Improving the Role of Consumers in the Private Enforcement of EU Competition Law: Utilising the Potential of Alternative Dispute Resolution Mechanisms

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Author: Max Immerzeel

29 July 2016

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In the present situation, consumers play virtually no role in the private enforcement of EU competition law. This is somewhat odd, considering that consumers incur losses due to competition law infringements and in the light of one of the core objectives of EU law, which is aimed at protecting the consumer interests. This thesis aims at providing solutions to the obstacles which consumers face when bringing damages claims in the private enforcement of EU competition law by exploring the potential of alternative dispute resolution (“ADR”) mechanisms. This thesis will argue that certain elements of ADR can be effective in practical terms, especially when deployed in combination with regulatory powers. However, it is uncertain whether consumers will ever bring claims for trivial amounts, due to the problem of rational apathy.

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Abstract...1

Introduction...4

I. The Status of Consumers in Private Enforcement...8

A. Practical experience: follow-on damages suits and consumers...8

B. Normative justification for (additional) consumer involvement...9

C. Consumer damages claims: economic obstacles...10

D. Shortcomings of the Damages Directive and Collective Redress Recommendation...11

1. Damages Directive...12

2. Collective Redress Recommendation...13

II. Practical obstacles and the potential of ADR...15

A. (Consumer) Alternative Dispute Resolution...15

B. A combination of ADR and regulatory powers...16

C. Practical obstacles faced by consumer in the private enforcement of competition law..18

1. Access to and gathering of evidence...18

2. Lack of effective collective redress mechanisms...20

3. Costs and funding of legal actions...21

D. Preliminary conclusion...22

III. Consumer ADR as an Instrument for Collective Redress and for the Private Enforcement of Competition Law...23

A. (Collective) ADR in the Damages Directive and its proposals...23

B. Consumer ADR as an instrument for private enforcement of competition law...25

1. The potential of consumer ADR in the context of competition law...25

C. Consumer ADR as an instrument for collective redress...28

1. Consumer ADR v. collective action...28

2. A view across the Atlantic: AT&T v. Concepcion...30

Conclusion...33

“Only a lunatic or a fanatic sues for $30”

- Judge Richard Posner, Carnegie v. Household Int’l, Inc., 376 F.3d 656 (7th Cir. 2004)

“In England, justice is open to all – like the Ritz Hotel”

- Judge Sir James Mathew (1830-1908)

“Verbunden werden auch die Schwagen mächtig”

J.F. von Schiller, Wilhelm Tell, 1804, Act I Scene III.

I

EU competition law is enforced by both public authorities (European Commission, NCAs) and private parties (competitors, suppliers, consumers). In contrast with the United States, the domain for victims of competition law infringements to claim damages was long left unexplored by the European law-makers. In Courage1 _{and Manfredi,}2 _{the ECJ explicitly held that that the} full effectiveness of Article 101 TFEU would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition. Despite the fact that competition damages actions were already possible on the basis of national procedural rules, these rulings sparked the development of a EU-level legal framework that would harmonise the manner in which private parties are able to claim damages, setting the pace for an increase in follow-on litigation.

Of all victims of competition law infringements, final consumers make up a category that are hit hard in comparison to others, although the size of their individual harm is usually modest. This is largely due to the fact that they are positioned at the end of the supply chain and therefore unable to pass on any overcharge in price to subsequent customers, while the overcharge is dispersed to many. Their loss is aggravated by an absence of an adequate legal framework to aggregate their claims in order to provide redress. This is peculiar, considering that in the eyes of the Commission, the ‘consumer welfare’ is the core objective of EU competition law.3 _Moreover,

1Case C-453/99 Courage [2001] ECR I-6297

2Joined cases C-295/04 to C-298/04 Manfredi [2006] ECR I-6619

3 A clear statement to this effect can be found in a speech of the former European Commissioner for competition policy, Neelie Kroes, given in 2005: “Consumer welfare is now well established as the

standard the Commission applies when assessing mergers and infringements of the Treaty rules on cartels and monopolies. Our aim is simple: to protect competition in the market as a means of enhancing consumer welfare and ensuring an efficient allocation of resources”. SPEECH/05/512 of 15 September

enhanced consumer empowerment to sue for damages could contribute to the deterrent functioning of competition law. It is therefore not difficult to advocate for enhanced consumer involvement.

The adoption of the Damages Directive4 _{in 2014 marked a new stage in the development of} private competition law enforcement. The Directive harmonises to some extent civil procedural rules in the Member States and is aimed at fine-tuning the interplay between private damages claims and public enforcement, and preserve the attractiveness of tools used by European and national competition authorities. In the 2005 Green Paper5 _{and 2008 White Paper,}6 _the Commission acknowledged that consumers were the group of victims who were most in need of reform, since they experienced difficulties in claiming damages before the Member State courts, due to national rules on standing, admissibility of collective actions, access to leniency and settlement submissions, costs and funding of collective actions and the calculation and distribution of damages. Unfortunately, the adopted Damages Directive is no more than a political compromise and a watered down version of the framework that was envisaged by the Commission. The adopted text is completely silent on the matter of collective actions. Rather, on the same day that the proposed Damages Directive was published, the Commission announced a general, i.e. not competition-specific, and non-binding Recommendation on collective redress.7

The Damages Directive and Recommendation on collective redress have been welcomed with a significant amount of scepticism and their merits and potential to consumers have been hotly debated in academic literature.8 _{The general consensus is equally unanimous as cynical: it} has very little to offer to consumers. This is supported by empirical research which suggests that only 3.6% of all follow-on suits are ‘consumer’ cases.9

4 3_{Directive 2014/104/EU on certain rules governing actions for damages under national law for}

infringements of the competition law provisions of the Member States and of the European Union (Damages Directive) [2014] OJ L349/1

5 European Commission Green Paper Damages actions for breach of EC antitrust rules, 19 December 2005, COM(2005) 672 final

6 European Commission White Paper Damages actions for breach of EC antitrust rules, 2 April 2008, COM(2008) 165 final

7 Commission Recommendation on collective redress mechanisms (Collective Redress Recommendation) [2013] OJ L201/60

8 4_{See e.g. Drexl, ‘Consumer actions after the Adoption of the EU Directive on Damage Claims for}

competition law infringements’ [2015] 15(10) Max Planck Institute for Innovation & Competition Research Paper 1-35

9 B. Rodger, Competition Law: Comparative Private Enforcement and Collective Redress across the EU (1st edn, Kluwer Law International 2014), p. 162

The current state of affairs is the result of years of negotiations and reaching compromises and the political debate has now come to a standstill. Significant changes to the current framework can therefore not be expected in the near future, as the stakeholders will await the results of the implementation in the Member States. Rather than focussing on providing a different version of the same idea, this thesis will turn to recent developments in EU consumer law to explore whether this legal area has to offer solutions in improving the position of consumers in the private enforcement of EU competition law.

