Kristaps Loze University of Amsterdam, July 2015 ID: 10866256
Improving Private Enforcement of Competition Law:
The Case for a European Civil Court
Master‟s Thesis for the LLM European Competition Law and Regulation 2014-2015 Under the Supervision of Prof. Dr. K. J. Cseres
1
Table of Contents
Introduction 2
Chapter I – What is Private Enforcement? 4
1. Public v Private Enforcement: A Brief Description 4
1.1. Public Enforcement 4
1.2. Private Enforcement 5
1.2.1. Types of Private Enforcement 6
1.3. The European Civil Court 6
1.4. Conclusion 6
Chapter II – Issues with the Current System of Private Enforcement 8
2. Introduction 8
2.1. Jurisdictional Issues – The Anchor Defendant 8
2.1.2. Which Court Can Claim Jurisdiction? 9
2.1.3. The Provimi Case 10
2.1.4. The Further Development in the Reisch Montage Case 12
2.1.5. The Admissible Substantive Law 13
2.1.6. Examples of Forum Shopping 14
2.1.6.1. The Binding Effect of NCA Infringement Decisions 14
2.1.6.2. Information Revelation Mechanisms 15
2.1.6.3. Litigation Costs 17
2.1.7. Conclusion 18
2.2. “The Italian Torpedo” 18
2.3. Class Actions/Collective Redress 21
2.3.1. Overview 21
2.3.2. UK & Germany 22
2.3.2.1. The United Kingdom 22
2.3.2.2. Germany 24
2.3.2.3. Summary 25
2.4. Conclusion 26
Chapter III – The European Civil Court 27
3. Introduction 27
3.1. Jurisdictional Issues 27
3.2. Collective Redress 29
3.3. The Potential Obstacles that the European Civil Court might face 31
3.3.1. Treaty Basis for the Creation of the Court 31
3.3.2. Political Unwillingness 33
3.3.3. Backlog of Cases 34
3.4. Summary 35
Final Conclusion 37
2 Introduction
This Thesis will seek to critically examine some aspects of the current system of private enforcement of competition law in the European Union (EU) and to see whether the creation of a centralised European Civil Court that would deal with claims related to competition law infringements could make private enforcement more effective.
It will be discussed that even though there have already been some steps taken to make the use of private enforcement more available and effective, there is still room for improvement.
The legal problem that will be examined is that the current system of private enforcement in the EU is prone to abuse. Furthermore, as regards private enforcement, the citizens of some Member States are better protected than the citizens of other Member States. This is unfair and in need of change. A possible solution might be the creation of such a centralised Court.
The aspects of the current system that will be analysed include: jurisdictional issues and the availability and use of class actions/collective redress. These aspects have been chosen because they may arguably have a greater impact on the individuals to choose and pursue private enforcement against the violators of competition law.
In relation to jurisdictional issues, it will be analysed what kind of rules are currently in place regarding the choosing of the applicable jurisdiction for claims between persons from different Member States and what are their potential problems. The main problem that this Thesis will examine, related to this, is that the system formed by these rules has the potential to be abused. To outline without going into further detail at the moment, the potential for abuse will be illustrated by looking at the issues related to the Anchor Defendant1 and “The Italian Torpedo”2.
As regards class actions/collective redress, it will be examined what differences are there in their application and availability between the Member States and their use in the EU, whether they may be made more effective if the proposed European Civil Court would be created and what effect this may have on private enforcement. A brief comparison will be drawn with the use of class actions in the United States of America (USA).
1 Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2006] ECR I-6827 2
Franzosi, M “Worldwide patent litigation and the Italian torpedo” European Intellectual Property Review, 1997, Vol.19, Issue 7, pages 382-385
3
It will be discussed whether a centralised European Civil Court could be a beneficial tool to resolve the issues that will be examined and to make private enforcement of competition law more effective. It will also be looked at what possible issues the Court might face. As the potential scope of such a Court could be quite wide, this Thesis will only focus on the issues dealing with competition law.
This Thesis will be split into two main parts.
The first part will analyse the issues related to the current system i.e. the issues related to jurisdiction and class actions/collective redress.
The second part will discuss how the European Civil Court may help solve those issues of the current system, and some of the potential obstacles that its creation may face.
Following this discussion a conclusion will be drawn on whether the creation of the proposed European Civil Court could be a beneficial development in the strengthening of private enforcement of competition law in the European Union.
4 Chapter 1
What is Private Enforcement?
1. Public v Private Enforcement: A Brief Description
Before going into further discussion into the current system of private enforcement of competition law in the European Union, it would be beneficial to provide a brief description of what is the difference between public and private enforcement.
1.1. Public Enforcement
In essence, public enforcement means that either the European Commission (the Commission) or the national competition authorities (NCAs) of the Member States may investigate, pursue and enforce the competition law against any violators who have breached these rules.3
They have been granted wide investigatory and sanctioning powers to be able to do this under Regulation 1/20034.
Before the enactment of this Regulation, the Commission enjoyed exclusive competence in the area of making decision regarding the application of Articles 101 & 102 of The Treaty on the Functioning of the European Union (TFEU). However, this has now been abolished and the system has been decentralised “by [allowing] the application of Articles 101 and 102 TFEU by national competition authorities”.5
One of the reasons for this was the Commission‟s desire that the “NCAs should share with it the task of enforcing the competition rules, thereby enabling the Commission to concentrate its resources on pursuing the most serious infringements of the law”.6
Lastly, national courts can also apply Articles 101 & 102 of the TFEU.7
3 Regulation 1/2003 OJ 2003 L1/8, articles 4 & 5 4 Regulation 1/2003 OJ 2003 L1/1
5 Edited by Lianos, I., & Geradin, D. „Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar, 2013) 138
6
Whish, R. & Bailey, D. „Competition Law” 7th edition (Oxford: Oxford University Press, 2012) 296
5 1.2. Private Enforcement
Private enforcement, on the other hand, means that the person, who has suffered any harm due to the breach of competition rules, can bring a claim in court against the violator in order to seek a remedy for the harm suffered.
