Disclosure and access to evidence
Legislation and procedure
Welcome to the first edition of an occasional update, prepared by Bird & Bird's competition litigation team, on recent developments and notable judgments in the field of private competition law enforcement around the EU. Those affected by infringements of the EU competition rules are increasingly turning to the national courts to secure remedies, presenting the courts with a series of novel and complex questions in relation to issues such as limitation periods, jurisdiction and access to evidence. In many cases the courts are forced to anticipate the rules that will be introduced upon implementation of the EU Directive on competition damages which is due to take place no later than 27 December 2016.
Disclosure and access to evidence
A priority for claimants in competition damages claims is to obtain access to evidence to support their claims. Obtaining the published "non-confidential" version of the Commission's decision is often a key first step in that process. Conversely, undertakings found to have infringed Articles 101 and 102 will seek to have as much detail as possible redacted from the decision. A number of judgments of the EU and national courts over the past few months have addressed the tension between the parties, and the obligations of the European Commission in this situation. Meanwhile, the courts of some Member States (eg. the UK) provide for comprehensive disclosure of evidence between the parties to civil litigation, while the courts of others do not. The Directive will provide a minimum measure of disclosure. Some national courts are already anticipating these changes.
Italian Supreme Court orders disclosure to redress "information asymmetry" in competition claim
On 4 June 2015, The Italian Supreme Court issued a landmark judgment on disclosure in private antitrust actions. The Court emphasised the importance of private enforcement, and the duties of the Italian courts to give effect to EU law rights. It held that lower courts must ensure that claimants in competition damages claims are entitled to gain access to the necessary evidence to support their claims. This significantly enhances their prospects of success in standalone damages claims, which are characterized by a significant "asymmetry of information", given that the relevant data and information in support of the claim normally lie under the control or knowledge of the person who is responsible for the breach. The Supreme Court quoted extensively from the competition damages Directive, although it has not yet been transposed into Italian law. This judgment is likely to have a significant effect on the Italian legal system, by encouraging the victims of alleged infringements of the competition rules to seek damages.
We published a full analysis of this case here.
Commission rejects car glass manufacturers' confidentiality requests
On 15 July 2015, Pilkington and AGC Glass lost their appeals against a decision by the European Commission to publish a more detailed version of its 2008 Carglass decision. In that decision, the Commission imposed fines totalling EUR1.3 billion on the two applicants and a number of other manufacturers. The original published decision was heavily redacted, because Pilkington and AGC Glass refused to permit publication of information that could identify customers, information on prices, quotas and other details of the operation of the cartel and information identifying individual employees of the cartel members. The Commission's Hearing Officer ordered publication of these three categories of information in 2012, and the parties appealed, securing an interim injunction from the General Court in 2013.
The General Court held that the Commission was entitled to publish the more detailed information. While customer details, and details of prices and quotas, are usually confidential, in this case the members of the cartel had lost that protection by exchanging the details with each other. The information was also historical, being more than 5 years old, and in any event the Commission was entitled to consider the interests of victims of the infringement to seek compensation. The Court concluded that the information did not permit the identification of individuals. In the case of ACG, the Court also held that the fact that some of the information had been contained in documents or statements submitted pursuant to the Commission's leniency programme was not a bar to their publication in the decision.
Court of Appeal holds that claimants had enough information to start proceedings
On 5 August 2015, the Court of Appeal of England and Wales rejected the appeal by a number of retailers against a judgment striking out their claims relating to the period prior to 2007, in the multilateral interchange fee (MIF) litigation against Visa. The value at stake was approximately GBP500 million.
Under English law, claimants have a period of 6 years in which to bring a claim for breach of a statutory duty. Where relevant facts have been deliberately concealed by the defendant, this period begins once the breach has been discovered, or could with reasonable diligence have been discovered. The retailers had brought claims for overcharges resulting from the operation of the MIFs since 1977. The High Court had struck out the claim for the periods prior to July or October 2007 (the dates 6 years before the claims were brought). This was because prior to 2007, the claimants already had sufficient facts to allow them to formulate their claim and to establish a prima facie case. These facts were in the public domain as a result of a series of investigations conducted by competition authorities since 1992, the exemption granted to Visa in 2002 by the European Commission, the infringement decision by the then Office of Fair Trading against MasterCard in 2005, various press releases and other publications.