Consumer and competition law are already related in the sense that the two have, in principle, the same underlying objective, namely the protection and legal emancipation of consumers. 10 _{Besides, policymakers often point to the interdependencies between competition} and consumer law and their potential to deliver the maximum benefit for consumer welfare and productivity growth. EU consumer law is laid down in a patchwork of different legal instruments. In recent years and under the auspices of the access to justice movement, its development has been characterised by the introduction of the Consumer ADR Directive (ADR)11 _{which provides an out-of-court resolution of contractual disputes between businesses} and consumers. It is generally preferred over court proceedings, because it can provide speedier and cheaper solutions. Also, consumer ADR is inherently capable of deciding on multiple identical claims and can therefore be an effective instrument for collective redress. However, ADR is also seen as a threat to in-court dispute resolution as it may have a lack of rigour and transparency and may not sufficiently safeguard the principle of due process.

This thesis shall therefore explore whether these recent developments in consumer ADR can be of help in improving the involvement of consumers in private EU competition law enforcement. The central research question is formulated as follows:

“What is the potential of ADR in improving providing consumers effective access to damages claims in the private enforcement of competition law?”

This thesis consists of roughly three parts. Section I is aimed at creating context, by providing an outline of the problem at issue that arises from the present consumer involvement is the private enforcement of EU competition law. Focus will be laid on the flaws in the current

10 See Amsterdam Center for Law & Economics, Competition and consumer policies: starting points for

better convergence (Working Paper No. 2009-06)

11 Directive 2013/11/EU on alternative dispute resolution for consumer disputes (Consumer ADR Directive), OJ L165/63

legal framework, as well as economic and psychological barriers that are involved. Section II shall then turn to identifying the main obstacles in practical terms which consumers face and explore to what extent ADR is able to provide tangible solutions. Section III shall proceed by raising in-depth arguments in favour and against ADR as an instrument for collective redress and as an instrument to enforce competition law in a private capacity. A conclusion will provide a recap of all arguments put forward throughout this thesis.

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This section will firstly argue that there are ample normative justifications for an enhancement in the position of consumers. Secondly, it will identify the main obstacles that consumers face and analyse whether certain elements of consumer ADR are able to provide solutions in practical terms.

A. Practical experience: follow-on damages suits and consumers

In order to demarcate the topic of this thesis it is, firstly, of vital important to demonstrate the burdensome expedition that is involved in bringing a follow-on damages claim for competition law infringements. Once the Commission or NCA has issued a fining decision, the possibility arises for private parties to sue for damages in court. However, private parties and consumers especially may be hesitant to initiate proceedings, because it involves high costs, risks and lengthy proceedings. Below will follow a brief explanation of these difficulties.

First of all, follow-in damage claims are usually highly complex in terms of economic calculations and the assessment of evidence. This is largely due to the fact that the overcharge in price and pass-on must be calculated by economic experts. Anecdotal experience tells us that multiple parties involved may submit their own expert reports, which may contradict each other. It is ultimately the court which must strike a judgment as to the truth. These expert opinions are usually expensive, comparable to what parties must pay in lawyer fees. 12

The second factor is that follow-on damages claims may drag on for years of intense litigation. This is due to the fact that arties must await expert reports and the tradition of interlocutory judgments, references for preliminary rulings and appeals. For example, in the Netherlands, which has a court system known to be efficient in terms of time, the dispute between Tennet and ABB, concerning a damages claim for the anti-competitive conduct of the latter, took nearly six years to complete, as the first summons writ was delivered in October 2010, while the judgment by the Dutch Supreme Court was handed down in July 2016.13 _{This is} evidence that follow-on claims are demanding in terms of length. Such proceedings may even take longer in other jurisdictions, especially when questions are referred to the European Court of Justice.

12 The author has spoken with competition lawyers whilst doing internships at law firms Stibbe and Freshfields Bruckhaus Deringer, both Amsterdam located.

These two factors result in significant costs for litigation. A procedure in a civil court involves in essence court, lawyer and expert fees. Depending on the cost rules, parties incur these fees to different extents. In most European jurisdictions, the loser pay rule prevails.14 _{There are} cases in which the damage is significant and a party is willing to take the risk of suing in a civil court and paying the necessary fees. However, since consumer claims usually involve trivial amounts, parties are not willing to take those risks, as will be later discussed.

B. Normative justification for (additional) consumer involvement

The core objectives of EU competition law are characterised by a multiplicity of aims. Promoting the competitive process, attaining economic efficiency, the dispersal of economic power, the single market imperative and protection of SMEs can all be listed as goals of EU competition law. However, in recent years many competition authorities have stressed the central importance of consumer welfare when interpreting and applying competition law.15 _{This is} explicitly confirmed in Article 101(3) TFEU, which stipulates that consumers must receive a fair share of the efficiency gains generated by the otherwise restrictive agreement. Competition law enforcement therefore affects the economic well-being of consumers, and they should be involved in the process accordingly.16 _{Under EU law, consumers can bring complaints before} competition authorities are entitled to participate in the process of public enforcement.

In addition, consumers can bring damage claims (follow-on or stand-alone) before national courts, where they enforce the competition rules in a private capacity, acting as ‘private attorney generals’. In this role, consumers complement public enforcement in its aim to deter undertakings from infringements and making them comply with the law.17 _{Finally, throughout} the legislative process of the Damages Directive and in accordance with the Court’s rulings in Courage and Manfredi, the Commission highlighted ‘full compensation’ for ‘all victims of infringements of EC competition law’ as the ‘first and foremost guiding principle’ of the 2008 White Paper.18 _{This category undeniably includes consumers, while the adopted Damages} Directive deviates from this ambition as it has embraced deterrence has its primary object, as will

14 C. Hodges et al, The costs and funding of civil litigation – a comparative perspective (1 edn Hart 2010) 15 See supra 3.

16 K. Cseres & J. Mendes, ‘Consumers’ access to EU competition law procedures: outer and inner limits’ [2014] 51(2) Common Market Law Review 483, 485

17 M. Ioannidou, ‘Enhancing the Consumers’ role in EU Private Competition Law Enforcement: A normative and practical approach’ [2011] 8(1) The Competition Law Review 59, 64

be discussed below.

C. Consumer damages claims: economic obstacles

There are a number of circumstances and characteristics of consumer claims that make it practically unfeasible to bring an action before a court under the current legal framework. This section will demonstrate why consumer claims have distinguishing characteristics and warrant a special approach.

