Draft EU proposal enables cartel victims to strike back
The European Commission has recently published a draft private damages proposal that, if approved by the European Parliament, would revolutionise follow-on private litigation in European Union (EU) member countries.
The proposal has been under consideration for a decade, as the Commission worked to strike a balance between protecting whistleblowers and the public antitrust enforcement they afford, and allowing those people and businesses harmed by cartelists to collect damages. Now, after significant public debate, the Commission says the draft proposal will ensure that cartelists can be held liable for the harm they cause European consumers.
Under the proposal, the decisions of national antitrust authorities would be considered evidence of guilt in private actions in all member states, removing the need to prove an infringement occurred in follow-on litigation.
The proposal also provides EU courts with increased powers to force defendants in private damages actions to turn over documents and other evidence to their alleged victims, and extends the limitation period in which a damages claim can be brought.
Australia also has mechanisms for assisting victims of cartels and other anticompetitive behaviour to bring damages actions (in section 83 of the Competition and Consumer Act 2010 (Cwlth) (CCA)), however, the EU proposal differs from Australia’s laws in a number of important respects.
Under section 83 of the CCA, findings in prior cartel proceedings can be used as “prima facie” evidence of a breach. However a significant drawback of section 83 is that it is a rebuttable presumption, meaning defendants can force plaintiffs to prove their case by leading evidence which proves there was no breach.
Under the EU proposal, findings in prior cartel proceedings would similarly be considered evidence of guilt in private actions. However, unlike section 83 of the CCA, this will not be a rebuttable presumption – a finding of breach in prior cartel proceedings will be direct evidence of guilt in private actions. Despite this, infringement decisions by national competition authorities will continue to be subject to judicial review.
In addition, the EU proposal provides for a rebuttable presumption that the victims of a cartel suffered economic loss. If cartel members wish to challenge this, it will be necessary for them to show that the cartel did not cause harm (i.e. that prices were not higher as a result of the cartel agreement).
The proposal is aimed at overcoming one of the most significant hurdles faced by class claimants in Australia and other jurisdictions: namely showing what prices would have been “but for” the cartel agreement. It will be interesting to see how it works in practice, whether other jurisdictions follow the EU’s model, and how the measure of compensation will be calculated.
The European Commission’s proposal will now go to Parliament and the Commission’s council for debate. If it is adopted, member states will have two years to implement its recommendations.