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Coursework

International competition law


Question no. 2
Presented by
Mohamed Hemdani
Student no. 100142919

Table of contents

Introduction

1- Public enforcement of EU competition law

2- The emergence of the need to private enforcement

3- Private enforcement of EU competition law and the 2014 Directive

a- Difficulties to an effective private enforcement

b- How the directive tackles those difficulties


i-

Access to evidence

ii-

Joint and several liability

iii-

Indirect purchasers standing and the passing-on defence

iv-

The follow-on rule

4- Conclusion

Introduction
The purpose of the modern competition law is to protect the competitive process from
cartels, unreasonable restrains, and improperly acquired or maintained monopolies; to
regulate anticompetitive mergers; to promote business efficiency; and to protect
consumers.1
Public and private enforcement systems are the two pillars of competition law
enforcement. While public enforcement is considered the main and the most recognised
enforcement system.
Private enforcement is a relatively new one especially in the EU; however, it has been
the driving force of the US antitrust enforcement since the middle of the 20th century.2
Both systems have their benefits and costs, thats why finding a way to optimally
integrate both in one system is crucial.
Furthermore, the efficiency thereof should be assessed on the bases of the way they
address the goals of competition law without hindering the economic advancement of
undertakings, nor burdening the judicial system3.
European court of justice clearly affirmed in Courage v Crehan 4 that the right of those
affected of the wrongdoings in violation of articles 101 and 102 of the TEFU is to obtain
reparation for the damages incurred. Moreover, it stated that such claims are of the
utmost importance for the effective safeguard of the interests protected by the
competition rules.5
However, in Europe generally, the public enforcement system is the dominant
competition law enforcement system. Consequently, assessing the costs and benefits of
adding the private enforcement system to the existing one should be taken into
consideration in designing the optimal competition law enforcement system.6
This paper aims at reaching an understanding of the problems that triggered the need
for a European framework harmonising private enforcement, and whether the EU
directive on antitrust damages actions passed into law on 25 November 2014November 25, 2014 strikes the right balance between encouraging private actions for
damages and protecting public enforcement, focusing on the barriers to the effective
recovery of damages that might still exist despite the provisions of the directive.

Donald I. Baker, Revisiting History What Have We Learned About Private Antitrust
Enforcement that We Would Recommend to Others (2004) Loyola Consumer Law Review
vol.16(4)
2 Kai Hschelrath and Sebastian Peyer, Public and Private Enforcement of Competition Law A
Differentiated Approach, Discussion Paper No. 13-029, center for European economic research.
3 Ibid (1)
4 Courage Ltd. v. Bernard Crehan, Case C-453/99, 2001 E.C.R. I-6297
5 Valentine Mercia, The private enforcement of the competition rules in the European union A new
starting line, < https://www.competitionpolicyinternational.com/the-private-enforcement-ofthe-competition-rules-in-the-european-union-a-new-starting-line/ > accessed 5/1/2016
6 Ibid (2)
1

We will start with a brief characterization of both systems; following, the need of
integration; and finally, how the directive balance between the two systems and the
barriers for the full functioning of the directive in terms of achieving its goals.
1- Public enforcement of EU competition law
Public competition law enforcement refers to the system where Article 101 and Article
102 of the TFEU are enforced by the European Commission and by the National
Competition Authorities of the Member States when the anti-competitive practices
affect trade between Member States.7
The main aim of public enforcement of competition law is to deter undertakings from
engaging in anti-competitive practices by adopting a fining system that have a
sufficiently deterrent effect8.
Therefore, the main mechanism for the functioning of the public enforcement is to
impose deterrent fines, so that to make it unprofitable for firms to engage in anticompetitive behaviors, and of an amount inversely proportional to the chance of being
detected.
Although the level of a fine is fixed by having regard to the gravity and duration of the
infringement, the Commission can depart from the usual methods of calculation to
achieve effective deterrence. 9
Participants to cartels can benefit from a reduction of the fines imposed or even from
total immunity by applying for leniency and/or by opting for a settlement procedure. 10
2- The emergence of the need to private enforcement
Notwithstanding the increased level of the fines imposed by the Commission in recent
years, in particular in relation to cartels, anti-competitive practices continue to occur on
a large. The deterrent goal seems therefore far from being achieved.
Doctrine has given a variety of explanations to this lack of a proper deterrent effect,
including the inadequacy of a maximum fine based solely on turnover figures and
unrelated to the effective gains of the infringements, the lack of any criminal sanctions
and the underdevelopment of actions for damages.11
On this latter point, many scholars consider that private enforcement should provide
additional deterrence to that typical of the public enforcement system: a potential
infringer, while evaluating whether to engage in an anti-competitive practice, should

Caterina Migani, Directive 2014/104/EU: In Search of a Balance between the Protection of


