In 2005, KPN, the Dutch incumbent for fixed telephony services and leased lines, was subject to an investigation by the supervisory authority, OPTA, for having offered unlawful discounts to existing and potential business customers. In parallel, KPN made a press release stating that independent investigation had shown that the total amount of illegally offered discounts in the previous two years was approximately €20 million.
Following this press release, Bird & Bird was instructed by seven operators in the fixed telephony and rental line sector (which amounted to nearly all KPN's competition in the relevant market), to hold KPN liable on their behalf for the loss inflicted to the competition and to claim damages.Practical issues - (division of costs and revenues)
Before commencing any action, a few practical issues had to be resolved. Agreements had to be entered into to deal with the division of costs and any future damages award. To this end, the competitors agreed that each would have to reveal certain financial data. For reasons of business confidentiality, these data could not be exchanged, and were therefore communicated solely to Bird & Bird who then made a share proposal to each individual competitor. Once each competitor had agreed on its own share, the respective shares were eventually set out in a schedule to the agreement between the competitors, but were kept confidential and deposited in the safe of Bird & Bird's notary.
It was further decided that a foundation would be established in order to underline the unison between KPN's competitors and create a 'market front', reduce causal link related issues, prevent KPN from settling with any but all seven competitors and to become invulnerable for certain events at the side of individual participants, such as a take-over. The foundation was to manage the interests of its founders and commence proceedings against KPN in its own name. To that purpose, each competitor assigned its claim to the foundation.Legal issues - (tort, causal link, damages and disclosure)
It was envisaged that, given the fact that KPN had already admitted the unlawful discounts, it would be feasible to establish to the satisfaction of the court that KPN had committed a tortious act against its competitors by offering unlawful discounts. It was furthermore envisaged that the problem of the causal link between the tortious act and the loss subsequently incurred by the individual competitors would be overcome by the fact that the foundation represented nearly all competitors of KPN.
A complex issue was the calculation of the loss that KPN had caused to the competition. It was decided that the safest course of action was to use KPN's own press statement that a total of e20 million of illegal discounts had been offered in the two previous years as a starting point. Furthermore, it was decided that the claim would not be calculated on the basis of the actual loss suffered by the competition, but rather on the basis of the profit that KPN must have realised as a result of having been able to win or keep clients by offering unlawful discounts. It was decided that the foundation would ask the court to award damages in this sum, or, alternatively, to order KPN to turn over its profit. Under Dutch law the claimant can choose between the two types of damages. For the purpose of sustaining these claims, the court would be asked to order KPN to disclose all information in relation to the illegal discounts. In parallel with the actions of the market parties, OPTA proceeded with its investigation.
Finally, a settlement in the sum of €18 million was enforced upon KPN by OPTA by integrating this in its penalty decision. Apart from this compensation of the competition, OPTA imposed a penalty of €17 million on KPN.