2011 marked the ten year anniversary of the seminal Courage v. Crehan ruling of the Court of Justice [1], so it seems appropriate to take stock. In the last ten years there have been a lot of developments, indeed, a true revolution with regard to private antitrust enforcement in Europe. This statement does not imply a positive or negative stance vis-à-vis private actions for damages in the area of competition law but merely describes a reality. The Court of Justice has spoken three times in preliminary rulings. In 2001 and 2006, it set out the general principle and spelled out the constitutive conditions of individual liability for damages [2], in Courage and Manfredi [3], respectively, while in 2011, in Pfleiderer [4], it was called for the first time to make a balancing between the right to damages and the protection of leniency programmes.
In the legislative context, the last ten years have seen important developments. First, at the EU level, the European Commission published a Green [5] and a White Paper [6] in 2005 and 2008, respectively. In early 2011, the Commission also launched a public consultation aimed at achieving a coherent approach towards collective redress in the EU [7]. In 2009, a leaked copy of a Directive proposal was widely circulated in Brussels but the Union has so far not proceeded to legislate in this area. Nevertheless, the recent Commission Work programme confirms that in 2012 there will be a legislative proposal for private enforcement.
Meanwhile, in order to assist the Commission in the formulation of guidance to be provided to national courts on the quantification of damages, a study was commissioned and published on DG Competition’s website in January 2010 [8]. Then, in June 2011, the Commission held a public consultation and published a Draft Guidance Paper on quantifying harm in actions for damages based on breaches of the EU antitrust rules [9].
Second, at the national level, there have been various reforms designed to facilitate private antitrust enforcement, spanning from the UK Enterprise Act 2002, to the 7th amendment of the German Law against Restraints of Competition (GWB) [10] and most recently to new legislation in Bulgaria [11], the Czech Republic [12], Denmark [13], Hungary [14], and Italy [15]. Then, there is now a growing mass of national cases, including awards for damages, establishing national precedents and dealing not only with the fundamental questions of the existence of a remedy but also with the more specific conditions for the exercise of the right to damages.
E-Competitions has played a critical role in these developments. The private initiative has filled in an important gap, i.e. the building of a corpus of valuable information on EU and mainly national doctrine, legislation and precedent. Following three e-Competitions special bulletins on this topic, in 2005 [16], 2006 [17] and 2010 [18], it is a pleasure to revisit the past decade and have a glimpse of what we can define as “second generation” topics, assuming that the “first generation” questions (existence of a remedy and basic conditions for the exercise of the corresponding right) have now been settled. I leave aside purely procedural questions or questions faced only in one Member State, such as the time limits sagas in the UK [19] or elsewhere [20] and concentrate on the questions of standing and passing-on, characterisation of damages, quantification of harm, causation, binding effect of public authorities’ decisions, collective claims and access of claimants to the public authority’s file.
Standing and passing-on
Many national laws in Europe contain restrictive rules on standing for competition law-related damages actions. In continental legal systems, the question of damages for competition law infringements has been more or less clear in jurisdictions following the unitary norm system of the French Civil Code (Article 1382), where the sweeping general nature of the national rule on civil liability allows for a liberal approach with regard to standing, but problems have existed in countries following the German doctrine of Schutznorm, where plaintiffs claiming damages have to belong to a group of persons whom the legislator intended to protect. In some other countries, notably Italy, the courts had difficulties in granting standing to certain persons, in particular consumers, because of a distinction made between subjective rights (diritti soggettivi) and lawful interests (interessi legitimi). According to this approach, the competition rules protected only the latter and consumers could not avail themselves of this protective scope [21].
In Germany itself, until the latest amendment of the Competition Act, standing to sue for damages was conferred only on persons within the “protective scope” of the law. With regard to liability based on German competition law violations, the German courts tended to grant standing only to persons at whom the illegal activities were specifically directed [22]. For these reasons, section 33(1) GWB, which now applies both to German and to EU competition law-based liability, relaxed the rules on standing by referring to “affected persons”, including competitors and “other market participants”.