First, it must be pointed out that the size of consumer financial harm resulting from competition law infringements never amount to huge sums individually, also referred to as ‘scattered loss’.19 _{This is largely due to the fact that consumers are at the very end of the supply} chain and the overcharge in price that it caused by, for example, a cartel in the market for an input material of a product is dispersed to thousands, if not millions, of final consumers. The relatively modest size of the damage and possible claim are the main cause of the ‘rational apathy problem’. Private parties will initiate proceedings only if the private benefits of doing so (expected outcome of the proceedings) are higher than the private costs (litigation cost, lawyer fees). However, this private cost-benefit calculus has no systematic relation with the social costs and benefits. The social costs also comprise the harm suffered by individuals who do not sue and other losses that cannot be attributed to individual parties. To align the private motive and the social motive to sue, all monopoly losses should be compensated to force the firms infringing competition law to internalise the full negative welfare effects to their behaviour.20

The second economic problem with regards to collective actions is the ‘free-riding problem’. Every individual who is the victim of a law infringement has an interest to leave the enforcement efforts to other individuals, so that profits can be obtained without having to spend own resources. As long as individuals may receive benefits by being a passive group member and putting the risk of suffering losses on the shoulders of an acting plaintiff or organisation, free-riding will remain pervasive.21

A third and final economic issue arises from the ‘principle-agent problem’, which is also the most prominent concern in Europe about the US-style class action. Typical for a principle-agent

19 R. van den Bergh, 'Private Enforcement of European Competition Law and the Persisting Collective Action Problem' [2013] 20(1) Maastricht Journal 12,

20 Ibid., 20 21 Ibid., 24.

relationship is that the interests of the agent (attorney) do not coincide with the interests of the principle (victims). In Europe, it is widely believed that US class actions have led to excesses and abuses and that representative actions by consumer organisations will “serve the purpose of rendering rights under competition law more effective and accessible to citizens, while clearly moderating the excesses and external costs associated with certain types of class actions (such as abusive settlements)”.22

Apart from the economic problems discussed above, consumers are also faced with psychological barriers to bring actions before courts. One of these barriers consists of the fact that consumers are hindered by a general unawareness of competition rules and common lack of recognition of the possibility of involving private actors in law-making and law enforcement. Other factors that raise challenges are unfamiliarity with the legal language and lack of information about the actual harm and the infringements, in combination with a lack of investigatory tools to detect them. Moreover, consumers are challenged by the significant length, costs and complexity of competition law litigation.23

D. Shortcomings of the Damages Directive and Collective Redress Recommendation

The Damages Directive is completely silent on the issue of collective redress, whereas it was envisaged as an indispensable element in the 2005 Green Paper and the 2008 White Paper. In fact, the debate on the desirability of an EU measure on collective redress considerably delayed the decision of the Commission to propose the Antirust Damages Directive.24 _{The reason for this} was that, a few months after the publication of the 2008 Green Paper, DG SANCO published a Green Paper on Collective Consumer Redress.25 _{This initiative would later take the lead and in} cooperation with the Commissioners for Competition, Health and Consumer Affairs, and Justice, it resulted in the adoption of the 2013 Collective Redress Recommendation,26 _{which applies to all} violations of rights under EU law.27 _{The European Parliament advocated for this broad field of}

22 Ibid. 26.

23 K. Cseres, ‘Harmonising Private Enforcement of Competition Law in Central and Eastern Europe: The Effectiveness of Legal Transplants through Consumer Collective Actions’ [2015] forthcoming(?), 9, 21 24 C. Hodges, ‘Collective redress: A Breakthrough or a Damp Sqibb?’ [2014] 37 Journal of Consumer Policy

67, 69

25 European Commission Green Paper on Collective Redress, 27 November 2008, COM(2008) 794 final 26 Commission Recommendation on collective redress mechanisms (Collective Redress Recommendation)

[2013] OJ L201/60

27 J. Drexl, ‘Consumer actions after the Adoption of the EU Directive on Damage Claims for competition law infringements’ [2015] 15(10) Max Planck Institute for Innovation & Competition Research Paper 1, 24

application across multiple categories of violations of EU law, as it was considered tempting from a general perspective of European judicial unity. This is largely due to the conflicting interests that influenced the legislative process, with consumer organisation lobbyists supporting collective redress and strong business interests opposing any EU action.28 _{Ultimately, it was} however the strong opposition of a number of Member States that convinced the Commission to not go further than proposing a non-binding instrument.29

1. Damages Directive

The “improvements” offered by the Damages Directive have failed to provide tangible solutions to consumers, especially in light of the expectations that were created in the 2005 and 2008 Commission proposals. The underlying reasons mostly arise from the cautious approach that the EU legislature has finally taken, deferent of the feared US claim culture. Despite the proclamation of full compensation as an objective in Recital 12 of the Directive, it is still difficult to bring a damages claim before a court as a consumer.

It comes without doubt that consumers will benefit from a reduction in the expected amount, length and costs of litigation. However, several elements of the Damages Directive affect the predictability of damages claims negatively. For example, Article 17(2) Damages Directive entails the rebuttable presumption that cartel infringements cause harm, whilst pursuant to Article 17(1) courts are empowered to estimate the quantum of the harm suffered. This may cause uncertainty in terms of the final amount of compensation that will be awarded and makes it difficult to make a risk-benefit analysis when initiating proceedings. Moreover, defendants will be more willing to settle a dispute in order to cover this risk.

The substantive requirements that the Directive imposes on a consumer claim are likely to be a cause for legal uncertainty. Article 3(1) Damages Directive only lays down a right of all victims to claim full compensation for the harm sustained, but is silent on the concrete requirements for establishing that claim. Consequently, the provision fails to harmonise this important element and leaves it to the national courts to decide whether the infringer has caused the inflicted harm and whether a type of fault is required on the side of the infringer. Hence, it is up to the law of the Member States to define these standards, which nevertheless have to be

28 Supra 14, 67

29 See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of Regions – ‘Towards a European Horizontal Framework for Collective Redress’ [2013] COM(2013) 401 final, 6

applied in conformity with the principles of equivalence and effectiveness. This absence of harmonisation will make it difficult to bring joint actions of multiple claimants who have suffered losses in several countries, including consumer collective actions with a cross-border dimension.30

Nonetheless, the primary defect of the Directive regarding consumer actions is that it failed to impose obligations on the Member States to introduce collective redress mechanisms and the question remains whether the 2013 Recommendation fills this void, as will be discussed below.

2. Collective Redress Recommendation

As already discussed, whether the “improvements” brought by the Antitrust Damages Directive are effective for consumer actions will largely depend on the availability of collective redress measures in the Member States. However, certain key aspects of the Recommendation fail to provide an adequate framework.

