Promotion and Harmonization of Antitrust Damages Claims by Directive EU/2014/104?
TL;DR: In this paper, the authors assess the features of the Directive and the challenges it poses for its implementation by Member States, and assess the impact of this Directive on the enforcement of competition law.
Abstract: Directive EU/2014/104 is the latest legal instrument that crystalizes the evolution of EU competition law enforcement. This paper assesses critically the features of the Directive and the challenges it poses for its implementation by Member States. The Directive codifies the case law of the EUCJ and it encroaches upon the autonomy of Member States in setting the institutions, remedies and procedures available for victims’ of antitrust infringements. Although the Directive provides a fragmented and incomplete set of rules that only partially harmonizes antitrust damages claims in the EU, and it’s slanted towards follow-on cartel damages claims, it has publicised the availability of damages claims, creating momentum that will transform how competition law is enforced in the future.
Summary (7 min read)
- Directive 2014/104/EU is the corollary of the EU's policy regarding the promotion and facilitation of private enforcement of competition law 1 .
- This paper examines the contents and goals of the Directive and the specific rules adopted while also briefly analysing some of the relevant steps and features of the procedure leading to its adoption.
- This may help to explain the options and compromises taken in the final version and its scope.
- It is controversial and there remains uncertainty regarding how effective it might be.
1. The path to the adoption of the Directive
- The evolution in EU competition law enforcement and policy that led to the adoption of the Directive started more than a decade ago (se Timeline below), during which several relevant milestones were reached, all pointing in the direction that some legislative action of the EU was required.
- The Green Paper built on the evidence provided by the Ashurst report on the legal conditions for damages claims in MS (2004) 4 .
- In 2006 the CJEU further clarified its position concerning damages claims by victims of EU competition infringements -extending their availability to indirect victims 5 .
- Is mainly concerned with protecting the investigations of the European Commission and of the National Competition Authorities (hereinafter NCAs), by limiting access or disclosure of information included in their administrative files.
- In combining these two contradictory goals, the Directive gives preference to public enforcement over the promotion of private claims for damages 25 , adopting a distinctive approach to that set out in the earlier EUCJ case-law 26 .
3. The Directive: legal grounds and rules.
- In analysing the Directive, the authors will consider its legal basis under EU Law (infra §3.1), and briefly describe its provisions (see infra §3.3).
- It cannot be denied that certain Directive rules will produce some impact on the successful pursuit of damages claims by victims of competition infringements, but it is necessary to reflect on the more subtle and underlying features of the Directive that may explain why and how that impact may not be the one envisaged or intended by its drafters.
3.1. Why a Directive? Legal basis.
- To date, Regulations have been the only rules adopted on the basis of article 103 of the TFEU.
- A Directive was the preferred option in this case.
- The change in legal basis and type of EU law adopted was based, in part, with the compensatory goal mentioned above and with the content of the rules adopted: affecting substantive tort and civil procedural issues governed by MS national laws, most of which will be strongly and deeply rooted in their domestic legal traditions.
- Indeed, given the uneven level of protection that exists for victims' right to compensation in different MS, the Commission used article 114 of the TFEU as a complementary legal basis for the Directive.
- The Directive introduces several rules that make important inroads eroding and limiting national remedial autonomy (see infra §3.2).
3.2. Eroding and Encroaching Upon National Remedial Autonomy.
- The direct applicability of articles 101 and 102 of TFEU by national courts had been recognized by the EUCJ for many years 30 , and was given express legal ratification in Regulation 1/2003 (article 6) 31 .
- A similar reasoning explains the Proposal for a Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market, 22 of March 2017.
- For an overview see Asimakkis P Komminos "Effect of Commission Decisions on Private Antitrust Litigation: Setting the Story Straight" (2007) Common Market Law Review 44: 1387-1428.
- The provisions of the Directive, together with the principle of effectiveness, embody the victims' right to seek compensation for the harm caused by competition law infringements as a way to place them in the position they would had been but for the infringement, ruling contrary to EU law any national rule that makes those claims excessively difficult or impossible.
