Competition Law (Private Enforcement)
1. Subject and scope
The fundamental rules of Union competition (antitrust) law, Arts 101, 102 TFEU/81, 82 EC (prohibition of restrictive agreements and exemptions; abuse of a dominant position; competition (internal market)), are directly applicable according to the case law of the European Court of Justice (ECJ). Since the entry into force of Reg 1/2003 on 1 May 2004 this is also the case for Art 101(3) TFEU/81(3) EC (prohibition of restrictive agreements and exemptions; competition law (procedure)). Regulation 1/2003 was intended to decentralize the enforcement of Arts 101, 102 TFEU/81, 82 EC by extending the competence to apply these norms to the national competition authorities and national courts of the Member States. Previously, both articles were primarily enforced by the European Commission and, to a lesser extent, also by national competition authorities (competition law (procedure); competition law, sanctions). National courts, the fora of private enforcement, only played an ancillary role in the application of Union antitrust law.
Private antitrust claims may be raised either in contractual disputes, in the course of which one party invokes the anti-competitiveness and illegality of the contract (prohibition of restrictive agreements and exemptions; vertical agreements in EU competition law; competition law (sanctions)) and possibly also claims damages, or in non-contractual litigation. In non-contractual litigation claimants seek injunctive relief against and/or damages from undertakings that are allegedly in violation of competition law. This latter type of litigation consists of both actions brought after an administrative decision finding an antitrust infringement (follow-on actions) and actions brought independently of an administrative investigation. Both forms of damages actions were rarely heard of in the Union before 2005. Even though the number of follow-on actions has increased significantly in some Member States since then, antitrust damages actions remain the exception in many Member States. This is despite the fact that the tort laws (law of torts/delict, general and lex Aquilia) of all Member States do in principle provide for a right to compensation for damages caused by an antitrust infringement.
There is a certain tension between this status quo and the ECJ’s judgment in Courage, in which the court emphasized the importance of private damages actions for the effective enforcement of Arts 101, 102 TFEU/81, 82 EC. According to the court, the full effectiveness of Art 101 TFEU/81 EC and, in particular, the practical effect of the prohibition laid down in Art 101(1) TFEU/81(1) EC, ‘would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition’ (ECJ Case C-453/99 – Courage Ltd v Crehan [2001] ECR I‑6297 para 26; confirmed by ECJ Joined Cases C-295/04 and C-298/04 – Manfredi [2006] ECR I-6619 para 60 and ECJ Case C-360/09 – Pfleiderer [2011] ECR I-0000, para 28). The ECJ would decide no differently for Art 102 TFEU/82 EC.
The Courage judgment, more than Reg 1/ 2003, has made private enforcement one of the most widely debated topics of Union antitrust law. Since 2002, some Member States, such as the United Kingdom, Germany, Spain and Hungary, have introduced legislation to make private antitrust enforcement more effective. In all these Member States private enforcement is meant to complement public enforcement rather than to replace it. The Commission has pursued much the same objective. In December 2005 it published a Green Paper and in April 2008 a White Paper on private damages actions for breach of Arts 101, 102 TFEU/81, 82 EC, both accompanied by detailed Staff Working Papers. The papers present detailed options (Green Paper) and proposals (White Paper) for strengthening private enforcement. The White Paper also summarizes the acquis communautaire achieved so far from the Commission’s perspective.
In the Green Paper the Commission had contemplated a damages regime that would go beyond mere compensation and also pursue the objective of deterring future infringements. This was given up in the White Paper which adopts a compensatory approach where deterrence would only be a side-effect. It is subject to some debate whether the ECJ had in mind mainly the compensatory function of damages actions and hence the protection of individual rights when it decided Courage and Manfredi, or rather their deterrence effect and thus the effective enforcement of the prohibitions contained in Arts 101(1), 102 TFEU/81(1), 82 EC.
Whether legal redress by way of damages actions should be rendered more effective at all (and if so, at what level—that of Member States or of the Union) is also a matter of controversy.
