JONES DAY TALKS®: Private Antitrust Litigation in Europe: The Big Picture
Private enforcement actions relating to antitrust matters has increased dramatically across Europe in recent years, both as follow-on damages claims in reaction to governmental enforcement actions, or as standalone competition claims pursued in litigation and arbitration by private parties. Jones Day partners Jürgen Beninca and Nicholas Cotter discuss what is behind the escalation in cases, including the effects of the European Union's 2014 Damages Directive.
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Dave Dalton:
In a dramatic reversal of how these matters were previously addressed, private antitrust litigation cases across Europe have surged in recent years. Jones Day partners, Dr. Jürgen Beninca and Nicholas Cotter, are here to discuss the impact of the EU Damages Directive, the types of cases they're seeing, and the trends clients and interested parties need to watch. I'm Dave Dalton, you're listening to JONES DAY TALKS®.
Dave Dalton:
Based in Jones Day's Frankfurt office, Dr. Jürgen Beninca counsels European and U.S. Corporate clients on antitrust regulatory compliance and represents businesses before cartel authorities, including the German Federal Cartel Office and the European Commission. He also argues before courts in antitrust matters.
Dave Dalton:
Partner Nick Cotter represents clients in high value, antitrust and regulatory litigation. Based in London, he has obtained groundbreaking judgments in the compensations sphere in the English High Court and Court of Appeal. Nick also acts for clients in general commercial disputes, both litigating and in arbitration.
Dave Dalton:
Jürgen, Nick, thanks so much for being here with us today.
Jürgen Beninca:
Thanks Dave, for the invitation.
Nicholas Cotter:
Yeah, thanks, Dave.
Dave Dalton:
We're talking about private antitrust litigation in Europe. In fact, this will be the first in a series we're going to call JONES DAY TALKS®: Private Antitrust Litigation in Europe. This is the first of what we hope will be several very, very informative podcasts. Let's start with Jürgen. Give us a general overview of private enforcement of competition laws in the EU. What's the high level view as we speak today?
Jürgen Beninca:
Private antitrust litigation has certainly seen tremendous developments over the last two decades. When I started practicing antitrust law in 1998, private enforcement was, in Germany at least, non-existent. People believed that the antitrust laws only protect the market as a concept and not suppliers or customers of industry. This has changed tremendously over the last two decades. According to statistics published by the EU, we have had only a couple of dozen cases in the first decade of this century.
Jürgen Beninca:
This has certainly changed according to information published by the German Bundeskartellamt, the German Federal Cartel Office. We have had more than 640 cases in the last three years, in one cartel only. Today, I think one can really say that private antitrust enforcement is the rule and not the exception, as it has been in the past. As a result, this has been become more and more common.
Dave Dalton:
Sure. Previously, the mindset, if you will, was, we're protecting the market, make sure anti-competitive matters aren't coming forward and limiting market activity. Now, it's flipped to where private parties are seeking damages or looking to prevent or handle these matters on their own in private litigation. It has been a complete flip, hasn't it?
Jürgen Beninca:
It has indeed. One should also say that, at least in Germany, in the good old days, depending of course on what position you are standing on, German major corporates did not sue each other. This has certainly changed. I think the corporate governance laws have had a significant impact. Now CEO of a German publicly listed company feels an obligation to at least check whether pursuing antitrust damage claims make sense from a commercial perspective, once a company has found out that it has been a victim of a cartel. And that was not the case certainly 20 years ago.
Dave Dalton:
Now, that is interesting, that major corporates weren't suing each other in Germany up until fairly recently over antitrust-type matters, at least. I wouldn't have thought that. I think the cases may be different in different jurisdictions, but that is an interesting development.
Dave Dalton:
Let's go over to Nick for a second. Nick, talk about the number of cases, how they've accelerated in recent years and what you make of the trend.
