[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 2.4.2008

SEC(2008) 405

COMMISSION STAFF WORKING DOCUMENT Accompanying document to the WHITE PAPER on Damages actions for breach of the EC antitrust rules

IMPACT ASSESSMENT {COM(2008) 165 final} {SEC(2008) 404} {SEC(2008) 406}

TABLE OF CONTENTS

1. Procedural issues and consultation of interested parties 5

1.1. Background, Commission departments involved and chronology 5

1.2. Consultation and expertise sought 6

1.2.1. Review of the status quo for actions for damages in Europe 6

1.2.2. Identification of various possible options to improve compensation of victims of infringements of competition law 6

1.2.3. Opinions of institutional stakeholders 6

1.2.4. Other consultations 7

1.2.5. Study analysing potential impact 8

1.3. Inter-service consultations 8

1.3.1. Informal consultations within the European Commission 8

1.3.2. Formal Inter-Service Consultation 9

1.4. The Impact Assessment Board 9

1.5. Legal context of the proposed initiative 9

2. Problem to be addressed − the “WHY” 11

2.1. The current legal framework for competition damages actions is ineffective: major difficulties for victims to obtain compensation 11

2.2. The scope and scale of the problem 13

2.3. Causes and drivers 16

2.4. Need for EU action in view of the likely evolution of the problem 20

3. Objectives − the “WHAT” 22

3.1. General objective 22

3.2. Specific objectives 23

4. Policy options − the “HOW” 26

4.1. Identifying the policy options to be assessed 26

4.1.1. Method for identifying and grouping the individual measures into bundles to form Policy Options 26

4.1.2. Individual measures not included in the Policy Options analysed 27

4.1.3. Measures regarding interaction with public enforcement 28

4.1.4. Provision of non-binding assistance for quantification of damages 28

4.2. Description of the Policy Options assessed 28

4.2.1. Policy Option 1: legislative measures maximising facilitation of claims and incentives for victims 29

4.2.2. Policy Option 2: substantial facilitation and partial incentives for damages claims by means of legislative measures 30

4.2.3. Policy Option 3: moderate facilitation by means of more limited legislative measures 31

4.2.4. Policy Option 4: moderate facilitation by means of non-regulatory measures 32

4.2.5. Policy Option 5: zero action at EU level (baseline option) 32

5. Analysis of impact 34

5.1. Assessment criteria 34

5.1.1. Benefits 34

a. Ensuring full compensation of the entire harm suffered 34

b. Increased awareness, enforcement, deterrence and legal certainty 34

c. Access to justice 35

d. Efficient use of the judicial system 36

e. A more level playing field 36

5.1.2. Costs 36

a. Litigation costs 36

b. Administrative burden 37

c. Error costs 37

d. Implementation costs 37

5.1.3. Other impacts 37

5.2. Identifying and assessing the impact of each Policy Option 38

5.2.1. Policy Option 1 38

5.2.2. Policy Option 2 41

5.2.3. Policy Option 3 43

5.2.4. Policy Option 4 46

5.2.5. Policy Option 5 48

5.3. Likely costs for public authorities and businesses under the Policy Options 50

5.4. Other impacts, in particular likely implications for the EU budget 51

6. Comparing the options 52

6.1. The Preferred Option 52

6.1.1. Interim results of the impact analysis 52

6.1.2. Identification of the Preferred Option 55

6.1.3. Impact of the Preferred Option 58

6.2. Summary comparison of Policy Options 61

6.3. Proportionality and EU added value of the Preferred Option 62

6.3.1. Proportionality 62

6.3.2. European added value 62

7. Monitoring and evaluation 65

Procedural issues and consultation of interested parties

Background, Commission departments involved and chronology

1. The key issue addressed in the White Paper is the current lack of an effective legal framework for private actions seeking compensation for the damage caused to citizens and businesses as a result of infringements of EC competition law. While public enforcement by competition authorities punishes breaches of competition law, compensation of victims can only be obtained via national courts, in accordance with national procedural rules.

2. The Directorate-General for Competition is the lead service on the White Paper. The other departments involved are: DG Enterprise, DG Justice, Freedom and Security, DG Internal Market, DG Health and Consumer Affairs, DG Economic and Financial Affairs, the Legal Service, the Secretariat-General and the Bureau of European Policy Advisers. The White Paper on damages actions for breach of the EC antitrust rules is listed in the Commission Legislative and Work Programme for 2007.[1]

3. A study on the conditions under which private parties can bring actions for damages before the courts of the Member States for breach of the EC antitrust rules was undertaken by the law firm Ashurst, in response to a tender awarded by the Commission. This “Comparative Study”,[2] submitted on 31 August 2004, found that levels of private enforcement by means of damages claims in Europe are currently very low and that victims face substantial obstacles when trying to obtain compensation in court (see section 2).

