DIRECTORATE-GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY Collective Redress in Antitrust STUDY Abstract Consumers regularly suffer harm in the form of higher prices, lower output, reduced quality and limited innovation as a result of antitrust infringements but they are rarely compensated due to legal and practical obstacles. Collective redress is a mechanism that may accomplish the termination or prevention of unlawful business practices which affect a multitude of claimants or the compensation for the harm caused by such illegal practices. This study analyses the systems of collective redress for breach of competition law in the area of antitrust in the EU. Starting with an overview of the relevant national and EU legislation in this area, it discusses the question of an EU-wide specific system for collective redress in antitrust and the legal basis for a legislative initiative at EU level. Finally, it assesses advantages and limits of different policy options in relation to several procedural rules both generally applying to collective actions and specifically relevant to collective redress in antitrust. IP/A/ECON/ST/2011-19 JUNE 2012 PE 475.120 EN This document was requested by the European Parliament's Committee on Economic and Monetary Affairs. AUTHORS Paolo BUCCIROSSI, Lear Michele CARPAGNANO, University of Trento Lorenzo CIARI, Lear Massimo TOGNONI, Lear Cristiana VITALE, Lear With contributions by: Luca AGUZZONI, Marco BELLIA, Gaia BELLOMO and Riccardo ZECCHINELLI RESPONSIBLE ADMINISTRATORS Doris KOLASSA Stephanie HONNEFELDER, Seconded National Expert Policy Department A - Economic and Scientific Policy/ECON European Parliament B-1047 Brussels E-mail: [email protected] LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR To contact the Policy Department or to subscribe to its newsletter please write to: [email protected] Manuscript completed in June 2012. Brussels, © European Union, 2012. This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy. Collective Redress in Antitrust ___________________________________________________________________________________________ CONTENTS LIST OF ABBREVIATIONS 6 GLOSSARY 7 LIST OF TABLES 10 LIST OF FIGURES 10 EXECUTIVE SUMMARY 11 INTRODUCTION 15 1. STATE OF PLAY 18 1.1. Collective redress schemes in the EU 19 1.1.1. Identification of claimants 20 1.1.2. Legal standing: who is allowed to sue? 21 1.1.3. Binding or non-binding antitrust infringement decision 24 1.1.4. Limitation period for introduction of claims 26 1.1.5. Gathering evidence and disclosure of information 29 1.1.6. Allocation of cost 31 1.1.7. Sources for funding legal expenses 32 1.1.8. Provisions to facilitate settlement 33 1.2. Overview of case law 36 1.3. Conclusions 37 2. EVALUATION OF NATIONAL SYSTEMS 38 2.1. Evaluation of national systems 38 2.1.1. Effectiveness evaluation 39 2.1.2. Efficiency evaluation 41 2.2. Added value of an EU-wide system of collective redress in antitrust 42 2.2.1. Potential benefits of an EU-wide system 42 2.2.2. Potential costs of an EU-wide system 44 2.3. Conclusions 45 3. LEGAL ISSUES RELATED TO AN EU-WIDE SYSTEM OF COLLECTIVE REDRESS IN ANTITRUST 46 3.1. General law principles for an EU initiative in civil substantive and procedural rules 46 3.1.1. The principle of subsidiarity 46 3.1.2. The principle of proportionality 47 3.1.3. Competence of the EU to legislate on collective redress - principle of conferred powers 47 3.1.4. General principles on civil and procedural law 48 PE 475.120 3 Policy Department A: Economic and Scientific Policy ___________________________________________________________________________________________ 3.2. Specific legal issues related to the parallel competence to apply EU competition law by the European Commission and by National Competition Authorities 49 3.3. Specific legal issues related to the cross-border dimension of an EU initiative 50 3.3.1. Information issues: opening of procedure(s) 50 3.3.2. Information issues: network to connect and organise potential claimants 50 3.3.3. Jurisdiction conflicts and duplication of judgements 51 3.3.4. Forum shopping - location of court action 52 3.3.5. Applicable law 52 3.3.6. Execution of court decisions 53 3.4. Legal instrument: horizontal or antitrust-sector specific EU initiative? 