EC publishes White Paper on damages: an effective system of antitrust litigation?

On 3 April 2008, the European Commission (EC) published its White Paper on damages actions for breach of the EC antitrust rules. The White Paper's key proposals are as follows:

Who can claim (standing)?

Any individual or company which has suffered harm should be able to claim compensation. This includes indirect purchasers who had no direct dealings with the infringer but who were customers of the direct purchaser which did have such dealings. It also includes "qualified entities" such as consumer organisations, state bodies or trade associations. The Commission rejected the American model of class actions (one party litigating on behalf of all victims), settling instead for a hybrid whereby individuals can combine their claims but must expressly consent to do so;

Access to evidence

National courts should have the power to order parties to disclose precise categories of relevant evidence (this is less relevant for English litigation where there are already broad powers of disclosure);

Binding effect of infringement findings

Victims should be able to rely on decisions by the Commission or National Competition Authorities (NCAs) as binding proof of an infringement (this already exists in the UK). The Commission has however proposed that NCA decisions in one Member State should have binding effect in the courts of other Member States;

Requirement for fault

Member States take a diverse approach to the need to prove fault in addition to proving infringement and loss. For those Member States requiring a finding of fault (not the UK), a defence of inexcusable error has been proposed;

Measuring damages

The Commission dropped its proposal in the Green Paper that victims should be able to claim multiples of damages (as is the case in the US). New legislation should codify the existing legal position (actual loss, loss of profit and interest can be claimed) and a non-binding framework to facilitate the calculation of damages prepared;

Passing on overcharges

Defendants should be able to plead as a defence (where relevant) that overcharges have been passed by direct purchasers to their own customers, i.e. indirect purchasers. Such defendants face the burden of proof in establishing this. Where indirect purchasers initiate litigation to claim they have suffered losses, there will be a rebuttable presumption that any illegal overcharge was passed in its entirety to them;

Limitation periods

Limitation periods should not start to run in the case of repeated or serious infringements before the day on which the infringement ceases, or before the victim can reasonably be expected to have knowledge of the infringement and the harm it caused him;

Costs incurred in damages actions

Member States are encouraged to design procedural rules to foster settlements, to set court fees so as not to disproportionately disincentivise antitrust claims and to provide national courts with the option of issuing costs orders that victims (even if unsuccessful) should not bear all the other party's costs (i.e. departing from the normal "loser pays" principle);

Interaction between leniency programmes and damages actions – in order to ensure that leniency programmes remain attractive to whistle-blowers, all corporate statements submitted by applicants for leniency for breaches of Article 81 EC (the provisions against cartels and other anti-competitive agreements) should be immune from disclosure before courts.

Comment

The Commission's proposed reform is welcome but it is almost four years since the Commission first published its comparative study (which preceded the Green Paper) on antitrust litigation in each Member State. In the interim, jurisdictions such as England and Wales and, for example Germany, have introduced legal reforms to make antitrust litigation a reality. The White Paper does not therefore lead the reform agenda (as least for a jurisdiction such as England and Wales), it adds incrementally to existing developments.

The Commission has removed the most controversial proposal from its Green Paper - that a specific pan-EU framework for antitrust claims should exist over and above litigation procedures already existing before national courts. This is to be welcomed.

The Commission has also shied away from certain aspects of the American model of antitrust litigation which incentivise claims, such as multiple damages and class actions. This is consistent with its aim of fostering a genuinely European approach. However, the American model at least creates a real possibility for victims of all sizes to enforce their antitrust rights before courts. In many Member States, it remains practically impossible for many victims to do so.

The Commission's stated aim is to create an effective system of antitrust litigation in Europe. The success of its reforms (likely to be a couple of years away before implementation) will be judged by this standard.

The Commission has requested comments on the White Paper by 15 July 2008. Please contact us if you would like to participate in this consultation process.

This analysis was provided by Thomas Roberts, associate, +44 (0)20 7864 9515, thomas_roberts@wragge.com