After over a decade of discussion and debate, the Damages Directive (2014/194/EU) was formally adopted at the end of 2014, and Member States have until 27 December 2016 to implement it into national laws. The Directive’s stated aim is to improve enforcement of competition law by making it easier for those who have suffered loss as a result of competition law infringements to claim damages.
The UK, Germany and the Netherlands lead the way in follow-on damages actions; in other words private actions for damages following an infringement finding by the European Commission or national competition authorities, such as the Competition and Markets Authority in the UK. However, in more than two-thirds of Member States no follow-on actions are brought. It is estimated that as a result of the difficulties in bringing damages actions, consumers and businesses lose out on over €20 billion each year.
The Directive’s measures include:
- Making it easier for claimants to obtain evidence from infringers and from competition authorities – while appropriately protecting leniency and settlement applicants.
- Introducing a presumption that cartels cause harm.
- Providing that indirect purchasers who suffer harm may claim for that harm and so introducing a ‘passing on’ defence for direct purchaser claims.
- Clarification of the principle of joint and several liability for undertakings which have infringed competition law through joint behaviour.
- Introducing minimum limitation periods, five years from an infringement ceasing and one year after the end of competition authority investigations.
- Ruling out exemplary damages or other means of ‘overcompensation’.
- Protecting the position of those infringers who have entered into agreed compensation settlements.
- Ensuring that the burden and standard of proof required for quantification of damages does not render the exercise of the right to damages practically impossible or excessively difficult.
Much of this is already part of the legal landscape in the UK. However, the adoption of the Directive should lead to more effective enforcement and even out the position across Member States. The Commission is committed to being proactive to ensuring proper and timely implementation of the Directive. They will be producing guidelines for national courts on how to estimate the amount of overcharges passed on to the indirect purchaser. In addition, national competition authorities may be asked to assist in the quantification of damages, something that they have to date been keen to avoid.
The Directive represents a substantial attempt by the European Commission to make actions for damages easier for claimants. As well as substantial fines, this will provide a further disincentive for competition infringements. Only time will tell whether or not the Directive succeeds in its objectives.
For more information, please contact Noel Beale in our Competition team.