The Court recognised that the claimants had been "given comfort" by the prohibition decision issued by the European Commission against MasterCard in 2007, but it held that they had had enough information to bring their claim well before then. The Court of Appeal upheld this conclusion. The Court of Appeal held that the claims for periods prior to 2007 were time-barred. Furthemore, the claimants could not rely on the defendants' deliberate concealment of facts to extend the limitation period.
However, it should be noted that Arcadia v. Visa concerned arrangements that had been the subject of very high-profile investigation by the competition authorities for some years, with many of the details in the public domain. Claimants bringing proceedings to recover losses caused by secret cartels are likely to be in a better position to argue that they were not (and could not have been) aware of key facts for much longer. However the Court made it clear that competition cases do not fall within an exceptional category requiring a different approach to limitation. Claimants should therefore be aware that the trigger for the running of time for limitation purposes will not be the discovery of every potentially relevant fact but only those facts necessary to plead their cause of action.
We published a full analysis of the High Court's decision (now confirmed by the Court of Appeal) here.
Claimants in competition damages actions will often choose to claim against only one, or a few, of the members of a cartel. The defendants may then seek a contribution from other members of the cartel – "contribution defendants" or, in the UK, "Part 20" defendants. In practice, the relationship between the main and contribution proceedings, and the impact of settlements as between the various parties, is very important.
High Court rejects Part 20 defendant's limitation argument
On 16 June 2015, the High Court in England handed down its judgment in Newson v. IMI and Delta, a claim following the copper fittings cartel decision. The issue was whether Delta, a Part 20 defendant, could rely on limitation arguments in order to avoid the contribution claim by IMI, even following a settlement of the main proceedings between IMI and the claimants. The Court held that it could not.
One element of IMI's defence to the main proceedings was that the 6-year limitation period had expired. The claimant argued that it had not expired, because the cartelists had concealed the cartel. During the course of the damages action, Delta had admitted liability in principle for the claim but had also run the limitation argument, and had in addition provided evidence in support of its argument to argue that the limitation period had expired. IMI had not adopted this detailed evidence in its defence to the main proceedings, and had subsequently settled the claim. Delta then argued that it was not liable in the contribution proceedings, as the claims by the claimants had been time-barred and had never properly established in the main proceedings.
Section 1(4) of the Civil Liability (Contribution) Act 1978 provides that a defendant who has made a payment in settlement of a claim can claim a contribution from a Part 20 defendant who"would have been liable assuming that the factual basis of the claim against [the defendant in the main proceedings] could be established."
The court held that in this case the limitation argument was based on facts that IMI did not put forward, and therefore that the court was required to assume that the limitation argument would not succeed. On that basis, Delta was liable to contribute.
The Directive will change the current rules in England & Wales on limitation. It provides that a limitation period of at least 5 years will start to run when the claimant knows, or can reasonably be expected to know:
- of the behaviour and the fact that it constitutes an infringement of competition law;
- of the fact that the infringement of competition law caused harm to it; and
- the identity of the infringer.
There are no specific arrangements in the Directive (as there are in English law) to address the case of concealment, but the level of knowledge required by the Directive will effectively make it difficult for a defendant to argue that a limitation period has started to run until after the publication of a cartel decision, which will have a similar effect.
The Directive will also change the rules on contribution by protecting settling defendants against claims for contributions by defendants. So a defendant that settles early for a lower figure (as is often the case) will not face claims by its co-defendants. This is likely to incentivise defendants to settle claims quickly, in the knowledge that they will not be subject to future contribution claims.
The European Court of Justice issued an important ruling on jurisdiction in the context of competition claims in May. Since then, two cases in The Netherlands have illustrated the willingness of the Dutch courts to accept jurisdiction in follow on damages claims where at least one of the defendants is domiciled in the Netherlands.
