Commission’s report on the implementation of the Damages Directive

By Jose Rivas, Pauline Van Sande, Ciara Denihan

01-2021

On 14 December 2020, the European Commission published a report on the implementation of Directive 2014/104/EU of the European Parliament and of the Council (“the Damages Directive”). Overall, the Commission is positive about the implementation of the Directive in the Member States, but the Directive lacks sufficient application in practice. 

The Damages Directive has two complementary goals. First, to ensure that anyone who has suffered harm caused by an infringement of competition law, such as cartels or abuses of dominant market positions, can effectively exercise the right to claim compensation. Secondly, to ensure smooth interplay between public enforcement, by the Commission and national competition authorities, and private enforcement by individuals affected by the infringement. 

Article 20 of the Damages Directive required the Commission to review the Directive before 27 December 2020 and to submit a report to the European Parliament and the Council on its application. However, to date there has been a lack of experience on the application of the Directive, consequently it was not possible yet to assess its application. Therefore, the Commission’s report focuses instead on assessing the implementation of the Directive. Late implementation of the Directive by Member States is largely to blame for little experience in practice, with 21 Member States not meeting the 2016 deadline for transposition. Indeed, three countries did not transpose the Directive until the first half of 2018. Further, the substantive provisions cannot apply retroactively and the temporal scope of application of the Directive varies greatly across the Union. The lack of available data at this point is also due to the fact that damages actions are usually complex and drawn-out procedures, which usually only come after a decision of a competition authority (so called “follow-on damages”). The report notes that on average it takes 13 years from the date of purchase of the affected product or service for a first judgment to be rendered.

The report first focuses on the initial indications of the impact of the Directive, which it considers to be positive. The Commission relies on various studies which have been done to date, which show that private damages claims have risen since the implementation of the Directive. One such study notes an increase from 50 cases in 2015, to 239 cases in 2019, in 13 Member States. However, these figures also suggest that the Directive has not yet had an impact in all countries. The Commission’s report then goes on to examine the implementation of certain key elements of the Directive across several Member States, such as the right to full compensation, disclosure of evidence, evidentiary value of infringement decisions, limitation periods, the passing on of overcharges and estimation of harm. It is concluded that overall, the Directive is implemented uniformly in the Union. Divergences are to be found for example in the penalties for breaching the disclosure rules and in extensions of the minimum limitation period.

The report then continues to discuss the Commission’s various initiatives launched to ensure effectiveness of the Directive, including the Passing-On Guidelines in 2019 and the Confidentiality Communication in 2020. However, due to the recent introduction of both, it is difficult to draw conclusions on either. Nevertheless, it is noted that the recent judgement of the UK Supreme Court in Sainsbury’s v Visa and Mastercard shows that the Passing-On Guidelines can provide a useful reference point for national judges. 

Finally, the report examines the jurisprudence of the European Court of Justice (“ECJ”) in this area, focusing on four key rulings (Cogeco-Communications, Skanska Industrial Solutions and Others, Tibor-Trans and Otis and Others) which strengthen the protection of victims and their ability to effectively seek damages. The Commission is largely positive in its appraisal of these decisions. The report also notes the increasing number of cases referred to the ECJ since the Damages Directive entered into force; six cases have been decided and five are still pending. 

Although Article 20(3) provides that, if appropriate, the report should be accompanied by a legislative proposal, no such legislative changes are foreseen alongside this report, due to the lack of experience of the application of the Directive, as discussed above. However, given that this report was more limited in scope than was envisaged by the Directive, the Commission plans to conduct an in-depth review of the Directive once sufficient experience from the application of the rules has accumulated. Overall, the Commission’s conclusions in this report are positive and it is hopeful that the number of private actions for damages will continue to rise in the coming years. Furthermore, the increase in guidance from the European Courts, due to the rising number of cases in this area, should provide welcome clarity on certain issues in future.

For more information contact José Rivas, Pauline Van Sande or Ciara Denihan

 

 
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