Private Individuals in Damaging for Breaches of EU - Essay Example

?Topic: Discuss the ability of private individuals to seek damage for breaches of EU competition law. The European competitive law has seen key changes in the matter of its enforcement since the past twenty years, especially after the enactment of Regulation 1/2003 that created a visible change towards the decentralised application of the competition rules and the given possibility for the national courts to decree on private antitrust cases1. However, the position of private application of European competition law is not as clean as is of the public application in the European Competition Network2. Research on the position of claims for damages in case of violations of EC competition rules in August 2004, done for the European Commission, finds, “The picture that emerges from the present study on damages actions for breach of competition law in the enlarged EU is one of astonishing diversity and total underdevelopment"3. The outcome of the comparative report has enabled the European Commission to know the hurdles in the path of activating the private application of competition law within the Member States and discuss the ways by which a more dependable system of private antitrust enforcement could be created. The relative analysis of the various legal systems in the EU indicates a huge difference in the member states handling of competition law claims. Process-related differences between national legal systems in the EU are turning in favour of forum shopping in inter-state cases. Before taking an action, applicants involved in inter-state process can check the benefits and disadvantages of national jurisdictions before furthering an action for losses in one or many member states. The EU member states are expected to adhere to EC law, but the processes they follow for private enforcement cases are controlled at a national level. Changes to national law in one member state, like it happened in Germany, do not impress other member states. This gap between national process of the law and EC law needs to be settled for adopting an EU-wide universally dependable system4. This paper will discuss some leading trends in three of the Member States including Germany, UK and Italy. The role of European Commission in making the EU competition law very efficient on the private enforcements would be discussed. European Commission attained this aim by issuing the Green Paper in 2005, which was followed by the White Paper in 2008. The Courage5 verdict by the European Court of Justice (ECJ), brought more in focus the right of private individuals to fight for losses as an outcome of violations of EC competition rules, (specifically losses caused from breaches of Art 101 and Art 102 TFEU). One of the most significant reasons of the long ignorance of the private antirust from the competition policy is the distinct European system. The European Commission and European Courts impact private antitrust cases as they have registered their attendance in public competition law enforcement. Furthermore, the European Courts are not competent enough to decree on private enforcement of EC law infringements. The European Court of Justice only considers preliminary references by national courts of the Member States such as Courage and later Manfredi6 cases. Only in select cases the ECJ has taken a stance, as Courage and Manfredi cases have huge impression on the competition law policy7. The fight between Entrepreneur Estates (previously Courage) and MrCrehan over a beer tie agreement prompted the ECJs Courage decision in 2001. The Court said that “[...] the practical effect of the prohibition laid down in Article 85(1) [Art 101(1)] would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition”8. This personal right to seek reward for the damage caused by infringement of competition rules was again reasserted in Manfredi case in Italy9. The ECJ stated as based on the principle of effectiveness the national courts of the Member States should offer solution for claims made in private capacity for infringements of competition law. Although the Courage and Manfredi cases have added to the robustness of private enforcement in competition law, yet there are many hurdles for claimants to initiate private actions for application of the competition law. One of the private application’s hurdles is the deficiency of a specialist court in the EU that is qualified in such claims. Only the UK in the EU jurisdiction has this provision of a specialist court to decree on competition issues. There are many special and well-qualified judges, special procedural rules and expertise for competition law provided by the competition appeal tribunal (CAT). Besides, the onus of proving the occurrence of violation before the national courts still rests with the claimants. In the UK, the CAT and general courts are obligated by a violation decree of the OFT (Office of Fair Trading), or the European Commission. Nevertheless, if a claimant cannot depend on a past decision, the probability is high for depending on disclosure to prove a violation. Parties are bound to show all papers giving no consideration to the impact it may have on the case, but the courts generally do not permit requests to read all information, if it is clear that the claimant has no idea what to search for. In France the process is even more severe than the UK. The parties in France are only allowed to provide only case-specific information and the release of third party papers is reserved to specifically named papers10. Other than that, one of the other hurdles in the private enforcement of competition law is that national courts of the member states find it difficult to fix the amount of loss as they are yet to devise a cohesive way to calculate losses. For instance in Bernard Crehan case11, the earlier decree of the High Court computed the losses near to GB?1.3 million, which was later on decreased by the Court of Appeal near to GB?130,000 with the explanation that while both courts awarded compensation for loss of earnings, the High Court measured the damage at the time of the judgement, while the Court of Appeal approximated losses at the time of injury. Relatively speaking, in the US, third parties facing loss because of a breach of competition law can take legal recourse against the violating party three times the cost of the loss. This probability of three times compensation works as a strong disincentive to potential violators and inspires private parties to sue through private enforcement12. To add on, this issue has been discussed in the EU that a total passing-on-defence on should be offered or not. In an