Green Paper Damages actions for breach of the EC antitrust rules

1. Green Paper Damages actionsfor breach of the EC antitrust rules Donncadh Woods European Commission DG Competition

2. Overview • Background • Advantages • Structure and purpose • Access to evidence • Fault requirement • Damages • Passing-on defence / indirect purchaser • Representative / Collective actions • Costs • Coordination of public and private enforcement • Jurisdiction and applicable law • Other issues • Public consultation and follow up

3. 1. Background • Private enforcement and public enforcement are the two pillars of enforcement of the EC antitrust rules • Public pillar Private pillar

4. 1. Background cont’d • ECJ decision from 2001 C-453/99 Courage v. Crehan confirmed that actions for damages for breach of EC competition law is an established right in Community law: • “the full effectiveness of Article [81] of the Treaty and, in particular, the practical effect of the prohibition laid down in Article [81](1) 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. • Indeed, the existence of such a right strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community.”(paras. 26 and 27 – underlining added)

5. 1. Background cont’d • While Modernisation addressed some of the issues (removal of 81(3) bottleneck + empowerment of national courts) there are many more obstacles to the exercise of this established right • The Ashurst study undertaken for the Commission in 2004 identified a number of obstacles and concludes that damages actions for breach of competition law are underdeveloped in Europe • It is necessary to think about what else is required to facilitate the exercise of this right and to make private enforcement a more effective means of enforcement

6. 2. Advantages • Advantages of private enforcement: • ensures that businesses and consumers harmed by anti-competitive activity are compensated for their losses • enhances the overall level of respect for the EC competition rules and further develops a culture of competition among market participants • brings the benefits of Community law closer to the citizen • greater enforcement of the EC Treaty competition rules by an increased number of enforcers: it should complement, not replace, public enforcement

7. 3. Structure and purpose Structure of the Green Paper • Published on 20 December 2005 • Presents, for debate, 36 options for possible facilitation of damages actions • Staff Working Paper explains and discusses the issues in more detail What is the purpose of the Green Paper? • The Commission wants to make the right to claim damages for breach of Community competition law more effective. By publishing the Green Paper, the Commission wants to foster an open debate about the issue of private enforcement of EC competition law and about damages actions in particular.

8. 3. Structure and purpose cont’d The main issues • Access to evidence • Fault requirement • Damages • Passing-on defence / indirect purchaser • Collective actions • Costs • Coordination of public and private enforcement • Jurisdiction and applicable law • Other issues

9. 4. Access to evidence • The relevant evidence is often not easily available and is held by the party committing the anti-competitive behaviour • Options: • special rules on disclosure of documentary evidence • Disclosure of relevant and reasonably identified evidence by court order • Mandatory disclosure for classes of documents by court order • Obligation to provide parties with a list of accessible documents • special rules regarding access to documents held by a competition authority • alleviation / reversal of the claimant’s burden of proof

10. 5 . Fault requirement • The Member States’ legal orders contain diverse regulation of fault in antitrust-related torts • Options: • remove fault requirement for antitrust-related damages actions? • infringement to constitute by itself a fault only for the most serious antitrust infringements? • defence of excusable error where illegality shown

11. 6 . Damages • How to define damages? • compensatory damages • recovery of illegal gain • double damages (only for horizontal cartels) • Should damages contain prejudgment interest? • Calculation of damages – options: • use of simple / complex economic models for the quantification of damages => possibility of assessment of damages on the basis of an equitable approach • Commission guidelines for calculation of damages? • split proceedings (liability / quantum of damages)

12. 7. Passing-on defence / indirect purchaser • Should there be rules on the passing-on defence? • Green Paper provides four options on this issue (passing-on defence may be allowed or excluded) • Defence permitted – direct + indirect can sue • No defence – only direct can sue • No defence – direct + indirect can sue • A two step procedure – (a) infringer is sued for total overcharge, and (b) damages allocated between all parties • Should the indirect purchaser have standing? • indirect purchaser might be affected by the anti-competitive behaviour if the overcharge was passed on to him

13. 8. Representative / Collective actions • Representative / collective actions can serve to consolidate a large number of smaller claims into one action (time and costs saving) • Standing • registration / authorisation system • Distribution of damages • damages to the association itself / to its members • Quantification of damages • association = illegal gain • members = individual damage suffered • Option for collective actions by groups of purchasers other than final consumers

14. 9. Costs • Rules on cost recovery play an important role as incentives or disincentives for bringing an action • Should special rules be introduced to reduce the cost risk for the claimant? • if so, what kind of rules? - Unsuccessful claimants to only pay costs if they acted in a manifestly unreasonable manner by bringing the case? - Court to have discretionary power to order at the outset of a trial that the claimant not be exposed to cost recovery if unsuccessful?

15. 10. Coordination of public and private enforcement • Joint objective: greater deterrence for anti-competitive behaviour • How can optimum coordination be achieved especially vis-à-vis leniency programmes: • exclusion of discoverability of leniency application • conditional rebate on any damage claim against the leniency applicant • removal of joint liability from the leniency applicant

16. 11. Jurisdiction and applicable law Jurisdiction • Art. 5 Regulation 44/2001 (“Brussels I” Regulation) • domicile of the defendant, or (at the choice of the claimant) where the harmful event occurred Applicable law • General rule applicable to all damage claims • Art. 3 proposed “Rome II” Regulation – “law of the country in which the damage arises…” • Should there be a specific rule for damage claims based on an infringement of antitrust law? • the laws of the states on whose market the victim is affected by the anti-competitive practice • law of the forum • in a case where there are a number of affected markets, the claimant to choose between (1) any one of the laws so designated, (2) application of all designated laws, or (3) law of the forum

17. 12. Other issues • Use of experts • appointment by court or by the parties • Suspension of limitation periods • should limitation periods for damages claims be suspended during the administrative proceedings before the Commission or any of the NCAs? • Causation • is there a need to clarify the legal requirement of causation to facilitate damages actions?

18. 13. Public consultation and follow up Public consultation • Green Paper and the attached Staff Working Paper serve as consultation documents • All interested parties are invited to send their comments (email address: comp-damages-actions@cec.eu.int) • Deadline: 21 April 2006 Follow up • The Commission has not yet decided if actions – legislative or otherwise – are necessary. Also, no conclusions have been reached whether any possible action is best taken at the Community level or at the level of the Member States. • The Commission will take on board all comments received on the Green Paper and assess at that point what further action, if any, is needed.