Private Enforcement of Competition Law

SYMPOSIUM

Private Enforcement of Competition Law

Edited by: Pablo Solano Diaz and Lena Hornkohl

Table of Contents

1. Introduction

Pablo Solano Diaz and Lena Hornkohl

2. What Role for Private Enforcement in EU Competition Law? A Religion in Quest of Founder

Csongor István Nagy

3. The Protean Nature of the Effectiveness Principle in the Private Enforcement of EU Competition Law

Clio Zois

4. The Balancing of Powers in Private Antitrust Enforcement – when David met Goliath?

Mariya Serafimova

5. There must be Twenty-Seven Ways to get your Damages: Heterogeneity and Uncertainty in Antitrust Private Enforcement

Barry Rodger, Miguel Sousa Ferro and Francisco Marcos

6. Private Enforcement: a Prime Case for Forum Shopping

Thomas Thiede

7. Spanish Antitrust Litigation: Ecstasy and Failure

Eduardo Pastor

8. The Critical Role of (Potential) Cost Claims by Intervening Parties in Private Enforcement Proceedings. An Austrian Example

Florian Neumayr and Ana Toncoglaz

9. The Passing-On Defence: Don’t let the Money stay in the Pockets of the Cartelists

Antonio Robles

10. The Parental Liability in Private Enforcement of EU Competition Law

Marco Pasqua

11. Private Enforcement of the DMA. A Challenge for all Stakeholders involved

Miranda Cole and David Fila

12. Private Enforcement of the Foreign Subsidies Regulation

Volker Weiss and Jan Kupcik

Introduction

Pablo Solano Diaz and Lena Hornkohl

The raise of claims for damages resulting from competition law infringements to a full-fledged private pillar that completes the European Union (EU) antitrust enforcement edifice is probably the biggest revolution in the field in the past ten years. Seen in the bigger picture of EU law enforcement through private law, competition law is often given as the prime example and most developed field. The possibility of private enforcement of EU competition law has always been there, embedded in the very effet utile of Articles 101 and 102 TFEU, and its case-law consecration can be traced back to the turn of the millennium, where the landmark Courage v Crehan (C-453/99) judgement and then Manfredi (C-295/04) were pronounced. These represented (not so small) steps towards certain “communitarisation” of the criteria governing claims for competition damages beyond mere effectiveness and equivalence, albeit still subject to national procedural autonomy. However, a real harmonisation attempt was not undertaken until the Commission set the legislative wheel in motion in 2013 which resulted in the delivery of the Damages Directive (Directive 2014/104/EU). Ambitious for some, watered down for others, in any case much-discussed, the truth is that it was as successful in prompting litigation as it was not in bringing about clarity and unity (fair enough being a directive – one could think).

Ten years later it seems high time we took stock of solved and pending (procedural, substantive and practical) aspects and reflected on the fitness of EU private enforcement to deal with new challenges facing competition law. In lack of sufficient application cases, the Commission issued a rather vacuous report on the Damages Directive in 2020. Although the Commission came to an overall positive conclusion, due to the considerable backlog of most Member States transpositions and the transitioning period of the Damages Directive itself, the report now does not contain the envisaged in-depth analysis of the Directive. An amended Directive as foreseen in Article 20(3) to accompany the report was out of the question too. In short: more application cases and accordingly CJEU jurisprudence is needed. In the meantime, this symposium tries to give an overall picture on the state of play and future prospects of private enforcement in the EU. It endeavours, firstly, to provide a lay of the land by presenting the foundational constituents of the EU damages regime, concentrating on its very rational, its constitutional or institutional fit in the EU legal order and the procedural equilibria that it is meant to strike. Secondly, the seemingly consistent underpinnings of the harmonised private enforcement system and the array of national differences necessarily slipping through the cracks of procedural autonomy are contrasted as leading to uncertainty and forum shopping, on the one hand, and judicial “communitarisation” of cornerstone safeguards of the regime, on the other hand. These issues, in particular, passing-on, parental liability and cost allocation, are discussed in the third place. Fourthly, the broader private enforcement picture is sketched beyond traditional antitrust to ponder over its role in recently opened legislative paths – the Digital Markets Act (Regulation (EU) 2022/1925) and the Foreign Subsidies Regulation (Regulation (EU) 2022/2560).

