The UK Parliament has enacted regulations to implement the EU's Damages Directive. This Directive harmonises rules across EU Member States that regulate court actions seeking damages for breaches of EU competition law. Whilst much of the Damages Directive dealt with issues already provided for in English law – indeed, the UK regime was the inspiration for many of the harmonised rules – the new regulations make some important changes.
Background to the Damages Directive
The regulations are The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 (the Regulations). They implement Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union(the Directive). The Directive was the result of several years of research and policy initiatives at EU level, all with the aim of promoting enforcement of EU competition law by private parties bringing actions in national courts rather than relying solely on complaints to regulators such as the European Commission or the UK Competition and Markets Authority.
Competition litigation in the UK
The UK courts are the leading venue for litigation involving the EU competition law prohibition of anti-competitive agreements in Article 101(1) and the prohibition on abuse of a dominant market position in Article 102. The UK's pre-eminent position has been secured by the reputation for high quality and the international perspective of the courts in London, combined with English law's favourable approach to disclosure and large body of competition law specialists. The UK legislated as recently as 2015 to increase still further the opportunities for competition litigants, through reforms in the Consumer Rights Act 2015.
The UK's Brexit vote may cast a shadow over the UK's status for EU law claims, but the UK has pressed ahead with implementing the Directive, albeit a couple of months after the due date of 27 December 2016.
Some of the provisions in the Directive will lead to significant changes in other EU Member States. In particular, the Directive introduces a limited obligation for disclosure of relevant documents. This is not generally required in civil law jurisdictions such as France or Germany, but is a key part of litigation in common law jurisdictions such as England and the USA. Disclosure is particularly important in competition cases because, for example, the claim may involve a secret cartel or may require detailed evidence of pricing strategies or a business' market position.
Changes to the UK competition litigation regime
Key changes introduced as a result of the Directive include the following:
Limitation periods: whilst retaining the standard current six year limitation period for bringing a claim (five years in Scotland), the Regulations set out detailed rules for determining the "day of knowledge" which is the starting point of the period. The Regulations also provide for the limitation period to be suspended during an investigation the European Commission or a competition authority in the UK or any EU Member State.
Disclosure: a new obligation under the Directive to ensure "proportionality" in what is required to be disclosed has been implemented by a new Practice Direction 31C under the English Civil Procedure Rules. Whilst proportionality has in effect always been part of the English disclosure process, the Practice Direction cross-refers to the Directive, which notably includes confidentiality as a relevant consideration – this has not typically been relevant in English procedure previously. The Regulations also provide for documents submitted by a party to a competition authority as part of an application for leniency from fines not to be subject to disclosure, as disclosing such incriminating material would deter leniency applicants. For similar reasons submissions to settle competition investigations are not discloseable.
Passing on defence: a lively topic of discussion in damages claims against cartelists has been the availability of this defence. In essence, it involves a cartelist resisting a claim from a purchaser that it has been overcharged as a result of the cartel on the basis that the purchaser has itself "passed on" the increased price to its customers in whole or in part, so reducing or even extinguishing the purchaser's losses. The Directive formally recognises the availability of this argument, but the Regulations do not expressly implement it on the basis that since the Directive was adopted English case law has already incorporated the passing on method of calculating damages. The Regulations do, however, make clear that the burden of proof is on the defendant cartelist to establish that passing on is relevant.
Presumption of harm from cartels: the Regulations follow the Directive in providing a rebuttable presumption that cartels cause harm. The original draft of the Directive stipulated a percentage by which prices would be assumed to have been increased by a cartel, but this was not ultimately included. In its final form the presumption is of limited utility – there is no presumption that any particular claimant has suffered harm as a result of the cartel.
Liability: the Regulations set out significant changes to when an infringer of competition law will be held to be jointly and severally liable with co-infringers. This is of particular relevance in cartel cases, where a claimant may choose to sue only some of the cartelists. In particular, a small and medium-sized enterprise (SME) with a market share below 5% is liable only to its own direct and indirect purchasers. A recipient of immunity from fines following its leniency application is similarly protected, with a view to promoting leniency applications.
Effect of Brexit: some of the new rules seem likely to be scrutinised as a result of Brexit. Notably, the Regulations provide that infringement decisions by competition authorities in other EU Member States are prima facie evidence of an infringement. European Commission decisions are already binding on UK courts. Moreover, the government has chosen to conform the procedural regimes for UK competition claims with those for EU claims. How the courts in the UK will deal with EU competition claims once the UK is no longer an EU Member State is likely to be a vexed issue, albeit fairly low on the long list of issues to resolve as the UK leaves the EU.
The Regulations represent a further refinement of the already sophisticated regime on the UK for competition litigation. Claims in the High Court or Competition Appeal Tribunal involving a competition law element are becoming ever more frequent, with claimants just as likely to go to court as to complain to a competition authority. Damages claims following on from a competition authority infringement decision are now routine, especially in cartel cases. Maintaining the UK's status as the leading venue for competition cases is likely to be the subject of much debate as Brexit is implemented.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.