The European Commission has adopted a proposal for a directive to facilitate damages claims before the courts of the EU Member States by parties harmed by antitrust violations (http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html). The proposal aims to strengthen private enforcement of competition law by removing a number of practical and procedural obstacles to damages actions before the courts of the Member States.
The proposed directive provides (i) easier access to evidence, (ii) that decisions of other national competition authorities constitute proof of infringement, (iii) rules on limitations periods, (iv) the right to full compensation, including loss of profit, (v) a presumption that cartels cause harm, (vi) clarification of the passing-on defence and its consequences for direct and indirect purchasers, (vii) clarification of the joint and several liability of infringers and, finally, (viii) measures to facilitate consensual dispute resolution and settlements.
In addition, the proposal sets clear limits on the types of documents to which claimants can gain access. Specifically, (i) leniency corporate statements and (ii) settlement submissions may not be disclosed. The same holds true for documents submitted in the context of procedures before the competition authorities, as long as the case is still pending. These limitations on access to evidence are considered crucial to maintaining the effectiveness of leniency requests and settlements, which are very important tools for the enforcement of competition law by the European Commission.
The proposal will now be submitted to the European Parliament and the Council for discussion. The Commission would like to have the final version adopted before the European Parliamentary elections in May 2014, but the process may take longer. Once the directive comes into force, the Member States will have two years to adapt their national laws accordingly.
The implications of the proposed directive should be assessed carefully, as violations currently under investigation could fall under the new rules in a few years’ time. Therefore, companies may wish to already take these rules into account, for instance in assessing whether to request leniency or modify their document-retention policy.
Disclosure of documents in antitrust files
The European Court of Justice has recently heard a number of cartel cases involving access to evidence or documents. In Pfleiderer[1] and Donau Chemie,[2] the Court held that the national courts should adopt a case-by-case approach in determining the documents to be disclosed so as to allow for effective private enforcement. However, in view of the differences in procedural and access rules amongst the Member States, a case-by-case approach can result in significantly different outcomes, not to mention legal uncertainty. Hence the need for a common set of rules in order to strike a balance between safeguarding the effectiveness of public enforcement tools and private damages claims.
The proposed directive is based on the principle that national courts can order the claimant, defendant or a third party to disclose evidence under certain circumstances. The disclosure request should demonstrate that evidence in another party’s possession is relevant to the claim or defence and describe the specific items or categories of evidence sought.
The national court should rule on the proportionality of the request, taking into account the likelihood of the alleged infringement, the scope and costs of disclosure, whether the information is confidential and, if so, the arrangements to protect confidentiality, and the specification of the request (for a particular document in the competition authority’s file), in order to avoid “fishing expeditions”.
It should be noted that this proportionality check is similar to the disclosure procedure provided in Articles 877-880 of the Belgian Judicial Code.
Finally, the national court should have the power to effectively and dissuasively sanction failure or refusal to comply with disclosure orders or the destruction of evidence.
Limits on the disclosure of certain types of evidence
In addition to the proportionality check, certain documents are protected from disclosure requests at all times, including
leniency corporate statements in which the company describes to the competition authority its participation in a cartel and the role of the other cartel members, in order to obtain immunity from or a reduction in fines; and
settlement submissions, in which a company acknowledges an anti-trust violation to the competition authority and its liability for the violations with a view to an expedited procedure.
Such documents are protected from disclosure in order not to discourage companies from requesting leniency and seeking settlements, especially since the leniency programme has proved to be the competition authorities’ most effective tool in uncovering cartels.
Moreover, certain documents can only be disclosed after the competition authority has closed its proceedings, i.e.:
information prepared by a natural person or legal entity specifically for the purpose of proceedings before a competition authority, typically documents prepared for the defence (e.g. a response to a request for information or a reply to a statement of objections); and
documents drawn up by the competition authority in the course of its proceedings (e.g. requests for information, statements of objections, economic analyses, etc.).
Once the competition authority has closed its case, this information and these documents can be made available, even pending an appeal against the authority’s decision.
However, it should be noted that, as far as European Commission cases are concerned, the proposed directive does not affect Regulation (EC) No. 1049/2001 regarding public access to European Parliament, Council and Commission documents. Requests to access these categories of documents on the basis of Regulation (EC) No. 1049/2001 are still therefore possible. The outcome of such requests in cartel cases will most likely be determined in the EnBW[3] case, currently pending before the Court of Justice.