However, even under the more relaxed test, German courts have struggled with the question of standing because of the existence of a specific rule against the passing-on defence in the Competition Act (section 33(3) GWB). This rule led the courts to be rather reluctant to grant standing to indirect purchasers, bar some exceptional circumstances. The reason has invariably been the risk of unjust enrichment for claimants and multiple liability for defendants. The latter risk has actually led some German courts to innovative, if not impracticable, solutions, while attempting to reconcile the EU law requirements for a broad rule of standing with the German sensitivities. Thus, the Berlin Higher Regional Court, in the Berliner Transportbeton case [23], recognised indirect purchaser standing, while eliminating the risk of multiple liability by considering direct and indirect purchasers as joint creditors (Gesamtgläubiger). The court, however, stopped short from providing a rule on contribution among the joint creditors.
In Carbonless paper, a claim for damages was brought against a member of a price-fixing cartel, following on from a 2001 decision by the Commission [24]. The Karlsruhe Higher Regional Court awarded damages to a savings bank acting on behalf of an indirect purchaser but, controversially, the judgment strengthened the case of direct purchasers by restricting the passing-on defence. In so doing, it narrowed the chances for indirect claimants, as well as the circumstances under which they can seek redress. According to the court, such indirect purchasers can only pursue damages if they are customers of direct subsidiaries of the cartel members.
However, this ruling was recently reversed by the German Supreme Court [25], which held that indirect purchasers, who have acquired goods at an inflated price from a company which has itself been the victim of a price-fixing cartel, can bring damages claims against members of the cartel. At the same time, cartel members may invoke the passing-on defence, by pointing out that the claimant has passed on the overcharge to its customers and was therefore not exposed to the full “cost” of the cartel. In other words, the only meaning that can now be given to section 33(3) GWB is that, in principle, the passing-on defence is available, but the burden of proving the “passing on” of costs down the chain will have to be borne by the defendant.
In France, on the contrary, where standing has never been an issue, the courts fully recognise the passing-on defence. A 2010 ruling of the French Supreme Court actually reversed an appellate judgment for failure to assess whether the claimant had fully or partly passed on to its clients the overcharge resulting from the lysine cartel. Such passing-on would have amounted, according to the Supreme Court, to unjust enrichment. It is notable that the court’s judgment seems to place the burden of proof on the claimant and has been criticised for viewing the passing-on question only as a shield [26], unlike the 2008 Commission White Paper, which proposes the admissibility of the passing-on defence but stresses that the corresponding burden of proof must be borne by the defendant.
This is not the first time that a French court admitted the passing-on defence. In the Vitamins litigation, the Nanterre and Paris Commercial Courts [27] found that direct purchasers of vitamins passed or could have passed the cartel overcharge on to their customers. Of the two judgments, the first one received a lot of criticism because the court adduced that there was a pass-on from statements by the Commission that the cartel harmed consumers.
Quantification of harm
National courts have not very often reached the stage of quantifying the harm in private antitrust enforcement cases. There have been many cases which were settled [28]. At the same time, there are examples where the national courts established the liability but left the question of quantification of harm to be decided at a later stage, assuming that the parties would then conclude a settlement [29].
Claimants often find it difficult precisely to quantify the harm they have suffered as a result of an infringement of the EU competition rules due to a number of factors, including evidentiary burdens, lack of access to data, and/ or the general difficulty in producing robust estimations of damage. This can be quite a demanding procedure, as both the 2009 Study and the 2011 Draft Guidance Paper show. It is necessary to rely on economic experts, but then again the whole exercise must be very rigorous and avoid being based only on theoretical models. These difficulties are exemplified in the Spanish Antena 3 case, where the Madrid Court of First Instance partially accepted Antena 3’s claims and awarded EUR 25 million in damages [30], on the basis of an expert’s report submitted by Antena 3. The judgment was, however, subsequently overturned by the Madrid Court of Appeal [31], because the Antena 3 experts’ quantification of the damage was flawed. The court considered that Antena 3’s loss of profit must be proved with rigour and that it was unacceptable to award damages where proof of such loss is based on a theoretical expert report that runs counter to reality.
