EU Parliament backs cartel evidence release proposals but leniency corporate statements to remain confidential

Out-Law News | 23 Apr 2014 | 9:39 am | 4 min. read

Companies seeking cartel damages could get access to evidence which would help compensation claims under new proposals which have been backed by the European Parliament.

But national courts in member states would ensure "such disclosure orders are proportionate and that confidential information is duly protected," a statement by the European Commission said.

Leniency corporate statements and settlement submissions, which are documents which antitrust infringers prepare as part of their cooperation with competition authorities, and which can be self-incriminating, "can never be disclosed" under the plans, the Commission said.

The new directive is designed to make it easier for victims of antitrust infringements to sue for full compensation, as the Commission aims to increase the number of damages cases brought against infringing companies. Only a quarter of EU anti-trust rulings issued between 2006 and 2012 resulted in claims for compensation, according to the Financial Times. Most cases were brought by large companies in the UK, The Netherlands and Germany, whose national regimes are regarded as more victim-friendly on antitrust, said the newspaper. The Commission blames the relatively low figures on "national procedural obstacles and legal uncertainty" as well as "widely diverging rules" across the 28 member states.

Following the vote in favour of the proposals by MEPs, European Commission Vice President Joaquín Almunia who has responsibility for competition policy, said: "The vote by the European Parliament is great news for European citizens and businesses harmed by antitrust violations. The directive will help to make the right to full compensation a reality in the EU, by removing the practical obstacles that victims face today. When the directive is adopted and implemented, obtaining redress will become easier for them, especially after a competition authority has found and sanctioned an infringement.".

According to the Commission, the directive will remove a number of practical difficulties which victims face when trying to obtain compensation for harm suffered as a result of cartel activities which contravene EU anti-trust laws.

Under the proposed directive, victims will have "at least one year" to claim damages once a national competition authority has made an infringement decision – longer than at present.

In addition, final infringement decisions by national competition authorities will automatically constitute proof before courts of the same member state in which the infringement occurred.  In actions before courts of other member states, claimants will be able to present such decisions "as at least prima facie evidence of the infringement" said the Commission statement.

Victims will have the right to obtain full compensation for "actual loss and for loss of profit" plus payment of interest from the time the harm occurred until compensation is paid. Should the price increases resulting from an infringement be passed on along the distribution chain, those who actually suffered the harm will be the ones to receive compensation. Infringers would be allowed to defend themselves against a damages claim by proving that their price increase was partially passed on by the claimant to his own customers, and it would be easier for indirect purchasers to prove that a passing-on occurred.

Although under the proposals national courts would be able to order cartel operators to disclose evidence which would help the victims' compensation claims, they will not require the publication of corporate leniency statements and settlement submissions. These are documents which are provided by infringers as part of cooperating with EU antitrust investigations. Such statements are often offered to competition authorities by whistle-blowing companies which expose cartel activity. Ahead of the vote, some MEPs had requested that leniency statements be made available to victims, but the Commission resisted.

"Under the directive, leniency statements and settlement submissions can never be disclosed and used in civil damages actions," said the Commission. "The certainty that such self-incriminatory statements will not worsen the legal position of cooperating companies in the context of follow-on antitrust damages actions is essential to maintain the infringers’ incentives to voluntarily cooperate with competition authorities. In any event, the evidence needed by claimants will typically be contained in documents produced in connection with the perpetration of the infringement."

The proposals must be adopted by the European Council before they can become law, after which member states would have two years to implement the provisions into their national legal system.

Competition law expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said: “Currently, competition damages actions are brought in a comparatively small number of EU States; primarily the UK, Germany and the Netherlands. The directive is an important step towards increasing the number of competition damages actions and widening the range of EU countries in which such actions are routinely brought."

"The UK may well remain the ‘forum of choice’ for private actions for a range of reasons, including longer limitation periods, generous disclosure rules and the courts’ rapidly growing experience in considering the complex economic, legal and procedural issues," said Lougher. "In addition, proposed UK reforms, included in the current Consumer Rights Bill, are more generous than the EU directive, including in relation to collective and stand-alone damages actions."

"The directive nevertheless strikes a careful balance between a range of potentially conflicting interests; safeguarding the integrity and benefits of the EU’s leniency programme, avoiding the potential downsides of US-style class action litigation and yet encouraging the number of damages actions which are brought," he said. "In that context, the directive is a significant step forward but this remains a complex area. For example, the directive may encourage immunity applications by potentially limiting the liability of immunity applicants to damages suffered by their own customers, yet the recent Morgan Crucible case in the UK means that immunity applicants are likely to be sued first in any follow-on damages actions, potentially whilst appeals by their co-cartelists are still continuing in Luxembourg."

"The directive also highlights the need for the European Commission to improve its own performance if there is to be a material increase in the number of follow-on damages actions," said Lougher. "The directive provides for limitation periods of at least five years but as Peter Roth, President of the Competition Appeal Tribunal, commented recently it can be many years before the Commission actually publishes an infringement decision, which may contain much of the detail that is invaluable in order to bring a damages action."