Europe's new Directive on antitrust damages

Professor Kevin A. Diehl*

Subject: Competition law. Other related subjects: Civil evidence. Civil procedure.
Damages. Dispute resolution. European Union
Keywords: Alternative dispute resolution; Cartels; Damages; Disclosure; EU law; Joint and
several liability; Limitation periods; Passing on; Private enforcement
Legislation: Directive 2014/104 on actions for damages under national law for infringements
of the competition law provisions [2014] OJ L349/1

*G.C.L.R. 34 Introduction
On November 26, 2014, the EU Parliament and Council enacted the Directive on Antitrust
Damages. In enacting this Directive, the bodies sought to bolster arts 101 and 102 of the
Treaty on the Functioning of the EU (TFEU). Because differences in procedural rules and
liability among EU countries can create imbalances in the internal market, the legislators
relied in part of arts 103 and 114 TFEU to legislate these changes. The main provisions
establish easier access to evidence, final infringement decisions with more widespread
precedential authority, limitation periods, rebuttable presumptions for indirect customers in
passing-on situations, full compensation for victims, rebuttable presumptions of cartels
creating harm, and joint and several liability on infringers.

Background
The Directive emerged from the June 2013 Commission proposal to the Parliament and
Council.1 After legislators reviewed the proposal and offered amendments, discussion
meetings occurred in February 2014 with the objective of reaching compromise. The
Parliament and countries governments reached final compromise in March 2014. The
Parliament formally acquiesced to the final compromise text in April 2014. 2

Legislative intent
While this Directive creates more certainty and rights for private enforcement, it reminds that
alternative dispute resolution and public enforcement are still necessary for proper redress to
occur. Furthermore, the Directive indicates that its purpose is to deal with rules differences
among the EU countries, which have created uncertainty and unequal treatment.

Effectiveness and equivalence principles v extra elements

The Directive reminds that national compensation rules for such causes of action must
comply with effectiveness and equivalence principles. Thus, while nations can include
adequacy, imputability, or culpability as additional elements, effectiveness and equivalence
ultimately decide whether those extra elements stand.

Full recovery
National legislation must permit recovery for actual loss, profit loss, and interest. The interest
must begin accruing at the time of the harm and continue through the victims receipt of the
compensation payment. However, overcompensation must not occur either.

Evidence disclosures
Because of information asymmetry, the victim should not have to offer extensive specifics to
bring the cause of action but instead should have rights to disclosure from the defendant and
any relevant public authorities. Article 4(3) TEU authorises cooperation between the EU and
the countries. Article 15(1) Regulation (EC) 1/2003 also applies regarding information
requests. If courts must cooperate internationally to obtain evidence, Council Regulation (EC)
12/06/2001 applies.
However, the victim must first offer the plausible assertion based on facts reasonably
available of the harm the defendant caused. If the victim then so complies, categories of
evidence can be requested. The object and time must be specified. Courts should protect
confidential information so obtained from public disclosure. The Directive does not speak to
national legislation on further review of disclosure orders. Similarly, the rules underRegulation
(EC) 1049/2001, limiting disclosures based on public or private interest balancing, are not
affected. Also, as before, there is no right to disclosure of discourse between competition
authorities, and information disclosure that would interfere with continuing competition
authority review never can occur. Only part of any competition authority file on the defendant
is likely ever necessary. In the end then, proportionality should be the controlling factor. All
the following being true then, competition authorities can still volunteer observations to
courts under art.15(3) of Regulation (EC) 1/2003.

Evidentiary penalties
Similarly, to encourage continued cooperation with competition authorities, courts should not
require disclosure of leniency requests or settlements unless voluntary and self-incriminating.
As to the defendants, courts should have penalties available to penalise for the*G.C.L.R.
35 destruction of evidence. The risk of adverse inferences would be an effective deterrent on
defendants. As to the plaintiff, failure to continue maintaining the confidentiality of
information or abuse of disclosed information should similarly face penalties.

