The trio of documents published by the Commission last week mark an important moment in private competition enforcement in the EU. After years of debate and consultation, it is now clear that, whilst the Commission is determined to take some important steps to assist claimants in private actions, it is not prepared to bring about the sorts of fundamental changes which would be needed to realise the full potential of private enforcement.
The three documents each deserve close scrutiny. This blog is intended only to provide a broad overview.
First is a Communication from the Commission on how to quantify harm in competition damages actions. It is accompanied by a 69-page practical guide. This document, whilst not as momentous as the others discussed below, is likely to be extremely helpful in private enforcement actions, where the dearth of reported cases can add an unhelpful element of uncertainty on the question of how to calculate damages.
The second important document is the Commission’s Recommendation on collective redress and injunctive relief, which recommends that every Member State should provide for collective redress for breaches of EU law. The Recommendation is non-binding but the Commission has made clear that if it is not implemented then legislation will follow. The headline for UK lawyers is that the recommendation is for a form of collective redress pretty much identical to that which the UK government has already said it is going to adopt. Collective redress schemes should be opt-in rather than opt-out; contingency fees are generally frowned on; and there should be no punitive damages. Whether these are sensible limitations is a question for policy experts. But it is clear that they will severely curtail the attractiveness of such schemes for many claimants and claimant litigators.
On the topic of litigators, several commentators have suggested during the past week that the Recommendation suggests that collective actions should only be brought by non-profit entities. Many readers of this blog will be glad to hear that that is incorrect. In addition to recommending that groups of claimants should be able to bring collective actions, the Commission also recommends that Member States should designate “representative entities” to bring representative actions (a mechanism which already exists in the UK, and which has proved to be largely useless). It is those representative entities which should be non-profit making. On the other hand, the Recommendation does include the somewhat perplexing suggestion that lawyers’ remuneration should not “create any incentive to litigation that is unnecessary from the point of view of the interest of any of the parties”. Some defendants might say that any payment to a claimant lawyer is, from the defendant’s point of view, an unnecessary incentive to litigation.
The third document is a proposed Directive on rules governing private actions. The proposed Directive does not touch on collective redress, and is instead aimed at harmonising the existing national rules on private competition claims. If adopted, the Directive would apply to national enforcement of EU and domestic competition laws.
The proposed Directive would not bring about any fundamental changes to English law, which would instead need to be tweaked or clarified in certain respects – mostly in favour of claimants, although in some respects to the benefit of defendants. The key provisions are:
- Articles 5 to 7 contain provisions on disclosure. In very broad terms, they favour disclosure, including disclosure of documents held on competition authorities’ files. The important exceptions are leniency corporate statements and settlement submissions, which are not to be disclosed in any circumstances – a rule which would mark a significant tightening of the current position (and which would also arguably be unlawful, in light of the recent judgment in Donau Chemie).
- Article 9 would require that national courts cannot make decisions running counter to infringement decisions by national competition authorities.
- Article 10 would require a limitation period of at least 5 years running from the end of the infringement, or (if later) from the point at which the party knew or should have known about the behaviour, the fact that it was an infringement, the fact that it caused harm, and the identity of the infringer.
- Article 11 would require there to be joint and several liability for competition law infringements. It would also require that infringers should be able to recover contribution from the other parties, the amount of each party’s contribution to reflect their relative responsibility for the harm caused.
- Article 12 would require national courts to recognise the passing on defence. Such a provision would obviously benefit defendants in that it would preclude any court in the EU from following the US approach of allowing all claimants, direct and indirect, to claim their full loss with no regard paid to pass-on. Article 13 would require national courts to have the power to estimate the degree of passing on.
- Article 16 would introduce a rebuttable presumption that the infringement caused harm. It also provides that national courts must have the power to estimate the amount of harm caused.
- There are also helpful provisions in Articles 17 and 18 regarding dispute resolution.