Prior to 2001 there had been no judgement of the Court of Justice dealing with the question on whether private enforcement of EU law should be allowed and whether the Member States have an obligation to provide a remedy of damages “where harm has been inflicted as a result of an infringement of the competition rules”.8
This was clarified in the case of Courage9. In this landmark case for private enforcement it was held that “the full effectiveness of Article [101 TFEU] and, in particular, the practical effect of the prohibition laid down in Article [101(1) 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.10 This was later affirmed in Manfredi11 where it was stated that “it follows that any individual can claim compensation for the harm suffered where there is a causal relationship between the harm and an agreement or practice prohibited under Article [101 TFEU]”.12
The new Directive on Antitrust Damages Actions also now states that “Member States shall ensure that any natural or legal person who has suffered harm caused by an infringement of competition law is able to claim and to obtain full compensation for that harm”13
.
Furthermore, this is particularly important for individuals as “the Commission has no power to award damages” and therefore compensation for any harm suffered can only be obtained via a private enforcement claim through the courts.14
As can be seen, the right for a person to pursue private enforcement and to try to obtain compensation for a breach of competition rules has been clearly established.
8 Ibid 297 9
Case C-453/99 Courage v Crehan [2001] ECR I - 6314
10
Ibid para 26
11 Joined Cases C-295/04 to C-298/04 Manfredi [2006] ECR I - 6641 12 Ibid para 61
13
Directive on Antitrust Damages Actions 2014/104/EU OJ L 349/12, art. 3(1)
6 1.2.1. Types of Private Enforcement
Generally, two types of private enforcement claims can be distinguished: standalone and follow-on actions.15
In a standalone action, a claim is brought “where the alleged breach of competition law is not already the subject of an infringement decision by the European Commission” or a NCA.16 “In this type of action, the claimant will have to prove to the court that the breach of competition law occurred and that he suffered loss as a result of that breach.”17
However, in a follow-on action, the “breach of competition law has already been established in an infringement decision taken by the” Commission or a NCA.18
Therefore the claimant can rely on the NCA‟s “or European Commission‟s findings of infringement and fact and in most cases need only prove that he suffered loss as a result of that infringement”.19
One of the main benefits of a follow-on action is that since the Commission “has resources and experience [that many claimants lack] that enable it to identify infringements” and make it “better able to quantify the harm caused by the infringements of Articles 101 & 102” then provided that the Commission inserts in its decisions as much information as possible, then it should help individuals to launch successful private enforcement claims and thus relieve them from the necessity to perform a potentially costly and difficult investigation on their own.20
1.3. The European Civil Court
A question that can be asked regarding the proposed centralised European Civil Court is that comparing to public enforcement, that has been decentralised, why should the opposite step i.e. centralization, be taken to strengthen private enforcement? As will be seen in the following Chapters the current system of private enforcement in the EU can be abused as well as lead to situations where the citizens of some Member States are better protected than the citizens of others. Public enforcement does not deal with granting compensation to those that have been injured. The centralization of the private enforcement system would ensure that there is a system in place under which all are subject to the same rules and that it applies to everybody equally thus ensuring fairness.
15 Office Of Fair Trading „Quick guide to private litigation in competition cases” March 2010, OFT1520, p.9 16 id
17 id 18 id 19
Ibid 9-10
7 1.4 Conclusion
This Chapter provided a brief overview of the differences between public and private enforcement.
To sum up, public enforcement is conducted by the European Commission and the NCAs, while private enforcement – by a person who has suffered harm due to the breach of competition law.
The evolution of public enforcement to include both the Commission and the NCA‟s should also benefit the individuals who plan to pursue a private enforcement claim as they can rely on either the Commission‟s or NCA‟s findings or, if they are very confident that they might succeed, then they can also do so by trying to prove that a breach of competition rules has occurred themselves.
The difference between public and private enforcement is crucial as this Thesis will only concentrate on private enforcement.
8 Chapter II
Issues with the Current System of Private Enforcement
2. Introduction
In 2004, a study that examined “the state of damages actions for breach of competition law” in the EU was published.21 The “Ashurst study”, as it is called, came to the conclusion that the system of private enforcement that was in place was one of “astonishing diversity and total underdevelopment”. 22
Both before and after the “Ashurst study” several measures have been taken to try and improve the effectiveness of private enforcement. For the purposes of this Chapter, the main measures that will be looked at include the Brussels I23 Regulation on the applicable jurisdiction for cases & the Rome II24 Regulation on the applicable substantive law, as well as the newly adopted Directive on Damages Actions25. However, as will be discussed, there still remain issues that limit the effectiveness of private enforcement. The main issues that will be analysed include jurisdictional issues and the availability and use of class actions/collective redress. The choice to look at these issues has been made due to the fact that these could, arguably, be important for a person willing to pursue private enforcement as it may affect their capability and willingness to do so.
The jurisdictional issues that will be examined are related to the so called: 1) Anchor defendant; and 2) “The Italian Torpedo”.
2.1. Jurisdictional issues - The Anchor Defendant
This will require examination of international private law in relation to which court can claim jurisdiction. If a plaintiff wishes to bring a claim against a violator of competition law, it is necessary to identify which court may have jurisdiction to hear the case. As will be seen, a potential plaintiff may have the opportunity via the anchor defendant to choose to bring the case before a court whose
21 “The Ashurst study” http://ec.europa.eu/competition/antitrust/actionsdamages/comparative_report_clean_en.pdf, p.1 22 Ibid p.2
23 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1 24
Regulation 864/2007 OJ 2007 L 199/40
9
procedural rules and the applicable substantive laws are more beneficial to his claim thus, in essence, abusing the current system and participating in forum shopping.26
One of the reasons for such a possibility is the fact that there are no courts on the EU level such as the proposed European Civil Court (as opposed to the national courts of the Member States) that could claim full jurisdiction and, therefore, the “rights and obligations emanating from Union law are in principle enforced by having recourse to national administrative and civil law before national administrative authorities and national courts”.27