interlocutory decree on security for costs in the UK, the CAT cited the passing-on defence as a new and critical problem and stated that the question of whether a defendant has the right to increase it is not answered as a topic of EC and domestic law. So, if the ECJ permits a defendant to depend on the passing-on defence, the strength of private enforcement action over the member states would be greatly affected13. The condition in the US is far better. Defendants can no more depend on the passing-on defence in reference to selling to direct buyers for the reason being that finding the additional charge would create unwanted or lingering issues and also direct buyers would prove more efficient in the bargain than indirect buyers who may be unwilling to put claims in the given situation of having a lesser part of the loss14. Besides, In Courage v Crehan15, the ECJ held that any person could depend on a violation of Article 81 of the EC Treaty (now article 101 TFEU) before a national court. This indicates that refusing standing to indirect purchasers would be inappropriate with EC law as it works against the principle of straight effect. The ECJ did not decree in Crehanon the particular issue of whether indirect buyers have standing for private enforcement actions. Only future course of action would decide whether permitting indirect buyers to file a case would incriminate the path to the passing-on defence16. While private enforcement of losses action sin EU competition law is not as developed in a number of EU countries as expected but latest development in some Member States indicates the capability and eagerness of these countries to efficiently smoothen the private losses actions against violators of EC competition law. Let’s have a look at the developments of private enforcements in Germany, the UK and Italy. First, the seventh amendment to the German Act against Restraints of Competition came into effect as on 1st of July 2005. This amendment was targeted to apply the Modernisation Regulation and initiated leading changes to smoothen private losses actions17. Before this amendment, the claimant, to put forth a claim, had to be a part for the securing aim of the norm (Schutzzweckder Norm) of the specific competition law that had been violated. Nevertheless, in the new amendment, the claimant no more has to depend on any specific violation of the competition rule, for example, it is no more essential for cartel participants to show that cartel was particularly aimed against them when asking judicial relief or seeking loss compensation from the cartel participants. Standing for private application of claims is now quite vast, since claims can be made by anyone impacted by violation from market players. However, it is still mandatory for the claimant to provide evidence of carelessness or ill-will on the part of violator and show damages experienced. Besides this, the new law allows collective actions to a lesser extent. Certain institutions promoting trade have been permitted standing to claim for a violation to be rejected and, if it is an issue of global importance, for violator’s earning to be delivered to the state. These institutions can demand costs for their services by the Federal Cartel Office (Bundeskartellamt) if the violator does not compensates them upfront18. Further, as per the new regulation, passing-on defence (that is, the saying that the claimant has already transferred a superficially high value to its clients and as a result has not undergone any damage) cannot further be depended upon by the cartel participant. Therefore, violator of the competition law now faces legal action from both direct and indirect buyers that can show standing. This critical development was initiated by the rulings on the global vitamins cartel19. In 2003, claims were made before the German courts by many German companies that had procured vitamins from Hoffman-La Roche associate companies. Initially, the claims were rejected by the first two courts (LG Mannheim and LG Mainz) on the argument that Hoffman-La Roche did not straightway aim the claimants. Nevertheless, a higher district court, (the OLG Karlsruhe), studied the issue of communicating on defence in its obiter dictum. The court noted that it should be the final user who undergoes the cost of the disfigured market not the negotiating user. As per, it would not be right to provide compensation to a claimant who is the straight agreed part of the cartel and who does not finally suffer the loss. Although the new law in Germany has a huge effect on the private enforcement in competition law, the new provisions do not control all matters related to the commuting-on defence. It is yet to be seen how it will be used by the German courts, especially, in cases where a violator faces claims from both straight and indirect buyers for the same loss. The condition in the UK is much better than other Member States. As stated above, in the UK, there are two powers that are qualified in private enforcement claims (the CAT and the High Court) which the claimant could avail from broad discovery rules and specialist judges to hear loss claims on national and EC competition law. There have been many leading changes in case law as well. The Roche Products case brought new insights by fixing jurisdiction problems for the UK courts20. The case involved actions for losses wherein the defendant and one of the claimants were living outside the UK. Nevertheless, the agreement that the parties made carried foreign jurisdiction clauses. The court stated that so far as it had legal power over one of the claimant, relevant claims by non-UK companies should be permitted to be settled in the same case. A turning point came in 2004 for private application of actions, as the Court of Appeal in the Crehan case decreed the first award of losses for violation of competition law in English courts to a claimant21. In 2005, the first two claims for losses were presented before the CAT22. Although both cases were settled before a full trial, the openly available facts on these claims indicate that the CAT decided these issues effectively. Besides this, if a claimant desires to present a claim in the UK, it must reveal all leading papers that it perceives to depend on during the legal course, including related witness statements and expert attestation as early as possible23. This greatly decreases the time between initiating action and a case being ready to go to examination. Moreover, the claim processing in the CAT is comparatively cheaper and claims can be presented for examination in a fast and efficient way. The UK has been an appealing legal ground to fight for damages by