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Neelie Kroes

Member of the European Commission in charge of Competition Policy

Enhancing Actions for Damages for Breach of Competition Rules in Europe

Dinner Speech at the Harvard Club
New York, 22nd September 2005

Ladies and Gentlemen,

It is a great privilege to be here this evening with colleagues, experts, and people in the field. Thank you for inviting me.

This evening I would like to discuss the enhancement of private enforcement of the competition rules through actions for damages in case of breach of those rules.

It is a topic on which you have a lot of experience on this side of the Atlantic but on which the European Union is just beginning its collective reflection.

Let me make it clear from the outset that I am personally convinced that there is a lot of potential in advancing private enforcement of the European competition rules.

It could really put some extra wind in the sails of our enforcement boat. And it could really contribute to our number one priority in Europe: creating a more competitive environment for business and industry, and thus growth and economic and social welfare for our citizens.

What are the main advantages of private antitrust enforcement?

To start with, and this is generally acknowledged, more private enforcement of competition rules can bring clear benefits for the functioning of the market and the competitiveness of the economy.

That is basically so for two reasons:

  • In the first place, the threat of having to pay damages for the harm caused by an infringement of the competition rules has a strong additional deterrent effect. An effect over and above the sanctions that can be imposed via public enforcement. It can be reasonably expected that more private enforcement will lead to a higher level of compliance with the competition rules. Prevention is better than cure.
  • Secondly, I think that increased private action would further promote a culture of competition amongst market participants. By market participants I mean businesses and industry, but also consumers. This in turn would help broaden the basis of support for the competition rules. It would make our competition policy more real through direct involvement of the very consumers and businesses the rules are meant to serve. This implies a wider scope of enforcement beyond the priorities set by the competition authorities.

But there is more to private enforcement than optimising the impact of competition policy. The enforcement of the competition rules via courts provides direct justice.

It allows the victims of illegal anticompetitive behaviour to be compensated for the loss they have suffered. It is this which makes the competition rules instantly relevant for citizens.

That instant relevance for citizens is something that enforcement by competition authorities can only rarely achieve. Unlike courts, which address and enforce the rights of individuals, the authorities act in the general interest. That means that we have to set priorities.

So private enforcement has huge potential. But I do not look at the issue through rosy-tinted glasses! I know that private enforcement of the competition rules, and more particularly actions for damages, brings its own risks. You, US citizens, officials and experts, have for decades carefully watched all the ins and outs of damages actions. And you have your own debate around these issues, which I am following with interest.

Our debate in Europe is of rather a different nature. It is not about reducing the excesses of damages actions, not because there aren’t any excesses, but simply because we hardly have any actions for damages at all. The recent Ashurst study found that this form of private action is totally underdeveloped in Europe.

That is why the Commission - as I said, convinced by the potential benefits of encouraging private enforcement of the competition rules – wants to stimulate public debate in Europe on this topic.

We are conscious that this is a sensitive area. Any steps forward will need to be based on a good dose of common sense and a rational legal framework.

That is why I do not plan to come forward with a nice set of fully developed ideas and proposals for facilitating damages actions. Instead, we are preparing a detailed discussion document, in Commission terminology a ‘Green Paper’, which will set out options as the basis for discussion.

I want to stress that we have no preconceived ideas at this stage. The potential is there and we need to look seriously at releasing it. And, most importantly, we need to look at whether that can be done in a way which delivers the results whilst avoiding possible pitfalls and excesses.

We want to use the debate to identify the appropriate incentives for private damage claims, while avoiding unmeritorious and even vexatious claims.

We want to use the debate to find ways to increase deterrence, while avoiding the situation where defendants settle simply because litigation costs are too high.

In short, if we want to use the debate to see how we can do the European economy a favour. How we can foster a competition culture, not a litigation culture.

But I know it is not easy to strike the right balance.

It is in this search of the right balance that I am so keen to discuss this topic with you tonight. It is undisputed that the US has gained huge experience in terms of private antitrust enforcement. Europe can and should draw some valuable lessons from it.

For my part, your experience points to at least two key conclusions:

  • first, that there is absolutely no contradiction whatsoever between fostering private antitrust enforcement and preserving an efficient fight against cartels;
  • second, that it is important to have a just and efficient system for final consumers to claim damages.

First, on the interaction between public and private enforcement. Being a public enforcer of competition rules myself, you will not be surprised to hear that I would not like the key role played by public antitrust enforcement to be weakened by private actions.

I am convinced, though, that more private enforcement does not equal less public enforcement.

Rather on the contrary: my spontaneous feeling is that private enforcement is by nature complementary to and even strengthens the enforcement actions taken by competition authorities.

Some may wonder whether my plea for more private antitrust enforcement in Europe can be reconciled with my desire to uphold or even strengthen the efficiency of the European leniency programmes.

Well, I frankly do not see how the obligation to compensate the victims of an antitrust infringement could have a chilling effect on the leniency programmes of the European competition authorities.

Quite the opposite! A balanced private antitrust enforcement system should become a real incentive for leniency applications.

The recent changes in the US clearly illustrate that position. Corporations which qualify under the Department of Justice’s antitrust leniency policy will now be able to avoid both treble damages and joint and several liability if they cooperate sufficiently with private plaintiffs, for instance in the recovery of their losses.

I know we cannot simply “cut and paste” American solutions into the European context. But I found this reform which reduces the civil exposure of successful leniency applicants rather attractive. Not only does it manage to reconcile public and private enforcement. It also turns the modalities of private enforcement into a means of fostering a leniency programme: the leniency applicant gets a reward both under public and under private enforcement.

Yet another paradox is the alleged tension between a fair and an efficient system of private antitrust enforcement. A fair system ensures that those who suffer losses as a result of an antitrust infringement can get compensation. And that those who have not suffered any loss cannot enrich themselves on the back of the victims of the infringement. At the same time, fairness also implies that the private enforcement system cannot be construed in such a way that those who infringed the competition rules can easily escape from their duty to repair the damage caused by their infringement.

On the other hand, there are efficiency arguments. Arguments which suggest that those who are most likely to be successful in bringing a private antitrust action should be given incentives to do so. Efficiency further requires that the overall costs for society in processing a private antitrust action do not completely outweigh the possible benefits of such an action.

I know that the debate on justice and efficiency of private antitrust enforcement is a difficult one. I guess we won’t be able to find the definitive answer to it tonight (although I would challenge you all to try!).

But one thing is for sure: a private enforcement system which disables or even discourages final consumers from bringing actions for damages is unacceptable. That would fly against the very reason of having competition rules in the first place.

Every effort should therefore be made to design a system which protects the genuine interests of the final consumer without imposing a disproportional burden on the defendant. In that context, I believe it is worthwhile further exploring the possibilities of collective and representative damages actions.

Ladies and gentlemen, the topics I have briefly touched upon tonight are of course only some of the many aspects of damages actions for infringement of EC competition law. The Commission wants to discuss these and many other issues with all interested parties.

The Green Paper will in all likelihood also cover topics like access to evidence, the fault requirement, the calculation of damages, collective actions, costs of proceedings and of course, the pass-on defence and the question of standing for indirect purchasers.

We hope to have our Green Paper ready by the end of this year. I would like to urge all of you, academics, enforcers and business representatives, to actively participate in the public consultation and in the many debates that undoubtedly will follow. Your constructive input based on experience will certainly be a great stimulus to our own thinking on these issues.

Thank you for inviting me here, and for having listened so attentively. I think we have time for your comments now, and I would of course be happy to answer your questions.

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