Nicholas Cotter:
Yeah. I have to say I agree with what Jürgen has just said. The UK has been slightly different in terms of, I think there's been a fairly good run increasing antitrust litigation in the UK, probably for about 15 years. It's funny when you talk about what competition policy and litigation used to be and how that's changed over time. In the UK, in the early 2000s, competition law was enforced by the antitrust authorities to protect markets. Where it came up in litigation though, it wasn't really claimants seeking damages for antitrust infringements. It tended to come up on the defense side and it was the last possible defense for the bad defendant to try to reverse himself or herself or itself out of a exclusive distribution agreement, a contract. When you face no other defense to a breach of contract for basically acting contrary to the contract, you would move towards, "Well, the contract is void because it is exclusive and it infringes competition law."
Nicholas Cotter:
We ran that defense in a breach of contract claim in the early 2000s, where our client had sought to escape an exclusive distribution agreement for mobility scooters being imported into the UK. Generally failed. I think it was raised as a defense generally to get a bargaining chip in negotiations. But that was how competition law tended to play out in litigation. There were various changes in the early 2000s in terms of the direct effect as was there a European competition law in the UK for private litigants to rely on.
Nicholas Cotter:
But a new court was created in the UK in around 2003, the Competition Appeal Tribunal, which, as the name suggests, was a specialist court to deal with these kind of claims. That, combined with the General Courts, the High Courts taking a lot more antitrust claims, saw a development from about the early 2000s in basically, as you've been talking about, the claimant who has suffered from an antitrust infringement seeking damages, and that's really grown over the last 15 years.
Dave Dalton:
Good enough. All right. Jürgen, in the notes you sent over for preparation for today's program, you were kind enough to send us some background information, you talked about two primary drivers of the development in the increased caseload, if you will. Talk about what they are and what kind of impact they're having as we speak today.
Jürgen Beninca:
Happy to do so. I think one very important driver is, of course, the development of the case-law of the European Court of Justice in Luxembourg. Without major decisions at the beginning of the 2000s, in particular the famous cases Courage and Manfredi, it's clear that courts in the EU national member states would not have recognized the relevance of the antitrust law and the extent that these antitrust laws protect the respective as market sites, if you want to speak... That customers of a cartel are being protected, that is certainly due to these groundbreaking decisions in the early 2000s by the European Court of Justice.
Jürgen Beninca:
Then, in the aftermath, we have seen a series of legislative developments facilitating the pursuit of private antitrust damages claims on the national level. At the same time, the European Commission has always been trying to push legislative developments in that respect, which culminated in the end, in the EU Antitrust Damages Directive that was adopted in late 2014, had to be transposed into national law at the end of 2016. That has been another very important driver of the development. The European Commission stated this summer that it's going to perform a study on how these provisions, that had to be enacted because of this Damages Directive, have influenced the process of pursuing antitrust damages claims on a national member state level. I think we were going to see the first results probably in summer of next year.
Dave Dalton:
Interesting. Let's stay with Jürgen for a second. Talk more specifically, if you can, about the Damages Directive. What does it define in terms of how cases are played out? Obviously, it was a startling, but certainly an impactful development. Can you talk more about what it actually does in practice?
Jürgen Beninca:
The EU Damages Directive I think is such a broad pocket, one could have a podcast or a series of podcasts on this topic alone. This is really amazing.
Dave Dalton:
Sure. We probably will. Jürgen, if you're willing, I'm willing. Why not?
Jürgen Beninca:
The Antitrust Damages Directive has also a very long legislative history. The Commission has been convinced since the late 1990s, early 2000s, that public antitrust enforcement needs to be supplemented by private antitrust litigation and enforcement. That conviction led to a series of attempts to establish legislative tools and developments to promote the pursuit of antitrust damages claims by affected parties. At the beginning, at some point in time, the Commission was trying to propose certain changes to the Codes of Civil Procedure in the EU member state level, and received a pushback simply because the Commission lacked jurisdiction in that respect, so it changed course and it focused more on the material provisions and, cut a long story short, in end of 2014, the Antitrust Damages Directive was enacted. It had to be transposed into national law by the end of 2016. That has been the case.