any claimant, emerging from a violation of the competition laws24. A latest development in Italy has been surfaced with the decision of the Italian Supreme Court (Corte di Cassazione) in Compagnia Assicuratrice Unipol SpA v Mario25. This has paved the way for consumers to fight for claims on losses against violations of Italian competition law. The court decreed that consumers at a loss from an agreement that depends on an upstream cartel could initiate proceedings for revoking of that cartel and claim losses caused by that violation. The Supreme Court ordered that Article 33(2) of the Italian Competition Act holds to consumers who, if they get favourable response for revoking the alleged anti-competitive act, can claim losses. The earlier stance of the Supreme Court had been that consumers enjoyed no legal right under Italian competition law to revoke a contract because the purpose of competition law was to secure businesses and not consumers26. The court put forth the argument that the law was not straight way attached to consumer interests, whatsoever may be the issue or the losses inflicted on consumers. The court has annulled the past view, as it noticed that competition law safeguards anyone who is impacted by the market. The Court of Appeal (Corte di Appello) keeps to itself only the sole power to hear consumer petitions, which derives that applicant must pay increased costs and manage with the more complex administration generally linked with the Court of Appeal. Furthermore, due to the missing right to take class action in Italy, the solution option with private parties for a violation of Italian competition law is very limited. To sum up, there is huge difference between the member states in private application actions for competition law. Unless a greater level of understanding is attained at an EU level, member states like the UK and Germany are going to be the first preference for taking private actions and may even encourage reform in other territories. The capability of private parties to claim losses for violations of EU competition law is doubtful and do not impact the private parties in the EU States. Nevertheless, after heightened public debate and internal discussions on this topic, the Commission issued a Green Paper (December 2005)27 and took steps on losses actions for the violation of the EC antitrust regulation. The Green Paper attempted to find out the key hurdles for private actions and considered possible steps to better the situation for furthering complete damages applications. After analysing reviews on the Green Paper and considering the Manfredi case, the Commission issued the White Paper on EC losses actions in 200828. In the White Paper, the Commission suggested framing of rules for implementing into the laws of the Member States to encourage private losses actions for the violation of Art 101 and 102. These offerings are claimed to be “[...] balanced measures that are rooted in European legal culture and traditions”29.To enforce these steps would need critical shifts the substantial and process-related laws of most Member States. The White Paper discusses and furthers proposals for policy selections and particular steps to ensure that all victims of violations of EC competition law have reach to efficient remedial mechanism for total relief for the loss undergone. The key aim of the White Paper is to better the legal environment for victims to use their right under the Treaty to mend all losses suffered as an outcome of the EC antitrust regulation. Total reparation is the foremost priority and guiding principle. More efficient reward mechanisms denote that the burden of antitrust violations would be borne by the violators and not by the sufferers and legally functioning enterprises. Effective redress for private parties also heightens the possibility of a good number of illegal limitations of competition will be searched and that the violators will be held responsible. Besides, better reward justice would internally also create positive impact on limiting possible violations and better abidance with EC antitrust rules. Securing clean competition is related function of the internal market and critical for enforcing the Lisbon strategy. A competition environment helps in better distribution of resources, increased economic performance, heightened innovation and reduction in prices. Later on, the Commission issued a directive that primarily put forth the proposals presented in the White Paper. This draft directive was not cleared because some Member States objected to the Commission’s proposals. It is yet to be confirmed whether the draft Directive can be implemented in its present structure amidst the objections raised by some Member States and the European Parliament. On 4th February 2001, the Commission set up a public discussion to form a unitary European approach for complete reform30. Some of the critical areas were discussed related to the initiative to offer a complete and cohesive remedy for private individuals to get relief from competition law violations. It was stated that the effect of any likely Europe-wide step on the national legal systems would differ depending on whether the related Member State had a prior system of shared remedy in place and what had been the key traits of that system. Granted the vast range of currently prevalent national systems and their various degrees of efficiencies, deficiency of a regular approach to shared remedy at EU level may underscore the privileges of rights by citizens and enterprises and encourages to unequal application of those rights. That’s why the discussion materialised in some common principles to lead likely EU advances on shared remedial measures. These measures include the urgency on the part of EU for an effective and efficient remedy and also underlining the significance of information and the responsibility of representative organisation. Besides, there is need to conduct an appraisal of shared consensual resolution as a way of finding other methods of dispute resolution with a consideration for strong initiatives to avert abusive judicial proceedings. To conclude, as is evident from what has been stated above, there are indications of an increase in the private damage applications of competition law in some EU Member States. Latest developments in both the UK and Germany indicate that these are the legal territories where there is a heightened degree of such activity. It would be interesting to observe the impact of this activity in other territories, not least in the light of the Commission's proposed Directive (if and when applied) but in reaction to shifts in national legislation. Read More