EU increases priority of EU private antitrust enforcement whilst shunning “US extremes”

IP|Business is supported by Foley & Lardner LLP

The European Court of Justice ruled over 10 years ago that, as a matter of fundamental European Union law, persons who suffer injury are entitled, as a matter of right, to compensation.¹

Despite this judicial guarantee, very few victims of EU antitrust rules ever sue for redress of their injuries, whether individually or collectively.  According to the European Commission, these victims fail to receive billions of euros each year to which they are entitled.²  From the Commission's perspective, the failure of victims to recover compensation for injury suffered is due in large part to a failure of the current legal structure to provide appropriate incentives and procedures.

Even recognizing the need for redress, there remain serious barriers to achievement of a reform of the current European legal structures. First and foremost, there is no single uniform system governing actions for damages for infringement of EC competition rules at the present. The Commission can investigate violations of law and can, by decision, fine enterprises it finds to have infringed on EC law. A private party injured by reason of the conduct that the Commission found unlawful can rely on that Commission decision that a violation has occurred.

However, there are practical limits to the extent to which such an aggrieved person can benefit from the Commission's determination. There is no EU court system available to private parties within which to vindicate their rights. In the EU, the only court systems to which a private party has access are national courts.  As should be clear, these national courts have little in common by way of procedures, rules or competence to handle what are often complex competition violation scenarios.

While a Commission decision is binding proof of a violation, that is only one step in the process.  Moreover, even if a national competition authority (NCA) were to find a violation of EC antitrust law, that NCA determination, in most instances, has (unlike a Commission decision) no evidentiary value in a damage action brought in that NCA's national court.  To recover damages for that violation, an injured party would have to begin its own action and comply with applicable legal and procedural rules in national court, as it would if it were relying on a Commission decision as well.

According to the European Commission, most national court systems, even leaving aside the uncertainties of having 27 different legal systems, often are woefully ill-equipped to deal with the complex legal and economic issues posed by antitrust violations.

Among these deficiencies are problems of standing, discovery and collective redress.  There is virtually no effective procedural means in most member states to permit actions by groups of parties whose injuries stem from a common set of facts.  Such class actions are, of course, commonplace in the US. 

Second, there are significant differences on such fundamental issues as evidence and proof of damages. There are wide variations among the member states in statutes of limitations. When all of these problems are coupled with the almost complete absence of discovery in private litigation in most EU member states (and the confidentiality of the Commission's investigational files), it is not surprising that there has been little incentive or ability for injured parties to pursue actions for compensation of damages suffered in antitrust cases.  There is little or no incentive on the part of lawyers to bring such actions as well.  Further more, the losing party often has to pay all costs.

Several years ago, the European Commission proposed standards and criteria for the establishment of a European Union (EU)-wide system of private antitrust enforcement. To sweep away these barriers and to incentivize injured parties to seek redress, the Commission is proposing a number of fundamental steps, including 1) the guarantee of the right to recover actual damages (single damages as opposed to treble damages in the US); 2) a system of "collective redress" (similar to American class actions); 3) procedures to facilitate parties' "discovery" of relevant evidence; and 4) judicial presumptions guaranteed to expedite proof of violative conduct; and 5) uniform rules on causation.³

While this European initiative has been influenced by activist private antitrust enforcement in the US, the Commission made clear that its proposal is "a middle way” between the hurdles to compensation that currently exist in most EU member states and the incentives that lead, in the view of many Europeans, to excessive litigation in some non- European jurisdictions, for example, the US.

The Commission’s efforts generated both wide-spread interest and opposition.  After several years of debate, the European Commission in April 2011 sought once again to generate traction for the necessary political will and eventual legislative action to achieve an effective system through which persons damaged as a result of antitrust violations could seek and obtain redress.  While the Commission’s renewed efforts and priorities will be yet again debated before being adopted and while the proposals are more tentative than U.S. practice has long countenanced, it would be a mistake to dismiss or ignore the Commission's effort. Businesses with international interests are advised to plan now on how to deal with this very significant new development.  There is a growing consensus that action in this area is required.

Howard Fogt is a partner with Foley & Lardner LLP

¹ Case C-453/99, Courage and Crehan [2001] ECR 1-6297, and joined cases C-295- 298/04, Manfredi [2006], ECR 1-6619.
² See section 2.2 of the 2008 Commission's Impact Assessment Report.
³ Such incentives stop far short of U.S. rules permitting the recovery of attorneys fee, liberal (and often extremely intrusive and expensive) discovery and extended periods of limitations.