2.1.2. Which Court Can Claim Jurisdiction?
The general rule regarding which court should be able to claim jurisdiction is fairly straightforward. It is as follows – any persons domiciled in a Member State should, “whatever their nationality, be sued in the courts of that Member State” e.g. if a person is domiciled in the Netherlands then that person should be sued in the Netherlands.28 In most cases the person being sued is likely to be a legal person.29 Therefore, the legal person is deemed to be “domiciled at the place where it has its: a) statutory seat; b) central administration; or c) principal place of business”.30
Curiously, “there has been no European Court jurisprudence defining the scope of “central administration” in this context”.31
However, the general rule can be circumvented if the plaintiff wishes to bring a claim against multiple defendants that are domiciled in different Member States. Such a scenario is possible as cartel infringements are likely to include a number of undertakings that are active and domiciled in different Member States.32 Subject to the Brussels I Regulation, a defendant can be sued “where he is one of a number of defendants in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgements resulting from separate proceedings”.33
This is where the anchor defendant comes into play. In essence this article appears to favour the efficient hearing
26 Basedow, J. “Private Enforcement of EC Competition Law” Vol. 25 (Alphen aan den Rijn: Kluwer Law International,
2007) 248
27 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 234-235
28 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1, art.4 29
Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure” (Cheltenham: Edward Elgar Publishing Ltd., 2013) 462
30 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1, art.63(1)
31 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 462
32
Ibid p. 473
10
of cases that might otherwise be complex due to the presence of defendants from different Member States and thus different applicable jurisdictions, however, there exists the possibility that a plaintiff could abuse this provision and be forum shopping by following a strategy whereby a defendant (the anchor) from one Member State, which has procedural rules and laws that favour the plaintiff, could be used as an instrument to “pull” defendants from other Member States into the jurisdiction of the favourable Member State‟s courts.34 A good illustration of this is the Provimi35 case.
2.1.3. The Provimi Case
This case concerned an action by Provimi and other plaintiffs for damages for financial loss arising from the Vitamins cartel36. Proceedings were launched against a UK based undertaking in the English courts, as the undertaking had been domiciled in the UK. Provimi requested that its claim and therefore the jurisdiction of the English courts should be also extended to include other foreign undertakings that were involved in the cartel due to the fact that the claims against them would be “so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgements resulting from separate proceedings” as per the Brussels I Regulation.37
The Court agreed with this. Therefore, as can be seen, the UK based company was used as an anchor to pull the foreign undertakings into the jurisdiction of the English courts
This case touched upon two further issues that are of relevance for private enforcement and these are: 1) to what extent can a subsidiary whose parent company is one of the undertakings, that was part of the cartel, be subject to proceedings for the actions of its parent company; 2) to what extent are agreements between the parties that any disputes should fall under the jurisdiction of an agreed court, of relevance when it comes to infringements of competition law?38
Regarding the first issue on the status of a subsidiary, in the Provimi case the UK based undertaking (that was the anchor defendant) was the subsidiary of the parent company that had been the addressee of the Commission‟s decision on finding the cartel infringement i.e. the subsidiary itself had not been the addressee of that decision.39 The Court looked at this and found that the subsidiary had, indeed, infringed Article 101 TFEU “by (even unknowingly) implementing the
34 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford:
Hart Publishing, 2012) 46
35
Roche Products Ltd and others v Provimi Ltd [2003] EWHC 961
36 Commission Decision (EC) 2003/2 of 21 November 2001 relating to a proceeding pursuant to Article 81 of the EC
Treaty and Article 53 of the EEA Agreement (Vitamins) [2003] OJ L 6/1
37 Whish, R. & Bailey, D. “Competition Law” 7th edition (Oxford: Oxford University Press, 2012) 308
38 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford:
Hart Publishing, 2012) 43 & 44
11
cartels entered into by its Swiss parent company”.40 The Court based its finding on the economic entity doctrine, in that, “the legal entities that are part of one undertaking, by definition of the concept, have no independence of mind or action or will” and are, therefore, regarded as one since “the mind and will of one legal entity, is for the purposes of Article [101], to be treated as the mind and will of the other entity”.41
The key issue appears to be “the extent to which the parent company exercises decisive influence”.42
In Cooper43, even though “no reference was made to the European Court for a preliminary ruling to allow it to provide clarity on this issue”, the English court “held as sufficient for the subsidiaries to be anchor defendants for the particulars of claim to “encompass the possibility” that the subsidiaries were either parties to or aware of the particular anti-competitive conduct of the parent company”.44
However, this remains a controversial issue.