2. Individual aspects
a) Legal basis
The discussion surrounding the legal basis of actions for damages caused by infringements of Union antitrust law had first culminated in the opinion of AG Walter van Gerven in Banks and the case notes it provoked (AG van Gerven Case C-128/92 – Banks [1994] ECR I-1209 paras 36 ff) before re-gaining momentum in the wake of the Courage judgment. It remains controversial whether such claims can be based directly on Arts 101, 102 TFEU/81, 82 EC, as van Gerven has argued, or whether they find their basis in national law, which would of course have to respect Union law standards. In Courage the ECJ cites Francovich and hence the leading case on Member State liability for violation of the Community (Union) law, which is clearly based on Community (Union) law. However, unlike Francovich, the Courage judgment does not refer to the sanction of damages as a principle ‘inherent in the system of the Treaty’ (ECJ Joined Cases C-6/90 and C-9/90 – Francovich [1991] ECR I-5357 para 35). The question is almost entirely devoid of significance in practice. As Union law contains hardly any specific rules that could govern such damages claims, guidance must be sought in any event from national law, which would have to respect the principles of effectiveness (principle of effectiveness) and equivalence. Thus, in practice both approaches accept national law as a starting point and turn to the principles of effectiveness and equivalence to determine whether and how national law may have to be modified when it is applied to claims resulting from breaches of Union antitrust law.
The judgments in Courage and Manfredi as well as the case law on Community (Union) liability, state liability and the recovery of taxes incompatible with Union law already provide some guidance on how the right to damages would have to be administered to conform to the principle of effectiveness.
b) Acquis communautaire
Standing: Courage and Manfredi have shown that, according to the acquis communautaire, every individual must have a right to damages if there is a sufficiently direct causal link (see below for details) between the loss suffered and the antitrust infringement. Consequently, not only direct purchasers of an infringer have a right of action, but also the customers of these direct purchasers. Such an indirect purchaser may be harmed if the direct purchaser passes an illegally inflated price (partly) on to him (passing-on). The same principle applies, mutatis mutandis, on the supply side.
Damages: According to the case law, drawing on the principle of effectiveness, the acquis communautaire provides that injured persons must be able to seek compensation not only for actual loss (damnum emergens) but also for loss of profit (lucrum cessans) plus interest. As the ECJ confirmed in Manfredi, loss of profit may not be fully excluded as a head of damage, especially in the context of economic or commercial litigation, as otherwise the reparation of damage would be rendered practically impossible. At the same time, Member States may take steps to ensure that the award of damages does not lead to an unjust enrichment of claimants. Pursuant to the principle of equivalence, particular forms of damages, such as punitive damages, must be awarded if they are available in comparable domestic actions. All predictions that exemplary damages would be awarded by the English courts in antitrust damages cases have proven wrong so far. They have in fact been explicitly excluded for follow-on actions.
For antitrust infringements that result in inflated (supra-competitive) prices these principles mean that purchasers must at least be compensated for the difference between the price paid and the hypothetical (competitive) price that they would have paid absent the infringement (overcharge). Purchasers who sell on the goods affected by the violation may furthermore lose profits. Absent the infringement, such resellers would generally not only have paid less for units purchased, but also bought more units of the goods in question. This illustrates the output reducing effect (deadweight loss) of the infringement. Consequently, the reseller will have lost his margin on the units not purchased (and hence not sold on) due to the violation. According to the acquis, he must be compensated for this loss as well. This loss could either just be added as a second head of damage to the price difference, or, in the alternative, the reseller’s entire losses could be defined as his total lost profits, namely as the difference between the profits he would have earned with the goods in question absent the infringement and the profits he actually did earn. The question which of these two approaches is the adequate one is closely related to the approach one adopts towards the passing-on defence.
Passing-on (defence): Just as indirect purchasers may seek compensation for damages passed on to them, antitrust defendants frequently defend themselves by arguing that a purchaser plaintiff has in fact not suffered any damages, but passed on the alleged overcharge to his customers (passing-on defence). If one considers this defence irrelevant, multiple liability of the defendant for the same damage may arise if he is sued successfully by direct and indirect purchasers for the entire overcharge regarding identical units of the goods in question. However, if the defence is accepted, direct purchaser suits may—depending on the distribution of the burden of proof regarding the pass-on—be considerably less likely to ever be successful. The result may be that in many cases no private enforcement occurs at all. This is because indirect purchasers are often considered to be less inclined to sue than direct purchasers as the damage in question is more dispersed at their level of the distribution chain. As they are further removed from the infringement, they may also find it more difficult to prove the infringement itself as well as the damage caused by it.