4. On 19 December 2005 the Commission adopted a Green Paper and a Commission Staff Working Document on damages actions for breach of the EC antitrust rules. The purpose of the Green Paper was to consult stakeholders and stimulate debate. It identified obstacles to effective antitrust damages actions and set out different options as a basis for discussion. The Green Paper was met with broad interest.

5. In its 2007 Legislative and Work Programme, the Commission endorsed preparation of a White Paper on antitrust damages actions, which would suggest possible measures to follow up the 2005 Green Paper. To assist with preparation of the White Paper and the accompanying impact assessment, on 23 December 2006 the Commission published a call for tenders for provision of an impact study on the White Paper (the “Impact Study”).

6. Adoption of the White Paper is to be followed by a period of public consultation of all stakeholders.

Consultation and expertise sought

Review of the stat us quo for actions for damages in Europe

7. The Comparative Study identified and analysed the obstacles to successful action for damages in the Member States of the European Union. It stated that levels of private enforcement by means of damages claims in Europe are very low. The study found not only “total underdevelopment” of actions for damages for breach of EC competition law, but also “astonishing diversity” in the approaches taken by the Member States.[3] Following submission of the Comparative Study, the Commission met a number of high-level academics and legal experts to discuss issues arising from it.

Identification of various possible options to improve compensation of victims of infringements of competition law

8. The Green Paper identified various major obstacles to effective antitrust damages actions and set out different options on 15 issues, as a basis for discussion. The Green Paper was met with broad interest by stakeholders: it was discussed at a number of conferences and gave rise to nearly 150 formal submissions. This is in addition to numerous comments and material presented at conferences and in various publications.

9. Practically all the responses accepted the complementary role of private actions in overall enforcement of the EC competition rules. Most respondents agreed that victims of infringements of competition law are entitled to damages and that national procedural rules should be such that this right can be exercised effectively. Although the objective of the Green Paper therefore met with a broad consensus, respondents have diverging views about the nature and extent of obstacles to actions for damages, and the appropriate ways to remedy shortcomings. In particular, consumer associations (and law firms known as “plaintiff lawyers”) are generally in favour of far-reaching measures to facilitate and create incentives for private damages actions. Business associations and their advisers often argue more in favour of a moderate approach, some recommending taking no action at all. Academics and representatives from Member States agree on the objective and tend to favour options from the middle of the spectrum.

10. The White Paper is therefore intended as a basis for further discussion on these issues, based on specific suggestions and a detailed impact assessment.

Opinions of institutional stakeholders

11. The European Parliament contributed to the debate, in April 2007, with a Report and a Resolution on the Commission’s Green Paper. The European Parliament called on the Commission “to prepare a White Paper with detailed proposals to facilitate the bringing of private actions claiming damages which addresses, in a comprehensive manner, the issues raised in [its] resolution and gives consideration, where appropriate, to an adequate legal framework”. The issues raised in the Resolution are, in particular, the complementary role of actions for damages (and the issue of removing the joint civil liability of the successful leniency applicant), the asymmetry of information and of resources between the parties, the disclosure of evidence inter partes , the binding nature of NCA decisions, the need for collective actions, definition and quantification of damages, promotion of settlements, the passing-on defence, costs and limitation periods.[4].

12. On 20 October 2006 the European Economic and Social Committee (EESC) adopted an Opinion on the Commission’s Green Paper.[5] The EESC’s Opinion is positive about the Commission’s efforts to facilitate antitrust damages actions and considers that the Green Paper has opened up a broad and welcome debate on the need to make it easier for those injured by anti-competitive practices to recover damages. The Opinion supports measures at Community level to facilitate antitrust damages actions.

13. On two occasions, first on 11 and 12 September, then again on 9 November 2007, DG Competition met a group of experts from the Member States in order to hear their views on a discussion paper drawn up by DG Competition in preparation for the White Paper. Experts represented the Ministries of Justice, the Ministries of Economic Affairs and the national competition authorities of the Member States. Representatives from the EFTA Surveillance Authority, the Norwegian competition authority, the Icelandic competition authority and the Office of Economic Affairs of Liechtenstein were also invited to the meetings.

14. On 6 November 2007 DG Competition also held an informal meeting with a delegation of judges of national supreme courts, courts of appeal, courts of first instance and specialist competition tribunals from 12 Member States[6] to discuss specific issues related to antitrust damages actions, based on the discussion paper prepared by Commission staff.

Other consultations

15. Consultation on the issues raised in the Green Paper extended far beyond the formal period of public consultation. Since adoption of the Green Paper, Commission staff have repeatedly met a wide range of stakeholders and experts, in particular consumer associations, business representatives, lawyers and academics.