Leniency Corporate Statements and an Effective Private Competition Law Enforcement, Global
Antitrust Review (2014)
8 Guidelines on the method of setting fines imposed pursuant to Article 23(2)a of Regulation
1/2003 [2006] OJ C210/2 (Fining Guidelines), para 4.
9 Ibid (5) page 84
10 Commission Notice on immunity from fines and reduction of fines in cartel cases, [2006] OJ
C298/17
11 Barbara L. Boschetti, 'Enforcement nel Diritto Antitrust e Risarcimento del Danno' (2013) 1
Concorrenza e Mercato 27, in, ibid (7) page 85
7

consider the threat of an action for damages as a real cost, as well as the probability to
be detected by the competition authorities.12
Another, more social, point constituting a reason for the adoption of a private
enforcement system is to increase the public feeling of justice; thus, when a harmed
individual- specially an indirect purchaser- gets personal damages for harm, that
directly affects his belief in the efficiency of the justice system.
3- Private enforcement of EU competition law and the 2014 Directive
Private enforcement refers to the decentralised application of the competition rules
by individuals through private litigation before Member State courts, typically
seeking damages13.
The right to obtain compensation for overcharge harm and lost profits and the direct
applicability of Articles 101 and 102 TFEU have been clearly established by the
ECJ, in particular in the milestone judgments of Courage14 and Manfredi15. Despite
this recognition of its importance, private enforcement has so far had a secondary
role in the EU.16

a- Difficulties to an effective private enforcement


Private competition law enforcement suffers from many shortcomings, especially
when it comes to the cost and risk of litigation and absence of significant incentives
for example treble damages and contingency fees.
Moreover, the uncertainty over the role to be given to the decisions of the NCAs,
the sophisticated economic arguments required, and the limited experience of
national judges in dealing with competition law matters.
In addition, the asymmetry of information suffered by claimants and the difficulty
accessing evidence held by the infringers and subject to different disclosure
regimes across the EU represent a crucial issue which needs to be addressed in
order to build an effective and harmonised private enforcement system.17
Peyer argues that the willingness to begin a legal action depends on the following:
the expected probability to settle or win in court, the expected size of the reward
after settlement or trial, and the expected legal costs.18

Ibid(7) page85
Niamh Dunne, The Role of Private Enforcement within EU Competition Law, Kings College
London Dickson Poon School of Law Legal Studies Research Paper Series, paper no. 2014-37
14 Courage Ltd v Bernard Crehan [2001] ECR I-6297
15 Vincenzo Manfredi v Lloyd Adriatico Assicurazioni [2006] ECR I-6619
16 Ibid (7) page 88
17 Ibid (7) page 89
18 Sebastian Peyer, Compensation and the Damages Directive, center for competition policy,
working paper 15-10, ISSN 1745-9648
12
13

This is true, and reflects the concerns raised by Migani, not only in competition law
infringements cases, but this is also how a claimant thinks before starting any legal
action.
Consequently, the success of the Directive to ensure certainty about the outcome of
damage claims by tackling these issues, striking the balance between public and
private enforcement, will determine its effectiveness.

b- How the directive tackles those difficulties


i-

Access to evidence:

The Directive introduces disclosure to facilitate access to evidence in competition


damages cases in many Member States, chapter II of the convention deals with the
scope of disclosure of evidence and the exceptions thereof.19
Access to evidence is the most important and also controversial part of the treaty,
because, as important as it is for whoever seeking damages for a competition law
infringement, it might contradict with one of the pillars of the public enforcement
system which is leniency programs.
Although the ECJ established the concept of disclosing cartel information including
those in leniency programs in the decision of Pfleiderer 20 and again in Donau
Chemie21, referring that rigidity either by providing for absolute refusal to grant
access to the documents in question or for granting access to those documents as
matter of course, is liable to undermine the effective application of, inter alia,
Article 101 TFEU and the rights that provision confers on individual 22 , the
directive adopted a rigid approach.
The explanatory memorandum of the directive considers the balancing exercise of
Pfleiderer - where judges should 'weigh 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'- as leading to discrepancies
between and even within Member States regarding the disclosure of evidence from
the files of competition authorities' and to 'uncertainty as to the disclosability of
leniency-related information, likely to influence an undertakings choice whether
or not to cooperate with the competition authorities under their leniency
programme.23

Directive 2014/104/EU on antitrust damages actions.