54 3.4.1. Horizontal initiative 54 3.4.2. Sector-specific initiative in antitrust 54 3.5. Legal basis for a coordinated European approach to collective redress in antitrust 55 3.5.1. Judicial cooperation in civil matters (Article 81 TFEU) 55 3.5.2. Approximation of laws (Article 114 TFEU in conjunction with Article 169 TFEU) 57 3.5.3. Competition law area (Article 103 TFEU) 59 3.5.4. Dual basis: Articles 103 and 114 (in conjunction with Article 169) TFEU 60 3.6. Conclusions 63 4. INCENTIVES AND SAFEGUARDS 64 4.1. Identification of claimants (opt-in/opt-out) 65 4.2. Commonality of interest among the claimants 67 4.3. Standing: who should be allowed to bring a collective action? 68 4.3.1. Competence and loyalty of consumers’ associations 68 4.3.2. The ability of collecting funds 68 4.3.3. Small and medium-sized enterprises 69 4.4. Funding of legal costs: what kind of funding should be allowed? 70 4.4.1. Contingency and Conditional fees 70 4.4.2. Insurance products 71 4.4.3. Legal aid 71 4.4.4. Contingency legal aid funds (CLAFs) 72 4.4.5. Private funds 72 4.5. Recovery of legal costs 72 4.6. Gathering evidence and disclosure of information 73 4 PE 475.120 Collective Redress in Antitrust ___________________________________________________________________________________________ 4.7. How damages should be determined 75 4.7.1. Punitive damages 75 4.7.2. Passing-on arguments 76 4.8. Incentives to settle 76 4.9. Conclusions 78 5. INTERACTION BETWEEN PUBLIC AND PRIVATE ENFORCEMENT IN ANTITRUST 80 5.1. Binding or non-binding effect of public decisions? 80 5.2. Interaction with procedures specific to antitrust infringements 82 5.2.1. Interaction with leniency programmes 82 5.2.2. Interaction with cartel settlement procedures 83 5.2.3. Interaction with commitment decisions 84 5.3. Access to information held by the Commission and NCAs 84 5.3.1. Access to the file in general 84 5.3.2. Access to leniency applications 85 5.4. Limitation periods 86 5.5. Role of national competition authorities and the European Commission as amicus curiae and of the ECJ in preliminary rulings 86 5.6. Conclusions 87 6. RECOMMENDATIONS 88 6.1. Legal issues 88 6.1.1. Legal instrument: horizontal or antitrust-specific 88 6.1.2. Legal basis: Article 103 TFEU 88 6.1.3. Legislative Act: directive or regulation 88 6.2. Incentives and safeguards 89 6.3. Interaction between public and private enforcement in antitrust 90 REFERENCES 91 ANNEX 1: Details on the analysis on the legal admissibility of an EU-wide system for collective redress 94 ANNEX 2: Notification of the decision opening the procedure 97 PE 475.120 5 Policy Department A: Economic and Scientific Policy ___________________________________________________________________________________________ LIST OF ABBREVIATIONS ACPERA U.S. Antitrust Criminal Penalty Enforcement and Reform Act ADR Alternative Dispute Resolution AGCM Autorità Garante della Concorrenza e del Mercato (Italian Competition Authority) ATE After-the-event insurance CAT Competition Appeal Tribunal (UK) CJA Collective Judicial Action CPC Consumer Protection Cooperation GCEU General Court of the European Union CLAF Contingency Legal Aid Fund ECHR European Convention for Human Rights ECJ European Court of Justice ECN European Network of Competition Authorities ECON Committee on Economic and Monetary Affairs of the European Parliament EP European Parliament EU European Union FTC Federal Trade Commission (one of two US Competition Authorities) NCA National Competition Authority OECD Organisation for Economic Co-operation and Development OFT Office of Fair Trading (UK Competition Authority) SMEs Small and Medium-Sized Enterprises TEC Treaty Establishing the European Community TEU Treaty on European Union TFEU Treaty on the Functioning of the European Union US United States of America 6 PE 475.120 Collective Redress in Antitrust ___________________________________________________________________________________________ GLOSSARY Alternative Dispute ADR is a term used for a wide variety of mechanisms aimed at Resolution (ADR) resolving conflicts without the (direct) intervention of a court. ADR schemes usually use a third party such as an arbitrator, mediator or an ombudsman to help the two parties, e.g. consumer and the trader, to reach a solution to their dispute. Antitrust Antitrust in the EU context refers only to the specific part of competition law deriving from Articles 101 and 102 TFEU, i.e. anticompetitive agreements and abuse of dominant position and excludes merger control, state aid, etc., which are however an integral part of competition law. In the US, the terms antitrust and competition law are often used synonymously. Blackmail settlement Blackmail settlement refers to the risk that a defendant