Jürgen Beninca:
If you look at the Damages Directive and the provisions that had to be enacted as a result of that, I think we can identify the following groups of provisions. First of all, and that's really important because that has not been the case in every EU member state, the entitlement of a victim of a cartel to full compensation. That includes compensation for the actual loss, loss of profit and interest. Second, tools for getting access to relevant evidence, which is really an important aspect in Europe, because most European jurisdictions, until today, do not have a kind of discovery mechanism.
Jürgen Beninca:
There's a third major important point is that the infringement decision of, for instance, the Bundeskartellamt, the German Federal Cartel Office, constitutes full evidence of the violation of the antitrust laws in German litigation. That is, of course, an important step forward, because then the plaintiff only has to show causation and essence, and of course the damage. We have seen also further minimum statute of limitation periods, which now at least five years. We have rules on the so-called passing-on defense and, also very important, the rules of the Damages Directive established joint and several liability of all tortfeasors, of all cartel members, including the claim for contribution, and that's, of course, an important difference to the situation in the U.S.
Dave Dalton:
You're right. That was a lot to unpack and it's certainly complicated. I'm sure we'll talk more about all this moving forward. Let's go back to Nick for a second. Nick, you touched on this a little bit already, about the types of specific cases you're seeing, but can you walk us through what a typical case might be like in terms of private enforcement?
Nicholas Cotter:
Sure. There's two types of case, really, that we're seeing, particularly in the UK. One is more usual than the latter, but the latter is quite interesting. There's your fairly standard, whether it's in the High Court or Competition Appeal Tribunal, claimant seeking damages in relation to an antitrust infringement. Whether that is a claimant who sees, let's say a European Commission decision and wants to rely on that to seek compensation from the infringer. That tends to be, it will be one or a small group of claimants who issue a claim. I'll talk about that a little bit more in a minute, because that is the highest volume of cases that have being filed over the last 15, 20 years in the UK. More and more claimants prepared to take on a potential infringer, so where there is no EC decision, and that's called a stand-alone litigation, where you have to show there was an infringement, versus the litigation based on a decision of the European Commission or UK Antitrust Authority, which is a follow-on claim, which kind of sues in relation to that decision rather than having to establish an infringement from scratch.
Nicholas Cotter:
Both will be a small number of claimants, generally. They will follow a fairly traditional litigation process, which will be familiar to many litigants in the UK. So, say you will have the claim set out in a claim submission, which is filed at court. The defendant puts in a defense and then, after an initial, it's called a Case Management Conference, but basically a hearing to determine the mitigation will proceed to trial, you'll have a process whereby you have document discovery, which will take... It can be expensive. Will take several months. Each side will put in the evidence from witnesses it wants to rely on. And there's generally, particularly in this antitrust litigation, extensive expert evidence from economists and accountants, trying to assess the impact of infringements. Following that, you will usually have a trial. It might be three, four weeks. It might be longer. It's a process taking a couple of years. That's kind of the standard litigation process.
Nicholas Cotter:
The interesting new area that we're seeing is, since a Statute in the 2015 in the UK, there was the introduction in the area of antitrust of a more U.S. style class action, where you have the ability of a representative or a single claimant to seek the certification of a class in relation to an antitrust infringement, a certification hearing, and then, following that, a more standard litigation process. But again, it's a class claim which never existed in the UK and I think more generally in Europe, beforehand. In the U.S. style, where the single individual brings a claim for the whole class, have an aggregate damages award covering the whole that's a lost cause to that class by the infringement, and then a method to distribute that to the class members.
Nicholas Cotter:
That's an interesting development in recent years. It's going to be a different type of case that will be brought in relation to antitrust infringements. It's really early days in that area, but there's been... They all have to be brought in the Competition Appeal Tribunal, which is essentially the expert court, which will now deal with the certification. A few have been filed. The first two failed to get to be certified. One of those has proceeded up and we're waiting a decision on that from the Supreme Court in the UK as to the certification tests that will be applied, but there's probably about 10 filed claims in the CAT, the Competition Appeal Tribunal, which are now waiting to find out how certification will take place. They will then proceed in what is this new style of litigation, so certification hearing and a class claim that proceeds from that. It's an interesting development. They're really the two types of cases that we see. There's the standard litigation process for an individual claimant to seek damages from an infringement, and then there's this new class claim.