The substance of the Recommendation is the outcome of a complex balancing of four policy objectives: to provide an effective instrument for resolving a large number of individual claims capable of delivering legally certain and fair outcomes, while at the same time, incorporating safeguards against abusive litigation and avoid any economic incentives to bring speculative claims.31 _{This leads to a number of complications. First, the effectiveness of the provisions is} significantly hampered by the non-binding nature of the Recommendation. It provides that the Member States ‘should’ implement the provisions form the Recommendation by 25 July 2015.32 Upon its adoption and in the context of competition law, the Commission explicitly declared that the Recommendation “leaves it to the Member States to introduce collective redress actions in the context of private enforcement of competition law”.33

Second, the broad field of application across multiple categories of violations of EU law of the Recommendation is not targeted sufficiently to serve the purposes of private enforcement of competition law.34 _{In contrast with the Damages Directive, it puts different emphasis on its} objectives, namely on facilitating access to justice.35 _{The objectives which are more relevant to}

30 Supra 27, 21 31 Supra 29, para. 2.1. 32 Supra 27 para. 38

33 European Commission, ‘Commission recommends Member States to have collective mechanisms in place to ensure effective access to justice’ Press Release IP/13/524, 11 June 2013

34 C. Hodges, ‘Collective redress: A Breakthrough or a Damp Sqibb?’ [2014] 37 Journal of Consumer Policy 67, at 85-87.

competition law: the deterrent effect of collective actions regarding violations and compensation are only mentioned as secondary goals.36 _{Therefore, the Recommendation is not specifically} targeted at enhancing full effectiveness of the substantive rules, but rather at guaranteeing access to justice by individual consumers. Considering the choice of legal instrument, the implementation in the Member State is vital in securing the effective functioning of the changes brought by the Recommendation.

II. P

ADR

This section shall now turn to identifying the main obstacles in practical terms which consumers face when considering bringing a damages claim before a court. Moreover, this section shall explore whether and to what extent ADR may provide solutions in practical terms. In order to argue the potential of ADR, consumer ADR shall be introduced first.

A. (Consumer) Alternative Dispute Resolution

Of all options for delivering address, which can vary from a voluntary payment of damages compensation to ADR to private actions by means of litigation, it is intuitively clear that the voluntary payment is the easiest way of settling a dispute. A voluntary solution is also likely to save costs for all parties involved, such as the claimants, payers and state authorities (courts, regulators, etc.). By contrast, following legal proceedings usually implies more costs and longer durations, because of the requirement to observe due process and the possibility that a series of formal stages is involved. Hence, ‘doing the right thing spontaneously’ is more efficient than being compelled to do so by a court after a lengthy proceeding and the sooner a voluntary agreement is reached, the more costs are saved.

However, parties are not always equal in terms of financial and organisational resources and settlements may therefore not always end in an equitable amount, as significant discounts can be negotiated. ADR mechanisms can therefore be useful in overseeing whether party disparity does not lead to an unjustified settlement. Moreover, ADR can be a useful carrot as it provides a system of established procedures with the support of experienced and independent third-party facilitators.

ADR is an umbrella term covering a large number of processes to settle differences between the parties of a dispute by means of extra-judicial mechanisms: arbitration, mediation, expert determination or a combination of these schemes.37 _{For the purposes of the present analysis, it} suffices to focus on consumer ADR, a form of ADR which is designed to provide resolution of C2B-disputes. Commission studies show that many of these systems are available in the Member States.38 _{These vary from voluntary facilitation processes to proceedings where third parties take} 37 British Institute of International and Comparative Law, ‘ADR and collective redress’,

<http://www.collectiveredress.org/collective-redress/alternative-adr> accessed 26 June 2016

38 Civic Consulting of the Consumer Policy Evaluation Consortium, Study on the use of Alternative Dispute

binding decisions, operating as ombudsmen, sectorial dispute resolution boards, or other entities.

B. A combination of ADR and regulatory powers

In comparison to consumer ADR, the technique of regulatory redress is relatively new, but has already proven to be extremely successful in terms of speed and cost, if designed properly. The technique, developed by public enforcement authorities in the Nordic states and the United Kingdom, has been applied primarily in consumer redress. In this technique, public authorities responsible for enforcing consumer or sectorial regulatory law have used the existence of mass redress powers to negotiate swift payment of redress as an integral part of agreements with traders on the resolution of all legal consequences of infringements.39 _{The European Commission} has also set steps in the direction of this technique in its 2013 Deutsche Bahn-decision when it accepted commitments from DB that included the introduction of a new pricing system, as well as paying come customers compensation.40

Key determinant for the effectiveness of any regulatory redress design is the powers given to the public enforcement authority which can be used to facilitate or achieve the payment of compensation. A range of possible options exist, and those with any relevance or potential to private enforcement of competition law will be explained below, although they may currently be used in other legal areas and not be available in all Member States:

The “skimming-off” of illicit profits. This is a power widely used in the US, where the Securities and Exchange Commission ordered recoveries of USD 2.8 billion per year in 2010 and 2011.41 _{The Bundeskartelamt was also given the power to remove illicit profits in 2005,}42 although it has never been used. The technique has the disadvantage that it does not rectify victims’ harm, as the collected funds are received by the government.

To order redress to be paid, identifying exactly how much is to be paid to every possible claimant. This technique is used in the UK and appears to be highly efficient, although it is limited in the sense that all the details on the harm, victims and infringement need to be known. It is therefore unlikely that it is flexible enough to cope with most cases.

39 C. Hodges, ‘Mass Collective Redress: Consumer ADR and Regulatory Techniques’ [2015] 5 European

Review of Private Law 829, 833-874

40 Press Release: Antitrust: Commission market tests commitments proposed by Deutsche Bahn concerning

pricing system for traction current in Germany [2013] European Commission, 15 August 2013, IP/13/780

41 SEC’s Financial Statements for fiscal years 2011 and 2012, Government Accountability Office (GAO), GAO-12-219, at 57 (15 November 2011)

To bring a collective action on behalf of claimants. This is an interesting invention from Denmark, where the Consumer Ombudsman has the ability to bring a collective action on behalf all consumers against an undertaking. The power is two aspects: standing and funding. Under Danish law, individual claimants may only bring opt-in suits, whilst only the Consumer Ombudsman may bring a collective action for which he may request the court to designate that it should operate on an opt-out basis. This puts the ability on opt-out suits exclusively in the hands of a public official who is trusted to use it in the public interest, instead of private parties who may be open for selective and abusive use. The collective action is funded from public funds.

To bring public enforcement proceedings, in which private parties could piggy-back as “partie civile”. This technique in part of most continental European legal order, for example in the Netherlands where the claimants may join the criminal proceedings.

To order the infringer to propose a compensation scheme that would be approved by the authority, court or independent (ADR) body. This technique is widely used in the UK by regulators in the financial sector.

