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Vice President of the European Commission responsible for Competition Policy
Antitrust litigation – The way ahead
MLex seminar: Damages Litigation: A new frontier for Europe
London, 23 October 2014
Ladies and Gentlemen:
I am grateful to Robert McLeod for his kind invitation to your seminar.
This is going to be my last speaking engagement as Commissioner for Competition, and before going to the topic of my presentation today, I would like to thank Robert and his colleagues from MLex for the highly professional quality of their communication on competition policy issues.
It is only fitting that I have the opportunity to speak here about the private enforcement of competition rules, because I consider the Directive on Antitrust Damages Actions as the most important legal initiative I launched during my term.
The Directive, which is to be formally adopted in the coming days, is the first binding piece of EU legislation in this area.
But, indeed, the topic of antitrust damages actions has a much longer history.
I would like to quickly review this history before moving to the Directive proper and its likely implications for Europe’s citizens and businesses.
The right to full compensation for infringements of EU competition rules was recognised by the European Court of Justice as far back as 2001.
However, victims of such infringements found it extremely difficult to exercise their rights in practice. There were hardly any damages claims before national courts, largely because of obstacles in the national legislations of EU countries.
In a 2005 Green Paper and a 2008 White Paper, my predecessor Neelie Kroes tried to address this issue, identifying obstacles and proposing measures to remove them.
During this customary process to prepare the ground for new EU laws, the Commission engaged all relevant stakeholders and a heated debate arose between supporters and opponents of private enforcement.
Supporters held that the Commission should issue binding legislation, because victims of competition law infringements were entitled to compensation under EU law.
Opponents feared that EU legislation could import the abuses of US-like litigation culture into Europe, particularly through its class-action system. As a matter of fact, for a very long time much of the debate was centred on collective redress.
This is the situation I found on my desk almost five years ago, when I took office as Commissioner for Competition.
During my confirmation hearings of January 2010 I told MEPs that I would send a proposal for binding legislation to Parliament through the co-decision procedure.
In my view, it was just reasonable and fair that all victims of antitrust infringements, whether citizens or companies, could effectively exercise their rights thanks to the EU legislator. Both individual and collective actions could be used for that purpose.
But the discussions around collective redress had reached the European Parliament, which asked the Commission to further reflect on this point in a resolution voted by the majority of its members.
The question, then, was how to disentangle private enforcement from the hot debate about collective redress, using two separate instruments to tackle the two issues.
When the proposal for a Directive on Antitrust Damages Actions was adopted by the Commission and sent to the Parliament and the Council in June last year, it marked two firsts.
It was the first ever EU-level legislation in the field of the private enforcement of competition law.
It was also the first EU legislation in the field of competition law which – as I had pledged – was adopted on the basis of the ordinary legislative procedure with full involvement of the European Parliament.
The proposal suggested binding rules applicable to all antitrust damages claims – regardless of whether they were individual or collective – to allow consumers and businesses to go to court and seek compensation for the harm they suffered.
What has become of the collective-redress hot potato?
We decided to change tack and make it a more general issue. Collective redress is important to protect consumers’ interests against any breach of EU law, not only in the enforcement of competition law.
Therefore, we issued a Recommendation covering all fields and encouraging EU countries to set up national systems of collective redress according to a set of leading principles.
More than half Member States have had laws to allow collective actions for many years. But the question is whether these mechanisms really allow victims to obtain effective compensation.
A number of EU countries have introduced new legislation on collective redress very recently – for example France and Belgium – while others are discussing it. The UK, for instance, is in the process of upgrading their legislation based on their unsatisfactory experience with the current system.
These are encouraging developments. I am convinced that once private enforcement is a reality across Europe, doomsayers will be proven wrong and collective redress will find its way across Europe without bringing from the other side of the Atlantic the abuses that have taken place within the US system.
I’m looking forward to it. Certain breaches of competition law harm large numbers of citizens. In these cases, collective action is the logical response, and that will make private enforcement even more effective as a complement to public enforcement.
Let us now look at the Directive itself.
Once the Directive is transposed into national laws and becomes operational, its measures will certainly give important new tools to consumers and firms.
There are good reasons for that.
The Directive eases the heavy burden that is currently placed on victims in terms of providing evidence to national courts in support of their claims. Evidence can be obtained more easily from the companies that have it, and evidentiary rules are introduced to the benefit of the victims.
Another achievement of the Directive is that it will harmonise national laws. Its rules will apply throughout the EU and will make sure that all victims can claim damages irrespective of where they live in Europe.
