Global | Publication | May 2021
Antitrust damages litigation is increasingly important on the global stage, with the number of damages claims rising significantly over recent years. No longer primarily a US phenomenon, damages actions are now common in Europe, especially in the UK, Germany and the Netherlands (fueled by the EU Damages Directive), as well as increasing across the globe in jurisdictions not traditionally known for claims. This trend follows greater recognition that victims of anti-competitive conduct should not bear financial harm, with jurisdictions introducing reforms to encourage antitrust damages actions, as well as seeking to make their courts more attractive to foreign claimants. In this article we explain some of the key developments over the past year with advice for businesses facing or contemplating bringing a claim.
As the number of antitrust damages claims rises, so does the importance of establishing an effective litigation strategy. A key aspect is identifying important developments and trends and ensuring these are built into that strategy. Our global presence allows us to track and gain insights into major developments around the world – below we cover important developments over the past year that are likely to impact on litigation in the coming years.
A ruling by the EU Court of Justice in December 2019 provides important confirmation that, under the EU competition regime, a party can claim damages for loss caused by a cartel even if it is not a supplier or customer on the market affected by the cartel.
This pro-claimant ruling related to a request for guidance from Austria’s Supreme Court – where the state of Oberösterreich was seeking compensation from five lift/escalator companies involved in a cartel. The claimant had not made purchases from the cartelists but had granted subsidies (promotional loans to finance construction projects affected by the cartel) in a higher amount than would have been the case absent the cartel, given the cartel increased construction costs. The claimant argued this prevented it using the difference more profitably. Austrian law did not allow such a claim, but the Court of Justice ruled that the claim must be permitted under Article 101 TFEU – which confers a right on any person who has suffered loss due to a cartel to claim compensation. However, it was for Austria’s Supreme Court to determine whether the applicant had the possibility to make more profitable investments and a causal connection for its loss.
While it was already clear that indirect (as well as direct) purchasers could claim damages, this is the first time the EU Court of Justice has confirmed that a party not active in the cartelised market can establish a claim – likely encouraging further similar claims in future.
Another development worth noting over the past year is that the European Commission adopted its “Passing-on Guidelines” in July 2019, providing national courts with guidance on estimating the share of a cartel overcharge passed-on to indirect purchasers.
Courts in England and Wales – not only the specialist Competition Appeal Tribunal (CAT) but also the High Court – are increasingly accustomed to hearing competition damages claims, but a number of important issues are still being decided.
The UK saw its first cartel follow-on damages action reach trial and judgment in 2018, whereas previous cases settled outside the public eye. That landmark case was BritNed v ABB in which the amount of damages awarded – €11.7 million – was considerably lower than the €180 million originally sought. The case shows that, at least in the English system, not every antitrust infringement will lead to vast damages, as well as the importance of grounding damages assessments in factual evidence. A novel aspect of the damages awarded was the inclusion of an amount for “cartel savings” (i.e. for savings made by the cartelist, as opposed to loss the applicant suffered). However, this element was overturned on appeal, reducing the award.
When it comes to UK collective actions, all eyes are on Merricks v Mastercard, which is set to be heard by the Supreme Court in 2020 on appeal from the Court of Appeal. This is a £14 billion claim brought by Walter Merricks CBE on behalf of 46 million consumers who used a Mastercard between May 1992 and June 2008 and the first test of the Collective Proceedings Order (CPO) regime introduced in 2015 – a new opt-out collective action regime.
The Supreme Court will rule on the appropriate legal test for certification of claims for a CPO and the level of scrutiny which must be adopted regarding the distribution of an aggregate award when certification is considered. The CAT refused to grant a CPO in 2017, but the Court of Appeal sent the case back to the CAT having found the CAT’s approach too strict. However, the case has since been further appealed to the Supreme Court.
In the meantime, decisions on certification in other actions involving CPOs are being held up pending the Supreme Court’s judgment in Merricks. This includes a number of damages actions regarding the European Commission’s 2016 Trucks cartel decision. However, in a significant ruling in October 2019, the CAT dismissed arguments that a litigation funding agreement involved “claims management services” and an unenforceable and unlawful “damages-based agreement”.
Had the CAT ruled the other way, this would potentially have undermined the entire CPO regime given the importance of third party funding for CPOs. Indeed, the CAT appears acutely aware of the importance of litigation funding for CPOs, generally coming down on the side of claimants when issues arise.
This £14 billion claim is on behalf of 46 million consumers – over the age of 16 and resident in the UK for a continuous period of at least three months – who purchased goods or services between May 1992 and June 2008 from businesses in the UK which accepted Mastercard.
In the US, a judgment of the Supreme Court in May 2019 is considered one of its most important antitrust rulings in recent years, expanding the class of people with standing to pursue a claim.
The Illinois Brick precedent from 1977 restricts antitrust damages claims to direct purchasers only. However, in Apple Inc v Pepper the Supreme Court applied a more expansive interpretation of “direct purchaser” – with potentially significant implications for online platforms and other parties such as travel agents who often consider themselves to be intermediaries in transactions.
The claim alleged that Apple forced iPhone owners to pay above competitive prices for apps by making its App Store the only place to buy apps and charging a 30 per cent commission on sales. Apple disagreed – arguing the plaintiffs were indirect purchasers as iPhone owners purchase apps from app developers who decide whether to pass-on
Apple’s commission. The Supreme Court dismissed Apple’s claims, finding that iPhone owners purchase apps directly from Apple – the key issue is whether there is an intermediary between seller and buyer (which there was not on the facts); who sets the price is irrelevant.