16. Commission staff have participated in a large number of events (conferences, expert panels, etc.) to discuss more effective actions for antitrust damages in the EU and their implications. Moreover, the Commission itself co-organised two major conferences which were attended by a wide range of experts and stakeholders and were a valuable source of feedback – one on “Private enforcement in EC competition law” together with the ERA Academy of European Law (9 March 2006 in Brussels), the other on “Cartel enforcement and antitrust damages actions in Europe” together with the International Bar Association (7-9 March 2007 in Brussels).

Study analysing potential impact

17. An impact study on the White Paper on EC antitrust damages actions (the “Impact Study”) was undertaken by the Centre for European Policies Studies , in association with Erasmus University Rotterdam and Libera Università Internazionale degli Studi Sociali Guido Carli , in response to a tender awarded by the Commission.[7]

18. With this tender, the European Commission was seeking the expertise necessary to produce a study on the economic and social impact of a higher level of EC antitrust damages actions in Europe, especially in comparison with the current recognised low level. The Impact Study was officially submitted to the Commission on 21 December 2007.

19. The Impact Study provides the Commission with a thorough analysis to assist it in assessing the impact of a higher level of EC antitrust damages actions in Europe. In particular, it contains an extensive analysis of the existing research regarding private actions for damages, a welfare analysis of a more effective system of private antitrust damages actions in Europe and a cost-benefits/cost-effectiveness analysis of specific measures and comprehensive options that could enhance private antitrust damages actions in Europe. The Impact Study follows the method in the Commission’s Guidelines on Impact Assessment.[8]

20. In terms of final result, the Impact Study found that a range of measures facilitating antitrust damages actions would have a significant positive impact in the EU, namely ensure adequate compensation for victims, enhance deterrence of unlawful conduct and have positive overall economic effects. The Impact Study also identified the measures most likely to minimise any negative effects, such as higher litigation costs and heavier administrative burdens.

21. The Impact Study provided key input for the Commission in preparation for this “Impact Assessment Report” (or this “report”). However, the Commission has conducted its own analysis of the Impact Study and of the wealth of material gathered during the formal and informal consultations. Therefore, the conclusions of this report may, in some instances, diverge from the findings of the Impact Study, when there are sound legal or policy reasons to do so.

Inter-service consultations

Informal consultations within the European Commission

22. Since the White Paper touches upon a variety of issues, some of which are related to the work of other Commission departments, the Directorate-General for Competition ensured close cooperation with all the Commission departments concerned at different levels and at every stage of the preparatory process. This exchange of views before the official Inter-Service Consultation allowed progress in many areas and alignment of positions on more sensitive topics.

23. The sections of the White Paper which relate to issues touching upon the areas of activity of other Directorates-General have been drafted in cooperation with the DGs concerned. Cooperation was particularly close with the Directorate-General for Health and Consumer Affairs, which, together with the Directorate-General for Enterprise, was, inter alia, represented on the Commission evaluation board in the procedure to choose the contractor to carry out the Impact Study.

24. Furthermore, an inter-service group was set up for this Impact Assessment Report and met on various occasions – on 24 November 2006, 13 July 2007 and 10 December 2007. The members of this group were also given an opportunity to comment on the ongoing work of the contractor preparing the Impact Study.

25. This Impact Assessment analyses a wide range of policy options, some of which may, in different policy areas, also be or come to be assessed by other Directorates-General of the Commission. Based on all these assessments, the various initiatives by the Commission will continue to be closely coordinated. Particularly with respect to collective redress, it will, in due course, be appropriate to assess whether and to what extent a horizontal instrument can effectively tackle the issues identified, or whether specific competition law measures (as analysed in this report) are better suited to rendering the victims’ rights to compensation effective.

Formal Inter-Service Consultation

26. A formal Inter-Service Consultation was launched on 9 February 2008. The Directorate-General for Competition took due account of the various comments received during this consultation.

The Impact Assessment Board

27. A draft of this Impact Assessment was submitted to the Impact Assessment Board on 21 December 2007. In its favourable opinion dated 25 January 2008, the Board advised the Directorate-General for Competition to elaborate on certain problem definition issues, to make the identification of policy options more transparent, to further explain the relationship between public and private enforcement and to expand the analysis of certain forms of impact.

28. The Directorate-General for Competition has revised this report in line with the Board’s comments.

Legal context of the proposed initiative

29. In 2001 and 2006 the European Court of Justice recalled that, as a matter of Community law, the possibility of claiming compensation must be open to any individual who suffers harm as a result of an infringement of Community antitrust rules. As the Court emphasised, Community law requires effective remedies which create a realistic opportunity to exercise this right to damages.

30. The main objective of the White Paper is to ensure effective implementation of the finding of the European Court of Justice that the full effectiveness of the Treaty would be put at risk if there was no realistic chance for every individual to obtain damages for loss caused by conduct liable to restrict or distort competition.