On 21 May 2015, the European Court of Justice ruled on a series of questions from a German court about the application of the EU jurisdiction and judgments Regulation, Regulation 44/2001, otherwise known as the Brussels Regulation, in the case of cross-border multi-party competition damages claims. This was the first time that the Court had ruled specifically on the application of the Brussels Regulation in this area, and the judgment is therefore of great practical importance.
Claimants go to considerable efforts to bring their claims before "preferred" jurisdictions (with the UK, Germany and the Netherlands currently among the front runners). A defendant may always be sued in the courts where it is domiciled, so a technique often used is to bring proceedings against an "anchor" defendant domiciled in the chosen jurisdiction, and rely on Article 6(1) of the Brussels Regulation to bring the other defendants before the same court. The defendants will often seek to strike out the claim against the anchor defendant, with a view to removing the entire basis of the jurisdiction of the claimant's chosen court. The CDC judgment establishes that loss of the anchor defendant does not necessarily result in loss of the connection to the jurisdiction.
We published a full analysis of this case here.
Dutch courts accept jurisdiction
In proceedings in the Dutch courts following the 2012 Sodium chlorate cartel decision of the European Commission, Kemira, one of the cartel members, and a defendant in the damages claim,had argued that Dutch courts had no jurisdiction, and that claims against it should have been brought in Finland where it is domciled. On 21 July 2015, the Dutch Court of Appeal rejected the challenge, on the basis that one of the defendants in the infringement was domiciled in the Netherlands , also applying Article 6(1) of the Brussels Regulation, applied by the European Court of Justice in the CDC case.
On 22 July 2015, the District Court of Amsterdam rejected another jurisdiction challenge, this one brought by DB Schenker against Air France-KLM in relation to the Air cargo cartel. In this case, Air France, along with other airlines, applied for a declaratory judgment from the Dutch courts that it was not liable in damages to DB Schenker, a freight forwarder that had purchased air cargo services from the airlines. This would act as a jurisdictional 'torpedo', securing the jurisdiction of the Dutch courts and thereby preventing claims from progressing in other legal systems. According to DB Schenker, this amounted to, among other things, an artificial creation of a forum and an abuse of procedure. However, the District Court rejected this argument, and therefore accepted jurisdiction.
In most competition damages claims, a key issue is the extent to which the purchaser of the cartelised products or services has been able to "pass on" any overcharge to its own customers in the form of increased prices. The competition damages Directive introduces rules for managing this issue in the context of claims by purchasers at different levels of the supply chain. The European Commission is also due to issue guidance on passing on.
Dutch court rules on passing on in the Gas-insulated switchgear cartel
On 10 June 2015, the District Court of Gelderland ordered that Alstom should pay EUR 14.1 million in damages, the full amount claimed, to the Dutch electricity transmission system operator TenneT for loss resulting from the Gas-insulated switchgear cartel whose members were fined €750 million in 2007. This followed a judgment of the same court in September 2014 which ruled that, although Alstom was liable to pay compensation, the Court required further time to consider arguments relating to the passing on defence. The Court also held that in principle, TenneT bore the burden of establishing the level of overcharge.
The judgment in June is significant. First, it signals that the Dutch courts are prepared to award damages in follow-on damages claims, this being the first example of a successful claim in the Netherlands. Second, it demonstrates that the Dutch courts currently do not have consistent approach to the passing on defence, In September 2014, in TenneT's parallel proceedings against ABB resulting from the same cartel, the Court of Appeal of Arnhem-Leeuwarden had confirmed that the defence is available as a matter of Dutch procedural law, although it had left the evaluation of damages up to the assessing court.
The Gelderland court in ruled that passing on did not give rise to a defence to the damages claim. Instead, it found that since it was unlikely that indirect purchasers would come forward to claim damages against TenneT, as TenneT would have recouped the cost of its purchases over a number of years through electricity transmission tariffs paid by users of its network. These charges would ultimately have been borne by consumers. The Court considered it highly unlikely these consumers would claim, as it would be difficult to determine the extent of this overcharge. Instead, by awarding damages for the entire loss to TenneT, consumers would benefit from price decreases by virtue of the regulation of the tariffs. The Court therefore did not make any deductions for passing on.