Rules facilitating damages claims
Effects of national decisions
The proposed directive provides that the national courts of the Member States where the antitrust violations have occurred cannot take decisions that would run counter to final decisions of the national competition authorities (from the same or another Member State) finding that such a violation has been committeed.
This rule should facilitate claims for damages in cases brought solely before national competition authorities (thus not before the European Commission). However, it may be difficult to apply where there are conflicting decisions issued by national competition authorities in different Member States.
Limitation periods
Limitation periods for bringing an action for damages should be at least five years, starting from the time the injured party can reasonably be expected to be aware of the infringement and the fact that it constitutes an antitrust violation, the identity of the party/ies to the infringement and the harm caused. For continuous or recurring violations, the limitation period does not start to run until the end of the last violation. Further, the limitation period is suspended for the duration of an investigation by a competition authority until at least one year after the authority’s decision has become final.
It should be noted that these rules may result in an undesirable situation whereby claims for damages can still be brought before a national court, even if the limitation period in that Member State has lapsed, provided the statute of limitations is still running in another Member State.
Joint and several liability
The Member States should ensure that parties to infringements of competition law are held jointly and severally liable for the loss caused by their action. An injured party may seek full compensation from any infringing party.
However, in order to encourage leniency applications and prevent leniency applicants from becoming easy targets for damages claims, the proposed directive provides that parties to infringements that have been granted (full) immunity from fines by a competition authority can only be sued by injured parties other than direct or indirect purchasers if the potential claimant is unable to obtain full compensation from the other parties to the infringement.
Presumption of harm and the possibility to claim loss of profit
The proposed directive provides for a (rebuttable) presumption that a cartel causes harm. With respect to quantification of the harm caused by a cartel, the burden of proof should not be excessively difficult or virtually impossible to meet. The court should have the power to assess (or to have an expert assess) the harm caused. In addition, the claimant should be allowed to claim damages for loss of profit.
By shifting the burden of proof to defendants, the Commission hopes to facilitate damages claims, since claimants in private damages actions often find it difficult to prove actual harm stemming from a violation of competition law. It should be noted that this presumption of harm does not apply to cases involving abuse of a dominant position.
The passing-on defence and the indirect purchaser presumption
The proposed directive allows defendants to raise the passing-on defence if they can prove that the claimant has passed on (to its customers) all or part of the overcharge resulting from the antitrust violation.
In the case of indirect purchasers, there is a presumption that the overcharge has been passed on to them (and that they have been harmed by the overcharge) if the violation resulted in an overcharge for the direct purchaser and the indirect purchaser subsequently acquired goods or services that formed the object of the violation or that derive therefrom.
These two rules will have the effect of bringing indirect purchasers into the equation in damages actions and facilitating damages claims by them. It should be noted that the proposed directive does not indicate whether the indirect purchaser presumption is rebuttable; however, we assume that it should be possible to produce proof to the contrary. In addition, even if the overcharge has been passed on entirely, the direct purchaser may still have suffered loss, e.g. in the form of lost sales and profits due to the overcharge and the resulting price increase.
Consensual dispute resolution
The proposed directive aims to foster consensual dispute resolution (e.g. settlement and remediation) by providing for suspension of the limitation period for bringing an action for damages for the duration of the consensual procedure. In addition, the proposal provides that, once a settlement is reached, the party to the infringement cannot be required to compensate more than its share of the loss caused to the injured party, unless the claimant is unable to recover from the other co-infringers not involved in the settlement.
Conclusion
If adopted, the proposed directive should significantly improve the chances of successful damages claims by parties harmed by antitrust violations in many Member States.
However, it should be borne in mind that the proposal is extremely detailed, and very detailed procedural rules are often not flexible enough in practice to adapt to unforeseen situations or procedural issues: many unforeseen complexities could arise, especially when it comes to relations between various injured parties, parties to infringements and situations arising (limitation periods) or decisions taken in other Member States.
The proposed directive may therefore be viewed by some as a procedural Pandora’s box rather than a straightforward set of rules to level the playing field for damages actions in the EU.
In any case, the implications of the proposed directive should be carefully assessed, as violations that are currently under investigation could fall under the new rules in a few years’ time. Companies may therefore wish to already take these rules into account, for instance in assessing whether to request leniency or modify their document-retention policy.
