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Compensation and the Damages Directive
Sebastian Peyer
∗
Abstract:
The EU Damages Directive came into force in December 2014. One of its objectives is to
ensure that anyone who has suffered harm caused by infringements of competition law can
effectively exercise the right to claim full compensation in the courts of the EU Member
States. This paper looks closely at the Directive’s compensation goal and the key
arrangements that are to encourage victims to seek redress in the national courts. The paper
uses a simple framework to demonstrate that the legal measures in the Damages Directive
are unlikely to foster compensation because they fail to create incentives for harmed
individuals to seek redress. If Member States seek to encourage full compensation, they
should devise a framework for private antitrust actions that goes beyond the Directive’s
remit by, for example, allowing class actions.
Key words: Private antitrust enforcement; competition law; damages action; Damages
Directive; Directive 2014/104/EU; EU competition law
JEL classification: K41, K42
∗
Lecturer in Law, University of East Anglia. The author can be contacted at s.peyer@uea.ac.uk. I would like to
thank Cosmo Graham, Morten Hviid, Andreas Stephan, Mel Marquis, two anonymous referees and the
members of BECCLE and CCP for their valuable comments and feedback on earlier versions of this paper.
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A. Introduction
For many years the European Commission has advocated the use of tort claims to enforce
Articles 101 and 102 TFEU and the national equivalents. It initiated a discussion about the
state and role of private antitrust litigation in the EU Member States and how to facilitate
damages claims at the turn of the millennium. After more than a decade of consultations,
reports and discussion, the stakeholders agreed on certain measures to regulate and
harmonise antitrust damages actions.
1
These measures came into force with the Damages
Directive in December 2014.
2
The Directive pursues two main objectives. The first is to safeguard the effective private
enforcement of EU competition law by harmonizing the framework for compensation claims
across the Member States. The rules in the Directive endeavour to ensure that “anyone who
has suffered harm caused by an infringement of competition law […] can effectively exercise
the right to claim full compensation”.
3
The Directive obliges Member States to introduce
certain measures to encourage individuals to seek compensation for harm caused by
breaches of competition law. The second goal of the Directive is to coordinate public and
private enforcement – a circumlocution for limits that are imposed on private damages
actions to protect public law enforcement. Private actions that follow the announcement of
a public investigation by a competition authority can interfere with that investigation. If, for
example, a potential claimant seeks access to evidence that is in the hands of the
competition authority, it may reduce the willingness of firms to cooperate with the
competition authority if the cooperation would subsequently expose the firm to (greater)
civil liability in the national courts.
4
The coordination goal places limits on the goal of
effective compensation.
1
For a list of key documents see http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html.
2
Directive 2014/104/EU of the European Parliament and of the Council on certain rules governing actions for
damages under national law for infringements of the competition law provisions of the Member States and of
the European Union [2014] OJ L 349/1 (hereinafter “Damages Directive” or “Directive”).
3
Article 1(1).
4
Recital 25. Buccirossi et al. argue that damages actions do not reduce the attractiveness of leniency
programmes. Paolo Buccirossi, Marvao, Catarina Moura Pinto and Giancarlo Spagnolo, ‘Leniency and
Damages’ (2015) Centre for Economic Policy Research Discussion Paper Series.
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In this paper, I am scrutinising the compensation goal of the Directive and whether the
Directive’s legal measures will make it more likely that victims seek redress from the
infringer. My analysis will focus on the compensation goal because it epitomises the
damages actions reform and it has been stressed by all Commissioners involved in the
making of the Directive. For example, Margrethe Vestager, referring to the Damages
Directive, announced that “[…] it will be easier for European citizens and companies to
receive effective compensation for harm caused by antitrust violations”.
5
For my analysis, I
propose a simple framework to identify the factors that are likely to incentivise legal action
and, thus, the factors that are likely to encourage victims to seek redress. I will also identify
those aspects that are more likely to discourage victims from asking for compensation.
Based on this framework, I shall look into the potential effects of Damages Directive, asking
whether it is likely to encourage individuals to seek compensation. I argue that the Damages
Directive does not encourage more claims. When the Directive provides incentives to
commence legal action, they are either outweighed by the limitations that are placed on
private claims or by the costs associated with a more elaborate system of compensation
claims. If more compensation claims are desired, the Member States ought to introduce
rules on private antitrust enforcement that go beyond the narrow framework of the
Damages Directive.
This study has some caveats. First of all, I will work with a number of contentious
assumptions that underpin the Damages Directive. For the purpose of this study, I will
assume that the goal of more effective compensation, i.e. more damages claims, is sound.
6
I
doubt that more private claims will help victims of anticompetitive conduct to obtain more
effective compensation. However, I shall presume that this is true for the purpose of this
paper which is to assess the rules of the Directive in the light of its compensation goal. I will
also assume that the proposed measures are based on sound assumptions, in other words,
that there is a lack of private damages actions and that the non-harmonised national rules
discourage claimants from seeking damages. With regards to these issues I have pointed to
5
Press Release of the European Commission, Antitrust: Commission welcomes Council adoption of Directive on
antitrust damages actions (Brussels, 10 November 2014).
