Private enforcement of competition rules Belgium

21 November 2005

Indiana de Seze

As noted by Neelie Kroes, the Competition Commissioner, private enforcement of the competition rules has direct benefits for the functioning of the market as it has a strong deterrent effect and it promotes a culture of competition.It also provides direct justice for those who have suffered losses due to breaches of the competition rules. The Commission is keen to develop private enforcement in Europe and is due to issue a Green Paper on this topic by the end of the year, considering such issues as the passing-on defence, calculation of damages, indirect purchasers and collective actions. This is clearly a very important issue for the future development of EC competition law.

In this report, we discuss the possibilities, advantages and obstacles to the private enforcement of competition rules, i.e. (civil) actions between private parties with respect to alleged infringements of the competition rules and/or claims for damages following such infringements, for the following European countries: UK, Sweden, The Netherlands, Belgium, France, Germany and Italy.

Instead of merely listing the pros and cons of private enforcement actions in various countries, we have chosen a more practical approach. We discuss the various aspects of civil actions in the countries mentioned above by discussing the possible strategies in three different types of competition law disputes:

1. cartel agreements – cartel agreements can be damaging to third parties, e.g. competitors that are excluded or foreclosed from a market or purchasers who are overcharged for the products/services of the cartel members;

Case 1: cartel agreement

Hospital X purchases vitamin supplies on a regular basis. When attending a conference organised by a European branch organisation for hospitals, the head of X’s purchasing department learns that the same vitamins are sold at much lower prices by the same suppliers outside the country where X is located. However, upon X’s request, the vitamin suppliers refuse to sell the vitamins to X for the lower price at which they sell the same vitamins in other European countries. X has the impression that this is caused by an agreement whereby the larger pharma­ceutical companies jointly set minimum prices for their products in certain territories.

2. horizontal or vertical agreements – these can cause damage to the other party. We have chosen a vertical agreement for our example, but the strategies and considerations are not much different in the event of parties seeking enforcement of the competition rules with respect to a horizontal agreement, to which they are party.

Case 2: vertical agreement

A and B are parties to a distribution agreement. A is the producer and has a market share of 40% of the market for sales of sports gear and equipment in the EEA. B has been appointed as A’s sole distributor of its sport shoes in the national territory concerned. B has a market share of 30% on the national retail market for sport shoes.

According to their distribution agreement, which has a duration of 10 years, (i) A imposes on B an exclusive purchase obligation; (ii) B is compelled to purchase a fixed minimum quantity of products from A; and (iii) B must sell the products at prices specified in a price list applicable to A’s distributors. B wishes to challenge the distribution agreement and subsequently ask for damages.

3. abuse of dominant position – a purchaser or competitor can be the victim of abusive behaviour by a dominant undertaking and suffer damage as a result of excessive pricing, exclusionary practices, refusal to deal or grant access etc.

Case 3: abuse of dominant position

X is an alternative provider of fixed telephone services which entered the national market for fixed telephone services a few years ago. Originally X, like other new entrants to this market, was able to win a substantial amount of customers for its services. Recently, however, X has seen a substantial number of its customers switch to the incumbent operator Y, which holds a dominant position on the national market for fixed telephone services. Based on rumours in the market and implicit indications from its lost customers, X suspects that Y lures back customers by offering loyalty rebates and package deals for fixed telephone services and leased lines, on which market Y is also dominant.

X files a complaint with the national competition authority, who concludes – after a thorough investigation of Y’s business practices – that Y has abused its dominant position against X and other new market entrants. X wants to obtain compensation for the damage, which it suffered as a result of Y’s abusive behaviour.

We hope this case-by-case overview will help you to decide whether or not to engage in private enforcement actions and which jurisdiction you may choose, if you have a choice between various jurisdictions in view of the cross-border effect of the infringement concerned.

Belgium

Case 1: cartel agreement

Hospital X purchases vitamin supplies on a regular basis. When attending a conference organised by a European branch organisation for hospitals, the head of X’s purchasing department learns that the same vitamins are sold at much lower prices by the same suppliers in another country outside the country where X is located. However, upon X’s request, the vitamin suppliers refuse to sell the vitamins to X for the lower price at which they sell the same vitamins in other European countries. X has the impression that this is caused by an agreement whereby the larger pharmaceutical companies jointly set minimum prices for their products in certain territories.

