Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 — House of Lords, 2017-03-02
Topic: Domestic Commerce
James Stopford (Conservative, Centre-right): My Lords, these regulations implement key aspects of the EU damages directive. The damages directive aims to make it easier for consumers and businesses to bring private action claims for damages. It applies only where there has been a breach of European competition law, which may or may not be accompanied by a parallel breach of national competition law Among other things, the directive covers a range of issues affecting a claimant’s ability to have access to compensation, including access to the relevant information to support their claim; the time within which a claim must be brought; and incentives aimed at encouraging businesses to settle a claim early. The directive also offers protections for small business defendants, cartel leniency applicants and defendants’ commercially sensitive information, all of which help make the regime robust and fair to both consumers and businesses The United Kingdom has long been at the forefront in Europe on providing access to damages for breaches of competition law. The directive recognises the strengths of UK law in this area and is closely based on it. The Consumer Rights Act 2015 introduced changes to the law to help consumers and businesses bring private actions. The Act widens the jurisdiction of the Competition Appeal Tribunal and promotes collective proceedings and settlements As this directive is being implemented so soon after the changes implemented by the CRA, we are conscious that we should try to avoid unwelcome confusion and disruption. In our consultation with stakeholders, we initially proposed the usual "copy out" approach to implementation to ensure full compliance. However, respondents highlighted the risk that this carried the potential for undermining important, established UK case law and creating confusion. The Government’s approach therefore relies as much on case law and changes to court rules as on the introduction of new regulations. I now turn to "gold-plating" in respect of the single regime. The damages directive applies only where a business has caused harm following a breach of European competition law or both national and European competition law in parallel. It does not apply to harm resulting from a breach solely of national competition law. However, owing to the close relationship between the United Kingdom and EU competition regimes, the Government intend to apply the provisions to cases following breaches of UK law even when no parallel breach of European competition law exists. This is technically gold-plating, but it will provide for a simpler and more transparent regime and limit the amount of satellite litigation about which regime applies in a particular case. At consultation, stakeholders supported this approach I want now to set out the way in which the Government plan to handle the transition from the old regime to the new. The directive states that its substantive provisions should not be applied with retrospective effect, whereas procedural provisions can be backdated. The directive does not designate measures as substantive or procedural. To ensure clarity, the regulations distinguish substantive provisions from procedural Substantive new rules will apply only to claims where both the infringement and harm occurred after the coming into force of the implementing legislation. Procedural provisions will apply to proceedings which begin after the commencement of the implementing legislation and may apply to cases where the harm or infringement took place before the coming-into-force date. All provisions of the regulations are substantive save for the provisions on disclosure and use of evidence I will now run through the Government’s approach to some of the key provisions of the directive. The regulations introduce into UK law for the first time a presumption that cartels cause harm and a ban on the award of exemplary damages. The directive sets out provisions to tackle the passing-on of overcharges by a business which has been a victim of, for example, a cartel. Claimants may be several steps removed from the infringing company which is ultimately responsible for paying damages. If an infringement has caused price increases which have been passed along a distribution chain, those who suffered the harm in the end can claim full compensation In addition, the directive provides a defence where the claimants have passed on the whole or part of an overcharge. Well-established principles of tort law establish the right of indirect purchasers and the principle of passing on. The recent judgment of the Competition Appeal Tribunal in the Sainsbury’s v Mastercard case explicitly set out both the rights of indirect purchasers and the validity of the passing-on defence. Therefore, we are not legislating for these provisions. We are, however, using the regulations to set out who has the burden of proving that there has been passing-on and what must be established in the different circumstances It is important that SMEs are held accountable for their actions as part of a cartel. It is also important that any damages that an SME pays are proportionate to its role in the cartel. The regulations therefore ensure that an SME is liable only for the loss or damage caused to its direct or indirect customers. The protection applies only where the SME held less than a 5% share of the market for the duration of the offence or where paying damages would make the SME economically unviable. If an SME was the ringleader of a cartel, coerced others to join or had previously breached competition law, it would not be protected The regulations also limit the liability of successful applicants to a cartel leniency programme. As is the case with SMEs, a cartel leniency applicant is liable only for the loss or damage suffered by its direct or indirect customers, unless claimants cannot gain full compensation from other cartelists. To further protect the UK’s important cartel lenience regime, the regulations also ensure that leniency and settlement submission are protected from disclosure Part 5 of the regulations deals with the limitation periods, or prescriptive periods in Scotland. These are the periods during which a claimant can make a claim. The Competition Act 1998 already establishes a stand-alone limitation regime for competition private actions in the UK. The Consumer Rights Act 2015 amended this regime to bring it closer to the Limitation Act 1980 and similar legislation in Scotland and Northern Ireland Limitation periods already meet the requirements in the directive that they run for "at least five years." They will remain six years in England, Wales and Northern Ireland, and five years in Scotland. The limitation or prescriptive period starts when the competition infringement has ceased and a claimant knows or can reasonably be expected to know the identity of the infringer; that an infringement has occurred; and that harm has occurred arising from the infringement. The regulations ensure that the limitation period is suspended in various circumstances—for example, where a competition authority in the UK or the European Union is investigating the behaviour to which the complaint relates The regulations introduce a requirement that a defendant who settles a claim should be protected from contribution claims by co-defendants. This will protect the incentives for defendants to settle early, providing them with confidence that they will not be subject to multiple further claims once they have settled with affected parties What I have set out today is what this Government believe is a full implementation of the directive which retains important aspects of the UK’s current regime and will work for UK consumers and businesses in the long term. I commend the draft statutory instrument to the House Amendment to the Motion