Damage control: is it out of the question?
By John Cassels and Jessica Burns
In 2004, ex-EU Competition Commissioner Mario Monti recognised a ‘total underdevelopment' of private enforcement of EU competition law in Europe. Following (nearly) a decade long review, the Commission proposed on Tuesday of this week a new EU Directive, designed to make it easier for victims of competition law infringements to sue for damages.
Whilst all EU Member States currently entitle such victims to seek compensation before national courts, in reality few actions are brought due to legal uncertainty, excessive costs and difficulties in proving infringements and quantifying harm. Since 2006, only 25% of competition law infringements found by the Commission have led to damages actions (mostly these are actions brought by large businesses in the UK, Germany or The Netherlands). The Commission estimates that this equates to €23bn of the EU's 2012 GDP in compensation foregone by victims each year.
This week's proposals target barriers to seeking redress e.g. by empowering national courts to order disclosure of evidence in damages actions, ensuring decisions of national competition authorities constitute proof of an infringement before national courts, allowing victims at least five years to bring actions and introducing a rebuttable presumption that cartels cause harm.
The most controversial proposal, following the CJEU's 2011 Pfleiderer ruling, is an absolute protection from disclosure in civil actions for documents that form part of leniency applications and settlement submissions, to help ensure that cartelists who cooperate with the authorities are not disadvantaged.
In parallel, the Commission has also adopted:
- A Recommendation encouraging Member States to promote 'opt-in' collective redress mechanisms (whilst avoiding US-style litigation), so that victims harmed by the same infringement can bundle their claims into a single action and improve their chances of obtaining redress.
- A Communication and Guidance Note on quantifying harm to assist courts and claimants in the complex and costly assessment of exactly how much damage is suffered.
The Commission believes its proposals strike the correct balance between public and private enforcement. Only time (at least another three years) will tell us on which side the scales are truly tipped.
If you would like to discuss these issues, please do not hesitate to contact John Cassels at firstname.lastname@example.org or Jessica Burns at email@example.com