Pfleiderer v Bundeskartellamt [2011] ECR I-5161
21 Bundeswettbewerbsbehrde v Donau Chemie , Case C536/11,
22 ibid
23 Explanatory Memorandum to the Proposal for a Directive of the European Parliament and of the
Council on certain rules governing actions for damages under national law for infringements of the
19
20

Therefore, the directive includes leniency statements (along with settlement


submissions) in the 'black list' of documents which national courts can never order
a party or a third party to disclose,24 in order to ensure 'the undertakings' continued
willingness to approach competition authorities voluntarily with leniency
statements or settlement submissions.25
This seems to favor the public enforcement over the private one, putting the
incentives to whistle blow on competition law infringements for the culprits thereof
in some situations over the interests of the harmed individuals. Notwithstanding the
fact that article 17(2) of the directive gives an infringement presumption to cartel
practices.
This tendency seems logic, since the main aim of enforcement systems, whether
private or public, is to increase deterrence, and if the increase of private
enforcement which is basically oriented around private interests- would
jeopardize the bigger aim of competition law enforcement system then the directive
will lose one of its fundamental aims.
The problem with this is that it fuels the lack of certainty. As it was mentioned
before that harmonisation is the main aim of the directive, and one of the key issues
about harmonization is giving certainty to the parties of a dispute.
Consequently, the fact that access to leniency settlement documents is blocked,
might lead to forum shopping, especially in countries like the UK, Netherlands
and Germany where domestic laws provide for more access to other kinds of
documents, perhaps compensating the denied access to leniency corporate
statements.26
Migani argues that the re-establishment of the 'balancing role' of the national judge,
as supported by the Pfleiderer and Donau Chemie judgments, could be a solution to
that situation.27.
This is an adequate solution, especially it suggests a less discretionary basis to the
judges decision, and the judge will be bound to share the decision with the national
competition authority guided by ad hoc EU regulations, consequently striking the
balance between the public and private enforcement and, therefore, achieving
harmonisation.
ii-

Joint and several liability

competition law provisions of the Member States and of the European Union, COM(2013) 404, 11
June 2013, 3, in, Migani (5) page99
24 Ibid (19)
25 Alison Jones and Brenda Sufrin, EU Competition Law. Text, Cases and Materials (5th edn,
Oxford University Press 2014) , in ibid (5)page 99
26 Ibid (7) page 106-107
27 Ibid (7)page 107

Joint and several liability and the related rule of contribution have a profound effect on
the willingness of defendants to settle, and thus; on the compensation that is potentially
paid to victims of anticompetitive conducts28.
Many EU jurisdictions provide for a principle of joint and several liability.
Article 11 of the Directive changes two things: First, it removes small and medium
sized firms from the pool of jointly liable defendants if certain criteria are satisfied.
Second, it creates uncertainty as to the liability of the immunity recipient and they
distort the incentives of firms to settle disputes29, thus they are only liable by the amount
of their contribution in the harm as described in article 11 (6).
The arrangements for settling defendants are particularly puzzling and may create
unintended incentives on part of the claimant.
According to Article 19(1) of the Directive, settlements will reduce the claimants
remaining claim against other infringers by the whole share of harm that the settling
defendant has caused to the claimant.
For example, the amount of damages acquired by the claimant as if he settles with an
immunity recipient which is responsible for 50% of the harm gets only 25% of the
amount he should get, he then will be suing for only 50% of the amount of the harm
from the other infringers that have not caused direct harm to him but are jointly and
severally liable, even if he was able to get the whole left 50%, at the end he will lose
25% of the damages he deserves.
Alternatively, one could argue that the claim is not reduced at all when settling with a
jointly and severally liable infringer that did not have direct dealings with the claimant.
Article 19(1) reduces the settling injured partys claim by the share of the harm inflicted
upon the injured party which, in this instance, would be zero.30
The problem here is that if the claimant, already settled with one of the infringers, was
able to sue for the whole amount of harm after deducting only the amount settled, that
might result in an overcompensation from the part of the rest infringers, this is
something the drafter of the directive sought to eliminate with article 3(3).
iii-

Indirect purchasers standing and the passing-on defence

Although article 14(2) of the directive granted the right to indirect purchasers to assume
damages with the realisation of certain conditions, the flipside of acknowledging that
some or all of the harm has been passed on to the next level in the distribution chains
is recognising the passing-on defence.31

28Timothy

J Stanley, An Analysis of the Rules of Contribution and no Contribution for Joint and
Several Liability in Conspiracy Cases (1994) 35 Santa Clara Law Review 1122, in, Ibid (18) page
20
29 Ibid.
30 Ibid (18)p22
31 Ibid (18)