Csongor István Nagy sets the scene by ascertaining the raison d’être of the EU private enforcement regime as the interpretative key to its function and boundaries. Although the Damages Directive disavows deterrence and clings on to compensation as final cause, contrary to the transatlantic system, the author claims that both outcomes are intertwined. This is based on as systematic (mechanical even) stance on the general economy of the two-sided public and private enforcement system put forward by Advocate General Wahl’s resolved opinion in Skanska (C-

724/17). The enforcement policy objective of deterring breaches through punitive redress, which does not sit so well with continental legal orders forbidding unjust enrichment as it does with common law across the pond, is made legally palatable through procedural enhancement of the classic principle of effectiveness – most notably seen in the passing on presumption. Yet, one might wonder whether the consistent phrase used by the CJEU – last in the infamous Tráficos Manuel Ferrer (C-312/21) case – that the private sphere plays a role “in the financial penalisation of anticompetitive conduct” might prompt a reevaluation of punitive redress and a true continental shift in continental tort law concepts.

It would seem that enhanced or qualified effectiveness beyond the regular counterpart of equivalence in paddocking procedural autonomy is indeed key to the compensatory (or ultimately deterrent) rationale behind the EU private enforcement system. The jurisprudential fluctuations of the concept of full effectiveness, already coined in Courage v Crehan as the rights-based foundation for claims for competition law damages and showing many faces since then, is seen by Clio Zois as legal Proteus who may prophesise the real essence of damage claims if its true nature is ever grasped. In particular, she distinguishes three phases or shapes in case law and the Damages Directive itself: firstly, full effectiveness is identified with the existence of a right to compensation resulting from the breach of Article 101 (and 102) of the TFEU; secondly, it seems to shift back to a more classic function as a limit to procedural autonomy (along with equivalence); and, thirdly, it rises to the effective exercise of the right to compensation.

Placing full effectiveness, in its shape of effective right to compensation, at the heart of the EU competition damage regime system provides a useful yardstick to evaluate how fair the balance struck by harmonisation is. Mariya Serafimova discusses whether the role of private enforcement as a supplement to public enforcement in aspiring to consumer welfare could explain the departure from general civil law rules regarding, e.g., burden of proof or costs. This departure should help a metaphorical David overcome the imbalance of powers that makes the defendant a Goliath protected by information asymmetries, financial resources, and economic as well as factual complexity. Against this background, she reflects on how the actual application of devices such as the presumption of harm, the judicial discretion in estimating damages and the allocation of costs in recent cases such as Tráficos Manuel Ferrer may level the playing field in practice.

However, the task of delineating the contours of the harmonised standards introduced by positive and negative harmonisation (Damages Directive and case law) faces the additional challenge of the margin left to procedural autonomy. In the view of Barry Rodgers, Miguel Sousa Ferro, and Francisco Marcos, this allows the different solutions given in different Member States to, especially, four material issues to result in as many enforcement systems as countries there are. Such issues are the economic viability of private enforcement actions, which creates national rifts as regards the existence or intensity of collective actions; limitation periods, regarding which the CJEU has difficulties in criticising national limitation periods – as it did in Cogeco (C-637/17), so it tends to limit itself to clarifying the temporal scope of the Damages Directive – in Volvo (C-30/20) and upcoming Heureka (C-605/21); access to evidence, where national pre-trial disclosure rules vary widely if these exist at all; and international jurisdiction, where the abundant and lax CJEU rulings have stirred up forum shopping.

The latter issue is subject to closer analysis by Thomas Thiede, who presents forum shopping as the corollary of national differences and, hence, a defining factor of the harmonised private enforcement system with strategic implications in practice. He guides us through the rules on jurisdiction and applicable law in regulations Brussels I bis (Regulation (EU) No 1215/2012) and Rome II (Regulation (EC) No 864/2007) as interpreted by the CJEU. He focuses on several matters that are particularly prone to causing that phenomenon, including the single economic unit doctrine, the place of occurrence of harm as forum for tort, connected claims, and the fragmentation dangers in the choice of law applicable to damages given the massive national differences.

