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European Commission proposes more claimant friendly competition damages regime

    • Competition, EU and Trade - Competition e-briefings

    20-06-2013

    The European Commission has proposed a Directive on competition damages claims, the aim of which is to facilitate claims for compensation by victims of competition law infringements throughout the EU.

    According to the Commission, only 25% of its infringement decisions result in victims seeking to obtain compensation. National rules and procedures differ across the EU and the chances of obtaining compensation depend greatly on the rules of the Member State in which the claim is heard – this has led to uncertainty and a reluctance on the part of victims to enforce their rights.  The proposals seeks to remove the obstacles faced by claimants in some Member States, such as excessive procedural hurdles.

    The Directive

    Key proposals under the Directive include:

    • Easier access to evidence: National courts will, under specific conditions, have the power to order that the parties to proceedings or third parties disclose evidence.  However, the proposals provide that adequate protection should be given to settlement submissions as well as corporate statements by leniency applicants, information drawn up by competition authorities while those proceedings are ongoing as well as legally privileged materials.
    • Reliance on infringement decisions: Decisions of national competition authorities finding an infringement will automatically constitute proof before national courts of all Member States that the infringement occurred.
    • Clear rules on limitation periods: These rules will be clarified, ensuring that victims have sufficient time to bring an action. In particular, a victim should have a period of at least 5 years from discovering that it suffered harm in which to bring a claim. This period should be suspended if a competition authority starts an investigation. 
    • Full compensation: Victims should obtain full compensation for the actual loss suffered and also for loss of profits.
    • ‘Passing on’ defence: To the extent that direct customers have passed on any overcharge to indirect customers who are able to make a claim, this will provide Defendants with a partial defence. However, indirect customers may also have a claim and can, subject to certain conditions, rely on a rebuttable presumption that the illegal overcharge was passed on to them in its entirety.  The burden of proof will be on the infringer to rebut the presumption.
    • Quantification of harm:  In the case of a cartel, there will be a rebuttable presumption that the infringement caused harm.
    • Joint and several liability: Any participant of an infringement will be responsible for the harm caused by the infringement, on a joint and several liability basis, with the possibility of obtaining a contribution from other participants for their share of liability.  However, immunity recipients should only be liable on a joint basis where it can be shown that the injured parties are unable to recover full compensation from the other participants.

    In addition, the Commission has issued a Communication and a ‘Practical Guide’ to help victims and judges calculate the damages due in respect of a competition infringement.

    So far the Directive is in draft only. It will need to be discussed and adopted by the European Parliament and the Council under the ordinary legislative procedure of Article 294 TFEU.  Member States will also need to implement the Directive after it is adopted.  Therefore the proposals are at least a couple of years from becoming law. 

    Other EU and UK measures

    The Commission has also adopted a Recommendation advising Member States to set up collective redress mechanisms to improve access to justice for victims of EU law infringements in general. This Recommendation is not binding, although Member States have been asked to put appropriate measures into place within the next two years.  The Commission will review these measures to assess whether further measures may be necessary.

    Meanwhile the UK competition damages regime is also undergoing change, with a view to facilitating claims by victims of anti-trust infringements. On 12 June 2013, the Government published a draft bill which relates in part to private actions in competition law.  One of the key changes expected to be introduced in the UK is an opt-in class action regime.  Other important changes include wider powers to regulators, a fast-track procedure before the Competition Appeals Tribunal (CAT) and the extension of the CAT’s jurisdiction to hear stand-alone actions and to grant injunctions. The Department of Business, Innovation & Skills invites comments on the bill by 13 September 2013. 

    In April 2013, the Jackson reforms came into force in the UK.  Whilst these are not competition law specific, they do represent a major review of the UK civil damages regime.  Key provisions include requirements to exchange costs budgets very soon after the commencement of legal proceedings, the introduction of a range of disclosure options, defining the issues on which expert opinion is to be obtained and estimating the costs of providing the opinion.

    Comment

    The objective of the Commission proposals is to facilitate competition damages claims across the EU. It remains to be seen in what form the proposal will be adopted by the European Parliament and the Council.  For jurisdictions such as the UK, which already have a developed system for competition claims including a specialist court, the Commission proposals may have a limited impact particularly in relation to issues such as disclosure. However, the Commission’s proposals address one vexed issue, namely the disclosure of corporate leniency statements and settlement submissions which will now be subject to an absolute bar against disclosure.  This does not follow recent case law developments in this area and, together with the proposal to limit the joint liability of the recipient of immunity, could represent a shift in favour of cartel participants who are also immunity recipients.