Posted by Chantal Lavoie on 9 June 2016
In a move to facilitate private damages claims resulting from anti-competitive infringements, the European Commission adopted in 2014 a directive on EU antitrust damages actions (the Directive). Member States of the European Union have until 27 December 2016 to implement the Directive into their legal systems.
Private antitrust claims are governed by the national laws of Member States and introduced by claimants before national courts. What the Directive does is to provide a minimum set of harmonised rules in Member States to enable consumers to have an effective right to compensation for antitrust infringements throughout the European Union.
State of implementation
No Member State has yet fully implemented the Directive into its national laws. Depending on the private enforcement regime in place in each Member State, implementation of the Directive will impose a varying degree of changes to a Member State's rules. Some Member States already provide a judicial framework which is conducive to seeking redress from infringers for antitrust harm. Other Member States, with very limited rules to allow or facilitate such claims, will be required to make more profound changes to their legislation.
For the moment and based on public information received by the European Commission and available on its website, only Latvia has adopted legislation which partially implements the Directive. Finland has also proposed legislation to its national parliament for adoption. Other Member States are currently reported to be undergoing public consultations or to have prepared a first draft of the legislation (Spain). Over a dozen Member States have not yet publicly reported progress.
An important feature of the Directive is that it provides for a minimum set of rules to be adopted at national level to ease the process for claimants in seeking redress for antitrust infringements. Member States are however free to adopt more stringent rules if they wish. The Directive therefore provides Member States with a margin of discretion both in the interpretation of the minimum rules to be implemented and as regards any additional rules to be adopted over and above the framework of the Directive. As a result, the implementation process requires Member States to review their current private enforcement regime for antitrust claims, assess what is needed to bring it in line with the minimum prescribed rules of the Directive and decide also whether to make the national rules even more favourable to claimants. For those Member States without a tradition of private enforcement, the Directive will impose a major overhaul of national rules. Even for some Member States with a tested private enforcement regime, implementation of the Directive will give rise to some significant challenges. In Germany for example, the more extensive disclosure obligations imposed under the Directive will require an adaptation to (and possibly a re-think of) Germany's disclosure regime which, like many other European continental civil law jurisdictions, have strict rules for granting access to claimants to documentary evidence than common law jurisdictions such as the UK.
For many Member States, autumn is therefore likely to be hectic as working groups and legislative drafters scramble to finalise draft legislation to comply with the minimum requirements of the Directive.
Some practical consequences as of January 2017
Individuals and businesses having suffered harm as a result of an antitrust infringement under EU rules or EU national rules, will be able to seek redress before national courts of the European Union and have a minimum set of rules apply to them regardless of the Member State where the claim is introduced. The key set of minimum rules is as follows:
Disclosure of evidence
As explained above, the Directive requires Member States to provide for a minimum level of disclosure of evidence. This means that national courts must be able to order defendants or a third party to disclose relevant evidence under their control in response to a reasoned justification from a claimant (and vice-versa). Qualifications and exceptions to this general rule have been introduced to protect from disclosure certain categories of documents. In general, a balancing test has been put in place whereby national courts must consider whether the requested disclosure is proportionate, taking into account the legitimate interests of all parties concerned, including third parties.
Over and above this balancing test, the Directive also provides for certain documents to benefit from absolute protection from disclosure (so-called black list). These are 'leniency statements' and 'settlement submissions'. The absolute protection afforded to these documents is critical to preserving the effectiveness of public enforcement in relation to cartels. Indeed, leniency applications are key to a competition authority's ability to crack down on cartels. Likewise, the possibility for cartel participants to settle a case can be mutually beneficial to a competition authority and the parties. It is therefore important for leniency applicants and parties to settlement discussions to receive protection from disclosure of sensitive documents in order not to undermine the benefit of these tools for the public enforcement of cartels. Much discussion is currently focused on the interpretation of these two categories of documents and how these will be interpreted either in national legislation or by national courts. For example, 'leniency statements' are expected to cover corporate statements made by a leniency applicant but do they extend to the annexes submitted in support of the corporate statement? What about references to leniency statements or settlement submissions made in other documents subject to disclosure? Will the risk of disclosure have a chilling effect on decisions to apply for leniency given that the amounts at stake in follow-on claims may be far more substantial than the infringement fines. Some Member States may choose in its implementing legislation to be more specific regarding what is meant by 'leniency statements' and 'settlement submissions' whilst other Member States may leave it to national courts to interpret. Either way, there is a risk of different interpretations being adopted across Member States which could take years to resolve, eventually through appeals and preliminary references to the Court of Justice.
The Directive also sets out a grey-list of documents which can be disclosed once a competition authority has closed its proceedings. As a result, it is expected that evidence in the file of the European Commission (or a national competition authority) will become more easily accessible as of January 2017.