For the purpose of discussing the enforcement options of X in Belgium, we have assumed that X, as well as at least one of the cartel members, is located in Belgium.

Purpose of an action by X

The purpose of a private action by Hospital X against members of the cartel would be to claim damages for losses suffered or to obtain an injunction ordering the infringement to be stopped. The action before the Commercial Court would be based on an infringement of Article 81 EC and its Belgian equivalent, Article 2 of the Law on the Protection of Economic Competition (PEC), by the pharmaceutical companies for agreeing minimum prices for their products. In the court proceedings, X can demand that the cartel agreement be declared void and at the same time claim damages as a consequence of the infringement. If X’s primary goal is only to have the defendants cease the infringement, it is possible to initiate summary proceedings.

Legal basis for the action

X will have to demonstrate that the said infringement of the competition rules results in a breach of contractual obligations and/or in a quantifiable loss. Since the claim in this case is not based on a breach of contract, it is likely to be made on the basis of tort (Article 1382 Civil Code). As this case involves a cartel with several offenders and thus constitutes joint unlawful conduct, all members of the group may be jointly and severally liable if they can be held accountable for such conduct.

Standing and jurisdiction

As a customer of one of the members of the cartel and hence directly affected by the cartel’s pricing and market partitioning strategy, Hospital X may be assumed to have sufficient interest by bringing an action before the court, i.e. to have locus standi.

Belgian courts have jurisdiction if a defendant is domiciled in Belgium or if the offence takes place in Belgium.

However, X may also choose to initiate proceedings before a court in a country where one of the other defendants is located. If one of the defendants is located in the UK, it may be in X’s interest to (first) start discovery proceedings in the UK to gather evidence of the infringement (please see the UK section for details of its discovery procedures).

In view of the commercial nature of the parties, the Commercial Court will be competent to hear the case.

Collective Action

Although a class action suit is not available under Belgian law, it is possible for individual parties each suffering individual damages to file a single claim. However, each of the parties will be awarded damages individually on the basis of actual losses incurred by each of them individually.

Recognition of National Competition Authority/Commission decisions

The value of statements or decisions by other national authorities as evidence is at the court’s discretion. A decision of the NCA does not in itself constitute irrefutable proof of infringement, although it will rarely be ignored by Belgian courts.

Burden and standard of proof

According to Article 1382 Civil Code, the claimant, Hospital X, has the burden of proving its case. X must prove (a) that the defendants have infringed the competition rules and (b) that as a direct or indirect result of that infringement, X has suffered losses. To claim tortious damages, X must be able to prove:

1. Fault: although this is not settled case law, a breach of competition rules may amount to a fault;

2. Damage: X must establish the existence of the losses incurred; and

3. Causal link: between the unlawful act and the losses incurred.

Evidence

X must substantiate with its claim sufficient evidence that Article 81 EC has been breached. Evidence may be submitted in any form (documentary evidence, witness statements, expert opinions etc.). The judge is free to consider any evidence brought forward. The court has to be convinced that the above elements are present.

Discovery procedures do not exist under Belgian law. A claimant cannot rely on a disclosure obligation on the other party to obtain the evidence needed to prove his case, but must establish his own case. There are only limited possibilities to obtain evidence from the other party, e.g. if the judge orders the defendants to make their books available for inspection or to have their records inspected.

Evidence from pre-trial discovery in another country, however, may be recognised by Belgian courts, unless this would result in an ‘unfair trial’ in the sense of Article 6 of the European Convention on Human Rights.

Witness hearing

Parties may be called as witnesses, both in any pre-trial hearing and in the main proceedings, but their testimonies are not proof of the claimant's claims unless their testimony supplements otherwise incomplete evidence (Article 915‑961 Judicial Code).

Expert evidence

According to Article 962‑991 Judicial Code, expert evidence is admissible. Parties may request the judge to hear experts or may submit expert reports as evidence. Parties may request to bring forward their own experts. A judge may on its own initiative also call for expert evidence. Although there are official lists of sworn-in experts in a number of matters, anyone can be called as an expert.

Causation

X must prove that the losses suffered would not have happened, had the defendants’ infringement or unlawful conduct not taken place. This may be very difficult to prove, especially in this case, where X is a third party who institutes proceedings against members of a cartel agreement. To determine whether the damage is attributable to the cartel, the judge has to weigh up all the relevant aspects of the case.