The second issue that was discussed in Provimi that was on agreements on jurisdiction for disputes between parties, relates to private enforcement actions for cartel infringement claims by direct purchasers. The parties when negotiating are free to enter into an agreement that any dispute would fall into the jurisdiction of the Member state‟s courts of their choosing i.e. a prorogation of jurisdiction agreement. In such a case, the Brussels I Regulation states that “if the parties, regardless of their domicile, have agreed that a court or the courts of a Member Stare are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction”.45
In the Provimi case such agreements did exist in favour of the Swiss, French and German courts, however, the English court went on to analyse the agreements in question and found that by applying the substantive laws of those Member States, the prorogation of jurisdiction agreements were not wide enough to include competition law infringements in respect of those Member States.46 Therefore the Provimi judgement shows that the possibility of such a prorogation of jurisdiction agreement being enforced, if drafted widely enough, cannot be entirely excluded.47 This would have the effect of rendering the anchor defendant strategy inapplicable as the contract would already stipulate which court is to have jurisdiction. However, as already stated, this would only apply in cases dealing with direct purchasers as they would have
40 Whish, R. & Bailey, D. “Competition Law” 7th edition (Oxford: Oxford University Press, 2012) 308 41
Roche Products Ltd and others v Provimi Ltd [2003] EWHC 961 para 31
42 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 472
43 Cooper Tire & Rubber Co v Shell Chemicals Ltd [2010] EWCA Civ 864 44
Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure” (Cheltenham: Edward Elgar Publishing Ltd., 2013) 474
45 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1, art.25(1)
46 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 476-477
47
Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford: Hart Publishing, 2012) 50
12
entered into a contract with the cartel member and not when dealing with indirect purchasers as they could not have, by definition, entered directly into a contract with the cartel member and, therefore, be subject to such agreements.48
2.1.4. The Further Development in the Reisch Montage49 Case
The case of Reisch Montage concerned a claim for repayment of a sum of money against a defendant domiciled in Austria. The plaintiff wished to use the Austrian defendant as an anchor defendant and extend the claim against “a German domiciled bank that had stood security for that sum”.50
As already discussed, in itself, this should not have been a problem due to the Brussels I Regulation. The issue in this case was that the Austrian defendant was, in fact, bankrupt and, therefore, “by virtue of the Austrian regulations on insolvency” could not have judicial proceedings brought against him.51 The Austrian Court held that this did not constitute a problem and decided that the German undertaking should, nevertheless, fall under its jurisdiction.52 This meant that even though the Austrian defendant was used as an anchor to pull the German defendant into the Austrian court‟s jurisdiction, the fact that the claim was inadmissible against the Austrian defendant was not sufficient to constitute a bar to joining the German defendant to the proceedings.53 The effect of this ruling is that it promotes forum shopping by allowing the plaintiff to launch proceedings against anchor defendants where the claim against them is either “inadmissible or has no reasonable prospect of success” or even where an agreement has been reached that the claims against the anchor defendant would be dropped in exchange for the possibility of using him as an instrument to extend the claim against defendants from other Member States.54 The Court did try to limit this by stating in its judgement that the “anchor defendant provision” of the Brussels I Regulation cannot be invoked with “the sole purpose of removing” a defendant “from the jurisdiction of the Member State in which
48 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 475
49 Case C-103/05 Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2006] ECR I-6827 50
Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford: Hart Publishing, 2012) 46
51 id
52 Case C-103/05 Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2006] ECR I-6827, paras 31&32
53 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford:
Hart Publishing, 2012) 46
13
that defendant is domiciled”.55
However, according to Freeport56, the plaintiff may overcome this hurdle by simply “demonstrating the risk of irreconcilable judgements”.57
2.1.5. The Admissible Substantive Law
If a court of a Member State is capable of claiming jurisdiction over a case dealing with defendants from other Member States then this means that the case will be subject to the national procedurals rules of that court.58 However, crucially this does not automatically mean that the case will be subject to the substantive laws of that Member State.59 This is an important distinction as it may have an influence on the plaintiff when deciding whether to pursue private enforcement. In order to determine the applicable law, it is necessary to refer to the Rome II60 regulation.
The general rule regarding cartel infringements is that the applicable law “shall be the law of the country where the market is, or is likely to be, affected”.61
Therefore, provided that the affected market can be identified, the potential plaintiff would not be capable of choosing and should know which law is to be applicable in the relevant case. However, if the infringement affects or is likely to affect markets in more than one country then the plaintiff can choose to sue the defendant under one single law62 i.e. the law of the forum, subject to two restrictions: 1) that the defendant is domiciled in the Member State in whose courts the claim is brought; and 2) that “the market in that Member State is amongst those directly and substantially affected”.63
Therefore, even in this case, the potential plaintiff is not really capable of forum shopping due to these restrictions.
The situation is different if the claim is brought against more than one defendant for the same infringement. The Rome II regulation states that provided that the preferred court has jurisdiction over the defendants, the plaintiff can “choose to base his or her claim on the law of that court if the restriction of competition on which the claim against each of these defendants relies directly and substantially affects also the market in the Member State of that court”.64
This clearly complements the rules on jurisdiction under the Brussels I Regulation, in the sense that, if one jurisdiction is
55 Case C-103/05 Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2006] ECR I-6827, para 32 56
Case C-98/06 Freeport v Olle Arnoldsson [2007] ECR I-8319, paras 51-53
57 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford:
Hart Publishing, 2012) 47
58 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 14
59 Whish, R. & Bailey, D. “Competition Law” 7th edition (Oxford: Oxford University Press, 2012) 308 60 Regulation 864/2007 OJ 2007 L 199/40
61 Ibid art. 6(3)(a)
62 Edited by Huber, P. “Rome II Regulation: Pocket Commentary” (Munich: Sellier European Law Publishers, 2011) 200 63
Regulation 864/2007 OJ 2007 L 199/40, art. 6(3)(b)
14
established for multiple defendants from different Member States then they should be governed by the substantive law of the Member State in which that court is situated.65
On the face of it, this also appears to favour the efficient hearing of claims by reducing the complexity that the applicability of different substantive laws might entail. However, the result is that this article combined with the “anchor defendant” provision allows the potential plaintiff to go forum shopping for a court and the applicable substantive law that would most favour his case. For example, an interesting situation might arise, if the plaintiff is capable of convincing a court in State X that the subsidiary that is domiciled there, and whose parent company has been part of a cartel, should be the anchor defendant and by doing so be capable of pulling foreign defendants into the jurisdiction as well as the substantive laws of State X‟s courts and after doing so be able to drop his claims against the subsidiary for objective reasons with the potential outcome that the case would end up dealing with only foreign defendants in State X‟s courts that are subject to its jurisdiction and substantive laws, for the simple reason that those courts favour the plaintiff‟s claim the most.
2.1.6. Examples of Reasons for Forum Shopping
In order to demonstrate the attractiveness of forum shopping and why it might be an issue, it would be beneficial to provide three examples on the differences in rules of the Member States that might play an influential factor in judicial proceedings and thus, ultimately, the decision to pursue a claim via private enforcement.66
2.1.6.1. The Binding Effect of NCA Infringement Decisions
First of all, the infringement decisions of either the NCAs or the Commission would, by definition, be of relevance only in follow-on and not in stand-alone private enforcement cases as there can be no follow-on actions without a prior infringement decision. Understandably, if the infringement decision is binding upon the Court then this relieves the plaintiff of the obligation to prove that the defendant has infringed competition law.