Interestingly, there have been quite a few awards of damages in exclusionary conduct cases. This seems to contradict the commonly held view that it is easier to quantify the harm in exploitative (e.g. cartels) than in exclusionary cases. Nevertheless, difficulties remain with regard to compensation of lost profits. Thus, in Verimedia, a French case, a competitor sought damages following an exclusionary agreement [32]. The claim followed on from a 1998 decision of the then French Competition Council, which found that the defendants had voluntarily delayed the communication of information to the claimant necessary for it to conduct its activities in the market for media services. In its claim, Verimedia sought to recover damages as a result of loss of clientele. The Versailles Court of Appeal considered that, while the claimant was entitled to recover damages as a result of its loss of clientele, the quantum of those damages should be reduced due to the claimant’s lack of knowledge of the business area in which it was starting up, and the lack of precision of certain of its orders. The court therefore compensated the claimant only for the lost opportunity to penetrate the market more quickly. Moreover, the court rejected the claim for damage resulting from the difference between the claimant’s expected business plan and its actual financial results, considering that since loss of clientele and the non-attainment of expected profits are one and the same loss, they can be compensated only once.
In INAZ Paghe, an Italian case, INAZ sought to recover damages for the harm suffered as a result of the National Association of Employment Consultants’ collective boycott of its software packages [33]. In its judgment, the Milan Court of Appeal awarded damages, after applying a “but for” test. But the court stopped there. While INAZ was able to show that, prior to the boycott, its business was growing at a rate of more than 10% per annum and that this increase had suddenly ceased at the time of the boycott, the court considered that it could not be sure that this growth would have continued at a similar rate. An exclusionary case is also the first instance where a UK court granted damages. This was based on previous infringement decisions by the OFT in an abuse of dominance case concerning margin squeeze and rebates in the pharmaceutical sector. While the case was still pending before the Competition Appeal Tribunal, the court awarded “interim damages” for an amount of £2 million [34]. That represented, in the court’s view, roughly 70% of the likely final damages award. The case was then settled and no final judgment was rendered.
In exploitative cases, mainly cartels, a first barrier to cross, in quantifying the harm, is to prove that the cartel actually produced an overcharge. Three recent cases in Germany discuss this question. In theVitamins case, the Dortmund Regional Court applied the prima facie rule that [35], a market price is generally lower than a cartel pri. In Berliner Transportbeton, the German Supreme Court (BGH) [36], which was deciding on the appeals from the public enforcement decision of the Bundeskartellamt, stated that the longer is the cartel’s duration and the greater its geographic area, the higher should be the threshold for showing that a cartel did not accrue any economic benefit from its activity [37]. The Court thus concluded that prices in the cartel were likely to be higher than in a competitive market. Then, on the civil side of this case, the Berlin Higher Regional Court [38] held that there is a prima facie evidence that any quota cartel has had an anticompetitive and thus a price-enhancing effect. Furthermore, the court held that it can be assumed that the agreement of setting up a cartel is typically put into practice by its members. In other words, in both of these questions the defendant carries the burden to prove the opposite.
The latter principle has drawn some criticism because it is possible that a cartel was ineffective and hence there was no overcharge. There may also be decisions by competition authorities concerning agreements that infringe Article 101 TFEU or equivalent national provisions “by object” but may have never been implemented. In these cases the overcharge may also be negligible or zero [39]. Even on a cartelised market, price increases might also be explained by e.g. an unexpected increase in demand, as the Mannheim Regional Court has pointed out in the Carbonless paper case [40].
Characterisation of damages
In cartel cases, quantification of harm is closely related to the legal characterisation of damages, i.e.whether these can be restitutionary or even punitive, in order to compensate the victim, while avoiding to embark on a demanding calculation and quantification of harm.