Calculation of damages

Damages are assessed on the basis of the injury suffered by X.

In principle, damages consist of compensation. This means that the amount of damages awarded should, as far as possible, put X in the same (financial) position he would have been in had the infringement not occurred.

There is no maximum limit to the damages that can be awarded. However, the judge is free to limit the amount of damages to what is deemed to be reasonable. Fines levied by a competition authority are not taken into account.

Interest is awarded from the date the infringement occurred. The level of statutory interest for unlawful acts or torts is determined by Royal Decree and regularly adjusted to allow for market circumstances.

Passing-on defence

The passing-on defence is not explicitly provided for by law, nor is the issue of the indirect purchaser. However, such a defence may be taken into account by the judge in assessing the reasonable level of damages. In this case, X probably determined its (retail) prices on the basis of the prices charged by the pharmaceutical companies. The defendants could argue that X has passed on these prices to customers and, therefore, there is no or little damage suffered by X. However, they will bear the burden of proving this argument.

It is also relevant whether X itself has benefited from the infringement. Any such benefit and any fault or negligence on the part of X must, to the extent reasonable, be taken into account in assessing the level of damages awarded.

Timing

The time limit for initiating proceedings is five years from the day following that on which the claimant becomes aware of both the losses incurred and the identity of the person responsible. Proceedings for damages may take from one to several years to reach judgment in first instance. In complex cases, proceedings that go to final instance (after first instance, there is a possibility for appeal and then judicial review) can take more than a decade.

Costs

Court fees must be paid up front by both X and the pharmaceutical companies. The party against whom the court ruled may be ordered to pay the legal costs of the other party. The cost of litigation might be a factor that dissuades X from initiating an action for breach of the competition rules.

Advice to X

Considering the obstacles to private enforcement, particularly in terms of the cost of litigation, X may prefer a settlement to litigation. However, initiating a procedure is often necessary to get the defendants to negotiate. Provided that X can produce any evidence of the alleged infringement, we would advise X to initiate proceedings against the members of the cartel (together with other hospitals in a joint action) and request:

1. A declaration that the pharmaceutical companies have infringed Article 81 EC; and

2. Compensation for losses caused by the infringement.

Furthermore, we would advise X to submit a complaint to the Belgian Competition Authority in parallel to the court claim. This would provide the defendants with a further incentive to reach a settlement. If a settlement is not reached, it could lead to a finding of infringement by the Authority, which could subsequently form the basis of a claim for damages. The fact finding and assessment of the infringement will thus have been carried out by the Authority.

Another option for more effective evidence gathering may be to sue in a common law country (provided there is locus standi). Pre-trial discovery proceedings there may assist in the gathering of the necessary evidence for damages claims in Belgium.

Case 2: vertical agreement

A and B are parties to a distribution agreement. A is the producer and has a market share of 40% of the market for sales of sports gear and equipment in the EEA. B has been appointed as A’s sole distributor of its sport shoes in the national territory concerned. B has a market share of 30% on the national retail market for sport shoes.

According to their distribution agreement, which has a duration of 10 years, (i) A imposes on B an exclusive purchase obligation; (ii) B is compelled to purchase a fixed minimum quantity of products from A; and (iii) B must sell the products at prices specified in a price list applicable to A’s distributors. B wishes to challenge the distribution agreement and subsequently ask for damages.

For the purpose of discussing B's enforcement options in Belgium, we have assumed that B is A’s distributor in Belgium.

Purpose of an action by B

B could have two different reasons to take action: either (i) B has not suffered any losses but wants to end the agreement in order to be free to enter into an agreement with another supplier; or (ii) B has suffered losses as a result of the restrictive conditions of the agreement and wants to recover these losses from A.

Legal basis for the action

B could file a complaint with the Belgian Competition Authority. In view of the Authority's current workload, however, there is no guarantee that the Authority would actually process the complaint. In this case, B is more likely to be able to enforce the competition rules through court proceedings. As the complaint concerns restrictive contractual clauses contrary to the provisions of the Law on the Protection of Economic Competition (PEC), B could bring an action before the commercial courts:

1. Firstly, B could invoke the nullity of the provisions of the agreement that are in breach of Article 81 EC / Article 2 PEC, so that B is no longer bound by the agreement; and

2. Secondly, B can claim damages if B has suffered losses.

Standing and jurisdiction

B can bring an action before one of the commercial courts in Belgium. Despite the fact that he is a party to the contested agreement, B will be deemed to have sufficient interest in bringing the case.