Dave Dalton:
Interesting development there for certain. Nicholas, stay with you for another minute, then we'll swing back to Jürgen. What, generally speaking, do clients need to know or understand about these cases that maybe we haven't covered? What surprises them or what's lurking around the corner that maybe they didn't expect in terms of knowing what they should know about a matter like this?
Nicholas Cotter:
Yeah. I suppose... Bear in mind this, that the origin of most of these cases in litigation is an antitrust decision, an antitrust authority's decision. I think on the defense side, what defendants started to understand is that these claims, these litigation claims that follow on from an infringement, are really now a fact of life. There are very few, I guess, decisions where you don't then face litigation after it. And so it's something that defendants, or potential antitrust infringers, have to think about as soon as they become embroiled in a antitrust authority investigation. It will become more standard in terms of the thought processes, but when you're involved in an antitrust investigation, there's a desire to handle that, to get, to minimize what? To avoid a potential infringement, to minimize the fine, but the latter, you may have to cooperate, have to provide documents.
Nicholas Cotter:
Going forward, and I think defendants are already doing it, you have to think about what you actually provide, because you know that it can bite you down the line in mitigation when claimants screen claims based on the facts that have been disclosed to the antitrust authority and found in a decision. So for the defense side, I think, what do you need to understand, you need to understand that these claims are now a fact of life and you have to prepare for them from as soon as I think you become embroiled in an antitrust authority.
Nicholas Cotter:
From both sides, the defense and the claimant side, what you need to understand probably is these litigations are long and costly. Expert economists involved too, can be very expensive. They're not as likely to settle as they once were. What we've seen in recent years is that they've started to litigate to trial. I think in the early years, when the defendants facing this type of claim thought there is a finding of infringement by an antitrust authority, there's no upside in litigating, try and settle, and most of these cases settled. But what we're seeing is more litigating to trial and a number have litigated to trial.
Nicholas Cotter:
There was an interesting litigation in relation to the power cables' infringement decision of the European Commission, where there was a trial on that brought against ABB, one of the power cable companies. The claimants, really they recovered a fraction of what they're expecting to recover. I think we'll see more and more claims litigators. Defendants have seen that there is an upside of litigation because you may not pay anything like the claim size. Based on that decision people are growing to understand them, these anti-trust litigations, and they're the kind of things that they're learning over time.
Nicholas Cotter:
Another interesting angle, which I haven't really touched on, but has fueled some of the developments, is the growing amounts of litigation funding that's available for claimants bringing these claims. That is driving the volumes of antitrust litigations and people are grappling and getting to understand the pros and cons of funding. The obvious pro of funding for claimants is that you can litigate without needing to fork out too much in money, but the downside is they tend to litigate for longer because, once you've got a litigation funder looking for a slice of the damages, it's harder to settle.
Dave Dalton:
Right. Nick, I remember hearing about something like that. It was sort of, and I could be wrong, but I remember reading some of our commentaries and alerts here at Jones Day. That was an Australian phenomenon for a long time, I thought, litigation funding or class action suit funding in particular. Is this new? I guess it is new, you said, to the UK, correct?
Nicholas Cotter:
Yeah. New, new, it's probably four or five years. Because it's easy, isn't it? As a claimant, it's easy to bring a funded claim because you're not having to spend. Even to issue a claim in the UK costs you £10,000. It's not a step to be taken lightly, but if someone else is funding it, it's easy, but then it can embroil you in a lot longer litigation because you need to recover a lot more, which make it harder to settle in order to take some money yourself as a claimant, knowing that the fund is going to take however many percent.
Dave Dalton:
Right. Okay. Well, this-
Jürgen Beninca:
What Nick just said, I think applies not only for the UK, but also for the entire of Europe.