The European Commission has recommended that Member States adopt opt-in class
actions but this is not a binding legal measure32.
Cordozo argues that the EU should use the opt-out collective redress mechanism for
collective actions that reach judgment. Thus, one of the major drawbacks of the opt-in
system is that it will inevitably fail to include many injured parties who either never
receive notification of the impending lawsuit, or simply fail to opt-in, specially that the
available empirical evidence shows that indirect purchaser actions are a rather rare33.
There is no doubt that adopting an opt-out mechanism in collective redress under the
EU directive would maximise the deterrent effect specially with the directive giving
judges discretionary powers in assessing damages; thus, a judge would take into
consideration the amount of harm affected all the purchasers not only the claimant.
Additionally, that would ease the burden of litigation for indirect purchasers who suffer
from a lot of asymmetries regarding information gathering and litigation costs.
In a related context, Chapter IV tackles the contentious issues of the passing-on
defence, namely where a claimant has passed on to its own customers the entirety or
part of an overcharge resulting from the competition infringement.34
While some recognise the importance of the passing on defence on the grounds of
equality and preventing the overcompensation, Baker argues that passing on defence
might result in allowing culprits of competition law infringers to a windfall of extra
conspiracy-generated money, saying that in the absence of such defence, regulators
can force damage recoverees to reduce their rate bases and hence benefit the
customers.35
Bakers argument could be quashed on the grounds that the directive only allows the
passing on defence on relative bases, as to the ratio of the defendants contribution to
the total harm.

iv-

The follow-on rule

The Damages Directive makes decisions of the European Commission and the
national competition authority binding in that respective jurisdiction.
Arguably, the follow-on rule improves legal certainty and helps parties to better
estimate their chances of success.
Whereas Sebastian argues that the Directive does not exactly define which elements of
a public decision constitute the binding part and this may lead to uncertainty,

Commission Recommendation of 11 June 2013 on common principles for injunctive and


compensatory collective redress mechanisms in the Member States concerning violations of
rights granted under Union Law [2013] OJ L201/60.
33 Ibid (18)
34 Ibid (13)page 16
35 Ibid (1)
32

consequently, increases the potential cost of litigation, at least until this has been
clarified by the courts36.
However, this argument is not as significant, thus general Ratio decidendi rule
would apply here and the statement of law which is essential to the decision in the
case will be the binding part.
In addition, some of the Obiter dicta, findings due to investigations by the court or
national competition authorities, might be important in terms of deciding the amount
of damage based on the real harm incurred.
Judges will have to extend the meaning of the articles concerning this point in order to
maximise the benefits thereof by using all available information included in a
judgement.
4- Conclusion
No doubt that private enforcement plays a very important role for an effective
competition law enforcement system. The EU member states tried to introduce the
idea on different scales and degrees along with the ECJ, in recognition of its
importance.
The relationship between the public and the private side has been a difficult one, with
many scholars supporting the exclusive role of fines in pursuing deterrence while
others, backed by the ECJ judgments of Courage and Manfredi, sustaining that
damages should also have an important deterrent effect.37
The Directive presents an attempt to strike a balance between public and private
enforcement; however, in some points it failed to strike such balance as we mentioned
earlier regarding the access to leniency information, nevertheless, this seems to be
naturally hard to achieve.
Also the fact that there are still some obstacles facing damage seekers, whether direct
or indirect purchasers, is evident.
The Directives motivation towards indirect purchaser standing and passing-on
increases the costs of legal action while reducing the expected reward, if failed
address important aspects of antitrust litigation: legal costs, cost shifting and claim
aggregation, those are obstacles that the Directive shouldve tackled more properly.
One could argue that the Directive is not about compensation anyway but about the
protection of public enforcement in general, and leniency programmes in particular.38
Finally, in dealing with the current situation, it is going to be on the member states to
address those problems with enhanced internal legislations trying to remove as much
obstacles as they can, presumably by adding more certainty to the litigation process
and providing solutions to the litigation cost and damages quantification, in addition
to granting access to information without jeopardizing public enforcement goals.
Ibid (18)
ibid(7)
38 ibid(18)
36
37

Bibliography
1- Baker Donald I., Revisiting History What Have We Learned About Private
Antitrust Enforcement that We Would Recommend to Others (2004) Loyola
Consumer Law Review vol.16.
2- Hschelrath Kai and Peyer Sebastian, Public and Private Enforcement of
Competition Law A Differentiated Approach, Discussion Paper No. 13-029,
center for European economic research.
3- Mercia Valentine, The private enforcement of the competition rules in the
European
Union

A
new
starting
line,
<
https://www.competitionpolicyinternational.com/the-privateenforcement-of-the-competition-rules-in-the-european-union-a-newstarting-line/ >.
4- Migani Caterina, Directive 2014/104/EU: In Search of a Balance between
the Protection of Leniency Corporate Statements and an Effective Private
Competition Law Enforcement, Global Antitrust Review (2014).
5- Dunne Niamh, The Role of Private Enforcement within EU Competition Law,
Kings College London Dickson Poon School of Law Legal Studies Research
Paper Series, paper no. 2014-37.
6- Peyer Sebastian, Compensation and the Damages Directive, center for
competition policy, working paper 15-10, ISSN 1745-9648.
7- Commission Recommendation of 11 June 2013 on common principles for
injunctive and compensatory collective redress mechanisms in the
Member States concerning violations of rights granted under Union Law
[2013] OJ L201/60.