This paper is the second chapter of a book on ‘The EU Antitrust Damages Directive: Transposition in the Member States’, of which the authors are the editors. Oxford University Press will publish the book later this year – in December, I believe. This draft chapter can be found here.
The paper assesses critically the features of the EU Damages Directive and the challenges Member States face in its implementation. The authors examine the contents and goals of the Directive, its provisions, and whether the Directive is likely to achieve its purported aim of fostering compensation of victims of antitrust infringements. It is structured as follows:
A first section describes the path to the adoption of the Directive.
The paper describes the various stages in the progressive promotion of private competition enforcement in Europe. After the CJEU judgment in Courage in 1999, which instituted a right to compensation for competition infringements, the Commission prepared a Green Paper on damages actions for breach of EU competition rules in 2005. This Green Paper built on the evidence provided by the 2004 Ashurst report, which assessed a number of Member States as regards how damages claims may be brought there. In 2006, the CJEU extended in Manfredi the right to compensation to indirect victims of competition infringements. The Commission in 2007 undertook an impact assessment of the alternative options for private competition enforcement. The Commission then approved a White Paper in 2009, which led to an unofficial proposal for a Council Directive that never saw the light of day. During this initial period, the discussion focused on the compensatory goals of damages claims, and even led to the adoption of some guidance on the quantification of damages for judges in 2009.
The drive for the adoption of a Directive was re-ignited during Commissioner Almunia’s term, as the need for EU rules was made increasingly apparent by a number of cases on the interaction between public and private enforcement which found their way to the European courts (e.g. Pfleiderer (2011) and Donau Chemie (2012)). To limit opposition to the proposal, the provisions concerning collective redress mechanisms were removed.
In 2014, the Damages Directive was finally adopted.
A second section takes on the goals of the Directive.
The Directive is aimed at providing rules for effective compensation of victims of antitrust infringements, and harmonizing some rules concerning damages claims so that there can be a single and common level-playing field for these claims across the EU. The Directive also aims at ensuring coordination of private claims and public enforcement, mainly by protecting the investigations of the European Commission and of the National Competition Authorities (hereinafter NCAs). In so doing, the Directive gives preference to public enforcement over the promotion of private claims for damages.
A third section briefly describes the legal grounds for the adoption of the Directive and its provisions.
In order to enhance and promote damages claims, the Damages Directive introduces EU rules that erode the autonomy of Member States to set their own rules and procedures, and encroaches upon the principle of national institutional and procedural autonomy. This is in line with wider developments concerning the growing body of EU tort rules (like the rules on State liability, IP enforcement, unfair competition and product liability).
The Directive does not introduce a comprehensive set of rules for antitrust damages claims or regarding the interaction of private and public enforcement. Instead: (i) it codifies and elaborates on the CJEU’s case law; (ii) it adopts a few substantive and procedural initiatives “cherry-picked” from the most successful national regimes in the EU as regards antitrust damages claims (i.e. Germany, UK & the Netherlands). This section reflects this, and summarises the content of the Directive by reference to the right to compensation, limitation periods, quantification of harm, multi-party liability, allocation of damages along distribution chains, consensual dispute resolution mechanisms, disclosure of evidence, the protection of public enforcement, and the binding effect of infringement decisions.
A fourth section critically assesses the Directive.
The authors consider that the Directive neglects some issues that are relevant to ensure that victims will bring claims and have the potential to be successful. First, the Directive singles out monetary damages claims as the only type of possible private enforcement action covered by its rules. The Directive does not apply to other private claims (declaratory actions, orders to cease and desist, requests for interim measures, or restitution or unjust enrichment claims) which can be relevant in addressing the wrongs that may be provoked by antitrust infringements. Second, while costs/funding of claims and collective redress were identified as some of the main challenges to the success of competition damages claims in the EU, neither are addressed in the Directive. This attitude towards antitrust collective redress and aggregation of claims has its more recent corollary in the Commission’s proposed Directive for representative actions for the protection of the collective interests, which is not foreseen to apply to antitrust damages claims.
