Class Actions as a Means of Private Antitrust Enforcement: Recent European Developments
The European Commission was expected to unveil its plans for a proposed directive on “class actions in antitrust affairs” on 7 October 2009, but at the last minute this was delayed, no doubt due to the far-reaching consequences of the proposal and staunch political and industry opposition in some quarters.
If adopted into European Union legislation, such a directive would oblige the 27 EU Member States to adopt legislation providing for class actions in antitrust matters. This would impinge on private law and court procedure in the Member States, thus going well beyond the mere administrative enforcement of Articles 81 and 82 of the European Community Treaty. For this reason, it is possible that such an innovation can only be adopted as a joint legislative measure of both the EU Council and the European Parliament, and not just as a measure of the EU Council adopted after “consulting” the Parliament. The possibility of an increased role of the Parliament has no doubt encouraged the proposal’s opponents.
Judging by the Commission’s White Paper published in April 2008, it seems that the idea was to create “opt-in” collective actions, in which individuals, including indirect purchasers, could decide to combine their claims into one single action and representative actions on behalf of “identified victims” brought by “qualified entities” (e.g., consumer associations or similar organizations) which would be either officially designated in advance or certified for a particular antitrust infringement by a Member State on an ad hoc basis.
While the Commission pauses to consider its next step, some Member States are proceeding with class action legislation on their own initiative, including, most recently, Belgium and Italy.
A controversial pre-draft bill that would introduce class actions into the Belgian legal system was recently made public. This proposal does not focus on antitrust, in particular, but would of course be useable in such cases.
Recent “monster” trials, which proved to be almost unmanageable for the Belgian courts, and political pressure from consumer organisations have spurred the Ministries of Justice and of Consumer Affairs to this pre-draft bill. As with the European Commission’s initiative, the business community has spoken out against the pre-draft bill on business, political, legal and technical grounds.
The proposed procedure would be divided into two phases: an admissibility phase and a phase in which the Court of Appeals would decide on the merits of the claim. An action could be started unilaterally by writ or by “litigation” agreement among the claimants and the defendants, but in both cases the claimants would be required to nominate a sole legal representative for the conduct of the court proceedings.
In the admissibility phase, the court would determine whether the case in actuality concerned “mass-damage” and would define the class, in the case of an action brought by writ, or give or withhold approbation in the case of an action brought by litigation agreement. The Belgian approach favours an “opt-out” system unless the court or the litigation agreement provides for an “opt-in” system. The court or the litigation agreement would also stipulate how the action would be made public to the possible “class” of claimants (in addition to the fact that the action would be filed in a special public register).
If the court held the claim to be founded on the merits, it would also decide on the amount of damages to be awarded. The measures of damages would be limited to compensation for loss caused; exemplary or punitive damages would not be awarded. Damages could be awarded specifically to individual members of the class, or to the class as a whole, or to a combination of both. The sole representative of the class would normally be charged with sharing out any funds awarded to the class as a whole.
The main criticisms of the procedure as outlined in the pre-draft bill include the following:
It would only be open to claimants who have their usual residence in Belgium, a discrimination which may be inconsistent with EU law.
It would be open to individuals or representative organisations and not to companies or corporations. This would, for instance, disqualify a greengrocer plying his trade through a company, while his neighbour, doing exactly the same as an individual, would qualify. Arguably, this could violate the Belgian Constitution's equality principle.
It would be brought directly before the Court of Appeal, thereby omitting the normal first instance trial, with possibility of appeal for the losing party.
The formal Parliamentary bill and explanatory notes are still awaited.
In Italy, a law has been passed which will introduce a form of class action with effect from 1 January 2010. Contrary to the Belgian approach, the Italian law is modelled on an “opt-in” system whereby individual consumers must opt-in expressly if they want to join the class. The final judgment will be binding only on those consumers who have opted-in.
As proposed for Belgium, the Italian courts will first carry out an admissibility test to determine whether to allow the case to proceed as a “class action”. Such evaluation requires consideration of potential conflicts of interest, the identity of the rights to be vindicated and the capacity of the claimant to represent the class. If the case is admitted as a class action, the court will then establish terms and procedures to make the case public and allow individuals of the same class to opt-in.
During the first hearing, the court may decide to defer the decision on the admissibility of the class action if there is an investigation pending before an independent authority (e.g., the Italian Competition Authority) or an administrative court.
The order of admissibility can be challenged before the Court of Appeal, although appeal against the grant of admissibility does not suspend proceedings on the substantive claim.
The new law provides that the final ruling, if favourable to the claimants, must determine the full amount of damages due to the members of the class, the measure of damages being compensatory, not exemplary. This ruling can also be further challenged before the Court of Appeal and the latter’s judgment can be appealed on points of law before the Italian Supreme Court (“cassation”).
The two recent examples provided by Italy and Belgium, as well as the European Commission’s initiative—albeit suspended for a while—show that the legal landscape is changing in Europe in matters of class actions, and so must be kept under review by consumers and producers alike. The creation of the ability to bring a class action will facilitate the bringing of claims by claimant groups or consumer organisations on behalf of their members, and so will tend to increase the amount of litigation in this area, as the US experience has shown. This, in turn, will create an added incentive for companies to prioritise compliance with antitrust rules.