When the Manfrediruling of the Court of Justice was referred back to the national court, the Justice of the Peace of a small Southern Italian city followed an approach based on a mixture of equity and deterrence [41]. This damages claim followed on from a 2000 decision by the Italian competition authority, which found that the members of a car insurance cartel had collectively raised their premiums by 20%. In that decision, the authority had used the “yardstick method” in calculating the cartel overcharge by comparing the prices in the cartelised Italian market with the average European prices in other European (non-cartelised) markets. In support of his damages claim, the claimant relied on that finding. The court, adjudicating on the basis of equity, considered that the Italian competition authority’s finding as to the 20% overcharge amounted to a “simple presumption” and that the defendant had failed to rebut it. The court went further than full compensation by awarding the claimant double damages in order to increase deterrence and to skim off the illegal profits made by the defendant as a result of the cartel.
On the other hand, in Devenish, the English High Court decided, as a preliminary issue, that the non bis in idem principle precludes an award of exemplary damages in a case in which the defendants have already been fined or even not fined (as successful immunity applicants). At the same time, the court held that a restitutionary award, i.e. gain-based damages, was not available for competition law-based torts. The court also rejected the claim for an account of profits, which is a remedy aimed at stripping a wrongdoer’s profits [42]. On appeal, the Court of Appeal upheld the judgment and did not consider that the principle of effectiveness of EU law dictated a different result [43].
Causation
Causation is another important question. In Arkin, a case concerning liner conferences and the alleged violation of Articles 101 and 102 TFEU, the English High Court found that the right test for causation was whether the breach of duty was the dominant or effective cause of the loss. On the basis of that test, the court was required to consider whether the claimant was the author of its own misfortune by seeking to stay in a loss-making market [44]. In the end, the court decided that the plaintiff’s own irrational pricing policy was the predominant cause of his business failure. Thus, the conduct of a plaintiff who continues trading, although he knows that his business is evaporating, may take the form of contributory fault, break the chain of causation and thus exclude the defendant’s liability.
In another case, a Swedish court struggled with establishing causation and quantifying harm caused by an exclusionary abuse [45]. In proceedings brought before the Stockholm District Court by competitors of VPC, the central securities depository in Sweden, the claimants argued that VPC’s refusal to supply them with full CD-ROM copies of share registers constituted an abuse of a dominant position and that VPC should be ordered to pay damages. The court agreed that VPC had abused its dominant position, but awarded damages for half of the amount claimed, since full proof had not been presented by the claimants with respect to the quantum of their damages. For example, in relation to rental and employee costs, the court considered that it could not be excluded that office space and staff could have been used by other parts of the claimants’ business that were not affected by the abuse. Similarly, because the economy as a whole was in recession during the period when the abuse took place, the claimants were unable to precisely identify which part of the losses were the result of the defendant’s abusive conduct, and which part was caused by the general economic downturn.
Binding effect
A comparative analysis of national competition laws shows that although a pre-existing decision by an administrative authority may be used by the courts and the litigants to establish and prove certain facts, in particular in case of follow-on civil actions, such a decision does not normally acquire the status of binding authority, though it can certainly be persuasive authority. However, some Member States have introduced a rule that civil courts in followon proceedings for damages are bound by final infringement decisions of national competition authorities [46].
The scope, however, of this binding effect is not always clear, as, indeed, the English case law shows. Thus, in Crehan v. Inntrepreneur [47], a case decided on appeal from the High Court, the English Court of Appeal was confronted with the effect that past European Commission decisions had on a civil case where the facts were similar but not identical. The Commission in its past decisions, which were considered to be relevant to the facts of the civil case at hand, had found that the cumulative networks of the lease agreements between certain beer suppliers and pub tenants contributed to the foreclosure of the UK on-trade beer market, thus falling foul of Article 101(1) TFEU. In Crehan, the English courts had to identify whether the cumulative effect of several similar networks of beer distribution agreements foreclosed the UK market. The Court of Appeal reversed the High Court findings that a beer tie imposed on a pub tenant had not infringed Article 101 TFEU and held that the High Court judge should have followed the European Commission’s findings in the similar cases referred to above. It was the first time that the English Court of Appeal had awarded damages for breach of competition law [48].