Problem to be addressed − the “WHY”

31. The key issue addressed in the White Paper is the current lack of an effective legal framework for private actions seeking compensation for the damage caused to citizens and businesses as a result of infringements of EC competition law. Deficits regarding reparation of harm resulting from an infringement of directly applicable Community rules also exist in other areas of law. In the field of competition, however, the size of the uncompensated harm and the problems encountered are particularly big. This is mainly due to a number of particular characteristics of actions for damages for competition infringements. These include the very complex factual and economic analysis required, the frequent inaccessibility and concealment of crucial evidence in the hands of defendants and the often unfavourable risk/reward balance for claimants.

32. Companies which infringe the EC competition rules usually gain an illegal advantage on the market at the expense of other players and, in particular, consumers. The damage caused by anti-competitive practices, such as price-fixing or market-sharing agreements, can be immense. For example, in France, courts recently confirmed the findings of the Competition Council that a market-sharing cartel of mobile phone operators had led to damages for consumers that were estimated to be in the range of €295 to €590 million during the period from 2000 to 2002.[9] In another recent case, the UK competition authority estimated that collusion between large supermarkets and dairy processors to increase the prices of dairy products had cost consumers around £270 million (approximately €375 million) during a two-year period.[10] A cartel of brewers on the Dutch market is said to have inflated beer prices for consumers by €400 million from 1996 to 1999.[11] Abuse of its dominant position by a broadband provider and wholesaler in Spain[12] prompted a consumers association to claim €458 million in damages before a court as compensation for five years of illegal overcharging.[13] Infringements which concern more than one Member State and longer periods than these examples are bound to have a far greater negative impact. As a matter of fact, EU-wide infringements are becoming more and more frequent.

The current legal framework for competition damages actions is ineffective: major difficulties for victims to obtain compensation

33. In 2001 and 2006, the European Court of Justice recalled that, as a matter of Community law, the possibility of claiming compensation must be open to any individual who suffers harm as a result of an infringement of Community antitrust rules.[14] Community law requires an effective legal framework which creates a realistic opportunity to exercise this right to damages. This framework can consist of Community rules on the matter or, in the absence thereof, the legislation in the Member States on civil law and procedure, or a combination of the two. For the time being, no specific Community rules (other than those derived from the principles of effectiveness and equivalence) exist regarding claims for competition damages before civil courts, so the national rules on civil liability and civil procedure apply.

34. Under these very diverse national rules, in practice citizens and companies encounter difficulties in obtaining compensation for antitrust damages before the civil courts. The traditional legal mechanisms are not working effectively in the specific context of antitrust damages claims. This general problem identified by the Comparative Study, the Commission’s Green Paper and the annexed Staff Working Paper was largely confirmed during the public consultation. By contrast, many respondents who themselves face an increased likelihood of becoming (or representing) a defendant in damages actions considered the current legal and procedural framework appropriate.[15] The Impact Study on measures facilitating antitrust damages actions in Europe concludes that under the current systems it is very difficult to exercise the right to damages and that very few victims receive compensation.[16] The European Parliament and the European Economic and Social Committee also concur with the findings in the Green Paper and have called upon the Commission to address the problem of the ineffective legal framework for antitrust damages actions in the interest of consumers and businesses.[17]

35. The Comparative Study actually found “total underdevelopment” of such damages actions, an “astonishing diversity” in the approaches taken in the Member States and a considerable degree of legal uncertainty across the EU.[18] The study identified only a very limited number of successful damages awards for breach of EC antitrust rules since 1962.[19] The Green Paper and the annexed Staff Working Paper describe the main difficulties and obstacles in the legal systems of the Member States encountered by victims of infringements of competition law when trying to exercise their entitlement to damages;[20] section 2.3 recalls the main causes and drivers. Since the Comparative Study and the Commission’s Green Paper, an increase has been reported, in some Member States, in attempts by victims to claim damages before civil courts. However, the problems identified in the Comparative Study remain essentially unchanged, as in most Member States and across the EU the number of cases where victims have been successful in their action for antitrust damages[21] is still very limited (see section 2.4 for further details).

36. No statistics are available on the number of (usually confidential) settlements between victims and infringers or successful cases of alternative dispute resolution such as mediation. However, deficits are bound to exist in this respect too, as long as there are significant obstacles to judicial enforcement of the right to damages, given that, to a large extent, effective and equitable settlements and mediation presuppose a realistic possibility of alternatively enforcing the damages claim before civil courts.

37. As a consequence of the current situation, a large number of victims of infringements of competition law remain uncompensated for the harm suffered and see their right to damages under the EC Treaty frustrated. There is therefore a clear deficit in terms of corrective justice .