Precedential authority
Efficiency should be encouraged. Findings of infringement under art.101 or 102 TFEU should
not require further litigation on the proofs as damages causes of action are filed. For
instance, in actions in countries other than the final infringement ruling country, this finding
should nonetheless be prima facie evidence. On the other hand, national competition
authorities decisions should not interfere with national courts rights under art.267 TFEU.

Statute of limitations time

The limitations time should not start before competition authority infringement proceedings
cease or before the potential plaintiff knows or reasonably can be expected to know of the
actions, harms, and infringer identity underlying the infringement.

Joint and several liability

Cartel activity warrants joint and several liability. The plaintiff can pursue damages in
proportion to the infringement against each infringer or, in the alternative then, pursue all the
damages from any particular infringer. The infringer in the latter case can seek contribution
from the other infringers after the fact. Interestingly enough, while the Directive wants
unification of legislation, it permits the determination of each infringers share, whether based
on revenues, role, or market share, to be determined under national rules. Even though
effectiveness and equivalence principle still must apply, this concession is interesting.
Infringers cooperating under leniency programs should have some protection from
overindulgent damages claims, such as all the damages being pursued against that party
under joint and several liability. Usually, cooperating infringers are the first party exposed as
engaging in these illegal activities and otherwise would be easy prey for all damages to be
pursued against them. The only exception is if the victims cannot get full compensation from
the other infringers not subject to the leniency programs.

Passing-on defense
The actual loss can be the price differential between actual price and price absent the
infringement. An infringer can utilise the defense of passing on. If the plaintiff actually has
passed the actual loss on to others entirely, then that plaintiff has no right to pursue
damages. Nevertheless, passing on can still result in reduced sales. This harm can result in
damages for profit loss.
Indirect consumers can claim the prima facie case of harm by showing the passing on.
Infringers can try to rebut the presumption by showing the direct purchaser did not entirely
pass on the overcharges. The Directive delegates the authority to regulate the area to the
Commission in requiring it to provide courts with guidelines on determining passed-on
overcharges to indirect consumers.

Supplier plaintiffs
The existence of buyer cartels can result in lower prices paid to suppliers. As such, this
situation also requires consideration of passing on.
Actions in different countries can be considered to be related under art.30 of Regulation (EU)
1215/2012. As such, courts should have the opportunity to stay or decline jurisdiction over
actions or otherwise ensure that other courts damages findings do not result in
overcompensation.

Quantifying damages
Nations have their own authority to determine standards for quantifying the damages. The
limitations are that the requirements cannot result in damages actions being impossible
under effectiveness or being more difficult than similar domestic causes of action under
equivalence. Providing general guidance is delegated to the Commission.

Alternative dispute resolution

The Directive encourages alternative dispute resolution. First, it permits the statute of
limitations to stop running during such proceedings. Second, the Directive allows national
courts to suspend proceedings for the resolution to proceed. Finally, settling infringers should
not be pursued for all the damages under joint and several liability unless the other infringers
cannot fully compensate the plaintiffs for the rest of the damages. However, even this
exception can be removed for the settling infringer if its exclusion from continued joint and
several liability is provided for in the settlement.

Subsidiarity and then proportionality

The EU is then, under subsidiarity, allowed to adopt provisions to ensure the proper
functioning of the internal market with regard to arts 101 and 102 TFEU damages actions.
The Directive is not permitted to venture beyond what is required to meet its intended
objectives.

