Damage claims facilitated by Eu private enforcement proposal

The European Commission has adopted its long-awaited Directive on private actions. It explains how citizens and companies can claim damages when they are victims of infringements of the EU antitrust rules, such as cartels and abuses of a dominant market position. The proposal is set to remove a number of practical difficulties which victims frequently face when they try to receive a fair compensation for the damages they have suffered. Private actions in antitrust should significantly help claimants seeking redress from cartels and reduce disparities between Member states.

The EU Court of Justice has already recognized the right for all victims of antitrust infringements to be compensated for the harm suffered. These victims can obtain compensation by bringing an action for damages before a national court.

However, few claims are brought before national courts as it is still difficult for consumers and businesses to obtain redress. This is due to shortcomings in the applicable legal frameworks in most Member states that make it excessively costly and difficult to bring actions.

Helping SME's

This situation particularly affects consumers and SME's, who rarely can face the cost of legal action. Only 25% of antitrust infringements found by the Commission in the last 7 years have been followed by civil actions from victims according to the Commission. Most of these actions were brought by large businesses, and most actions were introduced either in the UK, Germany or the Netherlands where the national legal systems are more "claimant-friendly".

National rules are widely diverging across Europe and, as a result, the chances of victims to obtain compensation greatly depend on which Member State they happen to live in.

The proposed Directive aims to remove these practical obstacles. In parallel, the Commission has adopted a recommendation encouraging Member states to set up collective redress mechanisms in order to improve access to justice for victims of violations of EU law in general, including competition rules.

The proposal Directive

A number of measures which should facilitate antitrust damages actions in Member states:

• National courts will have the power to order companies to disclose evidence when victims claim compensation;
• Decisions of national competition authorities finding an infringement will automatically constitute proof before national courts of all Member states that the infringement occurred.
• Clear rules on limitation periods are established, so that parties have sufficient time to bring an action;
• Ensure that victims have a period of at least five years to bring a claimand that victims can effectively claim damages once an infringement has been found by a competition authority.
• Victims should obtain full compensation for the actual loss suffered but also for lost profits;
• The liability rules in cases where price increases due to an infringement are "passed on" along the distribution or supply chain will be clarified. In practice, this will ensure that those who suffered the harm in the end will be the ones receiving compensation.
• The new rules establish a rebuttable presumption that cartels cause harm. This should facilitate compensation given to victims.
• Any participant to an infringement should be responsible towards the victims for the whole harm caused by the infringement, with the possibility to obtain a contribution from other infringers for their share of responsibility. However, this should not apply to infringers who cooperated with an investigation and obtained immunity from fines before a competition authority.

The proposal fully takes into account the key role played by competition authorities (at EU or national level) to investigate, find and sanction infringements.

As a result of the proposal, it should be easier in the future for victims of antitrust infringements to obtain compensation.

EU-wide harmonization

Its main objective is to facilitate full and fair compensation for victims once a public authority has found and sanctioned an infringement.
These new rules will likely lead to a harmonization across Europe and will probably reduce the incentive for forum shopping by both claimants and plaintiffs.

The proposal also contains a number of safeguards to ensure that facilitating damages actions does not diminish the incentives for companies to cooperate with competition authorities under the "leniency" programmes.

The Commission has also adopted a communication on quantifying antitrust harm to provide guidance to National Courts and concerned parties in damages actions.

In order to help these concerned parties, the Commission has also prepared a "Practical Guide" which will be a useful tool for victims and national judges. These documents are however not legally binding.

Entering into force

The proposal for a Directive will now be discussed by the European Parliament and the Council. Once the EU institutions adopt a final text, Member states will have two years to implement its provision in their legal systems.