38. In addition, the lack of an effectively functioning legal framework for antitrust damages actions also precludes other beneficial effects of private enforcement of Treaty rights, namely the deterrence of future infringements inherent in effective compensation mechanisms.[22] If infringers of competition law have no fear of having to pay damages to their victims, they have fewer incentives to refrain from engaging in anti-competitive conduct. If victims have access to effective legal mechanisms to bring infringements of competition law before civil courts, there is a greater likelihood that a larger number of illegal restrictions of competition will be detected and addressed in full, as victims could have particular knowledge about the anti-competitive practices and may decide to take the initiative if the competition authorities do not pursue the case (e.g. for reasons of priority-setting because of limited resources). The Court of Justice emphasised this complementary function of private enforcement of directly applicable Treaty rights as early as 1963[23] and, in later years, made it clear that without a working mechanism for victims to obtain redress, the effectiveness of Articles 81 and 82 of the EC Treaty is put at risk.[24]

39. Articles 81 and 82 are a matter of public policy and lie at the heart of the functioning of the internal market.[25] Shortcomings in effective enforcement of Articles 81 and 82 hinder achievement of the results of competition, namely better allocation of resources, greater economic efficiency, increased innovation and lower prices. In this way, such shortcomings also have a direct impact on the functioning of the internal market, which relies on a system of undistorted competition.

The scope and scale of the problem

40. The problem outlined above is not limited to any particular Member State. It is observed in every Member State, although to differing degrees as the applicable national rules differ significantly (see section 2.4). Infringements of competition law, be they hardcore cartels, other infringements of Article 81 or abuses under Article 82, occur in almost every sector of the economy.[26] The problem outlined above concerns both actions for damages brought following a decision by a public authority and actions brought on a stand-alone basis. Moreover, the problem concerns all groups of citizens and businesses. Especially affected, however, are large groups of consumers and small and medium-sized enterprises (SMEs): often at the end of the distribution chain, they face particular difficulties in identifying and proving the harm they suffered (quantum and causal link) and perceive the uncertainties, risks and costs of an action as disproportionate to potential benefits.[27]

41. It is impossible to quantify precisely the total cost of the current ineffectiveness of the legal framework for antitrust damages actions to the direct and indirect victims and to society as a whole. There are no reliable empirical data, neither on the number of infringements of competition law occurring in Europe every year nor on the scale of the harm they cause. Especially for the gravest and most harmful violations, infringers usually go a long way to conceal their practices and their impact.

42. There is, however, general agreement that the total harm done to society by infringements of competition law is immense. Looking alone at hardcore cartels with effects across the EU ,[28] the Impact Study estimates that the annual direct cost to consumers and other victims in the EU ranges from approximately €13 billion (on the most conservative assumptions) to over €37 billion (on the least conservative[29]). This estimate comprises both the harm resulting from consumers and other victims having to pay a higher price due to the illegal conduct of the cartelists (the “overcharge”) and also the economic benefits forgone by consumers and other victims who do not purchase, or purchase a smaller quantity, due to the unlawfully inflated price (the “deadweight loss”[30]). It therefore covers the direct costs of cartels to consumers and other victims. It takes no account of more indirect macro-economic effects, such as the absence of greater allocative, productive and dynamic efficiency, which could have contributed to growth and employment, which are extremely difficult even to estimate.

43. If one adds to the figures on EU-wide cartels the annual cost to consumers and other victims of domestic hardcore cartels, the total annual cost for hardcore cartels in the EU can be estimated to range from approximately €25 billion (on the most conservative assumptions) to approximately €69 billion (on the least conservative).[31] Expressed as a proportion of the EU’s gross domestic product, the negative consumer welfare impact of all these hardcore cartels is estimated as ranging from 0.23% to 0.62% of the EU’s GDP in 2007,[32] which does not include the harm caused by abusive practices and infringements of Article 81 other than hardcore cartels. To illustrate the harm created by cartels and thus the potential benefits of enhanced private enforcement differently: if more effective compensation mechanisms were to lead to a reduction of hardcore cartels by, for example, 5%, the negative consumer welfare impact would be reduced by €1.25 to €3.45 billion.