To approve a compensation scheme that would be proposed by one or more of the parties. At first sight, this technique may sound as if it would have limited use. However, the Dutch Mass Claims Settlement Act has shown, the technique can be particularly useful in some situations. One situation is where the infringer takes the initiative in proposing a settlement. Another is where a settlement has been agreed between some or all of the parties, as occurs in settlement of non-USA claims after a settlement of a (more expensive) US class action. There are indications that the mere existence of the power can act as an incentive for parties to short-circuit litigation and move straight to settlement discussions.

To order an infringer to negotiate with claimants, with the help of an independent ADR body, such as an ombudsman. The Italian telecommunications regulator is based on this principle and was the subject of the Alassini-case. A power to order negotiation might be thought weak, but it is foreseeable that a mandatory mediation phase could be convenient in situations where parties are unaware of the existence of such instruments.

C. Practical obstacles faced by consumer in the private enforcement of competition law

As early as in the 2005 Green Paper on actions in antitrust matters,43 _{the Commission} 43 European Commission, ‘Green Paper - Damages actions for breach of the EC antitrust rules’ [2005]

identified six main legal obstacles in private redress by consumers: (i) standing of indirect purchasers; (ii) availability of the passing-on defence; (iii) access to evidence; (iv) the lack of effective collective redress mechanisms; (v) non-binding effect of competition agency decisions; and (vi) costs and funding of legal actions. Below follows a brief comment on the three most prominent obstacles.

1. Access to and gathering of evidence

Consumers face considerable difficulties in obtaining the necessary evidence to prove an infringement, the harm they sustained and a causal connection. This is in stark contrast with the US where discovery procedures have proven to be effective means. The rules on discovery in the Damages Directive are the result of the legislators’ balancing between the wide US-style rules and more modest disclosure mechanisms that are nonetheless more far-reaching than those available in many Member States. The Commission’s legislative proposals reveal three hesitations to adopting discovery mechanisms. First, the strategic use of discovery rules to gain access to competitors’ business secrets.44 _{This risk is however less obvious when consumer} claims are concerned. Second, discovery rules may have an effect on the defendant’s due process rights in Member States that provide criminal enforcement of competition law, such as the UK. The Court established in Orkem that the nemo tenetur-principle applies in administrative proceedings only to a limited extent. Undertakings can therefore not be compelled to answer questions that involve an admission of the infringement, though this does not apply to factual questions or requests for information. Third, discovery proceedings may involve significant costs, as many documents need to be reviewed by trained lawyers. It is therefore uncertain whether discovery procedures would be used on a large scale and how amendments could improve this. However, carefully structured discovery rules and active case management by courts could reduce the risk for abuse.

Moreover, extensive discovery rules could also negatively influence the effectiveness of public enforcement. If unlimited access to evidence in the Commission’s file were to be granted to private parties, undertakings guilty of infringements could be reluctant to submit evidence in the context of leniency applications and settlements. To completely exclude leniency applicants from civil liability was not an option against the backdrop of the Court’s ruling in Pfleiderer,

SEC(2005) 1732 44 Ibid. 57

Donau Chemie and EnBW, where it held that competition agencies have to engage in a weighing exercise to decide on a case-by-case whether the interest in promoting public enforcement precludes access or not. 45 _{In EnBW, the Court allowed the Commission to apply the presumption} that there is an overriding public interest in precluding access, but still held that it should be possible for the private claimant to show that there is no such interest.

The European legislator’s choice to generally exclude access to leniency statements in Article 6(6) of the Directive seems highly problematic in light of the Court’s rulings.46 _The interests of consumers are only taken into account to the extent that it accords them with a right to request access of the court seized to the documents that are withheld “for the sole purpose of ensuring that their contents fulfil the definitions of leniency statements and settlement submissions” in terms of the Directive’s formulation.

Another major cause of this obstacle is that the damage resulting from the overcharge in price minus the pass-on need to be calculated by economic experts. As was explained in Section I, this expert determination is burdensome in terms of time and costs, as all parties may involved usually submit their own expert reports which may sometimes contradict each other. The court must ultimately strike a judgment as to the truth. The court may also make use of its powers to order undertakings to submit their financial records for expert determination.

The discovery powers under an ADR procedure are usually less far-reaching than a court order, as an ADR body usually does not have the same powers as a court. Moreover, the determination of overcharge and pass-over must still need to be conducted by an expert panel. On the other hand, given the fact that ADR procedures are not public compared to court proceedings, the parties involved may be more confident that the financial data they submit will not be disclosed to third parties, as the parties involved may agree to a non0disclosure agreement.

There are many ADR architectures imaginable of how the gathering of evidence could be facilitated in combination with regulatory powers, even forms that may have advantages over the present judicial procedures. For example, consumers and undertakings could agree to having the financial records of the undertaking submitted to an independent expert panel which would

45 Case C-360/09 Pfleiderer [2011] ECR I-5161, para. 31, Case C-635/11 Donau Chemie [2013] EU:C:2013:366, para. 48 and Case C-365/12 P EnBW [2014] EU:C:2014:112, para. 100.

46 E. Clark & R. Sanders, ‘Navigating the Quantum Minefield in Cartel Damages Cases’ [2015] 6 Journal of

calculate the overcharge and potential pass-on. This expert panel could make its method of calculation public from the purpose of transparency without disclosing confidential or business sensitive financial data that would be to the detriment of the financial interests of the undertaking concerned.

2. Lack of effective collective redress mechanisms

The lack of effective collective redress mechanisms is widely regarded as the principle obstacle to consumers, although the identification of this problem already gives away the solution. Collective actions are generally considered to be the best way to resolve the incentive problems as outlined above, as was acknowledged in the Commission proposals of 2005 and 2008.

Studies undertaken by the Commission show that the majority of Member States have adopted some form of collective redress arrangement, yet the enforcement figures continue to be appalling. Most Member States chose to adopt ‘opt-in’ actions and representative actions brought by consumer organisations, while few others (Netherlands, UK, Denmark and Portugal) adopted an ‘opt-out model’. Collective redress mechanisms can take numerous forms, but regardless of the specifics of a particular system, it can be a useful tool in increasing consumers’ access to justice, can serve public policy goals, such as deterrence, and can increase the overall effectiveness of private enforcement. Key to collective actions is that they aggregate dispersed small claims and thereby solve the incentive problem of all individual consumers that is stopping them from initiating litigation. Aggregation of claims is therefore key to unifying consumers who have suffered harm. In addition, collective actions offer advantages for they provide the possibilities for spreading of costs. Litigation costs and the burden of the judiciary are reduced. Also, victims can be better represented and surveys show that citizens would be more willing to sue for damages in a court if they could join consumers who complain about the same thing.47

