The article, which can be found here, seeks to assess whether European efforts to promote compensation for anticompetitive harm have been successful. These efforts have focused on promoting compensation, treating deterrence as a goal best promoted through public enforcement.
It finds that collective enforcement has not been successful in the EU, particularly by comparison to the US, where the main objective of private enforcement is deterrence. By granting standing to both direct and indirect purchasers without also creating appropriate collective redress mechanisms, the EU system merely ensures that neither direct purchasers nor indirect purchasers can effectively exercise their right to compensation. The paper argues that Europe should adopt a deterrence-enhancing approach to private enforcement that borrows from the US.
The paper is structured as follows:
Section 2 provides an overview of competition enforcement models in the EU, with an emphasis on private enforcement.
It begins by describing how public enforcement prevails in EU competition law, which broadly assumes that fines and other public penalties generate sufficient general and specific deterrence. While corrective justice can theoretically be achieved solely through public enforcement, in particular by means of monetary remedies that deprive the wrongdoer of any benefit derived from illegal conduct, the compensation of victims for harm suffered requires private enforcement. Acknowledging this, the EU has sought to create a system of private enforcement that ‘complements, but does not replace or jeopardise, public enforcement’.
The paper then describes the path towards the adoption of the current regime of private competition enforcement in Europe. It also describes this regime, with an emphasis on the Damages Directive and its failure to bring about a mechanism for collective redress. It identifies the main reasons behind this failure, including fear of American-style litigation and a concern with protecting leniency programs. As a result, only a recommendation for member states to adopt collective redress mechanisms was adopted at EU level. The outcome of this failure to enact a collective redress mechanism is that competition damages claims have been mostly brought by corporations, while ordinary consumers have been unable to obtain compensation.
Section 3 compares private enforcement in the US and in the EU.
It describes how collective actions in the US have the double goal of ensuring deterrence and compensation – with deterrence having primacy. This primacy is made clear by the adoption of five measures: (i) automatic treble damages; (ii) wide-ranging discovery rules; (iii) opt-out class actions; (iv) one-way fee shifting (i.e. successful claimants will be able to recover their costs with lawyers from the defendant, but recovery by the defendant is not possible should they prevail); (v) lawyers being able to bring antitrust cases on a contingency fee basis. Taken together, these measures create incentives for lawyers to enforce the antitrust laws as private attorneys general.
As regards compensation, the US experience demonstrates that class members receive low proportional awards. In the EU, on the other hand, the system contains a number of rules that seek to ensure that full compensation is obtainable. However, private enforcement takes a decidedly secondary role with respect to public enforcement.
Section 4 assesses whether EU private enforcement rules are well-suited to achieve full compensation.
It begins by reviewing the various tools provided for in EU competition law to ensure full compensation, such as: (i) the rules on access to evidence; (ii) joint and several liability; (iii) the granting of standing to both direct and indirect purchasers; (iv) rebuttable presumptions of harm; and (v) the Commission recommendation on (opt-in) collective redress mechanisms.
Despite the adoption of these measures, the author concludes that: ‘While trying to achieve much in one fell swoop, the reform is in fact most likely to fail in providing full compensation, both for direct and indirect purchasers.’ First, protection of leniency documents is likely to pose challenges to bringing claims that cannot be surmounted through recourse to disclosure. Second, the granting of standing to indirect purchasers implies the recognition of a passing on defence, which risks seriously undermining the odds of success of claims brought by direct purchasers – even as the odds of success of claims by indirect purchasers remain low. This is further reinforced by end-customers, or even some purchasers further down the supply chain, lacking the incentives to bring claims on their own. Simultaneously, national experiments have revealed the inefficacy of opt-in collective actions in attracting a sufficient number of victims to make such actions economically feasible. Lastly, restrictions on the ability of for-profit entities and litigators to bring collective claims creates a situation of lack of ‘rational actors who would have the capacity to bring risky, complex and costly collective competition actions under conditions of eligibility’ – even if this could theoretically be rectified through rules on third-party funding.
Section 5 tries to determine whether deterrence-based remedies should be adopted in the context of EU collective actions.
At present, the situation is as follows: (i) public enforcement is given priority; (ii) most victims lack sufficient incentives to bring stand-alone claims; and (iii) victims and their representatives are discouraged from, or unable to bring collective actions. In order to rectify this situation, the author makes a number of suggestions: (i) adopting damage multipliers, which may be necessary to offset the significant costs of starting litigation; (ii) adopting very-wide disclosure rules; and (iii) promoting opt-out collective actions and assertive funding tools.
This paper provides an interesting comparison of the EU and US private enforcement regimes. It also makes a forceful argument for the adoption of collective redress mechanisms, which borrows significantly from the US experience.
I feel that a number of the arguments and assertion made in this article would benefit from greater empirical support. Having said that, I think the main argument is broadly correct: actual compensation for competition infringements is unlikely to be achieved absent opt-out collective redress mechanisms. The question, however, is how to reform the existing system, which has in any event just been implemented, without detrimentally affecting a number of goals that go beyond the promotion of full compensation. Such goals include limiting the costs and amount of litigation; protecting public enforcement; and preventing private enforcement from triggering a drift towards very prudent competition rules, so that competition law does not chill market competition, as arguably has happened in the US.