At present, the necessary legislative frameworks are in place in certain countries and not in others. The Directive will eliminate these uneven conditions.
This is an important advancement because it takes another step towards a deeper and more integrated Single Market, offering the same legal conditions across its territory.
A third significant feature of the Directive is that it will increase deterrence.
I am aware that deterrence and sanctioning lie at the basis of public enforcement, whereas private enforcement is primarily about compensation.
But these distinctions are immaterial for managers and stockholders. I’m convinced that the Damages Directive will persuade companies to consider their options a lot more carefully before they set up a cartel or adopt other anti-competitive practices.
This is just one of the many aspects we have considered as we were looking for the right balance between the public and private enforcement of competition law.
The underlying principle is that the fines imposed by public enforcers – both the Commission and national agencies – and the damages awarded in court are complementary; there is no trade-off.
The Directive takes great care to regulate the interaction between public and private enforcement to reach the right balance.
In particular, the Directive provides that victims can wait for the decisions of competition agencies before they go to court.
It also provides that victims can use the findings of competition authorities in the courtrooms and that their final decisions are proof that the infringement actually took place.
The former provision means that victims don’t have to worry that time limits will deprive them of the compensation they are entitled to as they wait for competition authorities to conclude their investigations.
As to the latter, let us not forget that most investigations are technically complicated and often confidential. Competition authorities have special tools, skills and expertise to detect and sanction infringements.
It is therefore logical that, in cases where the Commission or a national competition authority is carrying out an investigation, the victims and the courts can profit from their work.
At the same time, the Directive makes sure that the many cases that are likely to be heard in court will not encroach on the work of public enforcers.
In particular, self-incriminating information released in the context of leniency programmes and settlement procedures will not be disclosed, and immunity recipients – usually the first to be sued – will be liable only to their own customers and not to those of their co-cartelists.
These measures will preserve a company’s incentives to come clean and cooperate with competition authorities. It is in everyone's interest – not least that of the victims – that public enforcement is ever more effective.
The formal adoption of the Directive will take place very soon. It will be then for the Member States to transpose those rules into their national laws.
I can only hope for a swift transposition, given the broad support for the Directive and the consensus about the need for the rules it includes.
On the side of the Commission, it would be good to fine tune also our own rules to the new balance introduced by the Directive between preserving public enforcement and ensuring effective compensation.
Ladies and Gentlemen:
It is too early to predict in detail the impact of the Damages Directive. However, the improved legal framework that will be introduced will certainly bring more antitrust damages actions before the courts in the Member States.
We can expect damages actions to increase outside the three main countries where such claims tend to be concentrated at present: the UK, Germany, and the Netherlands.
We can also expect that more of these actions will be successful, in the sense that in more cases full compensation will be granted to the victims.
When the Directive’s legal framework is implemented in all Member States, all of Europe’s consumers and companies will benefit from it regardless of where they live or are established.
Victims will no longer be forced to look for an EU country whose national law is favourable to damages claims. This will significantly lower the threshold to bring such actions, especially for consumers and small- and medium-sized enterprises.
In addition, the increased threat of damages actions will probably lead to more out-of-court settlements, which I regard as a positive prospect.
The objective of the Directive is to allow victims to obtain fair compensation – through litigation or otherwise – and the Directive includes measures to stimulate such alternative means to obtain compensation.
Court litigation is a means to achieve the objective of full compensation. Out-of-court settlements and other forms of non-judicial dispute resolution – such as arbitration or mediation – are other means to the same end.
Finally, the Directive brings consumers and companies closer to the centre of competition policy.
Previous legislation in the field of competition law focussed on the public enforcement by competition authorities.
In contrast, the Directive empowers citizens and companies to directly exercise rights enshrined in the Treaty, just as is the case – for instance – for EU internal market rules.
In closing, I would like to publicly thank everyone involved in the process: the European Parliament, the Competitiveness Council and the Presidencies, the Member States, and all the individuals and organisations that have contributed to the debate.
The agreement on the Directive between Parliament and Council came less than a year after the initial proposal by the Commission; and this shows that the ordinary legislative procedure can be very efficient.
The cooperation between the co-legislators and the Commission has led to a text with which I am very satisfied. The legislative process has further shaped and improved the text of the Directive, while always keeping true to its ultimate purpose.
We can now look forward to the time when the Directive is fully transposed in the national legislations of the Member States, and private enforcement becomes an effective complement to the work of Europe’s competition authorities.