Despite the given fact that consumer ADR schemes and entities are in principle designed to process disputes on a case-by-case basis, all ADR systems of any size are inherently capable of identifying and processing multiple claims – and empirical research suggests that some already

47 Eurobarometer, European Union citizens and access to justice, October 2004, p. 36; 2nd _{edition of the}

Consumer Markets Scoreboard COM (2009) 25 Part 2, page 10 and Eurobarometer n. 299, at: http://ec.europa.eu/consumers/redress_cons/docs/cons_redress_EU_qual_study_report_en.pdf (access 05.10.2015).

do this on a large scale.48 _{This may take the form of a combination of collective consumer} actions and normal ADR mechanisms. The earlier cited Manfredi-case illustrates that if parties aim at providing compensation for final consumers, and to encourage them to take action to enforce the competition rules, then consumers will choose this redress avenue, for it provides optimal conditions to have their claims adjudicated in a swift, flexible and effective way. Moreover, the case shows that if claims are small in size and aggregation methods are not available, lawyers presenting consumers prefer to face small claims courts, where procedures are less formal and less demanding in terms of evidence and burden of proof.49 _{A more in-depth} analysis of potential of ADR as a means for collective redress will follow in Section III.

3. Costs and funding of legal actions

Seeking compensation for the harm suffered because of competition law infringements is a costly and risky undertaking, which is usually only undertaken by victims who can rely on substantial financial resources. Collective actions could reduce this burden by allowing multiple victims, who individually suffered damages of relatively small value, to share the costs of bringing a lawsuit. Yet in many cases the claimants cannot afford or are not willing to pay the upfront payments required to initiate a case, or cannot find a fair mechanism to allocate initial costs and need to rely on external funds.

This problem could (partially) be resolved by allowing contingency and conditional fee arrangements between lawyers and claimants, as witnessed in the US. Both contingency and conditional fees are effective instruments to facilitate private enforcement, for they shift part of the expected costs of the action from the claimant to the lawyer. Although the overall costs of litigating are not reduced by any of these arrangements, it can encourage the victims to bring an action for it solves the problem of the lack of financial resources for initial disbursements. It can therefore be an appropriate means for overcoming the ‘rational apathy problem’ and ‘free-rider problem’, as discussed above. Moreover, contingency fees may efficiently allocate the action’s risk, putting it on the shoulders of the lawyers who are either less risk-averse or can spread their risk on a portfolio of cases. Contingency fees are therefore also useful in dealing with the ‘principle-agent problem’.

ADR procedures may come as a solution to this effect, as they are usually available at zero

48 C. Hodges, I Benöhr, Consumer ADR in Europe (Hart Publishing 2012), pp 39. 49 Supra 23, 23

cost for consumers. Moreover, as less lawyers and courts are involved in the proceedings, costs can be reduced to the benefit of the parties.

D. Preliminary conclusion and possible consumer ADR architectures

It is clear from the outset that consumer ADR surely has potential to enhancing consumer involvement in the private enforcement of competition law in practical terms. The most prominent benefits would be that it is available at zero costs to consumers, it may provide better safeguards in terms of confidentiality and that consumer ADR is inherently capable of simultaneously dealing with multiple claims.

Numerous possible consumer ADR architectures are imaginable, which could be significantly strengthened by an involvement of regulatory powers and interaction with public enforcement. For example, a system could be designed in which the public enforcement procedure is halted to give firms the opportunity to cartelist firms to voluntarily initiate a compensation scheme for consumers. The total of this scheme could then be used as a mitigating circumstance in the setting of the fine. The negotiations between consumers and cartelist frims could be supervised by an ADR body. This body could also be given regulatory power as to determine four questions: which consumers are entitled to compensation (identification); does each claimant have a valid claim; how much compensation should be paid to each claimant; and how should the payment be distributed?

III. C

ADR

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Having argued that consumer ADR has potential in overcoming consumer obstacles in the private enforcement of competition law in practical terms, Section III shall now turn to providing an in-depth analysis on whether it is an adequate means in terms of two distinct criteria. First, whether it is an adequate instrument for the private enforcement of the law, and second, whether it has potential as an instrument for collective redress. In order to prove that ADR may be a useful addition to the current legal framework, it is important to look to what extent the current rules facilitate ADR.

A. (Collective) ADR in the Damages Directive and its proposals

Interestingly, the European Commission already embraced the potential of ADR in the private enforcement of competition law from a very early stage and considered it a legitimate avenue for collective actions. In the 2008 White Paper, it mentioned as follows:

“Collective redress for low-value damages can be achieved through a number of different mechanisms, either of a voluntary or compulsory nature, either judicial or non-judicial, either initiated by a group of victims, a representative body or a public authority. A non-judicial voluntary resolution of claims for damages may often be preferable for victims as well as for infringers, since such resolution does not involve the same costs and burden as do judicial proceedings, and usually allows for swift resolution of the matter at stake. However, alternative dispute resolution (ADR) and other voluntary mechanisms can only be effective and efficient if there is another effective option for the victim should no fair resolution be agreed on by the infringer. Judicial collective redress mechanisms, which may usefully be complemented by ADR, are therefore necessary to improve the situation of victims of competition law infringements, even though safeguards should be put in place so as to avoid abusive litigation. By allowing an aggregation of claims for damages that would otherwise not be viable in individual court action, judicial collective redress mechanisms not only ensure the victims’ right of access to justice, but also reduce the inequality between the victims (often the weaker party) and the infringers (often the financially stronger party) in out-of-court/settlement discussions.

It is therefore necessary to design facilitating measures enabling consumers and small businesses to effectively seek redress in court for the harm suffered from competition law infringements. These measures would play an important role in rendering the victims’ right to antitrust damages more effective in Europe.”

The rules on ADR that made it to the text of the adopted of the Damages Directive are designed to encourage and facilitate consensual dispute resolution, which includes out-of-court settlements directly negotiated between parties, arbitration, mediation and conciliation.50 _The first measure to this effect is the requirement that limitation periods must be suspended for the duration of the consensual dispute resolution process in so far as the participants to that process are concerned.51 _{The underlying reason for this measure is to give parties sufficient time to reach} an out-of-court agreement.52 _{Similarly, there may be reason for the national court to suspend} legal proceedings when they have already been initiated. The directive therefore requires the national court to be competent to suspend limitation periods for a period with a maximum of two years. This does not mean that the national court is obligated to do so.53

Another measure aimed at facilitating ADR can be found in the rule that, in case of several infringing undertakings that would normally be jointly and severally liable, the remaining claim of an injured party that agreed a settlement with one of those undertakings is reduced by the latter’s portion of the harm inflicted and that its remaining claim can only be exercised against the other, non-settling undertakings, whereas the latter cannot recover contribution from the undertaking that settled.54 _{This rule prevents settling undertakings from being worse off as a} consequence of the rules on joint and several liability. More generally, national courts are to take due account of any damages paid pursuant to a prior settlement when determining the amount of contribution that co-infringers can recover from each other.55