6
For a critical view on ‘boosting enforcement’, see Donald I Baker, ‘Revisiting History - What Have We Learned
About Private Antitrust Enforcement that We Would Recommend to Others’ (2004) 16 Loyola Consumer Law
Review 379–408.
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the lack of empirical evidence elsewhere and I will not reiterate my criticism here.
7
Finally,
there are limitations as to explanatory power of my observations. I will look at the potential
effects of isolated rules but this is not a precise science. There are a number of factors that
are not being accounted for in the stylised framework I am going to use. Furthermore, the
Member States have two years until December 2016 to implement the Directive into
national law.
8
The Damages Directive creates room for interpretation and National
legislators may read the rules of the Damages differently. Consequently, national rules may
diverge and so may the incentives provided for in the respective jurisdiction.
In the next section B, I will briefly outline the background and the content of the Directive to
illustrate the limitations, goals and scope thereof. Part C develops a simple framework to
determine the factors that incentivise potential claimants to bring legal actions. This
framework is then applied to the rules of the Directive in section D. Part E concludes.
B. The Damages Directive
I. Background and objectives
In this part, I will briefly retrace the formation of the Directive, its goals and the rules that
are to be implemented in the Member States. The Damages Directive has been in the
making for more than a decade under three different commissioners.
9
It implements two
decisions of the Court of Justice of the European Union (CJEU) that clarified that there is a
right to compensation for the breach of EU competition law.
10
7
Sebastian Peyer, ‘Private Antitrust Litigation in Germany from 2005 to 2007: Empirical Evidence’ (2012) 8
Journal of Competition Law and Economics 331–359.
8
Article 21(1).
9
Mario Monti (1999-2004), Neelie Kroes (2004-2009), Joaquín Almunia (2010-2014).
10
Case C-453/99 Courage Ltd v Bernard Crehan, ECLI:EU:C:2001:465 [2001] ECR I-6297; Case C-295/04
Vincenzo Manfredi v Lloyd Adriatico Assicurazioni SpA, ECLI:EU:C:2006:461 [2006] ECR I-6619.
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The European Commission began to explore the options for reforms by consulting
interested parties on damages-related questions in the Green Paper in 2005,
11
followed by a
consultation on the White Paper proposals in 2009.
12
The Ashurst Report informed the
Commission in the drafting stages of the Green Paper and provided material about the legal
situation in the Member States.
13
It also attempted to provide empirical evidence with
regards to private damages actions for the infringement of competition law. The White
Paper of 2009 was flanked by a study on the potential welfare effects of different options
for reform.
14
In the course of the consultations, the focus of the damages actions reform
changed from compensation and deterrence in the Green Paper
15
towards a more
compensation-centred perspective in subsequent documents, also excluding group actions
from the Damages Directive.
16
The Commission consulted on the quantification of damages
and published a practical guide for judges.
17
The quantification guidance does not form part
of the Directive. Class or group actions were considered separately and the Commission
issued a recommendation on common principles rather than regulating collective redress in
the Directive.
18
It is crucial to understand the assumptions that underpin the reform process. Most
stakeholders subscribe to the view that private antitrust enforcement in the EU Member
States is underdeveloped and that claimants face considerable obstacles when pursuing
11
Green Paper – Damages Actions for Breach of the EC Antitrust Rules, COM(2005) 672 final (19 December
2005).
12
White Paper on Damages Actions for Breach of the EC Antitrust Rules, COM(2008) 165 final (2 April 2008).
13
Waelbroeck, Denis; Slater, Donald; Even-Shoshan, Gil, Study on the Conditions for the Claims of Damages in
Case of Infringement of EC Competition Rules (Brussels 2004).
14
Renda, Andrea, et al, Making Antitrust Damages Actions more Effective in the EU: Welfare Impact and
Potential Scenarios (Brussels 2008).
15
The Green Paper also considered group actions. Green Paper (n 11), para 2.5.
16
Compensation would also lead to more deterrence, see White Paper (n 12), para 1.2. The Damages Directive
refers to deterrence only in the context of private enforcement potentially deterring cooperation with the
competition authorities, see Damages Directive, recital 26.
17
Draft Guidance Paper – Quantifying Harm in Actions for Damages Based on Breaches of Article 101 or 102 of
the Treaty on the Functioning of the European Union (Brussels 2011); European Commission, Communication
from the Commission on Quantifying Harm in Actions for Damages Based on Breaches of Article 101 or 102 of
the Treaty on the Functioning of the European Union (C(2013) 3440) (Brussels 2013).
18
Commission Staff Working Document – Public Consultation: Towards a Coherent European Approach to
Collective Redress (Brussels 2011); Commission Recommendation of 11 June 2013 on common principles for
injunctive and compensatory collective redress mechanisms in the Member States concerning violations of
rights granted under Union Law [2013] OJ L201/60.