Regarding the binding nature of the decisions of the European Commission, the national courts, when ruling on “agreements, decisions or practices” that have “already been the subject of a Commission decision”, must not take decisions that run “counter to the decision adopted by the Commission” i.e. the infringement decisions by the Commission are binding upon the national
65 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 487
66
Ezrachi, A., & Ioannidou, M., “Access to Justice in European Competition Law – Public Enforcement as a Supplementary Channel for „Corrective Compensation‟” Asia Pacific Law Review, 2011, Vol. 19, No. 2, p.11
15
courts.67 Furthermore, the national courts “must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated” and in such a case, the courts may then stay their proceedings until a decision is reached.68
The situation is different when dealing with the infringement decisions of national competition authorities. The infringement decisions of NCAs are binding upon the national courts of that NCA‟s Member State.69
In contrast, the infringement decisions of the NCAs of other Member States are not automatically binding on the national courts in all Member States.70 However, some Member States have adopted different rules and have established that the infringements decisions of the NCAs of other Member States will be also binding on their courts e.g. in Germany.71
Therefore, using Germany as an example, forum shopping might arise if a potential plaintiff that wants to pursue a private enforcement claim is dealing with a situation in which the NCA of his home MS has not yet made a decision regarding the competition law infringement, however, at the same time the NCA of another MS has done so, may decide to sue in Germany using the anchor defendant as the decisions of all NCAs are binding there, even if the German NCA has not yet reached a similar decision. Thus a plaintiff might want to try and sue in a Member State that has such a rule. This might prove to be unfair on the foreign defendants since they would be subject to legal proceedings in another Member State, which might prove to be costly, even though the NCA of that or their home Member State has not yet actually decided on the existence of the infringement.
2.1.6.2. Information Revelation Mechanisms
This relates to the different ways by which a plaintiff might be capable of obtaining information regarding the defendants either from the defendants themselves or the competition authorities.72
The Member States had a variety of different rules on discovery ranging from practically non-existent to considerable.73 The new Directive on Damages Actions will improve this by ensuring that national courts will, subject to certain conditions and a request by the plaintiff or defendant, the
67 Regulation 1/2003 OJ 2003 L 1/1, art. 16 68
id
69 Directive 2014/104/EU [2014] OJ L 349/1, art. 9(1) 70 Ibid art. 9(2)
71 Section 33(4) GWB
72 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 43
16
power to order the parties “to disclose relevant evidence which lies in their control”.74
However, they will not be able to go on the so called “fishing expeditions”75
as they will have to specify “as precisely and as narrowly as possible on the basis of reasonably available facts in the reasoned justification” and the principle of proportionality, what documents they require.76
That being said, this new article does not mean that disclosure rules will be the same in all Member States as it only sets out minimum requirements.77 Therefore, some jurisdictions may remain more attractive for potential plaintiffs such as, for example, the UK78 as the Civil Procedure Rules of the English courts “mandate that a party must disclose all documents which are relevant to the litigation, including those that harm its own case or support the opposing party‟s case”.79 Such rules as compared with Member States that have only minimum requirements may substantially favour a potential plaintiff‟s case. A side effect of such wide rules is that a plaintiff may bring an action without substantial evidence, with the hope that the discovery rules will benefit the case by providing evidence that is actionable.80 Therefore a potential plaintiff might go forum shopping and decide to use the anchor defendant to bring a case in the English courts with the hope that the wide discovery rules will benefit him with useful evidence, in an otherwise unmeritorious claim.81
As regards the files held by the competition authorities, the plaintiff may, in principle, request the national courts to “order the disclosure of evidence included in the file of a competition authority”.82
However, the Directive has had an interesting development in the area of the disclosure of leniency applications that should be briefly mentioned. The rule established in Pfleiderer was that the decision on whether to grant access to the files in a leniency application would remain in the realm of the national court‟s discretion whereby it should make a decision on a case-by-case basis by weighing “the respective interests in favour of disclosure of the information and in favour of the protection of that information provided voluntarily by the applicant for leniency”.83
Therefore this would have provided the plaintiff the incentive to forum shop for the court that is more sympathetic to the plaintiff‟s case and thereby be willing to grant access. The Directive now states that the
74
Directive 2014/104/EU [2014] OJ L 349/1, art. 5(1)
75 Jerez, H., V. “Competition Law Enforcement and Compliance across the World: A Comparative Review” Vol. 61
(Alphen aan den Rijn: Kluwer Law International, 2015) 416
76
Directive 2014/104/EU [2014] OJ L 349/1art. 5(2) & (3)
77 Burrow, E. & Sander, R. “Impact of the EU Directive on Antitrust Damages Actions” The International Comparative
Legal Guide to Competition Litigation, 2015, 7th Edition, pages 1-9, para 2.17
78 id 79
Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56 (Alphen aan den Rijn: Kluwer Law International, 2014) 58
80 Jerez, H., V. “Competition Law Enforcement and Compliance across the World: A Comparative Review” Vol. 61
(Alphen aan den Rijn: Kluwer Law International, 2015) 416
81 id 82
Directive 2014/104/EU [2014] OJ L 349/1, art. 6(1)
17
national courts will no longer enjoy such discretion and does not permit the disclosure of either the leniency statements or settlement submissions (except for those that have been withdrawn).84 Such absolute protection “seems to spell the end for the Pfleiderer balancing exercise in respect of such documents”.85
It appears that this also means that plaintiffs will no longer be able to forum shop for a more sympathetic court regarding leniency applications.