A third and final measure included in the directive to this effect is that the Commission and NCAs may consider that compensation paid as a result of a consensual settlement prior to their fining decision is a mitigating factor in the setting of that fine.56 _{This measure was included upon} request by the European Parliament. This institution initially sought the inclusion of a “voluntary compensation mechanism” as part of the relevant public enforcement proceedings, in the form of a provision on the suspension of those proceedings so as to allow for the conclusion of an out-of-court settlement and an obligation for the competition authority concerned to consider this a

50 Article 2(21) and recital 48 Antitrust Damages Directive 2014/104 51 Article 18(1) Antitrust Damages Directive 2014/104

52 See Recital 49 Damages Directive 2014/104 53 Article 18(2) and (3) Damages Directive 2014/104 54 Article 19(1) and (2) Damages Directive 2014/104 55 Article 19(4) Damages Directive 2014/104 56 Article 18(3) Damages Directive 2014/104

mitigating factor when establishing the level of the fine. The provision ultimately agreed upon is way less stringent, considering that the directive merely provides for a possibility to do so and not an obligation.

B. Consumer ADR as an instrument for private enforcement of competition law

This section shall now examine whether consumer ADR is an adequate instrument for the private enforcement of competition law. This section raises two arguments. First, it is doubtful that consumer ADR has significant threat in terms of “sticks”. Second, that it not entirely sure that a consumer ADR architecture would pass the tests of equivalence and effectiveness as prescribed by the Court of Justice in Manfredi and Courage.

1. The potential of consumer ADR in the context of competition law

As described before, it is clear that consumer ADR is a loosely adapted term and an unlimited number of distinct architectures can be imagined. Therefore, it is ultimately the design of the ADR system that is critical. First, in order to be an effective consumer ADR system, it has to be attractive to consumers and offer easily accessible, fast, and cheap service. Consumers with low value disputes will simply not bring an action before a court or approach lawyers if more accessible and speedy systems exist and when they are aware of these. This aspect of consumer choice should drive the design and modernisation of Consumer ADR systems.

Significant downside of consumer ADR is that it lacks any significant ‘sticks’ in the sense that it can provide safeguards to consumers to ensure compensation, because they will largely have to depend on the normal judicial procedures, and in Section I, it was argued that this offers little to consumers. The only instance in which consumer ADR may provide guidance is when cartelist firms wish to voluntarily reimburse the damage sustained by consumers. Therefore, Consumer ADR will only work if the undertaking assumes liability. Although this may come across as wishful thinking and may raise the question why big business would ever agree to voluntarily pay compensation without the stick of a court order, but there are a certainly incentives and compulsions thinkable that would induce the voluntary payment of compensation to consumers. According to Hodges,57 _{three major incentives are imaginable.}

First, cartelist firms could be incentivised to establish a voluntary payment scheme in order

57 C. Hodges, ‘Fast, Effective and Low Cost Redress: How do Public and Private Enforcement and ADR Compare’, in B. Rodger, Competition Law: Comparative Private Enforcement and Collective Redress

to comply with an internal policy on ‘doing the right thing’, placing the customer first and obeying the law, perhaps in accordance with requirements in an internal statement of ethics and compliance programme.

Second, in order to avoid or mitigate commercial damage for the firm resulting from damage to its reputation, and even to seek to enhance its reputation by announcing a swift voluntary restoration of a problem that it might claim to have discovered, in an attempt to ‘wipe the slate clean’. The impact of this will be greater for firms that have high reputations in competitive markets. Firms that are small, or local, or have low reputations for cost-cutting, should be less affected. Thus, this incentive may have force in relation to large retailers, or firms with large consumer brands, but less for lower profile intermediaries like wholesalers.

Third, to achieve a reduction in sanction(s) that will be imposed by the authorities, such as a reduction in a fine, especially if the fine would otherwise be large and the amount for the reduction might be significant. This is similar to the very significant incentives that are currently operated under the leniency policy to induce reporting of a cartel by a whistle-blowing firm, which would receive total immunity from a fine. The (fairness and restorative) justice in such a result may be questionable, but such considerations might be discounted on the basis that infringements would otherwise be identified and sanctioned.

Fourth, to avoid or reduce the costs of private litigation, especially if they are high. The impact of this factor will be greater for smaller firms than larger firms that have extensive resources or litigation insurance. It will however be lessened if the size of damages payments is comparatively high.

2. Principles of equivalence and effectiveness: Alassini v. Telecom Italia

A major point of criticism that is voiced with regards to consumer ADR is that it is primarily focused on resolving the dispute between parties, and is not designed to be a private method of enforcing the law.58 _{This is an interesting question and brings the principles of equivalence and} effectiveness as set out in Courage and Manfredi into play. According to the Court in Courage, all sanctions of EU law must be effective and in the context of the full effectiveness of Article 101 TFEU, it was required that “any individual” was entitled to claim damages for loss caused to him by conduct liable to restrict competition. This jurisprudence was affirmed and further

developed in Manfredi, where the Court emphasised the principle of effectiveness with regards to issues as prescription and interest under national law.59 _{Moreover, Article 47 CFREU} stipulates that “everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article”. The principle of effectiveness imposes the same obligations on the quality of enforcement of EU law and sanctioning violations thereof, including private enforcement and ADR mechanisms that are absorbed in the laws of the Member States.

ADR must therefore be tested against the principles of equivalence and effectiveness in order not to be overturned by the Court, should it ever get the chance to review it. A similar question has already been presented to the Court in Alassini v. Telecom Italia and it took the Court extensive reasoning to come up with a proper answer.60 _{The case concerned users of telephone} services had filed civil suits against a telephony company without making use of the ADR settlement procedure that Italian law had made mandatory for disputes of the kind under consideration. The court reiterated the rules and jurisprudence which subjects procedures set out in national law to the principles of equivalence and effectiveness an requires, with regard to effectiveness, that procedural rules must not make it in practice impossible or excessively difficult to exercise rights conferred by European law.61 _{It was argued that mandatory ADR is in} conflict with the principle of effectiveness, since it blocks access to courts and requires the consumer to engage in a settlement procedure prior to a court ruling. Accordingly, the Court considers that “it is admittedly true” that mandatory ADR “affects the exercise of rights conferred on individuals by the Directive”.62 _{It then moved on to a detailed analysis of multiple} factors that are of influence and rules that the Italian scheme is not contrary to the principle of effectiveness. These four factors are:

a. The outcome of the ADR proceedings was not binding upon the parties, and should the settlement procedure fail, a court-based resolution of the dispute was available; b. ADR did not cause a major delay, as the procedure had to be completed within 30

days;

c. The claim could not be time-barred during the settlement procedure as the applicable

