Francesca Richmond discusses recent developments in EU competition litigation
Litigation of claims to recover cartel damage is now a standard consideration when assessing risk across jurisdictions and setting corporate strategy. It is questionable whether the increase in claim activity reflects a trend to recovery for consumers and business, or simply demonstrates exploitation of opportunity by claimant law firms and funders. However, the fact remains that the volume and scale of litigation on competition issues demands strategic weight and attention.
Private enforcement of regulation by civil litigants creates a legitimate pressure in management of supply chains. However, it also carries the potential for disproportionate outcomes, with growing likelihood of litigating in multiple jurisdictions simultaneously and often while companies are also addressing regulatory investigations into the same issues. This article considers recent developments in the EU in this light and suggests some practical points to bear in mind for those litigating competition claims in future.
Forcing changes in behaviour, access to markets and recovering damage
It is important to remember that ‘competition litigation’ does not refer solely to claims for damage following on from a finding by a regulatory body that price fixing has occurred. Such cases are, of course, common – reflecting the idea that groups of manufacturers that collude to fix prices on the goods they supply should be required to compensate those that they have overcharged. There are many examples of this more typical category of claim and some interesting developments in recovery in such cases, which are detailed below. However, it is also true that other types of cartel activity, such as bid rigging and other types of anti-competitive activity, like abuse of dominance, are now also commonly subject to litigation and are pursued with the aim not only of recovering damages but also of securing specific commercial outcomes.
These other categories of competition litigation claim can be targeted at securing recovery of damage, for example, the £124m class claim filed recently on behalf of 890,000 consumers against three UK train operators alleging a collective abuse of dominance by failure to make boundary fares accessible to passengers holding a travelcard. More interestingly, such claims can also focus on securing participation in market or access to services, and so carry enormous strategic and competitive value. Examples include:
- Streetmap’s allegations that Google search engine algorithms directed users to its own Google Maps product rather than those supplied by other map providers.
- The Spanish competition authority finding that a Spanish national association of horse breeders abused its dominant position as a tournament supervisor by requiring competition organisers to use a data management computer programme that it had developed.
- The interim ruling secured by adidas against the International Tennis Federation challenging the limitations it had placed on the size of sponsor logos that could be featured on the clothing of athletes participating at Wimbledon – despite rules on the colour and features of athlete uniforms being a famous distinguishing characteristic of the event since 1877.
In these types of claim, the damages suffered as a result of historic behaviour are almost secondary to the value in securing an ongoing change – whether that be the ability to take a more prominent position on an online platform or search engine, have greater commercial freedom to position advertising, participate in profile-raising events or otherwise gain access to some service, distribution system or facility that might boost a competitive position. Consumers too are increasingly framing claims along these lines to pursue activist action and change corporate behaviour – whether that be prices charged, service delivery or regulatory standards.
Is recovery of damages now a reality?
The ability to litigate competition claims, let alone recover damage caused as a result of infringements, historically was limited outside the US. Difficulties to recovery included lack of information and disclosure, uncertainty of core issues such as jurisdiction, applicable law and limitation, as well as the overarching question of how to demonstrate causation and degree of harm. Procedural reform at EU and member-state level has changed that position dramatically. There is a concentration of activity in some jurisdictions – notably the UK, the Netherlands, Germany and Italy – but entities that infringe competition law should expect to face litigation across the EU and certainly in cases where a regulatory finding on liability has been made.
Overall recovery data is limited as the majority of claims for competition damage brought in the EU currently settle. It is understood these settlements generally are agreed at a small percentage of the sums claimed, in light of litigation risk and legitimate queries on quantification and passing on of loss. That may change as the handling of quantification and passing on of loss becomes more established. For example, BritNed recently was ordered by the English courts to pay damages of €11.7m against a claim reportedly valued at €180m. Although awarding only a proportion of the sum claimed, the judgment provides clarity on the treatment of evidence and principles underpinning recovery that will aid assessment of damages in future cases.
