Jose Manuel Panero Rivas
MA and PGD in Economics for Competition Law, King’s College London; LL.M in European Law, College of Europe
On 11 June 2013, the Commission issued its much expected Proposal for a Directive concerning damages claims by victims of antitrust violations (‘the Proposal’). This post aims to examine what the Commission has finally done in an area in which it has never felt too comfortable. The obvious reason for this is that, contrary to what happens with the vast majority of its legislative proposals, depending on its content the Directive could have a potentially detrimental impact on the crown jewel: public enforcement by the Commission of EU competition Rules.
This is a controverted area of EU competition law. Therefore, rather than aseptically describe what the content of the Proposal is, this post rather begins with an explanation of several elements the Commission considered when drafting the Proposal. This will be followed by a description of the solution retained by this institution.
A final word of caution in this introduction: this is a long-waited and matured legislative proposal. However, it is still for the Council and the Parliament to intervene in the legislative procedure. At this stage it is still unclear if amendments will be introduced by any of the two institutions. Nevertheless, what is already known is that some Member States have distinguished themselves by putting spokes in the wheels of this project, in a perceived defence of ‘their’ large corporations potentially exposed to this kind of actions – although one may think they should also consider the interests of, at least domestic, consumers.
(i) Some background elements for understanding the Proposal
It is worth recalling that the right of compensation for parties suffering the consequences of infringements of EU competition rules is well established in the case law of the Court of Justice of the European Union (‘CJEU’). Nevertheless, absent any EU rule governing this type of actions, it has been for the legal systems of the Member States to lay down detailed rules governing these claims. The limits of this autonomy were identified by the Court when proclaiming the principle of effectiveness (the national rules should not make the exercise of the rights excessively difficult or practically impossible) and the principle of equivalence (the rules may not be less favourable than those governing damages actions for breaches of similar rights conferred by domestic law).
However, the Commission has always been reluctant to introduce US-type actions for damages in the toolbox of competition law enforcement mechanisms. It is no secret that the star tool for the Commission with regard to its fight against cartels is its leniency programme. However, the incentives for an undertaking to apply for leniency (thereby escaping without a fine a prisoner’s dilemma-type situation) could be drastically reduced if the applicant could be subject to follow-on actions for damages by affected. This incentive could be further reduced if the documents which the leniency applicant provided to the Commission could subsequently be requested by a national court, as is now permitted in accordance with the Pfleiderer case law, in order to prove the existence of an infringement. In other words: one might expect that if actions for damages were to be made available to affected parties by a participant in a cartel which applies for leniency – as the principle of compensation of the harm suffered would require – then less applications for leniency would be made. Also companies would perceive less pressure to apply for leniency as they might consider that other undertakings would also be less likely to reveal the existence of the practice.
Determining what the actual damage suffered by a customer of those practices infringing antitrust rules is another essential element of actions for damages, but it is not an easy task. One reason for that is that some of the overcharges incurred could have been passed on to final consumers or other downstream actors in the supply chain. However, it is not uncommon that those indirect purchasers could face procedural hurdles for claiming compensation from the damage they actually suffered. It is also worth noting that the actual damage for some types of antitrust infringements are far from being evident, consider for instance certain infringements of Article 102 TFEU or even infringements of Article 101 TFEU which, despite being classified as infringements “by object”, do not have an actual impact on prices or output.
(ii) Main elements of the Proposal
Bearing in mind the above, the Commission issued its Proposal, which contains the following key elements:
- It contains the principle of full compensation. In Article 2, the Proposal states that ‘full compensation shall place anyone who has suffered harm in the position in which that person would have been, had the infringement not been committed. It shall therefore include compensation for actual loss and for loss of profit, and payment of interest from the time the harm occurred until the compensation in respect of that has actually been paid’.
- In Article 5, the Proposal establishes the rules on disclosure of evidence, which should allow affected parties to obtain the necessary evidence for presenting their case to a court when the claimant presents reasonably available facts and evidence showing plausible grounds for suspecting it has suffered harm from an infringement of antitrust rules. However, Article 6 offers absolute protection to leniency and settlement applications (for both leniency corporate statements and settlement submissions), also limiting access to other kind of documents needed for the purposes of public enforcement of competition rules.
- In Article 11, the Proposal establishes the joint and several liability of participants in collective infringements of competition rules (typically cartels). However, this Article makes an exception for leniency applicants having received immunity, which could only be forced to compensate damages caused by other participants in the infringement after the injured parties have shown they are unable to obtain full compensation from the other undertakings involved in the prohibited practice.
- The Proposal expressly recognises the possibility for infringing undertakings to invoke a passing-on defence (Article 12.1 of the Proposal) except in those cases in which it is legally impossible for indirect purchasers to claim compensation for their harm (Article 12.2 of the Proposal). However, this also establishes that indirect affected parties (those suffering harm because of the passing-on of the extra costs) should have at their disposal effective mechanisms of redress (Article 13 of the Proposal).
- On quantification of harm, Article 16 establishes the rebuttable presumption that, in case of cartel infringements, it shall be presumed that the infringement caused harm.
(iii) A foreseeable long and winding road until its adoption
The Proposal is now in the hands of the Parliament and the Council. Although the Proposal is a mature piece of legislation, the first reactions of these two institutions suggest that the Proposal is not likely to remain untouched in its final wording and that it will face a rocky ride in the course of the ordinary legislative procedure.