The way the passing-on problem is resolved in a legal system (if it is resolved at all) says much about whether its focus is on deterrence, which—in this context—means ensuring that the defendant does (at least) not keep his illicit gains, or on compensation of harmed market participants: the more a system favours direct purchaser suits, the more it is likely to be primarily concerned with deterrence (or in fact enforcement efficiency) rather than with compensation. Conversely, the more it addresses indirect purchaser concerns, the more likely it is to focus on compensation. To the extent that an acquis communautaire has evolved in this regard, it follows from the ECJ’s case law on the recovery of charges levied by Member States in violation of Union law (ECJ Case C-147/01 – Weber’s Wine World [2003] ECR I-11365 paras 95 ff). Under this case law, the passing-on defence has been recognized as admissible to the extent that it prevents an unjust enrichment of the plaintiff (namely where the damage has been passed on in full and no loss of profits has been incurred) and places the burden of proof on the defendant. Admitting the defence is permissible under Union law subject to these conditions, but not mandatory.
According to the White Paper, the defendant should have the right to raise the passing-on defence but would have to prove that a pass-on has in fact occurred. Indirect purchasers should be able to rely on a rebuttable presumption that an illegal overcharge has been passed on to them in full.
Causation: In Manfredi the ECJ explicitly mentioned causation as a precondition for liability. It follows from the ECJ’s case law on state and Community (Union) liability that the principle of effectiveness only requires the attribution of damages to certain conduct if they are a ‘sufficiently direct consequence’ of the conduct (ECJ Joined Cases 64/76, 113/76, 167/78, 239/78, 27/79, 28/79 and 45/79 – Dumortier Frères [1979] ECR 3091 para 21).
Fault: There is some debate as to whether, under the acquis, national law may make antitrust tort liability subject to a fault requirement as the majority of national liability regimes do. It is undisputed that Union law does not oblige Member States to require that an element of fault be proven. The White Paper suggests that once a claimant has proven an infringement of European antitrust law, the defendant should be liable for damages unless he shows that the infringement was due to a genuinely excusable error. The judgments in Courage and Manfredi are, however, also susceptible of a more open interpretation.
Limitation periods: The judgment in Manfredi may be interpreted, as the Commission does in its White Paper, as establishing the irreconcilability of a short limitation period (prescription) that begins to run with the first implementation of an illicit agreement and cannot be interrupted, with the principle of effectiveness. Otherwise prescription could bar claims based on continuous or repeated infringements even before the violation ends.
Burden of proof: Pursuant to Art 2 Reg 1/2003 the burden of proving an infringement of Arts 101(1), 102 TFEU/81(1), 82 EC rests on the party relying on it. The same applies to the conditions of Art 101(3) TFEU/81(3) EC.
Applicable law: Pursuant to Art 6(3)(a) and recitals 22 and 23 of the Rome II Regulation (Reg 864/2007) the law applicable to antitrust tort claims is the law of the country where the market is, or is likely to be, affected. If the market is affected in more than one country, the claimant may choose the applicable law as set out in Art 6(3)(b) Reg 864/2007.
c) Commission’s White Paper
In addition to a codification of the main elements of the acquis established so far, the Commission suggests in its White Paper a number of measures in order to improve the legal conditions for victims of violations of the Union antitrust rules who wish to exercise their right to reparation.
Access to evidence: Some of the typical difficulties of antitrust plaintiffs trying to prove (evidence (international)) their claim result from information asymmetries—some of the relevant facts are only in the possession of the defendant or a third party, especially as far as the establishment of the infringement itself and the quantification of damages are concerned. In order to improve access to evidence, the White Paper builds on the approach adopted in Dir 2004/48 on the enforcement of intellectual property rights (intellectual property (enforcement)) and suggests that national courts should under specific conditions have the power to order disclosure inter partes of precise categories of information or evidence relevant to a claim.
Collective redress: The White Paper identifies shortcomings in the area of collective redress (collective litigation) which render compensation of scattered low-value damages difficult and entail a number of procedural inefficiencies. It therefore suggests the introduction of representative actions brought by qualified entities as well as opt-in collective actions brought by victims who expressly decide to combine their efforts into one single action.