59 Manfredi, 71

60 Joined cases C-317 to 320/08 Alassini v. Telecom Italia SpA [2010] ECR I-2213 61 Ibid., para. 48.

statute of limitations was suspended for the duration of the settlement; d. The procedure was available at no cost to the consumer.63

In this case, the Italian ADR scheme was approved by the Court. This proves that, in principle, ADR is not contrary to the principle of effectiveness, although it is not certain to what extent this finding can be generalised. In Alassini, the Court tested Directive 2002/22/EC on universal service,64 _{which itself contains a clause that required Member States to introduce ADR} procedures, albeit not without going as far as to require more than an offer of such procedures or explicitly authorising Member States to make such procedures mandatory. In fact, Article 34(1) Directive 2002/22/EC stipulates that “Member States shall ensure that transparent, simple and inexpensive out-of-court procedures are available for dealing with unresolved disputes, involving consumers, relating to issues covered by this Directive”. It also provides that such procedures must lead to a fair and prompt settlement of the dispute. Finally, pursuant to Article 34(4) Directive 2002/22/EC, the ADR procedures are without prejudice to national court proceedings.

The question whether the availability of any other ADR scheme is contrary to the principle of effectiveness remains unanswered. However, the Court referred to two Recommendations of the Commission on the Principles of ADR, which are to be considered as the predecessors of the ADR Directive.65 _{Considering that the Court was prepared to attach so much weight to two} non-binding instruments, it is unlikely that the Court will strike down the ADR Directive, or national legislation based on it, on the ground that it conflicts with the principle of effectiveness.66

C. Consumer ADR as an instrument for collective redress

Third element of this section entails the assessment of consumer ADR in light of its effectiveness as an instrument fore collective redress. First, consumer ADR will be compared to the collective actin mechanisms available in the United States. Second, a major objection voiced towards collective actions and consumer ADR is that it will still not incentives consumers to bring claims, because of their rational apathy. This argument will argue that even the most consumer-friendly ADR scheme will have difficulty in empowering consumers, by drawing

63 Ibid., paras. 54 et seq.

64 Directive 2002/22/EC on universal service and users’ rights relating to electronic communication networks and services, OJ 2002 L 108/51

65 Ibid., paras. 9 et seq. referring to Commission Recommendation 98/257/EC, OJ 1998, L 115/31 and Commission Recommendation 2001/310/EC, OJ 2001, L 109/56.

66 G. Wagner, ‘Private Enforcement through ADR: Wonder Drug or Snake Oil’ [2014] 51 Common Market

inspiration from the US experience.

1. Consumer ADR v. collective action

As was already described in Section II, consumer ADR schemes and entities are in principle designed to process disputes on a case-by-case basis, but all ADR systems of any size are inherently capable of identifying and processing multiple claims. However, in those schemes in the Member States where multiple similar disputes have been received, consumer ADR bodies have attempted to apply procedures that deliver consistency of outcomes and efficiency of procedure.67 _{In this respect, they have adopted aggregation techniques that are similar to how} courts aggregate multiple individual cases in a collective action. These basic techniques are aimed at identifying that multiple cases have been received in which a similar issue arises, to temporarily stay all cases of a particular description, to decide on a generic approach, and to adjudicate on all cases within the cohort under the same scrutiny. Deciding on the right generic approach might take a number of different approaches, depending on the circumstances of the case: referring a point of law to a court for a binding decision on the law, obtaining the view of a sectorial regulator of the law, deciding a point of law as a preliminary issue, or deciding a number of test cases to give a range of different factual situations that can inform a balanced decision.68

In the context of this section, it is also worthwhile to focus on the benefits and costs of consumer ADR over collective redress, as for example enshrined in the US class action. Consumer ADR has, nonetheless, also substantial advantages over collective redress. First, on the political level, ADR has been met with much less resistance than the Commission’s proposal to improve collective redress (See Section I). ADR circumvents some important criticisms of collective redress.

First, given the fact that ADR works on a case-by-case basis and therefore lacks the potential for abusive litigation (blackmail) that is said to be inherent in the class action mechanism.

Second, opt-out class actions are faced with the need to distribute the damages paid over by the primary claimant to a large group of apathetic claimants who are not willing to make efforts to collect the awarded compensation.

67 Study on the Use of Alternative Dispute Resolution in the European Union. Final Report (Civic Consulting 2009), p. 41.

68 C. Hodges, ‘Mass Collective Redress: Consumer ADR and Regulatory Techniques’ [2015] European

Third, ADR is able to function without having to introduce some sort of contingency fee-mechanism, that is considered as ‘toxic’ in the US class action. In fact, it is widely argued that class actions cannot work without it.69

2. A view across the Atlantic: AT&T v. Concepcion

As described earlier, the European Commission believes that ADR offers advantages because it is faster, cheaper and less burdensome in terms of legal complexity.70 _{But the crucial question} is whether these advantages are strong enough to help overcome their rational apathy to bring claims when there are trivial amounts of compensation at stake. The American experience and the Supreme Court case AT&T Mobility LLC v Concepcion71 _{suggests that this is not the case.}

Even though this situation can not be transposed to the European situation one-on-one, it may provide a hallmark as to what to expect.

The dispute before the Supreme Court concerned a claim for reimbursement of $30.22 in sales tax that the claimant had to pay for the two cell phones they had acquired from the defendant. The phones had been offered in combination with a mobile phone contract at a price of zero, even though the consumer was charged for the sales tax. This practice allegedly amounted to deceptive advertising so that AT&T became liable to reimburse $30.22 to the buyers. The claimants, the Concepion family, had not been the only buyers but only a single in a class of thousands of others who they claimed to represent in the class action. AT&T filed a motion to dismiss the class action and asked the court to compel arbitration on the basis of an arbitration clause that was included in the standard terms and agreements of the mobile telephony contract. This clause excluded the jurisdiction of the public courts and compelled customers to make use of the dispute resolution procedure offered by AT&T. In this procedure, claims had to be brought individually, not in aggregates, as class arbitration was excluded. The dispute resolution process was structured as follows: customers could file their claims against AT&T by going to the company’s website and completing a so-called Notice of Dispute of a single page length. In response to the Notice of Dispute, AT&T was entitled to make a settlement offer. If no offer was made or the customer did not accept the offer within 30 days of filing, the

69 G. Wagner, ‘Private Enforcement through ADR: Wonder Drug or Snake Oil’ [2014] 51 Common Market

Law Review 165, 191

70 European Commission Green Paper on alternative dispute resolution in civil and commercial law, 6 May 2002, COM(2002) 196 final, para 5