European Directive 2014/104/EU on actions for damages for infringements of national and European competition law was finally adopted on 26 November 2014, after some ten years debate on the issue1.
Reliance on public enforcement – action by public authorities to penalise anticompetitive behaviour, essentially through the use of fines – is a defining characteristic of competition law in the European Union.
Directive 2014/104/EU now aims to facilitate private enforcement – actions for compensation brought on behalf of victims of infringements of competition law – by making means of redress more effective. It thus includes provisions on obtaining evidence, which aim to compensate for the asymmetry of information which is a key feature of legal proceedings under competition law. And the European Court of Justice ruled very recently on the issue of access by victims to evidence contained in the European Commission’s public enforcement file2. In addition, support for the development of private enforcement actions, alongside public enforcement, aims to discourage new infringements of competition law.
1 The first report by the European Commission on the subject was published in August 2004 http://ec.europa.eu/competition/antitrust/actionsdamages/study.html
2 ECJ 7 Oct 2014, Case T-534/11 Schenker: the Court refused to grant full access to the Commission’s file, ruling that the victim of the infringement should establish their need for access to any particular document included in the file, so that the Commission could weigh the arguments in favour of disclosure against the need to protect the confidentiality of the file, on a case by case basis.
This European drive to encourage private enforcement is complemented in France by the law of 17 March 2014, known as the Hamon Law, which introduced the possibility of class actions in competition law3. As a result, it will sometimes be necessary to coordinate the rules on class actions with those arising from Directive 2014/104/EU.
Before the adoption of the Directive and the Hamon Law, the risk of civil action was limited, for a variety of reasons, including, in some cases, the limited harm suffered by individual victims, or the difficulty of assembling evidence. As an example, only 0.08% of the victims of the cartel involving the mobile telephone operators Orange, SFR and Bouygues Télécom have commenced proceedings for damages.
After transposition of the Directive, which will require the introduction of a law and/or regulations within two years (by 27 December 2016 at the latest), the risk will be much higher. It is therefore important to start preparing now, by developing awareness of the main provisions of the Directive, as set out below.
Scope of the Directive: the Directive covers compensation for harm caused by infringement of competition law, defined as an infringement of Article 101 or 102 of the Treaty on the Functioning of the European Union (TFEU), or of national competition law (Articles 1 and 2 of the Directive4).
Obtaining evidence: where the claimant produces a reasoned justification containing
3 However, the Hamon Law is very limited in this respect, as class actions are open only to consumers, who are rarely the direct victims of competition infringements.
4 Unless otherwise specified, all references below to numbered Articles refer to Articles of Directive 2014/104/EU
Economic Division
Newsletter no. 14 of the Economic Division – January 2015
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reasonably available facts and evidence sufficient to support the plausibility of their claim for damages, national courts should be able to order the defendant or a third party to disclose relevant evidence which lies in their control (Article 5).
National courts should limit the disclosure of evidence to what is proportionate, taking account in particular of the existence of any confidential information. The courts will be able to order the production of evidence which contains confidential information and should have effective arrangements at their disposal for protecting such information. Courts should give full effect to legal professional privilege.
Assessment of the proportionality of an order to produce evidence will be particularly rigorous in the case of evidence held by competition authorities (Article 6). There is provision for specific rules on two categories of evidence:
– Some documents may not be produced until after the closure of proceedings by an authority;
– Other documents, namely statements made seeking leniency and settlement submissions, may never be subject to a disclosure order.
Documents falling into one of the two categories above will not be admissible as evidence in compensation proceedings if obtained solely as a result of access to the file of a competition authority, although the first category will be inadmissible only if the competition authority has not yet closed its proceedings (Article 7).
National courts should be able to impose penalties in the event of failure to respect the legal requirements on the disclosure and use of evidence, including failure to respect an order to disclose evidence, or destruction of relevant evidence etc. (Article 8).
Effect of national decisions: infringements found by a final decision of a competition authority will be deemed to be irrefutably established for the purposes of an action for damages brought before the courts of the same Member State (Article 9). If the decision finding an infringement of competition law is handed down by the competition authority of another Member State, it may be submitted to the court which has jurisdiction as prima facie evidence of an infringement.
Joint and Several Liability: in the event of a joint infringement by several undertakings, they will be jointly and severally liable for the harm caused (with some specific exceptions for SMEs and those benefitting from leniency programmes). An undertaking which pays compensation may take action to recover contributions from other infringers: the amount of each contribution will be fixed according to the relative share responsibility for the harm caused (Article 11).
Right to full compensation: victims of an infringement of competition law have a right to full compensation for the harm they have suffered, understood as compensation for actual loss and for loss of profit, plus the payment of interest. Compensation may not exceed the harm actually suffered: there is a specific provision against punitive and multiple damages (Article 3).
Passing-on of overcharges: where the harm arises from the difference between the price actually paid and that which would have been paid in the absence of the infringement, and the injured party has reduced its loss by passing it on, in full or in part, to its own purchasers, by increasing its own prices, the loss (or overcharge) passed on is no longer a loss for which the party which passed it on needs to be compensated (Article 12). Customers of the injured party can claim compensation for their own losses, provided that that they can show that the injured party passed on an overcharge to them (Article 14). The defendant may invoke the passing-on of the overcharge as a defence (the “passing-on defence” – Article 13). The Commission is to issue guidelines on how the passing-on of the overcharge is to be taken into account.
Quantification of harm: neither the burden nor the standard of proof required by the national courts for the quantification of the harm suffered
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should render the exercise of the right to compensation impossible or excessively difficult (Article 15). National courts should be enabled to estimate the amount of harm and may ask for the help of the national competition authorities in this respect. Infringements committed as part of a cartel are presumed to cause harm, but the presumption may be rebutted by the defendant (Article 17).
The assessment of harm gives rise to complex economic questions, as it requires a judgement of the position that the claimant would have been in if there had been no infringement. To help national courts, the European Commission issued a communication on this issue in 2013, together with a practical guide which provides insights into the different forms of harm normally caused by anticompetitive practices and sets out the methods which can be used to quantify such harm.
Limitation periods: each Member State must regulate for limitation periods, which must be a minimum of five years, and be suspended or interrupted by any action of a competition authority for the purpose of investigation or pursuit of proceedings in relation to an infringement which is the subject of the action for damages. The suspension or interruption may end at the earliest one year after the date on which the authority concludes its proceedings (Article 10).
Consensual dispute resolution: the limitation period for bringing an action for damages will be suspended for the duration of any consensual dispute resolution process; and legal proceedings already in progress may be suspended for up to two years where the parties engage in a consensual dispute resolution process (Article 18).
The share of harm for which an infringer who participates in a consensual resolution is liable shall be deducted from the damages claimed by the injured party who has taken part in the same procedure (Article 19).
Directive 2014/104/EU, together with the Hamon Law in France, is thus likely to have a significant impact on the number of actions for damages brought by victims of infringements of competition law, and clearly also on the amounts of compensation awarded to victims.
Economic Focus
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