- Finally, although procedural law belongs largely within the domain of MS' autonomy, some of the rules of the Directive further extend the growing body of EU procedural rules that, together with the principles of effectiveness and equivalence, may further constrain national rules and proceedings 38 .
3.3. Content of the Directive.
- Achieving 'full compensation' is the main declared aim of the Directive, repeated in several of its recitals and rules 40 .
- Nonetheless, the Directive is silent regarding the standard of proof, fault and causation requirements 44 .
- Moreover, the compensatory principle is further enhanced by the rebuttable presumption of harm in cartel cases.
3.3.2. Limitation periods.
- The right to compensation for harm caused by antitrust infringements is dependent on the bringing of a claim against the infringers in due time.
- Before the Directive, there were a variety of limitation periods for damages claims across the different MS.
- The Directive lays down clear rules concerning both the duration and running of the limitation period.
- 13-06-2018 13 the conduct constituted an infringement, that it caused harm to the claimant and the identity of the infringers (article 10.2).
- In doing so, the Directive tackles some of the potential costs, negative effects and conflicting interests raised by private litigation for the system of competition law enforcement as a whole 80 .
- Private damages claims complement action by public authorities against anticompetitive violations, and are arguably the only way to directly compensate victims of antitrust harm.
- The Directive now excludes this possibility, although it provides some safeguards in relation to the blanket disclosure prohibition which has to be interpreted narrowly.
- If, as a result of its assessment, the court deems that part of that evidence is not included within those two categories 100 , it may order their disclosure at any time (pursuant article 6.9) or after the competition authority has closed its proceedings (pursuant article 6.5).
3.3.3. Quantification of Harm.
- One of the main difficulties faced by parties injured by infringements of competition law is the quantification of the harm suffered.
- Those rules qualify the domestic rules on quantification of harm in damages claims in force in each MS.
- Moreover, a Communication on Quantifying harm in antitrust damages actions, 47 accompanied by a Practical Guide, 48 were adopted by the Commission when the Directive Proposal was presented, and they outline the diverse methods and techniques available to quantify harm.
- On the other hand, in the particular case of cartel infringements, the Directive seeks to alleviate the burden of proof for claimants by the introduction of a rebuttable presumption of harm (article 17.2).
- Nevertheless, infringers can rebut this presumption, and claimants still need to prove causality and estimate the amount of harm suffered 53 .
3.3.4. Multi-party responsibility.
- If several parties have committed an antitrust infringement, the Directive establishes the joint and several liability of all co-infringers.
- An exception is introduced to this rule to protect the immunity beneficiary, who will only be liable to "its direct or indirect purchasers or providers" and to the rest of the victims "only where full compensation cannot be obtained from the other undertakings that were involved in the same infringement" (article 11.4) 55 .
- In practice, it seems likely that gathering all the information required for the exception to apply will prove an un-surmountable task for both potential claimants and defendants 59 .
- Finally, a general contribution principle among all co-infringers is also established by the Directive.
- As an internal liability rule among co-infringers, any co-infringer has "the right to obtain a contribution from other co-infringers if it has paid more compensation than its share" (article 11.5).
3.3.5. Damages spread along a distribution chain.
- The Directive extends the right to compensation to "any natural or legal person who has suffered harm caused by an infringement of competition law", regardless of their position in the supply or distribution chain.
- In drafting the rules concerning compensation of indirect victims of the infringement, MS must avoid overcompensation or infringer's absolution of liability.
- These claims will more likely will follow-on a previous infringement decision by the European Commission or of a NCA that will make indirect victims aware of the infringement and ensuing harm they have suffered 61 .
- 58 This exception would not be applicable where the SME was the one that led the infringement or had coerced other undertakings to participate therein or the SME had previously been found to infringe competition law (article 11.3).
- 59 63 Nevertheless, as the passing-on refers merely to the overcharge, there will probably be part of the harm that remains with direct victims and therefore "where the passing-on resulted in reduced sales and thus harm in the Working Paper IE Law School AJ8-242-I 13-06-2018 16.
3.3.6. Consensual Dispute Resolution.
- The Directive seeks to promote consensual resolution among infringers and victims on the basis that this will enhance successful damages claims by reducing the uncertainty of litigation and by eliminating its costs 67 .