Directive text
Chapter I has arts 14. Article 1 provides the subject matter jurisdiction. Article 2 defines the
important legal concepts. Article 3 describes the right to full*G.C.L.R. 36 compensation but
not overcompensation. Article 4 relates the effectiveness and equivalence principles to the
situation at hand.
Chapter II contains arts 58. Article 5 deals with evidence disclosure in the end permitting
nations to provide for more disclosure than for which the Directive otherwise provides. Article
6 specifically delimits the extent to which competition authority files must be disclosed, giving
the competition authority ultimately the ability to volunteer observations. Article 7 further
defines the extent of competition authority file disclosure. Article 8 establishes penalties for
violations regarding evidence both to the plaintiff and the defendant. It permits the nations to
determine the actual penalties.
Chapter III reveals arts 911. Article 9 determines the precedential effect of national
competition decisions. Article 10 analyses the statute of limitations, requiring at least half the
decade as the time. Article 11 provides for joint and several liability.
Chapter IV discusses passing on in arts 1216. Article 12 explains the right to full
compensation in the context of passing on. Article 13 reveals the passing-on defense. The
next article defines indirect purchasers. Article 15 analyses damages claims effects on
different supply-chain levels. Article 16 delegates to the Commission the responsibility for
issuing guidelines to courts on determining overcharges shares passed on to indirect
purchasers.
Chapter V provides for the damages quantification through art.17. This article permits the
competition authority to intervene to help determine the amount of damages.
Chapter VI encourages alternative dispute resolution through arts 1819. Article 18 enables
alternative dispute resolution. Article 19 details the effect of settlements on other damages
actions.
Chapter VII contains the final procedural provisions in arts 2024. The Directive then ends at
this point.

Implications
Despite seeking unification of competition enforcement, the Directive permits nations to
determine their own penalties for evidentiary disclosure violations. It also enables nations to
have their own standards on how to ascertain the quantification of damages. Finally, the
statute of limitations time can differ in nations subject to the minimum. While nations must
consider effectiveness and equivalence, it is interesting that provisions meant better to
enable recovery for competition infringements do not provide for unified quantification
standards.
Forum shopping is still available. All else equal then, plaintiff friendly countries (higher
penalties for evidentiary disclosure violations, easier standards for quantifying damages, and
longer statute of limitations times) would be where the top levels of vertical integration
infringements would exist. They could then use the passing-on defense, leaving it to their coconspirators in defendant friendly countries (lower penalties for evidentiary disclosure
violations, more difficult standards for quantifying damages, and shorter statute of limitations
times) to deal with the issues. Ultimately, the vertical integration competition infringers would
avail themselves of differences in legal systems to the same extent tax planners avail
themselves of differences in tax system rates.
Even though the Directive intends full compensation for victims of competition infringements,
it does not move to the US standard of permitting punitive damages. Indeed, the Directive

says that there should in no way be overcompensation. Thus, the emphasis is more on
restoring the victims to the place they should have been than on punishing the infringers as
the deterrent. Discovering competition infringements is far more difficult than many other
causes of action, which the Directive even acknowledges on many occasions. Thus, imposing
punitive damages for the infringements noticed seems important to deter the others who
otherwise could continue undetected. Without even permitting nations to impose punitive
damages as no overcompensation is allowed, the Directive does not move far enough.
Again, the EU fear that more litigation than necessary could result seems to underlie the
choice not to move more completely toward the US model of private antitrust enforcement.
However, as this paper has previously stated, detecting competition violations is more difficult
than for many other causes of action. As such, private antitrust litigation, even with still more
lenient rules for plaintiffs in the US, falls far short of the number of causes of action for
securities fraud violation, derivative actions, etc. While these implications could seem to be
plaintiff friendly, readers should strongly consider that client companies are far more likely to
be victims in competition infringement actions than in any other types of business litigation,
such as the securities fraud, derivative actions, etc., previously mentioned.

Conclusion
The main provisions establish easier access to evidence, final infringement decisions with
more widespread precedential authority, limitation periods, rebuttable presumptions for
indirect customers in passing-on situations, full compensation for victims, rebuttable
presumptions of cartels creating harm, and joint and several liability on infringers. While
many of the new provisions to help victims of competition infringement do offer more
effective assistance than what existed before, the Directive does not move far enough toward
the US model.
Professor Kevin A. Diehl
G.C.L.R. 2015, 8(1), 34-36
*.
Department of Accounting and Finance, Western Illinois University.
1.
Frequently Asked Questions: Commission proposes legislation to facilitate damage claims by victims of antitrust
violations, MEMO/13/531.
2.
Antitrust: Commission proposal for Directive to facilitate damages claims by victims of antitrust violationsfrequently
asked questions, MEMO/14/310.

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