The relationship between leniency programmes and actions for damages: The Commission as well as almost all national competition authorities operate leniency programmes providing an incentive for undertakings involved in a cartel to disclose the infringement to the authority, put an end to their participation and cooperate in the authority’s investigation. In exchange they are granted immunity from or a reduction of fines (competition law (procedure)). Leniency applications have developed into a most successful tool for detecting cartels. There is some debate as to whether the strengthening of private enforcement could jeopardize the success of such programmes by deterring potential leniency applicants from seeking leniency. While avoiding fines, leniency applicants would run the risk of laying the foundation for their own future civil liability by filing an application (on access by third parties to corporate statements and other documents submitted by a leniency applicant to a (national) competition authority see ECJ Case C-360/09 – Pfleiderer [2011] ECR I-0000). Whether concerns regarding the continued attractiveness of leniency programmes are justified depends primarily on two factors: first, on whether the destabilizing effect of such programmes on cartels is in fact reduced by the strengthening of a separate liability regime. Secondly, the fine-tuning of the interplay between leniency programmes and private enforcement is of relevance. Such fine-tuning may for instance occur through limiting an immunity recipient’s civil liability and restricting access to leniency applications. Accordingly, the Commission suggests in its White Paper that leniency applications should be protected from disclosure in private litigation.
Binding effect of decisions of national competition authorities: Following the model of § 33(4) of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen), the White Paper suggests that final decisions of national competition authorities should have binding effect in civil suits in all Member States. When national courts in actions for damages under Arts 101(1), 102 TFEU/81(1), 82 EC rule on market behaviour which is already the subject of a final decision by a national competition authority within the European Competition Network (competition law (procedure)) finding an infringement of these articles, or when such behaviour is the subject of a final ruling by a review court upholding the national authority’s decision or itself finding an infringement, they should not take decisions that run counter to such a decision or ruling. This obligation would be without prejudice to the right, and possibly obligation, of national courts to seek a preliminary ruling under Art 267 TFEU/234 EC. The relationship between national courts and competition authorities would thus bear strong resemblance to the relationship between national courts and the European Commission (see Art 16(1) Reg 1/2003).
3. Perspectives
At the European level, potentially conflicting dynamics appear to be at work. Efforts to strengthen private enforcement coincide with an increasingly economic approach to the interpretation of antitrust law which requires a more complex assessment of the effects of a certain market behaviour before qualifying it as a competition law infringement (competition (internal market); abuse of a dominant position). The economic data needed for such assessments may be very difficult for private parties to collect.
The development of private enforcement is characterized by legislative reforms and a growing body of case law in the Member States as well as discussions on harmonization through secondary legislation at the Union level. Such a measure, which could in principle be based on Arts 103 or 114 TFEU/83 or 95 EC, would have to meet the challenge presented by the close interdependence between antitrust tort law on the one and general tort law and the law of civil procedure on the other hand. At the same time, it may provide an impulse for de facto harmonization beyond European antitrust law enforcement, namely for the enforcement of national competition laws as well as for the generalization of certain measures. Rules on collective redress, for instance, may be transposed by Member States not only for antitrust litigation but with a broader scope of application. The close interdependence of private antitrust enforcement with other areas of law does, however, also mean that even with European secondary legislation in place, there may always be a need to take recourse to national law in the context of private European antitrust law enforcement.
Literature
Karsten Schmidt, Kartellverfahrensrecht—Kartellverwaltungsrecht—Bürgerliches Recht (1977); Wolfgang Wurmnest, Grundzüge eines europäischen Haftungsrechts (2003); European Commission, ‘Green Paper on Damages Actions for Breach of the EC antitrust rules’ COM(2005) 672 final; European Commission, ‘Staff Working Paper, Annex to the Green Paper “Damages actions for breach of the EC antitrust rules”’ SEC(2005) 1732; Friedrich Wenzel Bulst, Schadensersatzansprüche der Marktgegenseite im Kartellrecht (2006); Jürgen Basedow (ed), Private Enforcement of EC Competition Law (2007); Thomas MJ Möllers and Andreas Heinemann (eds), The Enforcement of Competition Law in Europe (2007); Assimakis P Komninos, EC Private Antitrust Enforcement: Decentralised Application of EC Competition Law by National Courts (2008); Jacqueline Riffault-Silk, ‘Private Enforcement of European Competition Law: A Short Review of National Judicial Decisions’ [2008] Revue Lamy de la concurrence 93; Friedrich Wenzel Bulst, ‘Of Arms and Armour—The European Commission’s White Paper on Damages Actions for Breach of EC Antitrust Law’ [2008] Bucerius Law Journal 81; European Commission, ‘White Paper on Damages Actions for Breach of the EC Antitrust Rules’ COM(2008) 165 final; European Commission, ‘Staff Working Paper accompanying the White Paper “Damages actions for breach of the EC antitrust rules”’ SEC (2008) 404; Susanne Augenhofer (ed), Die Europäisierung des Kartell- und Lauterkeitsrechts (2009).
