Main content


Briefing

The EU Antitrust Damages Directive - A reality at last

Introduction

On the 10 November 2014, the Council of the European Union adopted the long awaited EU Damages Directive. The Directive is intended to encourage and facilitate competition law damages claims and to harmonise the approach of national judicial systems to such claims. While the Directive has primarily been discussed in the context of follow-on damages actions against cartelists, it is important to note that it applies to any violation of European competition law, including the abuse of a dominant position and non-hard core violations within horizontal or vertical cooperation arrangements, as well as licensing agreements.

Member States have until 27 December 2016 to implement the Directive into their legal systems. The Directive is intended to encourage and facilitate competition law damages claims and to harmonise the approach of national judicial systems to such claims. While the Directive has primarily been discussed in the context of follow-on damages actions against cartelists, it is important to note that it applies to any violation of European competition law, including the abuse of a dominant position and non-hard core violations within horizontal or vertical cooperation arrangements, as well as licensing agreements.

Member States have two years and twenty days from publication of the Directive in the Official Journal to implement the Directive into national legislation. It is anticipated, however, that national judges will start to take the Directive into account in pending civil damages proceedings before the end of the implementation period, to the extent they can do so within existing legal frameworks.

The impact of the Directive will vary considerably between Member States, depending on each Member State’s current laws. We provide an overview of the key provisions of the Directive and its likely impact below. 

Right to full compensation (Articles 3 - 4)

The key principle behind the Directive is that anyone who has suffered harm as the result of an infringement of European competition law should be able to obtain full compensation for that harm. The compensation should place the victim in the position that the victim would have been in had the infringement not been committed and is to include compensation for actual loss, for loss of profit and interest.
The principle of effectiveness requires that a Member State’s rules for obtaining compensation must not be such as to render it practically impossible or excessively difficult for a victim to claim damages. The principle of equivalence requires that the national rules for recovering damages resulting from breaches of European competition law (Articles 101 and 102 TFEU) are no less favourable for claimants than the rules governing actions resulting from infringements of national laws. 

Disclosure of evidence (Articles 5 - 6)

The Directive introduces extensive rights for national courts to order disclosure of evidence. However, the Institutions do not want to allow fishing expeditions. Judges are therefore only required to order disclosure of evidence if the request for disclosure is proportionate, precise and narrow. Member States are permitted to have more expansive disclosure rules as a matter of national law if they wish.
Member States are also required to give full effect to the applicable legal professional privilege rules and to ensure that there are effective mechanisms to protect the confidentiality of information that is disclosed. 

In relation to documents that form part of the relevant competition authority’s file, the Directive provides for a “grey”, “black” and “white” list:

  • Leniency corporate statements and settlement submissions are blacklisted and therefore may never be disclosed (other than to a court to confirm that the documents are in fact blacklist documents as asserted by the Defendant). The prohibition on disclosure extends to extracts from such documents which appear in otherwise grey or white list documents;
  • The grey list contains documents which are disclosable after proceedings are closed by the adoption of the competition authority's decision or otherwise (which presumably means after all appeals are resolved, though this is not stated in the Directive), such as requests for information and the statement of objections of the authorities, replies of parties to requests for information and to the statement of objections, and settlement submissions that have been withdrawn; and
  • The white list includes any document that does not appear on the grey or black list, such as pre-existing documents. Such documents may be disclosed at any time.

 The rules on disclosure of documents will probably be the biggest change for the legal systems of many Member States. The required disclosure will be far wider than currently available in many Continental national courts, and so is likely to increase the costs and administrative burden of damages litigation for all parties litigating in those courts. Furthermore, particularly after investigations have closed, evidence from competition authority investigations will become more easily accessible for claimants.

NCA decision (Article 9)

Decisions of national competition authorities (NCA) of one Member State will be considered at least prima facie evidence of a competition law infringement before a court in another Member State (although they are binding before the courts of the Member State whose authority has taken the decision). In contrast to the proposal in early drafts of the Directive, NCA decisions will not be binding on the courts of other Member States, as the prima facie presumption may be rebutted.

