Almunia: EU Antitrust damages directive “most significant”

St. Gallen International Competition Law Forum Remarks Highlight Civil Competition-Law Enforcement & Cartel Victims’ Access to Evidence as Top-of-Agenda for Outgoing Commissioner

Joaquin ALMUNIA, Vice President of the European Commission responsible for Competition policy & enforcement, made the following (excerpted) remarks at the 2014 International Competition Law Forum held in St. Gallen.

From a practitioner’s perspective, the Commissioner’s emphasis on cartel victims’ access to evidence, his subtle reminder that the Directive merely sets a “minimum standard“, and the parallel observation that the upcoming collective redress Recommendation will be applicable across all policy (and legal) fields are important highlights of the prepared remarks.

I will start with the Directive on antitrust damages actions, which I regard as one of the most significant developments in the competition-policy domain in the current mandate.

Infringements of EU competition law are not only bad for the competitiveness of our economy. They also harm companies and consumers directly.

We recognise that every individual consumer and business has the right to be compensated for this damage. However, given the legal systems of EU countries, only a few victims obtain compensation in practice.

The time has come to translate our principles into actual practice.

Last year the Commission tabled a proposal to remove existing obstacles in national rules and make it easier for victims to obtain compensation across the EU through private enforcement.

The European Parliament and the Council have seized the opportunity and reached a political agreement with remarkable speed.

The Parliament voted the final text by an overwhelming majority, and the formal approval by the Council is expected before or shortly after the summer.

This outcome is a major success for a number of reasons.

First, from the perspective of victims, the Directive will make it easier for them to get hold of the evidence they need to prove the damage, because national courts will be empowered to order disclosure of relevant evidence.

The Directive also allows victims to rely on decisions taken by national competition authorities when these find an infringement.

Moreover, it introduces clear rules on several aspects of competition litigation, thus reducing the existing uncertainties, which have a cost for all parties.

From the perspective of the internal market, the Directive sets a minimum standard in all Member States, which means more legal certainty and a more level playing field throughout the EU.

Finally, from the perspective of competition authorities, the Directive fine-tunes the interaction between their work and the compensation claims by private parties. This is thanks to rules that preserve the incentives of companies to cooperate in antitrust investigations.

In parallel to the Directive, the Commission has also adopted a Recommendation inviting Member States to introduce collective redress mechanisms at national level by mid-2015.

The Recommendation includes basic principles that would ensure fair, timely and affordable procedures across the EU. The Recommendation is not limited to competition law but covers all policy fields.

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EU Parliament votes in favour of private antitrust damages initiative

The European Parliament gave its green light to the Commission private-damages Directive today:

Brussels, 17 April 2014

Antitrust: Commission welcomes Parliament vote to facilitate damages claims by victims of antitrust violations

The European Parliament has approved a proposal for a Directive which will help citizens and companies claim damages if they are victims of infringements of the EU antitrust rules, such as cartels and abuses of dominant market positions. The Directive is based on a proposal by the Commission of June 2013 (see IP/13/525 and MEMO/13/531), and aims to remove a number of practical difficulties which victims frequently face when they try to obtain compensation for the harm they have suffered. In particular, it will give victims easier access to evidence they need to prove the damage and more time to make their claims. At the same time it ensures that the effectiveness of the tools used by competition authorities to enforce antitrust rules, in particular leniency and settlement programmes, is preserved. The proposal is now sent to the EU Council of Ministers for final approval. See also MEMO/14/310.

Commission VicePresident in charge of competition policy Joaquín Almunia said, “The vote by the European Parliament is great news for European citizens and businesses harmed by antitrust violations. The Directive will help to make the right to full compensation a reality in the EU, by removing the practical obstacles that victims face today. When the Directive is adopted and implemented, obtaining redress will become easier for them, especially after a competition authority has found and sanctioned an infringement.”

The EU Court of Justice has recognised the right for victims of antitrust infringements to be compensated for the harm suffered. However, due to national procedural obstacles and legal uncertainty, only few victims actually obtain compensation. Moreover, national rules are widely diverging across Europe and, as a result, the chances of victims to obtain compensation greatly depend on which Member State they happen to live in. The Directive aims to remove these obstacles. Main improvements include:

  • National courts can order companies to disclose evidence when victims claim compensation. The courts will ensure that such disclosure orders are proportionate and that confidential information is duly protected.
  • A final decision of a national competition authority finding an infringement will automatically constitute proof before courts of the same Member State in which the infringement occurred.
  • Victims will have at least 1 year to claim damages once an infringement decision by a competition authority has become final.
  • If an infringement has caused price increases and these have been “passed on” along the distribution chain, those who suffered the harm in the end will be the ones entitled to claim compensation.
  • Consensual settlements between victims and infringing companies will be made easier by clarifying their interplay with court actions. This will allow a faster and less costly resolution of disputes.