On 12 June 2015, the Dutch Supreme Court refused Alstom's request to join ABB in the TenneT/ABB appeal, following the District Court Gelderland acceptance of two separate actions against the distinct cartelists in April 2015.
Legislation and procedure
Changes to EU procedural rules ahead of the implementation of the competition damages Directive
On 6 August 2015, the European Commission amended its procedural rules in anticipation of implementation of the EU competition damages Directive, for which the deadline is December 2016. The amendments have been made to the Regulation 773/2004, ("Implementing Regulation"), by Regulation 2015/1348, as well as further amendments to four Commission Notices: the Notice on Access to the File, the Notice on Co-operation with National Courts, the Leniency Notice, and the Settlement Notice. Notably, the Implementation Regulation now includes law relating to leniency and settlement proceedures, which was previously only contained in the Notices.
The amendments provide some important clarifications. Firstly, the new Article 4a of the Implementing Regulation confirms that the EC will accept leniency corporate statements orally, and also states that pre-existing information, that is evidence that exists irrespective of proceedings or that is submitted by an undertaking in relation to immunity or reduction of fines, does not form part of the leniency corporate statement. Article 10a(2) establishes that settlement submissions may be provided orally. Article 16a is an entirely new provison which sets out limitations on the use of information obtained in European Commission proceedings. This corresponds to the provisions of Article 6 of the Directive, which protects certain categories of information, notably leniency corporate statements and settlement submissions, against disclosure in damages claims.
There are also important changes to the Notices. For example, the Notice on Access to the File now includes, at paragraph 48, a provision that misuse of information obtained for EU competition proceedings may be subject to penalties as a matter of national law. The Leniency Notice clarifies that, at paragraph 35a, the Commission cannot transmit leniency corporate statements for use in follow-on damages claims in the national courts, which is a clarification mirrored in the Settlement Notice at paragraph 39. The Notice on Co-operation with National Courts includes, at paragraph 26, a statement that disclosures to national courts should not unduly affect the effectiveness of the Commission's enforcement, or interfere with ongoing investigations.
Collective actions in the UK following the Consumer Rights Act 2015
The Consumer Rights Act 2015 (the Act), which received royal assent in March 2015, came into force in the UK on 1 October 2015. In addition to modernising consumer law by adding digital content as a new category of product, the Act introduces a new regime for private competition claims in the Competition Appeal Tribunal (CAT), opening up new avenues for private enforcement in the UK.
The Act introduces new opt-out collective proceedings. The opt-out scheme will automatically include all UK-domiciled (those who are not UK-domiciled must "opt-in") claimants into the proceedings unless they actively "opt-out" in a manner determined by the CAT. Collective proceedings must be commenced by a representative. In addition, to prevent abuses, the CAT will act as gatekeeper by issuing collective proceedings orders only to the claims fulfilling the requirements.
Specific rules regarding damages and costs will also apply to collective proceedings. Exemplary damages will now be prohibited and the presumption that the losing party pays the winning party's costs is retained.
The Act also facilitates stand-alone claims (ie. those that do not rely on a prior infringement decision by the European Commission or one of the UK authorities). Stand-alone claims can currently only be brought before the High Court, with the jurisdiction of the CAT limited to follow-on claims. In future, the CAT will have the power to hear both types of claim. This opens a new forum for claimants who may prefer to have their claim heard by a specialist competition law tribunal under a more flexible procedure. It is likely to increase the number of stand-alone claims in the UK as a whole.
Finally, the Act provides that the limitation period will be the same in the CAT and in the High Court, namely six years from the events giving rise to the claim (subject to the rules on concealment described above in relation to the Newson case). This addresses one of the major shortcomings of the current CAT procedure, where the restrictive limitation rules are seen as a significant obstacle to greater use of the Tribunal. The limitation rules for both the High Court and the CAT will need further amendments to bring them into line with the Directive.