This was not, however, the last episode and the House of Lords overturned the Court of Appeal and found that the High Court judgment should be restored. The House of Lords referred to the ECJ case law on conflicts between decisions of the Commission and national courts and followed a narrower concept of conflict, holding that there was no conflict between the Commission decisions and the High Court’s finding that the agreements did not infringe Article 101(1) TFEU. According to the House of Lords, whilst the court should respect the Commission’s expert analysis, Commission decisions are ultimately only part of the admissible evidence which the court must take into account.
Similar is the recent Enron case [49], where the UK Office of Rail Regulation had found that EWS was in breach of Article 102 TFEU for abusing its dominant position, by charging Enron discriminatory prices for access to its rail freight services without having any objective justification. In a follow-on action, the Competition Appeal Tribunal, held that there was no liability in damages for lack of causation [50]. On appeal, the English Court of Appeal ruled that tribunals overseeing damage claims are bound by the facts contained in an antitrust decision, but stressed that these have to be clear statements and not “stray phrases” [51]. In that case, the courts accepted that they were bound by the regulator’s findings with regard to antitrust liability but that the question of civil liability was open.
There are also other examples of national courts hesitation to accept a binding effect of administrative authority decisions over civil court proceedings [52].
Collective claims – Class actions
The introduction of US-style class actions does not find favour in Europe and has been one of the main points of controversy around the European Commission’s legislative proposals in this area. At the same time, some Member States recognise the need for the law to make possible a degree of aggregation of claims and have recently introduced legislation providing for opt-in class action possibilities. However, most Member States still lack specific legislative bases for such types of collective claims.
In the UK, parties have tried, at times successfully [53], to rely on existing civil procedural mechanisms, such as the Group Litigation Orders (GLOs). GLOs are most often used in mass tort personal injury cases and financial loss cases and are an “opt in procedure” publicised through the England and Wales Law Society. Then, recently, the English Court of Appeal rejected the attempt to use Rule 19.6 of the English Civil Procedure Rules to claim damages on behalf of all direct and indirect purchasers of air freight services from BA, without having identified and requested consent from all affected parties. Rule 19.6 allows representative actions where the party bringing the claim and each party in the represented class, has the “same interest” in the claim, but the court thought that the claimants were abusing the law and attempting to introduce from the back door an opt-out class action model [54].
The absence of class actions and collective relief at EU or national level has not, however, stood in the way of claimants joining their claims in national proceedings, using various mechanisms that the national laws allow for. Thus, a mechanism which has successfully been used to aggregate claims is the CDC model, where a specific business organisation (CDC) acquires the claims by customers of cartel members and then brings a bundled claim in its own name and on its own account. At the same time, CDC ensures that a part of the damages recovered will be transferred to the cartel victims. This model has attracted criticism, yet national courts, such as the Higher Regional Court of Düsseldorf, have considered it legal and the corresponding bundled claims admissible [55]. Then, in Slovenia, in 2010, a civil society was created to seek damages for some 75,000 Slovenian households from five electricity distributors that were condemned by the national competition authority for a violation of the competition rules, because they had simultaneously announced an increase in retail electricity prices for households [56]. Similarly, claimants have used “special purpose vehicles” to bring collective claims in the Netherlands.
Access to the administrative file – Protection of Leniency Programmes
A thorny issue that has to do with the broader question of the relationship between private and public enforcement is access by civil litigants (claimants, in most cases) to the administrative file of competition authorities, in particular, discoverability in civil proceedings of corporate statements made or submitted by leniency applicants. The recent ECJ ruling in Pfleiderer, has offered the Commission and national competition authorities some support in their approach to resist or limit access to such evidence by civil claimants, when the effectiveness of their leniency programmes is at stake [57].