Minimum limitation period of at least five years
Claimants will benefit throughout the European Union of a delay of at least five years to introduce a competition claim. Points of interpretation have arisen however regarding the calculation of the limitation period. This may result in different national rules implementing this rule. In particular, the Directive provides that the limitation period is suspended during an investigation by the European Commission or a national competition authority until one year after the infringement decision becomes final. A decision is final when it can no longer be appealed. However this raises the question whether an appeal on any ground (e.g. calculation of the fine) but not on the finding of an infringement should trigger the suspension. Also, should appeals by all parties to the infringement decision have run out before a decision is considered final as regards each infringer? National implementing rules might offer differing interpretations thereby creating a non-level playing field within the European Union. For defendants, the suspension of the limitation period until appeals have run out means that follow-on claims can be introduced several years down the line after an infringement decision has been adopted. As a result, defendants will need to take measures not only to assess and identify where antitrust infringements might give rise to follow-on claims, but also calculate for each relevant Member State the duration of their potential exposure to claims, eventually provision for such potential claims and take measures to prepare and retain relevant evidence for potential future court proceedings.
Joint and several liability
The Directive will require Member States to adopt the principle of joint and several liability of parties to an antitrust infringement. However, the Directive also sets out two exceptions to the principle of joint and several liability:
(i) for small and medium-sized enterprise under certain conditions; and
(ii) for immunity recipients. Joint and several liability will only apply to immunity recipients for harm caused to the applicant's own direct and indirect purchasers and with respect to other injured parties, only where full compensation cannot be obtained from the other infringers. As regards contribution claims, the immunity recipient will only be liable for the amount of harm it caused to its own direct or indirect purchasers. These measures provide some protection to immunity recipients given their critical role in the public enforcement of cartels and the fact that they are often the primary target for follow-on claims (as the infringement decision becomes final for the immunity recipients earlier on due to the likely absence of an appeal). The Directive does not touch on the apportionment of liability as between infringers and leaves it to national laws to determine rules in this respect. Although the European Commission has committed under the Directive to provide guidance on the calculation of the overcharge, differences in approach as between Member States will inevitably arise.
Evidence of harm and of antitrust infringement
The Directive introduces a rebuttable presumption that cartels cause harm. This provision will have the effect of shifting the burden of proof to defendants, thereby facilitating the task of claimants. The Directive also sets out that antitrust infringement decisions by a national competition authority or a review court provide irrefutable evidence for the national court in that same jurisdiction that the infringement has occurred. As regards a decision taken in another Member State, it may be presented before a national court as prima facie evidence of the antitrust infringement. It will be interesting to see whether national courts will place antitrust infringements decisions from other EU national competition authorities on a similar footing to decisions of their own competition authority for purposes of showing that the infringement has occurred. In principle, one would expect the decision of another EU national competition authority to give rise to a strong presumption that the infringement has occurred, particularly where the decision is based on similar antitrust rules. Nevertheless, a national court may accept to reverse a presumption that an infringement has occurred where the infringement decision of another EU competition authority is not in line with the decisional practice of the local competition authority.
Quantification of damages and passing-on defence
The Directive establishes the principle that anyone having suffered harm resulting from an antitrust infringement can claim compensation, whether that person is a direct or indirect purchaser. However, the defendant can invoke as a defence that no compensation is due where the overcharge resulting from the infringement was passed on to parties at the next level of the supply chain. The Directive also introduces a presumption, in the case of indirect purchaser claims, that passing-on did occur where evidence is provided that the defendant committed an antitrust infringement, the infringement resulted in an overcharge for the direct purchaser of the defendant and the indirect purchaser purchased the goods that were the object of the infringement (or derived from them).
The recognition of the passing-on defence in the Directive is a welcome addition for defendants. Nevertheless, defendants will need to exercise prudence when invoking the defence in order not to prejudice their position with respect to indirect purchasers in relation to whom limitation periods have not yet run out.
The calculation of the overcharge is also likely to raise significant challenges. Some Member States are expected to address this issue in implementing legislation by defining a fixed amount of overcharge which the cartel harm is presumed to give rise to. This will reduce the burden of proof for claimants but equally place the burden on defendants to rebut the presumption. For example Latvia is expected to set the amount of the overcharge to 10% in its legislation. Hungary has a similar provision which is already contained in its existing legislation. It will be interesting to see which other Member States opt for this route in their implementing legislation.
The implementation of the Directive at the end of this year will have important long-term consequences. At the outset, claimants will be provided with a more favourable framework in all Member States to obtain compensation for harm resulting from antitrust infringements. As a result, a more level playing field is expected to be created, although disparities will continue to exist and some scope for forum shopping is expected to remain. This is essentially due to the fact that the Directive prescribes only minimum rules of harmonization. In some cases, the Directive also leaves it to Member States to adopt national rules without setting out minimum requirements, for example on the method for calculating damages (subject to abiding by general principles of effectiveness and equivalence). As national/European case-law develops following implementation of the Directive, differences in interpretation and application of national laws implementing the Directive are also likely to arise. It will take time before conflicting interpretations are resolved through appeals and preliminary references to the Court of Justice.
Conversely, the Directive is also expected to lead to a potential reduction in leniency applications. Whilst care has been taken in the Directive to maintain a balance between introducing more efficient private enforcement without affecting the efficiency of public enforcement through competition authorities, there is speculation already that less immunity applications are being made of late in the European Union given the more favourable climate being created for follow-on claims. If confirmed and the trend continues, this is likely to impact on the ability of competition authorities to clamp down on cartels and accordingly, lead to fewer cartel decisions. Likewise, settlement practices could be affected by the forthcoming implementation of the Directive. Whilst ‘settlement submissions’ are protected from disclosure, settling parties could nevertheless find themselves primary targets for follow-on claims, particularly in hybrid cases where cartel proceedings against non-settling parties remain ongoing.