First reactions from various different actors within the Parliament suggest inter alia that (i) collective redress mechanisms should be part of the proposal; (ii) there should be changes in the rules concerning discovery of evidence (with contradictory views with regards to the direction in which the change should go); and (iii) limitation periods – five years in the wording of the Proposal – should be shortened. However, the final vote on the issue is scheduled for 5 December 2013.
At its turn, the Council seems to seek a tightened of disclosure rules, and also a shortening of the limitation period (to three years). It also seems to water down the possible fines a national court could impose to defendants in case they refuse to comply with disclosure orders or destroy evidence (provided by Article 8 of the Proposal).
Apparently, the Council is even contesting the legal basis used by the Commission. The Proposal has used a dual legal basis, namely Articles 103 and 114 TFEU. However, it seems that the Council – against the opinion of the Commission – is trying to avoid the use of Article 114 TFEU. In practical terms, this would mean depriving the Parliament from exercising effective legislative powers with regards to the Proposal.
The Proposal shows a complex equilibrium. The Commission has tried to genuinely foster actions for damages in the antitrust field while at the same time avoiding undermining a key element of its public enforcement of antitrust rules as is its successful leniency policy.
It is not for this post to determine if the Commission has been too zealous in its protection of public enforcement of competition rules or not. It is neither for this author to consider if, given the direct impact of the issue on a key competence of the Commission, this institution is the most appropriate actor to issue the Proposal (although, in any event, no other possible actor could have started the legislative procedure). However, the first reactions from the Council seem to point out that Member States would like an even less litigation-friendly environment than the one envisaged by the Proposal. At its turn, voices in the Parliament are claiming for the introduction of collective redress mechanisms. It is worth recalling that the Proposal enters into a field (actions for damages) in which there are significant divergences between Member States. It is possible that its content (for instance with regard to joint and several liability or passing-on defence) could potentially shock well-established principles of civil or commercial statutes or judicial practices in certain Member States.
The final Directive would be a major piece of legislation for EU antitrust policy. Because of the compensation to be awarded under it, it is also of vital importance for undertakings and consumers. Finally this is likely to have an impact on general EU law concerning judicial procedures in Member States. Time will tell what the final result is and if the Directive has the ability to close the gap between antitrust and civil and commercial law rules in several Member States, which may have the impression that competition rules are from Venus while tort liability is from Mars.
 Precedent works from the Commission in the field include (1) the European Commission, White Paper on Damages Actions for Breach of the EC Antitrust Rules, COM (2008) 165; and (2) the Commission Staff Working Paper Accompanying the White Paper on Damages Actions for Breach of the EC Antitrust Rules, SEC (2008) 404.
 Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, COM(2013) 404, 11.6.2013. But the Proposal does not come alone. The documents issued by the Commission on 11 June 2013 are the following: (i) Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, COM(2013) 404, 11.6.2013 (‘the Proposal’); (ii) Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, C(2013) 3440, 11.6.2013 (‘the Communication’); (iii) Commission Staff Working Document – Practical Guide on Quantifying Harm in Actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, SWD(2013) 205, 11.6.2013 (‘the SWD’); (iv) the Impact Assessment Report, SWD(2013) 203 final, 11.6.2013 (the ‘RIA’); (v) Executive Summary of the Impact Assessment Report, SWD(2013) 204 final, 11.6.2013; (vi) a Frequently Asked Questions document; and (vii) a Citizens summary.
 See W.P.J.Wils, “Should Private Antitrust Enforcement be Encouraged?” in W.P.J. Wils, Principles of European Antitrust Enforcement, 2005 pp.111-127.
 See Case C-453/99 Courage and Crehan  ECR I-6297; Joined Cases C-295 to298/04 Manfredi  ECR I-6619; and Case C-360/09 Pfleiderer  ECR I-5161.
 See Case C-453/99 Courage and Crehan  ECR I-6297; and Joined Cases C-295 to 298/04 Manfredi  ECR I-6619.
 Section 4 of the Clayton Act empowers private parties injured by violations of the Act to sue for treble damages. For a comparison of several aspects of both systems (including the role played in the US by actions for damages and the interface between the different tools) see J. Panero Rivas Criminalisation of EU Competition Law enforcement: the long and winding road in Derecho de la Competencia Europeo y Español, vol Dykinson Vol XI, 2013, pp. 139-185.
 Nonetheless, it is worth noting that those parties, independently from subsequent decisions of the participant in the cartel, have effectively suffered the harm.
 Case C-360/09 Pleiderer  ECR I-5161. In that case, the CJEU stated that, in absence of EU Law, it is for the national court to decide on the basis of national law and on a case-by-case basis whether to allow the disclosure of documents, including leniency documents.
 On that issue see S. Bishop and M. Walker, The Economics of EC Competition Law: Concepts, Application and Measurement, Sweet & Maxwell, 2010, pp. 699 to 721.
 A good example could be information sharing practices that are traditionally considered infringements of Article 101 TFEU by object but whose impact on prices in not evident.
 MLex Lawmakers face scrap over ‘group claims’ in damages law, 17 October 2013.
 MLex EU States may seek tighter disclosure rules in draft damages law. 10 October 2013. For the initial position of the different Member States see MLex EU Governments size up draft damages claims-law, 3 September 2013.
 MLex Legal advice casts doubt on EU damage-claim law, 31 October 2013.