The European Commission (EC) has sought to drive reform in this area for years and continues to do so. EU Directive 2014/104/EU on antitrust damages actions issued on 26 November 2014 produced material change by requiring that all member states introduce minimum procedural standards on specific points (including limitation periods and disclosure of documents) and also by instituting important evidential standards (including a presumption that cartels cause harm and recognising that such harm can be passed on from the direct customer to others in the supply chain). Many of the uncertainties surrounding satellite procedural issues are also now being tackled in the course of litigation and, if not resolved entirely, setting precedents that provide useful guidance on handling. For example, the English courts have recently issued decisions addressing jurisdiction (Vattenfall), applicable law (Deutsche Bahn) and limitation (Arcadia Group).
The EC has coupled targeted reform on competition litigation with a broader initiative on collective redress announced on 11 April 2018 that aims to promote consumer recovery in a number of areas, including competition damage recovery. The European Parliament approved an amended version of the proposal on consumer collective redress by plenary vote on 26 March 2019 and it is expected that it will be part of the legislative agenda following parliamentary elections in May 2019. The concept of recovery by representative bodies has also made its way into other EU legislation targeted at securing consumer rights, for example, the new online platform for business trading practices regulations contained a provision allowing for recovery by representative bodies.
Collective recovery – even if solely led by representative bodies or on an opt-in basis – therefore seems likely to become more widespread across the EU. Some member states have already taken the idea up with enthusiasm, with both the UK and the Netherlands introducing a form of opt-out collective action. It is worth noting in this context that, although the take up on UK class actions has been relatively slow to get off the ground, that is not due to a lack of appetite or a misreading of the need for collective redress. The procedural rules introducing the regime in the UK effectively required that the cause of action relied on arises after 1 October 2015 and so narrowed the scope to pursue proceedings in the short term. Nonetheless, five applications for a collective proceedings order have since been filed with the UK Competition Appeal Tribunal seeking approval based on the following criteria:
(i) The person bringing the proceedings is an appropriate representative of the class of claimants.
(ii) The claims eligible for inclusion in collective proceedings are:
(a) brought on behalf of an identifiable class of persons;
(b) raise common issues; and
(c) are suitable to be brought in collective proceedings.
While the first two applications considered were not approved, the rulings on each nonetheless indicate that the approach taken in the UK will be relatively generous on commonality of issues and qualities of representative, with a focus on the quality of expert evidence and whether an aggregated model of damage is viable. This encourages the view that collective actions activity will grow in the UK and that mass consumer recovery will become more common.
Clearly, this increases litigation risk for defendants. However, it does also open up the potential for collective resolution that consolidates defensive resources and allows greater control. So, instead of fighting across jurisdictions and suffering death by a thousand cuts, there is a possibility of a wider resolution and a return to business as usual at an earlier stage.
Current and anticipated claims landscape
The anticipated growth in litigation, coupled with the expansion of collective claims, produces a new landscape for in-house counsel and one that demands a multi-tasked strategy. Litigation must be co-ordinated across jurisdictions, allowing for very different speeds in progress and the impacts each claim might have on others. Analysis around whether to settle regulatory investigations and how best to resolve civil claims may well change as the overall costs attached to civil litigation shift. For example, Visa alone has reportedly stated to the US Securities and Exchange Commission that it has resolved 75 claims relating to interchange litigation and faces another 350 similar claims.
It is likely that conduct of these cases will also be complicated by a convergence of claims raised on different grounds that rely on the same infringing behaviour. We are already seeing consumer associations seeking to recover damage arising from claimed mishandling of consumer information, and arguing data privacy, unfair treatment of consumers and competition grounds in order to bolster their position. In a number of jurisdictions, such as Italy or Australia, those associations already have the ability to join a regulatory investigation and access the information gathered in order to inform the scope of the finding and lay the groundwork for subsequent civil litigation. This trend is likely to continue and creates a real risk that potential defendants will be forced to make massive duplicative pay-outs.
The most practical approach to this brave new world is to stand in readiness for it, ensuring visibility of exposure and litigation globally so as to ensure co-ordinated pursuit or response to claims. We do not yet have an entirely established set of expectations on how litigation will unravel – including costs and recovery – but we can at least see the parameters more clearly and plan on the basis that competition litigation in the EU is not solely a threat but now
Francesca Richmond, partner, Baker McKenzie