Dave Dalton:
All the Eu. Okay.
Jürgen Beninca:
Absolutely. We see these litigation financing firms everywhere. They have certainly, for certain group of potential plaintiffs, claimants, an effective offer because, let's face it, if you are, for instance, a small trucking company, you have purchased two or three different trucks over the last 10 years, it does not really make sense for you to pursue the claim yourself against the trucking cartel. So teaming up with other companies in a similar situation, teaming up with the litigation funding firm, from their perspective may make perfect sense. On the other hand, it's clear these firms, they do not anything on the cheap side as they request a significant share. We have had a number of clients who have discussed detailed arrangements with funding firms, but decided in the end to finance the litigation by themselves because they said the share that these companies are asking for is simply too high.
Dave Dalton:
Yeah. They don't come cheap, I'm certain. Let's wrap it up with this. This has been very, very informative, a great program. Thanks. Jürgen let's stay with you, and Nick, please feel free to weigh in also, but what kind of trends are you seeing? Are we going to continue to see an escalation in cases? Are there regulatory or other developments coming our audience should be aware of? Where do you see this in the next 18 months or two years, say?
Jürgen Beninca:
With respect to one important trend, I think we have just covered, and that is indeed litigation funding, that will continue to be with us for the foreseeable future. We see right now, certainly a peak in cases because of the trucks cartel, because of the statute of limitation period, we do not expect that there will be the same kind of increase over the next couple of years, but of course, new cartels will come up. It's not the case that only cases against the trucks cartel are filed in Germany. We have seen cases filed against the sugar manufacturers, cement manufacturers, firetrucks manufacturers, you name it. It's really broad. Whenever there is a cartel decision by the Bundeskartellamt or the UEC, there will be litigation. That will continue to be the case. That's clear.
Jürgen Beninca:
We will also see additional legislative action by the European Commission, as I said before. The Commission plans a study to evaluate the need for additional legislative action in the aftermath of the Antitrust Damages Directive.
Jürgen Beninca:
What I also expect, that at some point in time we are going to see, either in a particular member state or more and more member states or on the basis of European legislation, a class action mechanism in some form for Antitrust Damages Claims, which we do not have right now, at least in Germany. Once we have that, that is certainly going to be a game changer because, I mentioned before, the passing-on defense, it's often the case that only commercial customers have the incentive to pursue a claim. However, the consumer that has ultimately borne the damage of the cartel, the vitamins cartel in the early 2000s is a typical example, the typical consumer does not have incentives to bring a claim. I see a trend in the political discussion all over Europe, that more and more political parties seeing the need to address that deficit right now that exists.
Jürgen Beninca:
From that perspective and as a result, I think sooner or later, we will see some sort of class action mechanism. It's important to recall for our U.S. audience in particular, that class actions are seen very critical in continental Europe. They are considered to be abusive, but I think there's a growing belief that we need to have some sort of mechanism because certain deficits will remain on the basis of the existing legislation. It's likely to be an opt-in mechanism rather than an opt-out mechanism, but I think at some point in time, we were going to see that.
Dave Dalton:
Interesting trend to watch. The title of this podcast has been Private Antitrust Litigation in Europe, the big picture, and we've certainly got a great overview of that, so this has been very informative. Nick, Jürgen, thank you so much. Jürgen, you and I are going to be talking again shortly about a private antitrust litigation in Germany, so we're looking forward to that as this series continues.
Jürgen Beninca:
Thank you.
Dave Dalton:
Thank you so much for being here today.
Nicholas Cotter:
Thank you.
Jürgen Beninca:
Thank you.
Dave Dalton:
All right. Take care. For more information on Jones Day's antitrust and competition law and global disputes practices, please visit Jonesday.com. You can also find complete biographies for Jürgen and Nick on the site, and while you're there, be sure to visit our Insights page where you'll see White Papers, client alerts, newsletters, more podcasts, videos, and other valuable content. Subscribe to JONES DAY TALKS® on Apple Podcast or wherever you find quality podcasts. As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.
Speaker 5:
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