44. Even in the most effective system of private enforcement, not all the harm to consumers and other victims reflected in the above estimates will be compensated: this is because, inter alia , a considerable number of antitrust infringements will remain undetected. For hardcore cartels, the detection rate is generally assumed to be no more than somewhere between 10% and 20%.[33] For other infringements, the detection rate is higher, but the “conviction” rate (i.e. the rate of successful damages actions) is likely to be much lower, since claimants often find it very difficult to produce proof that the contested conduct produced actual anti-competitive effects.[34] It also has to be assumed that some victims do not come forward to claim compensation, for instance because they prefer not to disrupt an ongoing business relationship with the infringer. Moreover, in some instances, victims will find it rather difficult to convince courts of a sufficiently close causal link between any particular damage and the infringement.[35]

45. Any realistic estimate of how much compensation victims could expect under a more effective legal framework for antitrust damages actions is therefore necessarily lower than the total harm to consumers and other victims from detected and undetected infringements estimated (for cartels) above. The Impact Study assesses the potential benefit of a more effective compensation system in the EU by comparing the current ineffective legal framework in Europe with a legal system where private enforcement of competition rules by means of damages actions is very effective, i.e. where victims of antitrust infringements no longer encounter the same obstacles to claiming compensation in court for the damage suffered.[36] On this basis, the Impact Study estimates that the total amount of compensation (single damages plus pre-judgment interest[37]) that victims of antitrust infringements are currently forgoing ranges from approximately €5.7 billion (on the most conservative assumptions) to €23.3 billion (on the least conservative) each year across the EU.[38] These estimates relate to all types of infringements of Articles 81 and 82. They provide an approximate idea of the amount of compensation that victims are currently forgoing. However, they should not be taken as a precise calculation of the magnitude of future antitrust damage awards, given that they have to be based on a range of, sometimes big, assumptions. They can only be taken as just an indication of the potential for more effective private damages actions.

46. More effective antitrust damages actions implies more cases. An increase in the number of court actions will result in additional costs, in particular for businesses, consumers and the judicial system. It is not possible to quantify with a sufficiently satisfactory degree of precision the costs to be expected as a result of this increase. However, sections 5 and 6 of this report assess alternative policy options in terms of the likely litigation costs, administrative burden and error costs, for both private and public entities.[39] It is even more difficult actually to measure, taking account of all potential benefits and costs, the net gains (or reductions) in terms of possible efficiencies (greater deterrence, lower prices, better quality and resource allocation and possible macro-economic effects) that could result from an effective legal system for private antitrust damages actions. Nevertheless, one finding of the Impact Study is that, in any scenario, the costs resulting from an increased level of damages cases would not offset the potential benefits in terms of compensation of victims as a result of the higher level of actions for damages.[40] Sections 5 and 6 set out a more detailed comparison of the positive and negative impacts likely to be triggered by alternative policy options.

Causes and drivers

47. During the Commission’s various formal and informal consultations of stakeholders, it became clear that the ineffectiveness of the legal framework for antitrust damages actions is due to a set of different causes and drivers: it is partly the result of the high degree of legal uncertainty that potential claimants, but also defendants, face. It is also due to a range of legal and procedural hurdles in the traditional rules of the Member States. These factors, combined with the fact that antitrust cases, by nature, often require an unusually high level of very costly factual and economic analysis and present specific difficulties for claimants when it comes to access to crucial pieces of evidence often kept secret in the hands of the defendants, deter many victims from bringing actions as they consider the risk/reward balance to be negative.[41]

48. As the Comparative Study on the conditions of damages claims has shown, legal uncertainty exists at several levels. For a number of important legal issues, existing national law is simply unclear about which rule applies in the specific context of antitrust damages cases.[42] These issues include, to give just one example, the availability of the “passing-on defence”.[43] This means a situation where a company that purchased from an infringer was in a position to reduce its economic loss by passing on the overcharge to its own customers. In most Member States, there are no clear rules and hardly any case law on this crucial issue.

49. Additional legal uncertainty for stakeholders stems from the significant differences between the procedural and substantive rules governing actions for damages in the individual Member States. These are described in the Comparative Study on the conditions of damages claims.[44] For instance, while in some Member States strict liability for damages exists once an infringement of the competition rules has been established, in others victims must produce proof that the infringer acted at least negligently.[45] Another example of big differences between the Member States are the possibilities (or lack thereof) for victims to gain access to, and use in court, evidence which is in the possession of the opponent. Also the way in which the damage is quantified differs considerably between Member States, for instance the treatment of losses of (business) opportunities or of interest. Such diversity in the legal systems is not only a problem for victims, be they consumers or businesses, when they try to bring an action for damages in another Member State, e.g. at the domicile of the defendant. For businesses, the potential of becoming a defendant in a damages action in another Member State under national rules which are unfamiliar to them and even unclear in objective terms, creates imponderability and costs that can have a negative impact on the functioning of the internal market. Moreover, in certain circumstances companies in Member States with less effective antitrust damages rules and procedures enjoy an undue competitive advantage in terms of potential liability over companies from Member States with more effective rules.[46] All in all, it is therefore clear that a more level playing field should be in the interest of both potential victims and companies doing business across the EU.