In view of the potentially long duration of court proceedings, B could decide to bring summary proceedings and ask for interim relief.

The judge can declare the provisions in breach of the competition rules and therefore consider them null and void. However, judges may not award damages on account of the lack of pressing interest, and claims for damages are, as a rule, dismissed in interim procedures.

Burden of proof

According to Article 1382 Civil Code, the claimant has to provide sufficient evidence in support of its case. In the present scenario, the claimant will also have to prove (a) that the agreement is in breach of competition law and (b) that as a result of that infringement, B has suffered losses. To claim damages in tort, B must be able to prove:

1. Fault: although this is not settled case law, a breach of the competition rules may amount to a fault. In the present case, the fault will have been committed by both parties. There may be scope for arguing that owing to the economic relations between the parties (a dominant supplier and a small distributor), the claimant had no choice but to accept the contract;

2. Damage: B must establish the existence of the damage incurred; and

3. Causal link: between the unlawful act and the damage incurred.

Evidence

In this case, the evidence of the infringement is in B’s possession, because B is party to the infringing agreement.

Vertical agreements with an exclusive purchasing obligation are considered to be agreements that may restrict competition. However, such obligations are not per se considered illegal and have to be assessed on their economic effects. If found to adversely affect competition, such a clause could be severed from the agreement, thus transforming the agreement into a non-exclusive one.

The retail price maintenance clause, however, would clearly bring the agreement within the remit of a so-called hard-core infringement under the Block Exemption Regulation, which would make the entire agreement null and non-enforceable.

With respect to the calculation of damages, the passing-on defence, timing and costs, the same information as set out above in Case 1 will apply to Case 2.

Advice to B

Given the fact that in this case a party to a distribution agreement wants to contest the terms of the agreement, this case is particularly appropriate for private enforcement. If B does not want to recover damages but only wants to invoke nullity and avoid the execution of the agreement, B has the following options:

1. B could consider the agreement null and void and wait for A to take legal action; or

2. Alternatively, B could initiate summary proceedings to obtain a declaration that the agreement is null and void.

If B wants to recover damages, we would advise B to initiate proceedings against A and request:

1. A declaration that A has infringed Article 2 PEC / Article 81 EC; and

2. Compensation for the damages caused by the infringement.

Case 3: abuse of dominant position

X is an alternative provider of fixed telephone services which entered the national market for fixed telephone services a few years ago. Originally X, like other new entrants to this market, was able to win a substantial amount of customers for its services. Recently, however, X has seen a substantial number of its customers switch to the incumbent operator Y, which holds a dominant position on the national market for fixed telephone services. Based on rumours in the market and implicit indications from its lost customers, X suspects that Y lures back customers by offering loyalty rebates and package deals for fixed telephone services and leased lines, on which market Y is also dominant.

X files a complaint with the national competition authority who concludes – after a thorough investigation of Y’s business practices – that Y has abused its dominant position against X and other new market entrants. X wants to obtain compensation for the damage which it suffered as a result of Y’s abusive behaviour.

For the purpose of discussing X's enforcement options in Belgium, we have assumed that both X and Y are located in Belgium.

Purpose of an action by X

Since it is likely that the abusive behaviour will have been terminated following the Competition Authority’s investigation, X wishes to claim compensation for the losses suffered as a result of Y’s abusive behaviour.

Legal basis for the action

X can claim damages and will have to show that the infringement of the competition rules resulted in a breach of contractual obligations and/or in losses.

Standing and jurisdiction

As X is a competitor of Y and therefore affected by the infringement committed by Y, it may be assumed that X has sufficient interest to bring an action before the court, i.e. locus standi.

Belgian courts have jurisdiction if a defendant is domiciled in Belgium, which is the case here, or if the effects are taking place on the Belgian market and affect market players in Belgium.

Collective action

If there are any more alternative providers of fixed telephone services in Belgium which are also affected by Y’s abusive behaviour, X may decide to join forces with these other competitors to bring a collective action against Y.

Recognition of National Competition Authority decision

The value placed on a statement or decision made by the Conseil de la Concurrence (CC) as evidence is at the court’s discretion. A decision by the CC does not in itself constitute irrefutable proof of infringement, although it will rarely be ignored by the courts.