The Directive also offers only a limited treatment of some issues, which will lead to uncertainty in the implementation of the Directive by Member States. First, the Directive ignores out-of-court dispute resolution mechanisms. Second, by merely seeking minimum harmonization, the Directive fails to provide a comprehensive and entirely coherent framework of substantive and procedural rules. As a result, many details will need to be addressed by the Member States. This means that there will only be partial or limited harmonization, and substantial legal differences between Member States will subsist. As a result, forum shopping will likely continue.
Finally, the Directive skews in favour of some types of claims. First, the Directive was evidently drafted with monetary damages in mind, and takes cartels as the typical infringement that will give rise to compensation. Second, underlying its concern with the interaction of damages claims and prior public enforcement, the Directive’s rules are slanted towards follow-on claims rather than stand-alone actions. Thirdly, while the right to full compensation is extended to all victims of competition infringements, the Directive’s rules mainly address cases involving victims located downstream. Accordingly it remains unclear if the Directive’s provisions, which were drafted with downstream victims in mind (both indirect purchasers and umbrella victims), can be applicable to victims located upstream.
A fifth section looks at the implementation of the Directive.
This section considers in general terms the risk of questionable or defective transposition of the Directive by Member States. The vague and indeterminate terms in which some of the Directive’s provisions are drafted, and the Directive’s frequent appeal to the principle of effectiveness and the duty of cooperation, exacerbates the risk of non-compliant implementation by Member States. The lack of clarity and vagueness of the Directive may explain some of the problems encountered by Member States in its implementation – particularly when taken together with the conflict between certain Directive provisions and some long-standing traditions and rules of the domestic laws of the Member States.
As such, non-compliance due to interpretation problems presents a serious risk. As most Member States have copied the Directive’s provisions into national law, and some of those provisions are notably vague or require complex interpretation, doubts regarding the compatibility of national law with the Directive will be raised in national courts. The authors consider that this will inevitably lead to preliminary rulings to the European courts.
This is a very good introduction to the EU Damages Directive – its background, content and limitations. I have some substantive quibbles regarding the authors’ analysis, but this is natural and does not impact my enjoyment of the paper.
For example, given the criticisms of the contents of the Directive, I would have enjoyed a more thorough analysis of the political background for the adoption of the Directive. I agree with the authors that collective action mechanisms and funding tools are very important for private enforcement to be fully effective – so I would have liked to better understand what the obstacles to the adoption of these measures were.
Furthermore, in its criticism of the fragmented and half-hearted approach adopted by the Directive, the paper seems at times to favour a higher level of harmonisation. I must disclaim that nowhere is this expressly said – but it is how I read the paper. My academic side sympathises with the authors’ criticisms of the Directive’s vagueness and lack of coherence. I also think that a more coherent, comprehensive piece of legislation would have been better for competition victims.
However, it is doubtful whether this was politically achievable. Personally, I also have my doubts about whether it would have been desirable (and, in this, my EU law background plays an important role). The Directive interferes – significantly – with the private law traditions of the Member States. Without commenting on the approaches adopted by individual provisions of the Directive, it strikes me as reasonable for the legislator to opt for vague provisions that will have to be implemented by national legislatures and courts. National authorities will undoubtedly seek to ensure that the rules implementing the Directive are in line with national tort/contractual procedures, thereby ensuring systemic coherence and enhancing the acceptance and legitimacy of the Directive’s approach in Member States.
The fact that this may lead to national divergence is in line with national procedural autonomy; that it allows forum shopping is even desirable from a regulatory competition perspective; and that it will lead to preliminary references is a natural outcome of the process of European integration. Of course, it is not an ideal outcome for victims of competition infringements, but it is a first step in the right direction which will allow other steps to follow in due course.