2.1.6.3. Litigation Costs
The potential litigation costs including court and attorney fees and any other expenses, play an important role in the decision making process of an individual when deciding whether to bring a private enforcement claim.86 The prospect of high costs is likely to provide a disincentive for an individual to pursue such a claim. For the purposes of illustrating the potential problem, the focus will be on the losing party‟s obligation to pay the attorney‟s fees of the winning party and the relation this might have to forum shopping. The new Directive does not deal with the issue of costs.87 The general rule in the Member States is that the losing party has to bear the litigation costs, however, there are differences in the amount that needs to be compensated and as will be discussed, this may have an effect on forum shopping. 88
For example, in the English courts, the losing party is potentially liable for all the legal costs of the winning party and there is no cap for attorney‟s fees.89 In Greece, the attorney‟s fees cannot exceed 20% of the amount claimed.90 Therefore, even if the losing party is ordered to cover the legal costs, they should not fear the possibility of obtaining high attorney‟s costs as the amount is capped. In Latvia, the attorney‟s fees are capped depending on the amount of the claim – if the claim does not exceed €8500 the attorney‟s fees are capped at 30% of the satisfied claim, if the claim is for an amount between €8501 and €57 000 then the attorney‟s fees are capped at €2850 and, finally, if the claim is for an amount exceeding €57 001 then the attorney‟s fees are capped at 5% of the satisfied claim.91
84 Directive 2014/104/EU [2014] OJ L 349/1, art. 6(5) & (6) 85
Burrow, E. & Sander, R. “Impact of the EU Directive on Antitrust Damages Actions” The International Comparative
Legal Guide to Competition Litigation, 2015, 7th Edition, pages 1-9, para 2.18
86 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 59
87
Burrow, E. & Sander, R. “Impact of the EU Directive on Antitrust Damages Actions” The International Comparative
Legal Guide to Competition Litigation, 2015, 7th Edition, pages 1-9, para 1.4
88 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 59 - 71
89 Ibid 69 90
Greek Code of Lawyer‟s Conduct, art. 92(3)
18
It is argued that while the capping of attorney‟s fees can have a positive effect and provide an incentive for individuals to pursue private enforcement for a lack of fear of potentially high attorney‟s costs in the event of an unsuccessful action, it may also have negative effects. The argument that is proposed is that it may encourage forum shopping for unmeritorious cases.
For example, an individual who is not sure whether he has a strong case or, even in a worse scenario has an unmeritorious claim, may be dissuaded from bringing a claim before the English courts due to fears of potentially high costs in case of a failure. At the same time, the individual may decide to bring the case through the anchor defendant before the Latvian courts as he would be assured that the attorney‟s fees could not exceed a certain limit, in the case, that the claim is not successful. This would be a clear example of forum shopping. Therefore, this may provide an incentive for potential plaintiffs to bring claims that are not particularly strong. The defendant would, thus, incur losses due to litigation in another Member State for an unmeritorious claim that would have likely not have appeared before a court, if not for the capped attorney‟s fees.
However, it should be stressed that this would only pose a problem in regards to unmeritorious claims as, otherwise, it might have positive effects.
2.1.7. Conclusion
It could be argued that the plaintiff in a competition law infringement case would likely be the victim and, therefore, “deserves privileged legal protection” and should be able to forum shop “to select the court and the applicable law which provides the greatest advantages”.92
Indeed a philosophical question of whether “the ends justify the means” may be asked on whether the victim should be entitled to use tactics that are not completely fair.93 However, as will be discussed next, the cartel members themselves might also be capable of using these rules to their advantage.
2.2 “The Italian Torpedo”
One of the ways in which the competition law infringers may take advantage of these rules is by launching the so called “Italian Torpedo”. This involves abusing the Lis Pendens article in the Brussels I Regulation that states that “where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of
92 Basedow, J. “Private Enforcement of EC Competition Law” Vol. 25 (Alphen aan den Rijn: Kluwer Law International,
2007) 248
19
the court first seised is established”.94
This allows for the peculiar situation in which a cartel member, who knows that he might soon be sued for compensation by the victims that have incurred losses due to the infringement, the possibility of using a delaying tactic in which he brings an action against the victims for a declaration that establishes their non-liability before a Member State‟s court that is not capable of claiming jurisdiction and is known to be slow in reaching a decision.95 By doing so, it denies the victim the capability of bringing an action against the cartel member, as the courts of all other Member States must stay their proceedings until the court before which the first application was made reaches a decision, even if that court can in no reasonable way claim jurisdiction.96 For example, in the past - cases before the Italian courts have been known to have taken more than seven years to be decided only at the first instance, hence the name “Italian”.97
Therefore any victims of a competition law infringement might find it excessively difficult or almost impossible to receive compensation if such an action is taken and is successful in achieving its aim of delaying. Furthermore, if during this time period the limitation periods for bringing an action in some Member States have expired then any further actions by the victims might be barred by law. The infringer, on the other hand, is capable of gaining more time to prepare its case and to prepare for any potential damages that might be incurred in the future.98
A comparison that has been famously drawn regarding this, describes the “Italian Torpedo” as “the principle that the slowest ship determines the speed of the entire convoy“, in that, “all the countries are obliged to stop their engines until the slow-moving ship arrives”.99
The case of Gasser v MISAT100 is a good example of the “Italian Torpedo” being used. Following a conflict between an Austrian and an Italian company, a pre-emptory “torpedo” was launched in Italy. An exclusive prorogation of jurisdiction clause that conferred jurisdiction on the Austrian courts had been present, and thus the Austrian company subsequently launched proceeding in Austria. The Austrian courts referred the case for a preliminary ruling from the CJEU. The CJEU stated that “a court second seised whose jurisdiction has been claimed under an agreement conferring jurisdiction must nevertheless stay proceedings until the court first seised has declared that it has no
94 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1, art.29(1)
95 Moretti, F. M. & Nascimbene, L. “No Scent of “Torpedo”” Global Competition Litigation Review, 2009, Vol.2, Issue
2, p. 67
96
Ibid 70
97 Štanko, A. “Cross-Border “Torpedo” Litigation” Common Law Review, 2009, Issue 10, p.21
98 Veron, P. “ECJ Restores Torpedo Power” Intellectual Review of Property and Competition Law, 2004, Vol. 35, Issue
6, pages 639 & 640
99 Franzosi, M. “Worldwide patent litigation and the Italian Torpedo” European Intellectual Property Review, 1997,
Vol.19, Issue 7, pages 384 &385
20
jurisdiction”.101 Therefore, the “Italian Torpedo” had been successful as no court could continue with their proceedings until the Italian court had reached a decision. The law regarding exclusive jurisdiction clauses has changed but nevertheless this case illustrates the delaying strategy.
