Private Actions in Competition Law: European Commission Proposes a New Directive on Antitrust Damages Actions in the EU

by Orrick, Herrington & Sutcliffe LLP

On 11 June 2013, the European Commission (the “Commission”) proposed a new Directive on private damages actions for breaches of EU competition law. This note highlights the key changes proposed by the Commission, which, if the Directive is adopted, will introduce some fundamental changes to the EU private enforcement regime.

Proposed new Directive on antitrust damages actions

The proposed Directive is aimed at reaching two main objectives - optimising the role between the public and private enforcement of competition law and enabling victims of EU competition law infringement to obtain compensation more effectively. In particular, the Directive contains specific measures to improve the national legal frameworks governing private actions for damages.

Disclosure of evidence: Perhaps the most significant development of the Directive is the introduction of disclosure of evidence across the EU (i.e., Member States shall ensure both parties to the proceedings have the opportunity to request the national courts to order disclosure of information). The UK already has a sophisticated disclosure regime; currently, however, it is very difficult for litigants in Continental Europe to obtain evidence. Whilst the proposed reform includes a range of safeguards aimed at protecting sensitive cartel evidence from disclosure to cartel victims (e.g., leniency corporate statements and settlement submissions can never be disclosed), other types of documents, such as information prepared especially for the investigations of a competition authority (e.g., responses to the competition authority’s requests for information) or information drawn up by a competition authority in the course of its investigations (e.g., formal antitrust objections) will enjoy only temporary protection. These will be able to be disclosed after the competition authority’s investigation has concluded.

Presumption of loss: The Directive introduces a rebuttable presumption, in the case of cartels, that an infringement causes harm but stops short of putting a figure on the harm and instead leaves it to the national courts to estimate the amount of harm.

Pass-on defence: The Directive confirms the availability of the pass-on defence: an infringer can invoke as a defence against a claim for damages the fact that the victim passed on all or part of the overcharge resulting from the infringement. The burden of proof that the overcharge was passed on lies with the infringer. The Directive also introduces a rebuttable presumption that an overcharge has been passed on to the indirect purchaser if the indirect purchaser can show that (a) the defendant has committed an infringement of competition law, (b) the infringement resulted in an overcharge for the direct purchaser, and (c) he purchased the goods / services the subject of the infringement, or purchased goods / services derived from or containing the goods / services that were subject of the infringement.

Joint and several liability: The Directive clarifies that where several undertakings infringe competition law jointly, they should be jointly and severally liable for the entire damage caused by the infringement. However, this should not apply to immunity recipients who should only be liable for the amount of harm they have caused by only paying damages to the direct and indirect purchasers/providers they have affected (rather than the cartel’s total damage). As the protection of the immunity recipient should not hinder a victim’s right to full compensation, an immunity recipient shall be fully liable “as a last-resort debtor” if a claimant is unable to obtain full compensation from the co-cartelists.

Limitation periods: To ensure cartel victims have a genuine opportunity to bring a damages action, the Directive introduces extensive limitation periods, so that parties have sufficient time (at least five years) to bring an action after they have become aware of the behaviour constituting the infringement, the qualification of such behaviour as an infringement, the harm it caused and the identity of the infringer. If a competition authority starts investigations, this period is suspended until at least a year after a decision is final or proceedings are otherwise terminated.

Effect of national decisions: According to established EU case law, Case C-199/11 European Community v Otis and others [2012] ECR I-0000, and Article 16 of Regulation 1/2003, when national courts rule on agreements, decisions or practices under Articles 101 and 102 of the Treaty on the Functioning of the European Union that are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. To promote consistent application of the EU antitrust rules and to increase legal certainty, the Directive extends this principle to final infringement decisions (meaning the “operative part of the decision and its supporting recitals”) by national competition authorities, or by a national review court.

Next steps: The Commission will need to build political support to get the Directive adopted. Given the fundamental changes introduced to legal systems in Continental Europe and considering the reluctance of several Member States to introduce legislation aimed at increasing litigation, it is by no means certain the Directive will get through the legislative process. We expect substantial lobbying efforts by European business organisations, either to scupper the Directive, or to reduce its scope. For example, businesses will be concerned that an infringement decision in one EU Member State can be used to support a European-wide damages action brought in another Member State. Another area of resistance will be the obligation to disclose, in damages actions before national courts, materials produced by investigated parties or competition authorities in antitrust investigations. If the Directive gets approved, Member States will have two years to implement it in their national legal frameworks from the date of its adoption.

The proposed Directive is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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