50. Uncertainty amongst stakeholders about the applicable rules even exists with regard to the established acquis communautaire on damages for harm in the field of competition, which is mainly derived from judgments on the Treaty rules by the European Court of Justice. Victims of infringements of the competition legislation (and their legal advisers) are often unaware that the Court has spelled out a number of significant practical consequences that flow from the general principles governing protection of the Community law entitlement to damages.[47] These examples include certain specific requirements concerning the beginning, duration and suspension of limitation periods under national law which determine the time after which a claim for damages can no longer be brought. They also include specific implications, following from the Community law principle of effectiveness, for the national rules on standing ( locus standi ) in damages cases, i.e. the procedural conditions that determine which group of persons is entitled to start a lawsuit for damages. Also in the case of the types of damage that victims must be able to recover under national law for breach of EC competition law, the acquis communautaire establishes certain principles[48] not well known to victims.

51. As mentioned earlier, alongside the legal uncertainty described, the national rules on civil law and civil procedure contain a series of direct difficulties and obstacles for victims seeking effective redress in competition cases. These have been set out and analysed in more detail in the Green Paper and the accompanying Staff Working Paper. During the formal and informal consultation, many stakeholders confirmed their existence and importance. This group of obstacles in the rules of civil procedure and civil law comprises the following aspects:

52. Obtaining access to the evidence necessary for proving a case for damages is considered to be one of the main problems faced by victims for a combination of two reasons: competition cases are extremely fact-intensive and require assessment of a variety of very complex factual elements, while it is often very difficult, or even impossible, for claimants to produce the required evidence, since it is in the possession of the defendants. Many Member States apply strict rules requiring claimants to proffer precisely identified pieces of evidence to support all the facts of their case and impose only limited obligations on defendants to reveal crucial evidence in their possession. This makes it extremely difficult for victims to overcome the information asymmetry present in most competition cases.[49]

53. The damage that antitrust infringements cause to consumers and small businesses is often scattered between a large number of victims. In view of the existing procedural difficulties and the complex analysis required in antitrust cases, such victims are unlikely to bring individual damages actions given the costs of the litigation in relation to the size of their individual claims.[50] However, few Member States currently allow effective collective redress mechanisms resulting in the award of damages.[51] This particularly affects SMEs and final consumers.

54. As mentioned earlier, the lack in many Member States of clear written rules or even guidance from case law concerning the passing-on defence creates significant uncertainty about the outcome of actions and deters potential claimants from taking the potentially high cost risk of an action.

55. Where a private action for damages follows a decision by the European Commission, existing legislation (Article 16 of Regulation 1/2003) provides that claimants for damages can rely on this decision as unrebuttable evidence of the infringement before civil courts. In the majority of Member States, decisions adopted by the national competition authorities (NCAs) lack any such binding effect. [52] Only in a few Member States can claimants rely before civil courts on such public decisions as unrebuttable evidence of the infringement found. In the others, defendants are allowed to call into question the findings of the NCA decision and the civil courts presented with a claim for damages can be required to re-examine the facts already investigated and established by the specialised NCA, even if its decision was confirmed by appeal courts. Even if such relitigation as regards the finding of the infringement would in most cases be unsuccessful, it would add a further imponderability and, especially, time and costs to the claimant’s lawsuit and deters victims from bringing an action for damages.

56. Unduly short limitation periods can bar potential claimants from bringing an action.[53] The Member States’ limitation periods for damages actions differ in length and in terms of the starting event (occurrence of damage or knowledge thereof).[54] Particularly in follow-on actions, it can be efficient for parties to wait for the outcome of the public proceedings (and a possible appeal), but in certain instances the rules on limitation periods in Member States do not allow this.

57. In some Member States, claimants who have established that the defendant infringed antitrust rules and caused damage to them still have to prove either negligence or intent on the part of the infringer.[55] Litigation on the issue of fault adds to the costs and duration of proceedings and increases uncertainty, especially when the relevant factual evidence to determine whether an undertaking applied the requisite standard of care are in the possession of the undertaking.

58. Although the case law of the Court of Justice clarifies several issues regarding the types of damage that are recoverable, significant differences and uncertainty exist in the Member States’ laws as regards the way in which victims can calculate the damage suffered . Quantification can be particularly difficult, since the claimant has to produce evidence of a hypothetical scenario, namely what his economic situation would have been in the absence of the infringement.[56] In many Member States it is unclear to what extent judges can have recourse to approximate methods of calculating damages, such as the ex aequo et bono method or the use of rebuttable presumptions, in cases where exact calculation of the damage proves practically impossible or excessively difficult.[57]

59. The last, but by no means least, driver of the current ineffectiveness of damages actions relates to the costs of actions and the rules on their allocation . The risk of excessive costs (due to the difficulties of bringing a case for antitrust damages under the current legal framework) or of overly unpredictable costs (due to the legal imponderability described and the difficulty of foreseeing the complex economic assessments in many antitrust cases) amplifies the chilling effect of the other obstacles described.[58]

Need for EU action in view of the likely evolution of the problem

60. The problems described above and the overall ineffectiveness of the legal framework for antitrust damages actions are not new. Member States have been required to guarantee the effectiveness of EC competition rules since the EC Treaty entered into force. In 2001 the Court of Justice explicitly recalled that, in the absence of Community rules, this includes the obligation for Member States to provide for effective remedies under their rules of civil law and procedure to safeguard the right of all victims to compensation for harm suffered as a result of antitrust infringements. Nonetheless, to date little progress has been made in the vast majority of Member States.