- 64 Likewise, following what is prescribed in article 17.1 in providing national courts the power to estimate harm when it is impossible or excessively difficult to quantify the harm, article 12.5 expressly recognizes this power in relation to harm to indirect purchasers.
- Concerning the timing of any ensuing litigation, limitation periods for legal claims should be suspended during the negotiations (article 18.1) and courts may suspend their proceedings for up to two years if the parties enter into a consensual dispute resolution concerning the claim covered by that action for damages (article 18.2).
- The other rule deals with consensual dispute resolution in cases of multi-party responsibility when a settlement is not reached with all the co-infringers (see supra §3.3.4).
- Secondly, any litigation regarding the remaining claim of the settling injured party can be directed only against non-settling co-infringers and they shall not be able to recover contribution for the remaining claim from the settling co-infringer (article 19.2).
3.3.7. Disclosure of evidence.
- The difficulties faced by antitrust victims in obtaining access to evidence of the infringing conduct and of the harm they have suffered thereby is one of the obstacles that helps to explain the limited number of antitrust damages claims brought up to date in most MS.
- An infringement decision by the Commission or a NCA certainly helps claimants not only in being able to identify themselves as victims but also in building the follow-on claim (see infra §3.3.9).
- Likewise, defendants may need to have access to evidence held by claimants or third parties to counter arguments of the claimants regarding the existence of infringement, the harm and its quantification or the causal link.
- The Directive acknowledges that in some MS the existing claimant-friendly discovery procedures may allow a wider disclosure of evidence and they may continue to exist, although they will have to adequately respect the safeguards set out in the Directive (article 6.8).
- Among the considerations that have to be taken into account by the national court in issuing the disclosure order are: (a) the available facts and evidence supporting the plea which justify the disclosure request; (b) the scope and cost of disclosure; and (c) the protection of confidential information.
3.3.9. Binding effect of NCAs infringement decisions.
- The protection of leniency and settlement submissions is not the only issue concerning the interplay of damages claims and public enforcers dealt with by the Directive.
- Infringement decisions by the Commission or NCAs and damages claims the Directive makes provision for follow-on claimants to be able to rely on prior infringement decision adopted by the NCAs.
- The final rule adopted in the Directive is less ambitious than the draft provision contained in the 2013 proposal which heralded a "EU-wide binding effect" 101 , as the Directive provision only extends to decision by domestic NCAs and appeal courts 102 .
- The Directive only requires foreign NCA decisions be deemed to be prima facie evidence of an infringement.
- As such, the evidentiary value of those decisions is limited, as that "finding can be assessed as appropriate, along with another evidence adduced by the parties" (recital 35).
4. Assessment of the Directive. Scope and texture of its rules: neglected issues, limitations & inherent biases.
- The Damages Directive tackles the task of positively harmonizing the rules on antitrust damages claims, but in doing so, it neglects some relevant issues that would be required for claims to be raised and for them to be successful (infra §4.1).
- The rule that the court cannot deviate from the domestic NCA's final decision also exists in the UK (Section 58A of the Competition Act 1998).
- Of course, given the essence of a Directive as a flexible legal instrument, and considering that some of its clauses only impose minimum harmonization 105 , the possibility exists for MS to further extend the scope of the new rules or shape them to be more comprehensive and effective 106 .
4.1. Shortcomings and neglected issues.
- First, the Directive singles out monetary damages claims as the only type of possible private enforcement action covered by these rules.
- The Directive does not apply to other private claims (declaratory actions, orders to cease and desist of infringement, requests for interim measures, restitution or unjust enrichment claims or claims for compensation in nature) which may be relevant in addressing the wrongs that may be provoked by antitrust infringements 107 .
- The focus on damages claims can probably be better explained and understood by considering the Directive's slant towards cartel damages claims (infra §4.3).
- Secondly, even within the realm of damages claims, although the Commission had noticed in the works that led to the adoption of the Directive that costs/funding of claims and collective redress were two of the challenges that should be addressed in promoting antitrust damages claims in the EU 110 , there is specific provision for neither in the Directive.