National differences are then used to illustrate how the harmonised standards fall into place in reality and the practical challenges facing judges and parties. Eduardo Pastor takes a famous episode from Don Quixote as an allegory of the evolution of Spanish judiciary’s dealings with damages claims. He argues that the particularities of the judicial design in this Member State, involving certain inherent lack of specialisation, entailed some enthusiasm as commercial courts took the lead (reflected in the many preliminary referrals sent over to the CJEU) to be curbed at a later stage by insufficient expertise of lawyers and judges, dispersion of cases, and the absence of a class action system and a proper institutional infrastructure for safeguarding consumer interests. With this Spain-focused assessment, he nevertheless paints a bigger picture for overall more effective private enforcement in the EU.

Another paradigmatic national example is provided by Florian Neumayr and Ana Toncoglaz, who focus on the development of cost claims in Austria. The constitutional debate in this Member State about intervening parties’ lack of liability for costs if the main claim is rejected brings the importance of costs once again to the forefront. This seemingly practical question is, however, capable of transcending the procedural plane and becomes a question of full effectiveness due to the high costs involved in damage litigation, and the multiplicity of defendants and intervening parties – which can be decisive for the outcome and incentivised or deterred by the assumed cost risk to be pondered over against the intervening party’s lack of independent influence on proceedings.

Antonio Robles opens the thematic block by addressing the one topic that caused rivers of ink to flow even before the Damages Directive: passing-on. He dissects this multi-faceted phenomenon and concludes that the choice made in the presumption-defence binomial is the only possible legal (rather than economical) option, which entails that it must operate through a legal device – the burden of proof. It is also an autonomous EU law concept derived from the compensatory essence of EU damage claims and from the role of private actions in the overall enforcement system, rather than from general effectiveness, which entails a narrower margin from procedural autonomy not to breach full effectiveness.

The other major presumption-based catalyst on which the Damages Directive rests is discussed by Marco Pasqua: parental liability. He navigates through the main cases to recall that a strong presumption of decisive influence was the traditional way of overcoming the fact that the EU autonomous construct of ‘single economic unity’ as an atom of competition law is ill at ease with general civil law’s personal liability concept. Then, he shows that this approach faced further difficulties in private enforcement when projected in the distorting mirror of procedural autonomy and how a qualified concept of full effectiveness is once again used to keep national quirks on a leash. At the end of the day, the solution is not quite different from public enforcement: an atomic concept of single economic unit, which, however, entails greater consequences in private enforcement, especially in terms of international jurisdiction and forum shopping. Against this analysis, one might wonder if the single economic unity doctrine can spill over to adjacent fields, e.g., data protection law.

Finally, the private enforcement of new regulation expanding the universe of competition law is discussed in two pieces. Miranda Cole and David Fila emphasise the role to be played by national Courts in enforcing the Digital Markets Act, which includes a similar device to Article 16(1) of Regulation (EC) No 1/2003, whereby only adopted decisions by the Commission would prevail. Additionally, harmonised procedural rules in the Damages Directive and the role of the Commission and national competition authorities as amicus curiae would be applicable, as anticipated by the German example. Lastly, Volker Weiss and Jan Kupcik explore the legal basis, standing and potential remedies for private enforcement of the Foreign Subsidies Regulation, based on general EU law principles and traditional competition and state aid devices, in the absence of specific guidance.

The contributors to this Symposium have provided invaluable pieces to help complete the puzzle of EU private enforcement as it stands now. We trust this will allow the reader to put the multiple threads of CJEU case law and national experiences from this past decade in order and get a sense of how the non-Euclidean geometry of the EU damage claims will unfold in the coming years.

What Role for Private Enforcement in EU Competition Law? A Religion in Quest of Founder

Csongor István Nagy (*)

The movement for EU competition law’s private enforcement emerged about two decades ago. Although invalidity is specifically provided for in Article 101(2), actions for damages had remained, for the most part, a mere theoretical possibility. In the CJEU’s jurisprudence, the discussion arose in the context of English tort law, in Courage v Crehan, (1) which had to be reconciled with the continental thinking of fault-based liability limited by unjust enrichment.

(2) This ushered a judicial quest for a workable solution amalgamating the different national approaches. In parallel to these developments in the case-law, the European Commission’s Green Paper on Damages Actions for Breach of the EC Antitrust Rules, followed by the White Paper of the same title, opened a new era. Although, perversely, this movement has produced much more scholarly pieces than court judgments, it gradually turned private enforcement from a theoretical possibility into a practical reality.

