April 10, 2008
Last week, the European Commission published its White Paper on Damages actions for breach of the EC antitrust rules (available here). The principles of the White Paper are developed in more detail in the accompanying Commission Staff Working Paper (see here). The White Paper presents policy options and specific measures to ensure that all victims of infringements of the EC competition rules have access to effective redress mechanisms in order to obtain full compensation for the harm that they have suffered as a result of the infringements. To date, only a small number of the victims have been compensated for the loss that they have suffered, since the national rules that govern antitrust damages actions contain several legal and procedural obstacles to enforcing the Community right to damages for antitrust infringements.
After a first quick reading, I would like to briefly comment on a few things. The Commission proposes, among other things, to introduce two types of mechanisms of collective redress which would allow the aggregation of individual claims of the victims. Firstly, is suggests representative actions, which would be brought by qualified entities, for instance consumer associations, on behalf of some or all of their members. Secondly, it proposes opt-in actions, in which victims expressly decide to combine their individual claims into one single action. This second option aims to remedy the situations in which entities like consumer associations are not able or willing to pursue the claim. The introduction of some type of collective actions is, in my opinion, necessary in order to ensure that consumers, in particular, are fully compensated for the loss that they have suffered as a result of higher prices. The costs and uncertain outcome of court proceedings discourage consumers from claiming compensation especially when the loss of the individual consumers is fairly low. But let’s imagine that thousands or consumers have paid an over-charge of 300 euros as a result of a price-fixing cartel. Few consumers would be willing to initiate antitrust damages actions if they had to prove the infringement and the casual relationship between the infringement and the harm that they have suffered, as they would deem it too burdensome and could not be sure that they were able to get compensation in the end. On the other hand, the cartel members would easily make profits amounting to hundreds of thousands or even millions of euros without having to fear civil liability for the infringements of competition rules. Only if the consumers could join their forces in a collective action would there be a realistic possibility for all victims to get full compensation for their loss.
Given that the key evidence which is necessary for proving an infringement of competition rules is usually held by the infringer of the competition rules or by third parties, the Commission suggests that a minimum level of disclosure inter partes should be ensured. National courts could therefore in certain circumstances order parties to proceedings or third parties to disclose precise categories of relevant evidence. However, according to the Commission, the access to this kind of evidence should be subject to strict judicial control in order to avoid excessive and burdensome disclosure obligations. This is a very welcome step since access to evidence is likely to be the most significant obstacle to effective compensation as it is usually otherwise impossible for third parties such as consumers to prove the infringement.
The Commission also proposes that decisions by national competition authorities finding an infringement of Articles 81 and 82 EC should have a binding effect as is the case with the Commission’s own decisions. It is indeed difficult to see why the final decision of a NCA would not bind the courts when they decide an action for damages based on an infringement of the EC competition rules, since what is at stake is the consistent application of these rules, as the Commission rightly points out. The fact that the national court seized with an antitrust damages claim will have to re-examine whether an infringement of the competition rules exists instead of concentrating on examining the casual relationship between the infringement and the alleged harm, calculating the quantum of damages etc., is a waste of both public and private resources.
The White Paper also aims to ensure that private enforcement will not have negative effects on the public enforcement of the EC competition rules. In order words, the risks of damages actions should not discourage companies that have participated in cartels from informing the Commission through leniency applications of the existence of those cartels. The Commission therefore emphasises the need to protect the disclosure in antitrust damages actions of corporate statements submitted by leniency applicants. (Corporate statements contain, among other things, a detailed description of the applicant’s participation in the cartel). It is doubtful though that this will be sufficient to ensure that private damages actions will not influence in a negative way the number of leniency applications made (provided of course that the damages actions will in the future become more common and successful and thus serve as a deterrent, which is not the case for the time-being). The situation is different in the United States where the company that is granted immunity from fines only has to pay single damages instead of treble damages in compensation to the victims. Perhaps the EU should also think about introducing some kind of punitive damages (although not treble damages) for members of hard core cartels, as those are very clear-cut restrictions and nobody disagrees on that they are harmful to the economy and consumers? This would make it possible to encourage leniency applications by requiring the first company that applies for immunity from fines only to pay full compensation to the victims but no punitive damages.
The White Paper also contains other interesting issues, such as suggestions on how to treat the passing-on of over-charges to the next level in the production or distribution chain and how to reduce the costs of damages actions. However, what is lacking is a reference to the legal basis on which the Commission would base the measures that it has suggested, provided of course that the Council gives its approval. Instead, the Commission only refers to the ECJ judgments Courage v. Crehan and Manfredi stating that those judgments have indirectly confirmed the competence of the Community to adopt legislative measures aimed at making antitrust damages actions more effective. I’ll get back to the topic on which Treaty article could serve as a legal basis in a later post.
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