- The Directive is silent in this regard and, in doing so, it AJ8-242-I 13-06-2018 26 neglects two crucial issues that would facilitate successful compensation (but which, at the same time, are more politically sensitive and problematic) 111 .
4.2. Limited treatment.
- Litigation is costly and out-of-court solutions may be the best way to address damages claims by antitrust victims.
- The Directive clearly looks at legal claims brought before national courts as the main tool through which victims' compensation is to be assured, with minimal reference to non-judicial claims and to consensual dispute resolution (see supra §3.3.6) 115 .
- Indeed, in seeking some minimum harmonization of the rules for antitrust claims, the Directive fails to provide a comprehensive and entirely coherent framework of substantive and procedural rules that would promote compensation.
- Concerning the distinction between substance and procedure, which will prove essential in deciding the transitory regime of the Directive (article 22), the Directive leads to unnecessary uncertainty, as the classification of rules according to this hybrid categorisation may vary from MS to MS 116 .
4.3. Inherent biases.
- The neglected issues and the limitations discussed above are explicitly acknowledged by the Commission and the Directive itself.
- On the other hand, those risks are greater in the case of non-cartel competition infringements, where the ambiguity of the prohibitions may, some would argue, lead to nuisance suits or erroneous damages awards.
- All in all, in underlying its concern with the interaction of damages claims and prior actions by public enforcers (recital 6), the Directive's rules are slanted towards follow-on claims rather than stand-alone actions 124 .
- After the Directive is implemented, there will only be partial or limited harmonization, and substantial legal differences will subsist and, therefore, forum shopping will continue 135 .
5. The implementation of the Directive.
- MS should have implemented the Antitrust Damages Directive by 27 of December 2016 (article 21.1).
- MS should also notify the Commission of the provisions adopted for implementation and transposition.
- The Directive contains 24 articles and 56 recitals.
- The quality of the Directive itself (unclear and vague in some aspects) may explain some of the problems encountered by MS in its implementation 148 , together with the conflict between certain Directive provisions and some long-standing traditions and rules of MS law 149 .
- AJ8-242-I 13-06-2018 34 vague or require complex interpretations, doubts of the compatibility of national law with the Directive will be shifted to national courts, which will it is suggested inevitably lead to preliminary rulings being requested by those courts from the EUCJ.
- This paper has looked at the Antitrust Damages Directive as the latest legal instrument that crystalizes the evolution of EU competition law enforcement.
- Moreover, as indicated before, some of the legal solutions provided in the Directive appear too vague or too complex which will inevitably lead to interpretation problems that may negatively affect the incentives to bring damages claims or their outcome.
- Thirdly, as has been stressed in this paper, as the Directive leaves room for the national remedial/procedural autonomy, MS' idiosyncratic rules in MS legal systems which do not contravene the principle of effectiveness will continue to exist and be applied.
- Finally, it remains to be seen how the new rules adopted by MS in compliance with the Directive will enhance or promote damages claims and private enforcement of competition law in general.
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"Promotion and Harmonization of Anti..." refers background in this paper
...…of competition infringements, direct and indirect, but the Directive’s rules mainly address cases involving victims located downstream, 122 See Dunne (2014) Cambridge Yearbook of European Legal Studies: 145 and 168-185175-179; Mark-Oliver Mackenrod “Private incentive, optimal deterrence and…...
...111 See Dunne (2014) Cambridge Yearbook of European Legal Studies: 165 and Peyer in Marquis & Cisotta (ed.)...
...117 See Dunne (2014) Cambridge Yearbook of European Legal Studies: 162 and Howard (2014) Journal of European Competition Law & Practice 4: 456....
...120 See Dunne (2014) Cambridge Yearbook of European Legal Studies: 145 and 168-185....
"Promotion and Harmonization of Anti..." refers background in this paper
...See also Commission Staff Working Document Practical Guide Quantifying Harm in Actions for Damages Based on Breaches of Article 101 or 102 of the TFEU accompanying the Communication on quantifying harm in actions for damages 12 (footnote 26) and Franck P. Maier-Rigaud “Toward a European Directive on Damages Actions” (2014) Journal of Competition Law & Economics 10/2: 358 and Frank P....
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