In the specific case, the Bundeskartellamthad imposed fines on the three largest European producers of decor paper and on five individuals personally responsible for price-fixing agreements and agreements on capacity closure. Pfleiderer, a purchaser of decor paper, brought an action for damages against the producers of decor paper, from which it stated it had purchased goods. In order to prepare for the civil proceedings, it applied to the Bundeskartellamt for comprehensive access to the files relating to the cartel proceedings. After Pfleiderer received a version of the three decisions imposing fines, from which identifying information had been removed, and a list indicating the evidence collected in a search, it expressly requested, by way of a second application, access also to the leniency applications, the documents voluntarily transmitted by the immunity recipients and the evidence collected. The authority informed the claimant that it intended to accede to that request only in part and to limit access to the file to a version from which confidential business information, internal documents, the corporate statements themselves and documents provided by the applicants had been removed.
The Court of Justice, reminded, first of all, that neither the EU Leniency Notice, nor the ECN Notice, nor the ECN Model Leniency Programme bind the authorities and courts of the Member States, due to their soft law nature. Then, the Court, preferred to give a judgment of principle and not to offer a list of discoverable and non-discoverable evidence, as Advocate General Mazák had proposed in his Opinion. Since this was a matter, for which no Union legislation was in existence, it fell under the competence of the Member States. Therefore, the Court probably felt that it was impossible or – at least – inelegant for itself to construct a specific rule of discoverability. Its reliance, however, on the general principle of effectiveness [58] left no doubt that “leniency programmes are useful tools if efforts to uncover and bring to an end infringements of competition rules are to be effective and serve, therefore, the objective of effective application of Articles 101 TFEU and 102 TFEU. The effectiveness of those programmes could, however, be compromised if documents relating to a leniency procedure were disclosed to persons wishing to bring an action for damages” [59].
Then, after repeating the Courage and Manfredi well-known text as to the important role of private antitrust enforcement in Europe [60], the Court ruled that a balancing exercise is here necessary that can be conducted by the national courts only on an ad hoc basis, taking into account the above principles and the overall circumstances of each case.
It should, therefore, be no surprise that Pfleiderer resulted in more preliminary references to Luxembourg. A recent preliminary reference from Austria exemplifies this problem: Under Austrian procedural law, access to cartel proceeding files may only be granted if all parties involved give their express consent. In the case at hand, all cartel members refused to give their consent, so that the Austrian Cartel Court would have to deny access to the cartel file. However, in the light of ECJ’s ruling in Pfleiderer the Austrian Cartel Court enquires whether the Austrian provision conflicts with EU competition law [61].
Apart from cartel proceedings, where disclosure is usually targeted at leniency-related documents, recently plaintiffs have also sought to obtain access to documents held by competition authorities in non-cartel cases. For example, Ma Liste de Courses (MLDC), an online discount coupon processor had initially submitted a complaint before the French Competition Authority against two rival companies, HighCo and Sogec, for setting a standard for online coupons without consulting other companies, such as MLDC. The Autorité decided to accept commitments offered by the two undertakings, to remove competition concerns, however, MLDC subsequently introduced an action for damages for the harm it had suffered during the period the allegedly anti-competitive conduct was at place. In so doing, MLDC sought non-confidential versions of all written and oral statements gathered by the NCA during its investigation, including the parties’ and third parties’ written observations, minutes of hearings, replies to questionnaires and several other documents on the administrative file. The French court decided that disclosure was justified, bearing in mind that the plaintiff only sought access to non-confidential versions of such documents [62]. This is an interesting case showing that claimants may be more successful in their requests for discovery in cases not involving a cartel leniency programme. Indeed, it may be argued that the public policy concerns to resist such disclosure recedes in cases of commitments decisions which, in terms of competition enforcement, do not mean as much as the leniency programmes [63].
Conclusion
It is clear that private actions in Europe have taken off. National courts no longer deal with the question whether there is a remedy for victims of anti-competitive conduct, but rather they must now rule on a series of important questions. As a result, an interesting body of national case laws is taking shape. Broadly speaking, the national courts are confronted with the same problems, have similar concerns and respond to the latter in similar ways. This “spontaneous” harmonisation is to be welcomed.
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