There have been attempts to defuse the “Italian Torpedo” regarding exclusive prorogation of jurisdiction clauses. The Brussels I Regulation now states that “where a court of a Member State on which an agreement…confers exclusive jurisdiction is seised, any court of another Member State shall stay the proceedings until such time as the court seised on the basis of the agreement declares that it has no jurisdiction under the agreement”.102
The only exception to this is if the exclusive jurisdiction clause confers “exclusive jurisdiction of several courts” in which case “any court other than the court first seised shall decline jurisdiction in favour of that court”.103
Therefore, provided that there is a valid clause that confers exclusive jurisdiction upon a court agreed on by the parties then in such cases the “Italian Torpedo” strategy should prove to be ineffective as the chosen court and not the court first seised has the priority to decide.104 However, as seen in Provimi105, problems may remain if the wording of the exclusive jurisdiction clause is not wide enough to cover all competition law infringement issues. Furthermore, if there is no such exclusive jurisdiction clause in the agreement between the parties, then in that case the “Italian Torpedo” remains a threat.
That being said in relation to private enforcement of competition law one of the factors that limits the “Italian Torpedo‟s” effectiveness is the fact that it is “nigh impossible for members of a cartel to pre-empt actions by all possible claimants”.106 However, it is likely that a cartel could be capable of identifying the victims, which have been harmed the most and can accordingly claim higher amounts of compensation, and thus launch such a delaying tactic against them.
In conclusion, the threat of the possibility of an “Italian Torpedo” being launched against a victim, with whom there has been an agreement that includes a valid exclusive jurisdiction clause, appears to have been minimised. All others seem to remain susceptible to such an abusive delaying tactic.
101
Ibid 54
102 Regulation 44/2001, OJ 2001 L 12/1, replaced by Regulation 1215/2012 OJ 2012 L 351/1, art.31(2) 103 Ibid art. 31(1)
104https://www.ashurst.com/publication-item.aspx?id_Content=11722 – accessed on May 17th, 2015 105 Roche Products Ltd and others v Provimi Ltd [2003] EWHC 961
106
Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination” (Oxford: Hart Publishing, 2012) 57
21 2.3. Class Actions/Collective Redress
The last issue of the current system to be discussed is that regarding class actions/collective redress. As evidenced by the United States of America (USA), an efficient class action system can be a contributing factor towards more widespread and effective private enforcement.107 As will be discussed, currently in the EU there has been no harmonization on this issue and wide differences can be observed between the systems in place in the different Member States.108
The pre-draft Directive on Damages Actions had included an article on group actions109, however, subsequently it did not make it into the final version and the Directive “does not require Member States to introduce collective redress mechanisms”.110 This shows that there have been attempts to implement them across the EU but this has not yet yielded success. As will be discussed in the next Chapter, the proposed European Civil Court might be a step towards this.
2.3.1. Overview
Before comparing some of the different systems that are in place in the European Union, it would be beneficial to provide a brief overview of what is meant by class actions and collective redress, and why this is important for private enforcement.
The term “class action” usually refers to the US system whereby “one or more persons belonging to a broad class of persons that have been harmed by anti-competitive practices bring an action on behalf of the unidentified class of persons”.111
This term due to the specifics of that system, which will not be discussed in this Chapter, is not widely used in the EU and instead the terms “representative action” and “collective action” that fall under the umbrella term of “collective redress” are preferred.112
Even though the application of these actions under collective redress differs between the Member States, the definition of these terms is largely similar between all of them.
107 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 193
108 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 161
109 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination”
(Oxford: Hart Publishing, 2012) 169
110 Directive 2014/104/EU [2014] OJ L 349/1, Preamble 13
111 Edited by Lianos, I. & Geradin, D. “Handbook on European Competition Law: Enforcement and Procedure”
(Cheltenham: Edward Elgar Publishing Ltd., 2013) 263
22
Representative actions are actions for damages brought by “a natural or legal person [such as consumer associations, state bodies or trade associations] on behalf of two or more individuals or businesses who are not themselves party to the action, and are aimed at obtaining damages for the individual harm caused to the interest of all those represented (and not to the representative entity [itself])”.113
On the other hand, in “collective actions” the victims themselves “expressly decide to combine their individual claims for harm they suffered into one single action”.114
This is more akin to US style class actions.
The availability of the possibility of launching such group actions can have a positive effect by enhancing private enforcement.115 One of the main benefits associated with them is that it can provide an incentive to pursue private enforcement for those victims who might otherwise have decided not to do so due to the potentially small amount that could be recovered and the possibility of incurring high litigation costs.116 Furthermore, from a procedural point of view, it could be more efficient that multiple recoveries for the same harm are avoided and instead are combined into one single proceeding.117
To illustrate some of the differences that the collective redress mechanisms have among the Member States, two brief case studies will be examined.
2.3.2. UK & Germany
The Member States that will be examined are the United Kingdom and Germany. These Member States were chosen because they both have advanced competition law regulations and because the UK has the common law system, while Germany represents the civil law.
2.3.2.1. The United Kingdom
For the sake of clarity, in this context, the UK is meant to represent the laws of England & Wales. Scotland has not introduced a group litigation mechanism yet.118
113 Staff Working Paper, SEC(2008) 404, para 49 114 White Paper, COM(2008) 165 final, p.4 115
Jerez, H., V. “Competition Law Enforcement and Compliance across the World: A Comparative Review” Vol. 61 (Alphen aan den Rijn: Kluwer Law International, 2015) 416
116 Ibid 256
117 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination”
(Oxford: Hart Publishing, 2012) 169
118
http://globalclassactions.stanford.edu/sites/default/files/documents/England_Country%20Report.pdf - accessed on May 21st, 2015
23
The main collective redress mechanisms that are available in the UK are group litigation orders (GLO) and two types of representative actions.
The GLOs119 are more similar to a case management procedure rather than a new form of civil procedure. The court may decide either by an “application or on its own initiative, whether a GLO procedure will be applied, when a number of claims giving “rise to common or related issues of fact or law” exist or are presumed to exist”.120
These claims are entered into a group register established for the purposes of the GLO.121 If a judgement is given in a claim on the group register then it is binding on all the members of that group and the judge can decide on the “binding effects for future claims that will be entered in the register”.122 However, “each plaintiff has to prove his or her damage individually and these issues have to be decided upon an individual basis” unless there has been a settlement agreement which is to be divided between the members of the group.123 This is somewhat similar to a class or collective action.
There are two types of representative actions available – one that is general and another one that is available only for consumers.