Interestingly, however, private enforcement has ducked the central question of its existence. What is its ultimate purpose? Is it merely meant to make compensation a reality or is it destined to deter from violating competition rules? Is it to compensate and reinforce public enforcement, is it to compensate and supplement public enforcement or is it to punish and, to some extent, replace public enforcement? Although this may appear only a theoretical question, the answer has very important implications. It determines the use and usefulness of comparisons (to US antitrust), the selection of benchmarks for the evaluation, the limits of regulatory playing-field and, finally, the prism of legal interpretation. In US antitrust law, private enforcement serves a public purpose and, hence, comparisons are of a limited value, if EU private enforcement is considered to serve a predominantly compensatory function. If private enforcement’s purpose is conceived as supplementing or even partially replacing public enforcement, the number of actions for damages may appear to be disappointingly low, but if conceived as mere compensation and, as a side-effect, reinforcement of public enforcement, it might be regarded as less disappointing.

The difficult theoretical question is exacerbated by the fact that compensation and deterrence are inseparable and interlinked: compensatory damages deter (though less effectively than super-compensatory damages do) and super-compensatory damages compensate (though much more lavishly than compensatory damages do). Still, this does not detract from the importance of the question: which one is the main purpose, and which one is the side-effect?

EU legislation and the CJEU’s case-law gives mixed signals when it comes to the teleology of private enforcement. The Commission’s Recommendation on Collective Redress, in Recitals 1 and 10, defines collective actions as a means to “facilitate access to justice in relation to violations of rights under Union law” and to reinforce the effectiveness

* Csongor István Nagy is professor of law at and the head of the Department of Private International Law at the University of Szeged and research professor at the Center for Social Sciences of the Eötvös Loránd Research Network. He is recurrent visiting professor at the Central European University (Budapest/New York/Vienna) and the Sapientia University of Transylvania (Romania)

This op-ed is based on the author’s following publication: Csongor István Nagy, What Role for Private Enforcement in EU Competition Law? A Religion in Quest of Founder, in The Cambridge Handbook of Competition Law Sanctions 218-229 (Cambridge University Press, 2022), available at https://ssrn.com/ abstract=4154371 or http://dx.doi.org/10.2139/ssrn.4154371

of EU law. The Recommendation is based on the premise that collective actions are needed because they enhance both the effectiveness of the law (through stopping and preventing unlawful practices) and the chance to obtain a real legal remedy (compensation). Nonetheless, while the Recommendation lists access to justice and effectiveness of the law as aims equally important to compensation, in Recital 15 and paragraph 31, it also makes clear that the purview of these is strictly limited by what is permitted by the compensatory function.

The EU Private Enforcement Directive (3) also features the above multiplicity of aims. Recitals 3 and 13 identifies the full effectiveness of EU competition rules as the Directive’s aim but at the same time limits the extent of the deterrent and victim-friendly rules by ruling out overcompensation and unjust enrichment. The above mindset finds reflection in the detailed rules. While the Directive contains a list of victim-friendly rules in terms of presumptions and reversed burden of proof, these do not question the basic civil law tenet that the injured person may be compensated only for the loss he suffered and cannot become richer as a result of the compensation.

Contrary, however, to the above legislative signals, the CJEU’s ruling in  Skanska (4) signals the prevalence of the public policy function (deterrence). In this approach, private enforcement increases institutional capacity as the decentralized application does and private actors (and courts) are providing free assistance for public enforcement as NCAs do. In  Skanska, AG Wahl considered private and public enforcement to be part of the same unitary enforcement system and private enforcement’s function to be predominantly deterrence, to which the compensatory function is subordinate (paragraph 50). This policy consideration shaped his proposed interpretation of EU law. Although the CJEU did not expressly take up this notion, it endorsed the idea that public and private enforcement make up a unitary system. This conceptual kinship between public and private enforcement may suggest that deterrence may be one of the primary roles, if not the primary role, of private enforcement and is legally construed based on an extended concept of effectiveness. This notion was taken up by the Private Enforcement Directive (in Recital 6).

It is easy to analogize this stance with US antitrust law’s reliance on the “private attorney general.” Although, in the EU, private enforcement does not and cannot have the kind of weight it has in the US, the explicit articulation of its public policy rationale, which took root as early as Courage, (5) is a major development. It is questionable, however, what this view about the teleology of private enforcement may mean in practice. The use of private enforcement for the advancement of public policy purposes creates a challenge for civil law.