In 2019, we have also seen signs of US courts seeking to widen the scope of discovery in antitrust cases. Although federal civil procedure rules state that disclosure must relate to the elements of the claim, in an ongoing antitrust damages case on which we are instructed a US court granted a disclosure request that went well beyond that, ordering defendants to disclose both responsive and non-responsive documents and then claw back the non-responsive documents. Only excluded from the scope of disclosure was legally privileged or personal sensitive material – meaning competitively sensitive information was required to be disclosed. Reflecting the seriousness of the issue, as of the time of writing, defendants have sought an interim appeal to the US Supreme Court.
Canada’s Supreme Court decided a number of important issues regarding competition damages actions in September 2019 – most notably regarding umbrella purchasers and certification. In Pioneer Corp v Godfrey, the Supreme Court confirmed that, in addition to direct and indirect purchasers of a cartelist’s products, “umbrella purchasers” (i.e. consumers who purchased products from non-conspiring competitors of the cartelists) can bring claims – thereby expanding the scope of potential liability in damages actions to the benefit of claimants.
On certification, the Supreme Court affirmed that, at the certification stage, a court only needs to be satisfied that the plaintiff has shown a plausible methodology to establish that the loss reached one or more claimants at the purchaser level – a relatively low threshold. If at the subsequent common issues trial, the court is unable to determine from expert evidence which class members had suffered a loss and which had not, further individual issues trials may be required. Thus, by pushing determinations on commonality of loss from the certification judge to the judge at the common issues trial, this potentially opens the door for certification of price fixing class actions in cases where liability cannot ultimately be determined at a common issues trial.
Our German antitrust and competition team secured a landmark judgment in relation to an antitrust damages claim before Germany’s Federal Supreme Court in December 2018. Public transport company VBK had brought a claim against our client, a German rail construction company, Schreck-Mieves, in respect of harm allegedly suffered from participation in the rail infrastructure cartel.
German courts have developed a practice in cartel damages claims of allowing claimants to rely on prima facie evidence – meaning defendants are required to disprove that specific transactions were affected by the cartel and that harm occurred. The EU Damages Directive also establishes a rebuttable presumption that cartels cause harm, but the case in question pre-dates the Damages Directive.
We successfully challenged the prima facie evidence in this case, shifting the burden of proof away from the defendant and back to the claimants. This is the first time that Germany’s Federal Supreme Court has examined the issue of prima facie evidence in a cartel damages claim – with significant implications for similar damages claims in other sectors and potentially discouraging claims relating to markets where it is difficult to prove harm.
The past year also saw deployment of a German law passed at the end of 2018, implementing a new instrument for collective redress – the Model Declaratory Action (Musterfeststellungsklage). This seeks to facilitate claims by a large number of consumers harmed by a business practice. Although widely considered a positive development for consumer protection, the law is restricted in scope. In particular, it provides for only a declaratory decision binding on issues of fact and law – meaning consumers who wish to obtain damages after such a decision must file separate and individual proceedings for their specific damages claim. Despite its limitations, this new mechanism may spur further antitrust damages actions in Germany.
A substantial reform to Italy’s class actions rules in 2020 has the potential to make Italy a considerably more attractive jurisdiction for antitrust damages claimants. The new rules, entering into force in April 2020, extend the scope of class actions and create significant procedural incentives for claimants, such as allowing class members to join an action even after the court has issued a first decision on the merits. These permissive rules have raised concern that they may encourage opportunistic behavior by claimants while creating uncertainty for plaintiffs. However, the significance of this development may depend on how courts apply the new regime going forwards.
Recent changes to the Australian Competition and Consumer Act 2010 (ACC) in July 2019 are intended to bring competition claims within the reach of smaller businesses lacking the financial means to bring claims. The Commonwealth Parliament amended the ACC to allow claimants in competition damages cases to seek an order from the court recognizing that they are not liable for the legal costs of the respondent regardless of the outcome of the claim. This is naturally likely to encourage claims.
Class action reform more broadly is a hot topic in Australia. Australia’s High Court ruled in December 2019 that common fund orders (CFOs) are not permitted in class actions – a type of court order providing for a litigation funder’s remuneration to be calculated as either a percentage of a successful class action judgment/settlement or a multiple of the costs incurred in litigating the proceedings (and usually entitling the funder to be paid before any amount is distributed to group members).
There remains the option of funding equalisation orders (FEOs) whereby the litigation funder receives only what it is entitled to from group members who have entered into funding agreements. However, many class action claims may be less attractive as funders need to engage in time-consuming “book building” – identifying, contacting and signing-up as many group members as possible to funding agreements. Access to justice for unfunded group members is also likely to be reduced with funders likely to prefer “closed” class actions, including only claims of funded members.
In Brazil, a legislative proposal which seeks to double the amount of damages that can be awarded against companies that breach competition law is one step closer to being enacted by Congress after it was approved by a commission of the House of Representatives in 2019. If enacted into law, it will increase the incentive for claimants to file claims for competition damages, and may well lead to a significant increase in damages claims in Brazil. This is a development to watch.
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