in a (and discovery) collective action prefers to settle, even if the merits of the claim are dubious, to avoid the expenses and the negative publicity that will stem from the trial. A settlement may also be induced by the prospective cost of complying with a disproportionate request for disclosing documents and information in those jurisdictions (like the US) where the discovery phase occurs before the trial and the court has none or limited supervisory power. Collective redress Collective redress refers to any mechanism that 'may accomplish (or collective judicial the termination or prevention of unlawful business practices which action) affect a multitude of claimants (consumers and/or SMEs) or the compensation for the harm caused by such illegal practices' (see Commission Staff Working Document, Public Consultation: Towards a Coherent European Approach to Collective Redress). Conditional fees Conditional fees refer to arrangements between lawyer and client whereby the client pays a premium to the lawyer, above the agreed fixed or hourly fees, in case of success. Contingency fees Contingency fees refer to arrangements between lawyer and client whereby the latter pays the former only if the case is successful, usually with a share of the sum received. Disclosure In a civil action each party can obtain evidence from the opposing party by requesting the disclosure of relevant information as and if foreseen in national legislation. Disclosure also includes any specific document that the judges may order to produce. Pre-trial discovery Pre-trial discovery refers to the compulsory (pre-trial) disclosure of all documents relevant to a case; it is common in the US. Forum shopping Forum shopping refers to the practice of some litigants of bringing their action to the court that is considered the most convenient one, i.e. where they will be most likely to obtain a favourable judgement. PE 475.120 7 Policy Department A: Economic and Scientific Policy ___________________________________________________________________________________________ Group/class action An action brought by one (or more) members of the group of victims; the US term is class action. Leniency Depending on the legal framework, competition authorities may be programmes allowed to offer reduced penalties or even immunity to the first company (whistleblower) disclosing information about a cartel in which they are involved. Limitation period The period of time during which a claim can be made. Normally this period is calculated with respect to the moment in which the cause of the harm is deemed to have arisen, or when a claimant had reason to know of the harm. Micro businesses Micro businesses are defined as companies having less than 10 employees and either a turnover of less than EUR 2 million or a balance sheet total of less than EUR 2 million (according to the Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises 2003/361/EC; OJ L 124 of 20.5.2003, p. 36). Opt-in model Victims only become parties to a collective action if they take some affirmative step to be included. Hence only those who 'opt in' are bound by the judgment (and eventually receive compensation). Opt-out model All the victims become parties to the litigation automatically, unless they take an affirmative step to 'opt out' of the action. Hence, unless a victim opts out of the litigation, he or she will be bound by any judgment issued by the court, or by any settlement between the representative claimants and the defendant. Passing-on The term ‘passing-on’ refers to the mechanism by which a downstream supplier increases its selling price following a price increase in one of its inputs. Passing-on defence The passing-on defence can be invoked by defendants against the direct purchasers when they claim for compensation for a cartel price overcharge. According to the passing-on defence, the direct purchaser is not entitled to receive compensation for the part of the overcharge that he or she has passed on to the next layer of indirect purchasers. Passing-on offence A passing-on offence argument can be raised in two circumstances. First, the indirect purchaser may claim damages even if the relevant product was not purchased from the infringer but from an intermediary, to the extent that the latter passed on the overcharge to him. Second, the direct purchaser may claim damages for lost sales due to the increase in price charged in the downstream market due to the input overcharge caused by the infringement. 8 PE 475.120