Limitation period (Articles 10 and 18)

The Directive aims to harmonise limitation periods for competition law damages claims across the EU, which are currently widely divergent between Member States. The limitation period will be a minimum of 5 years throughout the EU, from the time when the claimant knows or can reasonably be expected to know that the particular defendant infringed competition law and caused the claimant harm. Furthermore, the limitation period is suspended/interrupted during a competition authority’s investigation and until at least one year after an infringement decision has become final or proceedings are otherwise terminated. A novelty for most Member States is the introduction of a suspension while the infringer and the victim are involved in consensual dispute resolution, albeit in that case the suspension may not exceed two years. Also, Member States are required to ensure "reasonable and sufficient" limitation periods for any claims against immunity applicants on the basis of joint and several liability where compensation cannot be recovered from the other undertakings involved in the infringement.

Limitation of joint and several liability (Articles 11 and 19)

Undertakings which infringed competition law must be jointly and severally liable, subject to several important exceptions:

  • The immunity recipient is liable only to its own direct and indirect purchasers, unless the claimant can prove that it cannot obtain damages from other infringers; and
  • SMEs that did not lead or coerce others into the infringement nor committed a competition law infringement before shall be liable only to their own direct and indirect purchasers if (i) their market share was below 5% during the infringement and (ii) applications of the normal rules would jeopordize their economic viability.

Infringing undertakings must be able to bring contribution claims against one another, although an immunity recipient is only liable for in the amount equal to the harm caused to its own direct or indirect purchasers. Protection from contribution claims is also provided for infringers who reach consensual settlements with claimants.

The protection for SMEs and immunity recipients from joint and several liability will be a novelty in most, if not all, Member States and may help to strengthen the immunity regime and the importance of obtaining immunity.

Passing-on of overcharge (Articles 12 - 15)

The Directive aims at enabling all natural and legal persons that have suffered harm caused by an infringement of competition law to claim and obtain full compensation for that harm, but over-compensation is to be avoided. Damages may not have a punitive character. As a result, Member States must ensure that compensation for actual loss at any level of the supply chain does not exceed the overcharge harm suffered at that level.

The passing-on defence will be available to all defendants, but the defendant bears the onus of proving that the overcharge was passed on. For this purpose, defendants may reasonably require disclosure from the claimant and from third parties.

Indirect purchaser claimants will bear the burden of proving that the overcharge was passed down to them. However, pass-on to indirect purchasers will be assumed where the defendant has infringed competition law, the infringement has resulted in an overcharge for the direct purchaser and the indirect purchaser purchased the goods or services subject to the infringement or their derivatives. The Commission is to issue guidelines for national courts on how to estimate the share of overcharge that has been passed down to indirect purchasers. 

Presumption and qualification of harm (Articles 16 - 17)

The Directive creates a rebuttable presumption that cartel infringements cause harm. The Institutions have stressed that while there is a rebuttable presumption that the cartel infringements cause harm, this does not entail a (double) presumption that harm was caused to any particular claimant, although this is not stated in the Directive. This is still to be proven by the claimant. The national courts are to estimate the harm caused where it is impossible or excessively difficult to precisely quantify the harm.

Temporal application (Article 22)

The Directive provides that the provisions of the Directive will not apply in actions for damages claims already before a national court before entry into force of the Directive. This may result in some claimants delaying bringing claims until the Directive is in force, for example so that they can take advantage of enhanced disclosure regimes which will be required in many jurisdictions.

Conclusion

Once implemented, Directive seems likely to achieve the Commission’s aim of facilitating an increase in civil damages being paid, whether as a result of litigation or simply as a result of settlements following more credible threats of litigation (not only in relation to cartel infringements but in relation to all types of competition law infringements). Claimants seem to benefit most from the Directive, particularly by the rules relating to disclosure of documents and the rebuttable presumption of harm. On the other hand, aspects of the Directive are advantageous for defendants as well. Defendants will benefit from the disclosure regime to obtain documents from claimants relevant to the passing-on defence and the Directive ends once and for all in all Member States the debate on whether or not a passing-on defence is available. It also provides greater clarity on the entitlement to bring contribution claims. and provides greater clarity about the protection of leniency and settlement materials from disclosure.

The next phase is the implementation of the Directive. It will be interesting to see how Member States go about implementing the Directive and the extent to which divergent approaches emerge, which may in turn have an impact on the locations in which claims are brought in the future. Furthermore, while the Directive does not introduce a class action regime, the Directive operating in conjunction with the class action regimes that already exist or are proposed for several Member States are likely to be a further spur to claims in those jurisdictions.