Burden of proof

According to Article 1382 Civil Code, the claimant, provider X, has the burden of proving his case. X must prove (a) that the defendant has infringed the competition rules; and (b) as a result of that infringement, X has suffered losses. In this case, there is a good chance that the court will accept the CC’s decision as proof of infringement. That means that X will still have to prove:

1. Fault: although this is not settled case law, a breach of competition rules may amount to a fault;

2. Damage: X must establish the existence of damage incurred; and

3. Causal link: between the unlawful act and the damages incurred.

Evidence

X will probably not have much trouble proving infringement of Article 82 EC and/or its Belgian equivalent, Article 3 PEC, although providing evidence can represent a significant accounts-browsing hurdle. Additionally, X must prove the losses he has suffered, which is likely to mostly consist of lost customers. Evidence may be submitted in any form (documentary evidence, witness statements, expert opinions etc.) and the judge is free to consider any evidence brought forward.

Expert evidence

According to Article 962‑991 Judicial Code, expert evidence is admissible. Parties may request the judge to hear experts or may submit expert reports as evidence. Parties may request to bring forward their own experts. A judge may also call for expert evidence on its own initiative.

Causation

X has to prove that the losses suffered would not have happened, had the defendant not abused his dominant position. This may be very difficult to prove, especially because losing customers or a decline in business can be caused by other problems in the business. To determine whether the damage is attributable to Y, the judge has to weigh up all the relevant aspects of the case.

Calculation of damages

Damages are assessed on the basis of the injury suffered by X.

In principle, damages consist of compensation. This means that the amount of damages awarded should as far as possible put X in the same (financial) position he would have been in had the infringement not occurred.

There is no maximum limit to the damages that can be awarded. However, the judge is free to limit the amount of damages to what is deemed to be reasonable. Fines levied by a competition authority are not taken into account.

Interest is awarded from the date that the infringement occurred. The level of statutory interest for unlawful acts or torts is determined by Royal Decree and regularly adjusted to allow for market circumstances.

With respect to the calculation of damages, the passing-on defence, timing and costs, the same information as set out above in relation to Case 1 also applies to Case 3.

Advice to X

Despite the fact that X may find it difficult to prove his case, in particular because this requires obtaining contract terms and conditions awarded to third parties, initiating proceedings may prompt Y to negotiate a settlement and pay damages avoiding a lengthy court procedure.

Summary

To summarise our experiences with private enforcement in the various European countries, we have drawn up the two matrices below, in which the obstacles and advantages to private enforcement have been indicated.

Matrix I: Obstacles to private enforcement

The matrix below indicates which factors may present obstacles (on a scale of 1 to 5) to private enforcement in the main EU Member States.

1=no problem, 2=minor problem, 3=neutral, 4=possible problem, 5=major problem

UKSwedenNetherlandsBelgiumFranceGermanyItaly
standing

1

1

1

1

1

1

1

obtaining evidence

1

4

5

5

5

5

3

collective action

4

4

4

4

4

5

4

limitations on forms of evidence

1

1

1

2

1

1

3

witness hearing

1

1

3

4

4

3

3

expert evidence

1

1

2

1

2

1

3

recognition of NCA / Commission decisions

1

2

1

1

1

1

3

burden of proof

4

4

4

4

4

4

3

causation

3

3

4

4

4

4

3

calculation of damages

2

4

4

4

4

4

4

passing-on

3

3

3

4

3

1

4

indirect injury

3

5

4

5

5

4

4

timing

5

5

3

5

4

3

4

costs

5

3

3

5

2

3

3


Matrix II: Advantages for private enforcement
The second matrix indicates which factors may facilitate private enforcement in the various EU Member States and thus may constitute a reason to choose a certain Member State for launching a private enforcement action.

UKSwedenNetherlandsBelgiumFranceGermanyItaly

standing

X

X

X

X

X

X

X

obtaining evidence

X

X

collective action

limitations on forms of evidence

X

X

X

X

X

witness hearing

X

X

expert evidence

X

X

X

X

X

X

recognition of NCA / Commission decisions

X

X

X

X

X

X

burden of proof

causation

calculation of damages

X

passing-on

X

indirect injury

timing

X

costs

X

X

X

X

X