Private damages actions before courts and public enforcement of antitrust rules by competition authorities (whether the Commission or national authorities) are complementary tools. Through the Directive they will reinforce each other, on the one hand to achievefull compensation for victims (including lost profits and interest) and, on the other, to enhance the key role of competition authorities in investigating and sanctioning infringements, thus achieving deterrence. In particular, cooperation between companies and competition authorities under so-called “leniency” programmes plays a key role in the detection and sanctioning of infringements of competition rules. Without such cooperation, many infringements would never be discovered in the first place, and in many cases, it is therefore the successful enforcement of competition rules by a public authority that will enable victims to subsequently seek and obtain compensation. As a result, the Directive contains a number of safeguards to ensure that facilitating damages actions does not diminish the incentives for companies to cooperate with competition authorities (see MEMO/14/310).

Next Steps

Today’s plenary vote in first reading was the European Parliament’s final step in the procedure. Approval by the Council will complete the legislative procedure. Once the Directive has been officially adopted, Member States will have two years to implement the provisions in their legal systems.

The full text of the Directive is available here:

http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html

Background

In June 2013, the Commission submitted its proposal to the European Parliament and the Council (see IP/13/525 and MEMO/13/531). After both co-legislators discussed the proposal and suggested amendments, informal meetings between the three institutions (so-called trilogues) were launched in February to achieve a compromise text. Representatives of Member States’ governments agreed to the final compromise text at the end of March.

 

Concepcion’s class arbitration prohibition also applies to antitrust cases

The U.S. Supreme Court has ruled that AT&T v. Concepcion wasn’t merely about preemption by the Federal Arbitration Act.  It goes all the way — and as long as a statute does not call for or expressly allow class resolution of claims brought under it (which statute does that anyway?), a class arbitration waiver is in principle enforceable, according to yesterday’s 5-3 decision in American Express Co. et al. v. Italian Colors Restaurant et al., case number 12-133.

Class plaintiffs who attempt to rely on the theory that “effective vindication” of their federal statutory rights would be thwarted by upholding a class waiver in arbitration agreements will likely fail, post-Italian Colors.  Held Justice Scalia curtly: “[T]he antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.”  The judge-made “effective vindication” argument “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable.  But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”

The case marks a high point (for some, a low point) in the contra-class trend of the last several years, giving further ammunition to those who had already thought that Concepcion would mark the de facto end of class arbitration of disputes — the expectation there is that every company that had an arbitration clause in its contracts would simply amend it to prohibit class arbitrations, thereby effectively circumventing the often sole affordable mechanism for low-value (but numerous) claims.  Credit cards or debit swipe fees (small, but there are billions of them every day) are but one example.  And since Italian Colors, antitrust is now explicitly in the mix!  In the words of Justice Kagan — whose scorn for the majority opinion is best expressed by her as “a betrayal of our precedents, and of federal statutes like the antitrust laws” for a plaintiff attempting to vindicate his federal Sherman Act rights to proceed in a low-dollar value case on a non-class basis may well have become a “fool’s errand” post-Italian Colors.

 

UPDATE: See also the Paul Hastings client alert on American Colors here.

Draft E.U. Commission paper on private antitrust damages leaked?

Final Commission guidance on private AT actions imminent?

BusinessWeek’s Stephanie Bodoni reports that Bloomberg has obtained “draft plans” by the European Commission to level the playing field across Europe when it comes to private damages actions (often follow-on cases, but also conceivably stand-alone claims) brought by plaintiffs in the national courts of the E.U. member states.

According to the report, the draft “stop[s] short of forcing nations to allow group lawsuits,” thereby evading the tricky question whether or not to “import” U.S.-style class actions or the less-drastic collective-action mechanism of some E.U. members states (e.g., the UK, NL).

It’s about time.

Any such paper, if real, has been in the making for years, given the history of the E.U. Commission’s (lackluster, because so delayed?) efforts in this regard. The Green Paper came out in 2005, the subsequent White Paper in 2008. We’re now 5 years into … nothing.

Class Actions in South Africa? Attend the 12 June 2013 seminar @ Wits Law School

Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment, handed down by Judge Wallis of the Supreme Court of Appeal last year, and the effects it has on South Africa’s jurisprudence.

The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).

For more information, a full schedule, and to sign up, please visit the event page here.

Background:

On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).

The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:

  • there must be an objectively identifiable class;
  • a cause of action must exist which raises a triable issue;
  • there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
  • there must be appropriate procedures for distributing damages to the members of the class; and
  • the representatives must be suitable to conduct the litigation on behalf of the class.

The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements.  Accordingly, the SCA remitted the matter back to the WCHC.