The EU Damages Directive sets out that the goal of private enforcement is compensation – claimants should be neither over- nor under-compensated, which means that the passing on of overcharges can be invoked both as a shield (for the defendant in the proceedings) and as a sword (by indirect purchasers). The authors seeks to determine whether the Directive has been correctly transposed by Member States, and assess how the Directive’s rules on passing on have affected the relative position of the parties and the role of national courts in competition damages claims in the EU.
The paper, which can be found here, is structured as follows:
First, the paper describes how passing on has been treated under EU law over time. In doing so, the article reviews the CJEU’s case law (mainly Courage and Manfredi) and the Commission’s work leading to the adoption of the Damages Directive.
Section 2 briefly deals with the contents EU Damages Directive as regards passing on, with a focus on the Directive’s Section 4.
The provisions in this section of the Directive deal with matters such as the right to full compensation, the passing on defence, the standing of indirect purchasers and the presumption that they have suffered harm. Because of the options adopted in these provisions, the Directive also finds it necessary to address the interaction of different actions for damages by claimants acting on different levels in the supply chain. Lastly, the authors discuss the provisions that require the Commission to prepare guidelines to assist national courts on how to estimate passing on.
The article then reviews the transposition of the specific provisions of the Directive, as concerns passing on, into the legal systems of three Member States –Germany, France, and Ireland.
- Regarding Germany, the leading case is ORWI. This judgment allowed the passing on defence in Germany subject to stringent requirements, while also granting standing to indirect purchasers to claim competition damages. The transposition of the Directive seems to have alleviated the high threshold that defendants’ would have to meet to establish a passing on defence – which still aligns with the national doctrine of ‘Vorteilsausgleichung’ or ‘Adjustment of Benefits’, but no longer requires the defendant to prove that the claimant has not suffered any harm as a result of volume effects.
- In France, the leading cases of Le Gouessant and Doux placed the burden of proving that no passing on had occurred on the claimant – which is in direct contradiction to the Directive’s allocation of that burden of proof on the defendant. French law was therefore amended to reflect the Directive.
The authors think that the biggest challenge to the correct implementation of the Directive in France concerns how French judges will take on the task of estimating overcharges and passing on. In particular, while the Directive requires harm and passing on to be estimated if it cannot be determined exactly, under French tort law a respondent may avoid liability if the extent of harm is uncertain.
- In Ireland, the transposition act reflects the wording of the Directive exactly.
The authors seem to be concerned with the possibility of inconsistent interpretations of the Directive by national courts, with concomitant references to the ECJ. The authors’ concerns also seem to fluctuate between national transpositions leading to excessive compensation on some occasions, and to under-compensation on others.
Personally, my view is that the Directive’s insistence on ‘full compensation’ is all good and well in theory, but unfeasible in practice. A requirement to achieve a full and perfectly correct allocation of compensation is also not actually reflected in the provisions of the Directive.
There are significant difficulties with quantifying harm in practice, which increase the moment one starts to look at passing on. These difficulties are actually recognised and addressed by the Directive’s provisions on estimation and presumption of harm. Another level of complexity is then added by the Directive’s requirement that courts should take into account potential decisions of other courts in related cases when determining the amount of damages. As such, it is not surprising that national courts have started to depart from the pure compensation principle. Instead, they seem to be relying on national principles of tort law to interpret passing on restrictively, reflecting a concern with under-enforcement (a topic for another email, but one that I address in a forthcoming article to be published by the Common Market Law Review).
I expect to see more work on this topic as time moves on and as preliminary references start to reach the ECJ.