The first representative action that is available under the Civil Procedure Rules124 allows one named person to file “an action on his own behalf and on behalf of a represented class, when they share the same interests”.125
The requirement for the same interest has been traditionally interpreted as meaning: “a) a common interest, arising, for example, from the same contract; b) a common complaint; and c) a remedy other than damages that benefits all represented”.126
“The represented class members do not themselves become party to the litigation, but are bound by the outcome, unless the court rules otherwise.”127
The second distinctive representative action stems from the Competition Act and is only available for cases dealing with consumers.128 This enables a specified body to bring a follow-on action for damages “on behalf of two or more consumers who have claims in respect of the same
119 (UK) Civil Procedure Rules, Part 19III 120
Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel: Intersentia Publisher, 2010) 212
121 id 122 id 123
id
124 (UK) Civil Procedure Rules, Part 19II
125 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 210
126 Ibid 211 127
Ibid 210
24
infringement”.129
Individuals who wish to pursue such a claim must expressly consent to be represented and to become part of the action.130 “The individuals represented are protected against an adverse cost ruling in case the claims would be unsuccessful” and in such a case the specified body faces the risk of bearing the costs.131 Damages are awarded on an individual basis unless there has been a settlement, which would then be distributed by the specified body.132 However, this action has not yet been widely used.133 The most high profile case in which this action was brought was the Replica T-Shirts134 case that involved a price-fixing cartel between the manufacturers and distributors of football T-Shirts.135 When the case was settled the harmed consumers were only entitled to a “free mug or T-Shirt or optionally £10, upon proof of purchase of one of the T-Shirts in question in one of their stores”.136
This was a brief overview of the main collective redress actions available in the UK and, as will be seen, there are differences with the available actions in Germany.
2.3.2.2. Germany
The situation is different in Germany.
Collective actions as such do not exist in Germany.137 An interesting alternative is offered by a Belgian corporation – Cartel Damages Claims (CDC) – that acquires “the damage claims of many affected companies by way of purchase and assignment and initiate[s] proceedings before the German courts”.138
“While this principle does not in itself form a real group litigation mechanism”, it has been fairly successfully applied in Germany.139 The problem with such an alternative private
129 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 188
130 id
131 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 216
132 id
133 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 188
134 The Consumer Association v JJB Sports PLC, Competition Appeal Tribunal Case no 1078/7/9/07
135 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 226
136
id
137 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 170
138 Basedow, J., & Francq, S., & Idot, L. “International Antitrust Litigation: Conflict of Laws and Coordination”
(Oxford: Hart Publishing, 2012) 167
139
Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel: Intersentia Publisher, 2010) 233
25
enforcement mechanism is that the CDC is unlikely to pursue small claims as the potentials gains might not be a high enough incentive.140
There are two available representative actions – one for an injunction and the other for damages.
In representative actions for an injunction, a trade association may have standing if it represents a “substantial number of affected firms as members” and that those firms offer “the same or similar products or services on the same market” as the competition law violator.141
Consumer association were “expressively not included” and do not fall under the definition of an association.142
Such trade associations may also pursue representative actions for damages if there has been a competition law infringement that has been done intentionally and affects a large number of parties.143 This would initiate the skimming-off procedure which has the aim “to deprive anyone who unfairly distorted competition of his illegal gains”.144
But this is only possible if the Federal Cartel Office has not already “collected the illegally gained profits in a public investigation”.145
However, crucially, the proceeds from the trial go to the Federal Budget and not to the association who brought the action.146 As can be imagined, this does not provide an incentive for the active pursuit of these kinds of actions among trade associations and for this reason trade associations have not yet pursued such a representative action for damages.147 Furthermore, they “are burdened with the risk of bearing their own and their opponent‟s costs if they lose”.148
2.3.2.3. Summary
As can be seen in the case-studies of the UK and Germany, even though, collective redress mechanisms as such do exist in both Member States, there are differences between them and the
140 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 171
141 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 231 & Gesetz gegen Wettbewerbsbeschränkungen (Act against Restraints on Competition) § 33
142 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 232
143 Id
144http://globalclassactions.stanford.edu/sites/default/files/documents/Germany_National_Report.pdf, p.23 – accessed on
May 22nd, 2015
145
Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56 (Alphen aan den Rijn: Kluwer Law International, 2014) 170
146 Keske, S., E. “Group Litigation in European Competition Law: A Law and Economics Perspective” (Mortsel:
Intersentia Publisher, 2010) 232
147 Rodger, B., J. “Competition Law, Comparative Private Enforcement and Collective Redress Across the EU” Vol. 56
(Alphen aan den Rijn: Kluwer Law International, 2014) 170
26
resulting remedies are also different. One major difference is that consumers do not appear to be able to bring any type of group actions in Germany apart from the possibility granted by CDC.
A good illustration of where potential problems might lie is in the recent Commission‟s Statement of Objections that was sent to Gazprom whereby it alleges that Gazprom is abusing its dominant position in several Member States.149 For example, in the scenario in which Gazprom is found to be abusing its dominant position it would become liable to attract private enforcement claims. Since it is accused of pursuing an unfair pricing policy in five Member States150, it can be assumed that there would be consumers that would be harmed. It will be further assumed that the damage done to each individual would not be that great to provide a high incentive to pursue a private enforcement claim. Due to the differences in the collective redress mechanisms across the EU, in some Member States the consumers might be denied standing while in others they would be allowed.
It seems unfair that in the European Union some people might be denied recovery while others allowed due to such a difference in procedures.151
2.4. Conclusion
The discussion that has taken place can be concluded by saying that while private enforcement is available in the European Union, there remain issues that can hinder its effectiveness.
The parties can have the opportunity to abuse the rules relating to jurisdiction to their advantage either through the anchor defendant or the “Italian Torpedo”. Furthermore, the differences in the rules promote the incentive to forum shop. The differences in collective redress mechanisms across the EU lead to the situation whereby the citizens of some Member States are better protected than the citizens of others. This could be described as being unfair and in need of change.
The next Chapter will propose a potential development that could help solve these issues and, therefore, improve the effectiveness of private enforcement in the EU.
149http://europa.eu/rapid/press-release_IP-15-4828_en.htm - accessed on 27th May, 2015 150
id
