective action on behalf of a class of persons for harm suffered as a result of competition law violations.  Members of the class who wish to be excluded would have to opt out of the action. Various safeguards are contained within the draft Bill; for example, the case must be certified as being suitable for an opt-out action by the CAT (one of the aims being to prevent claims being brought by law firms, litigation funders or special purpose companies), and contingency fees and punitive or treble damages are prohibited.

The UK Government hopes that the Bill will make it easier, and therefore more attractive, for individual - or groups of - claimants to bring private damages actions before the UK courts.  The Government expects this to lend additional support to the public enforcement carried out by the UK and EU competition authorities and to ensure adequate compensation to any person who has suffered damage as a result of an infringement of competition law.

The Consumer Rights Bill is available here. The statement on policy reform and the responses to the BIS consultation can be found here.

UK Case Law

English court strikes out follow-on conspiracy claims but confirms validity of its use in principle

On 12 November 2013, the Court of Appeal struck out two claims for conspiracy in the case of WH Newson Holding Ltd and others v IMI Plc and others [2013] EWCA Civ 1377, overturning a previous ruling of the High Court.  The claims were brought by a group of builders' merchants following a Commission decision fining several companies, including IMI, for price fixing and market sharing in the copper-tube market.  Although the Court of Appeal found that the High Court had correctly interpreted section 47A of the Competition Act 1998 (which allows follow-on claims based on an infringement of competition law) to permit a claim for conspiracy to be brought under those provisions, the court noted that the Commission had not found that IMI intended to injure the claimants when it agreed to take part in the cartel, meaning that an essential ingredient of conspiracy under English law was absent.

The Court of Appeal reasoned that the statutory language of section 47A contains no restriction on the cause of action which forms the basis of a claim, so long as the underlying infringement decision contains the elements needed under English law to establish the cause of action.  Following its previous decisions in the cases of Enron Coal Services Ltd v English, Welsh and Scottish Railway Ltd [2009] EWCA Civ 647 and Enron Coal Services Ltd v English, Welsh and Scottish Railway Ltd [2011] EWCA Civ 2, the court found that such elements must be expressly contained within the Commission's decision upon which the section 47A action is based, the CAT itself being unable to make or infer further findings of infringement.

Although the Commission decision found that IMI had agreed to take part in the cartel, it did not contain an express finding that the cartel members had intended to injure.  Here the Court of Appeal differed from the High Court, finding that the intent to injure could not be implied simply from the act of participating in the cartel, as the claimant's loss must follow from the object of the conspiracy.  In this case, the loss to the builders' merchants did not inevitably flow from the cartel's actions, as IMI could have expected the claimants to pass on the price rises to their own customers and therefore suffer no loss themselves; merely being indifferent as to whether the claimant may suffer loss did not fulfil the requirement of intent.  The Court of Appeal therefore concluded that the claims for conspiracy should be struck out.

This is an important decision in that it confirms that claims can be made under section 47A for breaches other than of a statutory duty.  Despite this, claimants will face challenges bringing conspiracy claims, as it is rare for a cartel decision to contain a specific finding of the required intent.

The judgment is available here.

High Court refuses to strike out contribution claim against un-named infringer in follow-on damages action

On 4 December 2013, the High Court declined to strike out a contribution claim, brought by defendants in the WH Newson litigation, against a third party that was not named in the Commission's decision in the copper tubes cartel.  Cartel participants IMI and Boliden were sued in the High Court by victims of the cartel and subsequently brought contribution claims against both Mueller Industries Inc, which was found to be a member of the cartel through its subsidiary Wednesbury Tube & Fittings Company Limited, and Wednesbury's former owners AGA Rangemaster Group plc and AFG Manufacturing Limited (together "AGA") – AGA itself was not mentioned in the infringement decision.

Mueller objected to a High Court order, made at AGA's request, obliging IMI and Boliden to disclose documents to AGA relating to Wednesbury's participation in the cartel, arguing that the claim against AGA was illegitimate.  It proposed that because AGA was not an addressee of the infringement decision, it followed that AGA could not itself be liable to a claim for contribution under section 1 of the Civil Liability (Contribution) Act 1978 in respect of any liability of Boliden and IMI under section 47A Competition Act 1998.

The court found, however, that although proceedings in the CAT can only be brought against addressees of an infringement decision, this ceased to apply once the case was transferred to the High Court in July 2012.  As Article 101 TFEU has direct effect, the claimants in the WH Newson litigation could have brought an action against AGA in the High Court, regardless of whether or not AGA was the subject of a pre-existing infringement decision.  Any amount contributed by AGA would have reduced the amount payable by Boliden and IMI and vice versa.  Therefore, the Claimants would have relied on the same cause of action and sought compensation for the same damage, fulfilling the requirement laid down in the case of Royal Brompton NHS Trust v Hammond [2002] UKHL 14 that a contribution should only be made if the two claims are for the same damage.

Once the UK Consumer Rights Bill becomes law (see above), the CAT will like the High Court have jurisdiction to hear ‘stand-alone’ damages actions as well as follow-on actions against named infringers.

The judgement is available here.

Rejection of stay of proceedings pending appeal to the CJEU

The High Court has declined to stay the litigation brought against Mastercard by twelve retailers, including WM Morrison, Debenhams and Asda, for damages arising from abuse of its multi-lateral interchange fees (“MIFs”).  The European Commission found MasterCard’s MIFs to be illegal in December 2007, a decision which was upheld in 2012 by the EU's General Court.  MasterCard is appealing this decision to the European Court of Justice (“CJEU”) and requested the UK damages actions be stayed pending the resolution of this appeal.

MasterCard argued that a decision could be expected from the CJEU by early 2014, that this was not an unduly long period, and that it would face a disclosure bill of £700,000 if the stay was not granted.  The High Court rejected this argument, in part by taking into account the length of time since the wrongdoing and the further delay in any redress for the Claimants if the stay was granted. The judge, however, stated that the court should decide questions of limitation and applicable law as preliminary issues.  These issues are likely to be heard after 1 July 2014 and then be followed by a two part trial.  The first half will assess whether MasterCard is liable for damages and, if so, the second half will decide on quantum.

The case follows the trend of greater reluctance among English judges to stay damages actions pending appeal of EU infringement decisions in Luxembourg.  Although the English courts cannot take a decision which contradicts a judgment of an EU court, they must also have regard to the overriding objective of dealing with the action justly, requiring inter alia that the case is handled expeditiously and fairly.

The judgment is available here.

French blocking statute cannot be used to avoid disclosure requirements in English proceedings

On 22 October 2013, the Court of Appeal ruled in Secretary of State for Health and others v Servier Laboratories Ltd and others and National Grid Electricity Transmission plc v ABB Limited and others [2013] EWCA Civ 1234 that Areva and Alstom in the one case, and Servier Laboratories in the other, are not entitled to use a French 'blocking statute', which prohibits a French company from disclosing any potentially damaging corporate data for use as evidence in foreign proceedings, without prior authorisation from a French court.  The Court of Appeal agreed with the previous assessment of the High Court in June 2013 that the risk of any executives being prosecuted under the blocking statute, which has only been used once since its creation in 1968, was very low.  The Court noted that the supremacy of EU law over national law meant that it was highly unlikely that the French law could be used to frustrate the requirements contained within EU law, especially those regarding the duty to co-operate, non-discrimination, anti-competitive behaviour and abuse of a dominant position. 

The judgment is available here.