Though this statement could call for a reconsideration of the prevailing paradigm of compensation and the introduction of super-compensatory damages, such as punitive or treble damages, in my view these statements do not question the traditional civil law foundations and the principle that the compensation is not meant to enrich the victim but to duly compensate him. Instead, it simply confirms that the main reason why civil liability is so important for EU law is that it also has a deterrent effect. The idea to use and, to the extent possible, maximize the side-effects of private enforcement on public enforcement is a recurring element of the CJEU’s case-law. (6)

Victim-friendly rules may extend until the point where they are tolerable by civil law’s compensatory logic. This does not imply that EU competition law’s private enforcement rules cannot be more victim-friendly than general tort law. It only means that private enforcement may make use of the grey zone between compensatory and super-compensatory damages but cannot transgress this. Legal presumptions concerning damages, the reversal of the burden of proof as to the passing-on defense, to mention a couple of them, do not question of civil law’s basic tenet that compensation must be limited to the loss suffered. They go beyond general tort law and facilitate actions for damages but conceptually still comply with the principle of full compensation.

Article 3 of the EU Private Enforcement Directive pronounces that victims shall be entitled to full compensation, extending to the actual loss and lost profit (and interests); however, it makes it explicit that “[f]ull compensation under this Directive shall not lead to overcompensation, whether by means of punitive, multiple or other types of

damages.” Article 17 alleviates the burden of quantifying the harm suffered. The treatment of passing-on defense and the claim of indirect purchasers features a similar compromise between the public policy function and traditional compensatory thinking: the EU Private Enforcement Directive stretches the victim-friendly rules until the point where they, though more generous than traditional tort law, can still be conceived as compensatory (and not punitive).

The passing-on defense accrues from the compensatory logic of damages: the injured person cannot be compensated for a harm he did not suffer; if the harm was partially or fully passed on, it was not or not fully suffered by the injured person but by the indirect purchasers, who bought the products from the direct purchaser. At the same time, the passing-on defense may be an effective defensive tactic, because of the problems of proof it raises. In US antitrust law, these policy considerations warranted the discarding of the passing-on defense (7) and, as a consequence, the denial of indirect purchasers’ standing. (8) The principle that passing-on may not be used either defensively against a direct purchaser, or offensively against an antitrust violator is justified by the effectiveness of enforcement. The passing-on defense may highly encumber the enforcement of the claims of direct purchasers, while it is highly unlikely that indirect purchasers could effectively prove the loss they suffered and enforce their claims. Hence, the policy consideration of enhancing the effectiveness of private enforcement suppressed the private law considerations emerging from the notion of compensation.

While this policy-oriented construction could not be reconciled with the European legal mindset, policy considerations did shape the rules on passing on. The EU Private Enforcement Directive refused to step out of the shadow of the compensatory logic and endorsed the passing-on defense and the standing of indirect purchasers (Articles 12(1) & 14), but – with a view to enhancing the effectiveness of private enforcement – placed the burden of proof on the wrongdoer (Article 13).

All in all, it seems that while private enforcement has multiple purposes in EU competition law, it features an idiosyncratic compromise between policy-oriented deterrence and the traditional notions of civil law (full compensation, prohibition of unjust enrichment). While serving a public policy purpose and making use of the grey zone between compensatory and super-compensatory damages, EU “private competition law” does not go beyond that and remains within the confines of “compensation.” (9) The fact that it is the deterrent side effects that make private enforcement relevant for EU competition law and subject to special legislative attention does not question its compensation-oriented DNA.

[1] C-453/99 Courage v Crehan, ECLI:EU:C:2001:465.

[2] C-295/04 to C-298/04 Manfredi, ECLI:EU:C:2006:461.

[3] 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, OJ [2014] L 349/1.

[4] C-724/17 Skanska and others, ECLI:EU:C:2019:204.

[5] Case C-453/99 Courage and Crehan [2001] ECR I-6297.

[6] See C-882/19 Sumal, ECLI:EU:C:2021:800, para 36, C-163/21 PACCAR, ECLI:EU:C:2022:863, para 56, C-312/21 Tráficos, ECLI:EU:C:2023:99, para 42.

[7] Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968)

[8] Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)

[9] For instance, the preservation of the ex turpi causa principle in Courage v Crehan, though limited by the possibility to prove that the innocent part was dragged into the anticompetitive arrangement, impairs the effectiveness but is a limitation justified by civil law principles.