European Commission Releases White Paper on Damages
April 8, 2008
The White Paper signals an important move towards greater private antitrust enforcement in Europe; while it will take some time for any formal legislative changes to emerge, companies can provide the Commission with their views now and ultimately help shape EU private antitrust enforcement policy.On 3 April 2008, the European Union (EU) antitrust enforcer, the European Commission, issued its White Paper on Damages, outlining a new approach to civil litigation for antitrust claims in the EU. This proposal, if adopted, would have a profound impact on companies operating in the EU. The White Paper on Damages broadly welcomes the concept of class actions, including by indirect purchasers, but also limits damages and attempts to curb potential discovery abuses.
Overall, the Commission has signaled a policy direction towards private enforcement. At present, parties that are harmed by cartel or anti-competitive conduct in the EU are unlikely to bring a claim for damages even after a finding of participation in a cartel by the Commission or a national antitrust authority. The objective of the Commission is to bring about a cultural shift in the private antitrust enforcement and to encourage companies and consumers to seek full compensation for damages arising from antitrust breaches. The White Paper deals not only with follow-on actions after a cartel investigation but also with all other forms of private antitrust enforcement.
Many of the proposals put forward by the Commission in its White Paper will require significant changes to national laws and procedures. This is therefore just the initial stage of a long exercise. In its White Paper, the Commission has made the following proposals:
- Class actions. The Commission argues that class actions are needed in the EU, and envisions lawsuits organized by individual claimants (as in the United States), as well as by “representative” bodies that could be “designated” by a Member State (e.g., consumer groups or similar organizations). The White Paper lacks detail on how this would be implemented even though it would require major changes to existing national law. Also noticeably absent is any discussion of jurisdiction—a key issue in litigation involving parties in more than one EU Member State.
- Indirect purchaser claims allowed. According to the Commission, indirect purchasers should have standing to pursue antitrust claims in court. To encourage indirect purchaser claims, the White Paper outlines a rebuttable presumption that, where a violation of competition law is proved, any illegal overcharge was passed on to indirect purchasers—in its entirety. The quid pro quo for this is that the “passing-on” defense (i.e., that purchasers bringing the claim passed on the overcharge to others so damage may not arise) will be available to defendants. As many national jurisdictions do not recognize indirect purchasing claims, this proposal would require a major change to some Member States’ laws.
- Broad discovery, but with safeguards. The White Paper attempts to balance the need for disclosure in antitrust cases against the risks inherent in broad, burdensome discovery. To reach this balance, claimants would be obliged to produce to the court all facts showing that they were harmed, and would be entitled to request only precise categories of evidence that are necessary and proportional to their claim. Further safeguards would apply to defendants who apply for leniency in a Commission or national investigation, protecting certain documents from disclosure. It is, however, unclear whether the fact that the defendant has applied for leniency is itself discoverable.
- Damages limited to “real value of loss”. In contrast to the availability of treble damages in private antitrust cases in the United States, the White Paper on Damages states that damages should be limited to the “real value of loss suffered”. This means that damages would be limited to the sum of the actual loss, lost profit and interest.
- Presumption of infringement. The Commission proposes that where the Commission finds a violation of competition law, this will serve as an irrebuttable presumption of infringement in any follow-on civil litigation. This reflects the current situation. The White Paper also proposes that a decision by an NCA which is confirmed by a national court should be considered as irrebuttable proof of an infringement in subsequent cases in other Member States. This proposal that a national court must accept without question the ruling of a national court in another Member State is very controversial.
- Cost of litigation. The Commission urges measures to control the significant costs of antitrust litigation and contemplates a derogation from the predominant “loser pays” rule in Europe in order to make antitrust litigation more attractive to potential claimants.
Although there is no imperative upon the Commission to follow up a White Paper with legislative proposals, White Papers have in the past been precursors to major reforms. Given the lack of detail in this ambitious White Paper, any concrete proposals are probably going to take some time to prepare. The Commission has invited interested parties to submit observations to the White Paper, which could influence the legislation eventually proposed.