61. Since the Commission’s Green Paper, there has been some increase in reports of attempts by victims to claim damages before civil courts, some of which were successful.[59] Besides greater awareness on the part of victims of their entitlement to damages, as confirmed by the Court of Justice, this increase in the number of lawsuits appears to be partly due to certain legislative developments in some Member States[60] and also to the emergence of new strategies designed to circumvent some of the traditional obstacles in antitrust damages cases.[61] However, monitoring of developments by the Commission and the findings of the Impact Study[62] show that successful damages actions are still scarce, that in many Member States the problems identified in the Green Paper remain essentially unchanged and that there is, therefore, still a clear need to improve the conditions for effective compensation of victims for harm suffered as a result of infringements of competition law.

62. As mentioned earlier, in recent years a small number of Member States have enacted legislation aimed at facilitating antitrust damages cases.[63] However, such isolated initiatives by Member States cannot be expected to be capable of effectively and fully remedying the root causes of the problem. First, there is no indication that any sizeable number of other Member States are likely to introduce, in the foreseeable future, legislative changes that will ensure an effective legal framework for damages actions brought by victims of antitrust infringements. Second, by nature, isolated initiatives by Member States cannot ensure that a consistent minimum level of effective protection of victims’ entitlement to damages under Articles 81 and 82 will be achieved in every Member State. Nor will they be able to provide a more level playing field for businesses or to reduce the uncertainty created by the current big differences between the national legal systems. Third, even the Member States which have completed the most comprehensive reforms have not addressed all the issues identified in the Green Paper and the accompanying Staff Working Paper.[64] Finally, the interaction between measures facilitating private enforcement of competition rules and various aspects of public enforcement needs to be addressed, for instance the operation and protection of the Commission’s and Member States’ leniency programmes. Individual action by Member States does not seem capable of achieving this in any consistent manner.

63. These issues will be addressed further in the discussion of the principles of subsidiarity and proportionality in section 6.3, as the relevant considerations and the evaluation depend very much on the specifics of the policy option chosen. Nonetheless, at this stage it can already be noted that any solution that is to remedy the main aspects of the problem identified effectively will, most likely, require some form of action coordinated at EU level.

Objectives − the “WHAT”

64. This section sets out the general policy objective pursued, along with several more specific underlying objectives. Based on these objectives, section 5.1 sets out and explains a set of specific assessment criteria that make it possible to measure, in qualitative terms, to what extent the various policy options considered are capable of contributing to achieving the general and specific objectives pursued.

General objective

65. The general objective of this policy initiative is to ensure that victims of infringements of EC competition law have access to truly effective mechanisms for obtaining full compensation for the harm they suffered.

66. Victims of infringements of EC competition law have a right to compensation conferred by the EC Treaty. However, to date, as underlined in section 2, the current legal framework in which actions for antitrust damages are brought makes it considerably difficult for victims to enforce their right. By pursuing this objective, the Commission wishes to guarantee, in every Member State, certain minimum common standards allowing victims effectively to claim, and obtain, full compensation from the infringers of the EC competition rules.

67. Today, the often very remote possibility of having to compensate for the harm caused by infringements of the EC competition rules poses no credible risk to wrongdoers. Rendering the right to compensation more effective will therefore create additional deterrence. Effective legal remedies will also enhance the incentives for infringers, when caught, to settle out of court with the victims and, consequently, improve the quality of settlements for the victims.

68. Achieving this objective of more effective compensation will ensure that the costs of infringements of competition law are borne by the infringers, and not by the victims, by compliant businesses and, indirectly, by society as a whole. This is in line with the competitiveness objectives for the EU.

69. Since the primary objective pursued is full compensation of victims, the damages to be awarded should not influence the level of fines imposed by competition authorities in their public enforcement activities, nor under any future framework of enhanced private actions. Public fines and purely compensatory damages serve two distinct objectives that are complementary: the main objective of public fines (and of potential criminal sanctions) is to deter not only the undertakings concerned (specific deterrence) but also other undertakings (general deterrence) from engaging or persisting in behaviour contrary to Articles 81 and 82. The main objective of private damages is to foster corrective justice by repairing harm caused to individuals or businesses. Of course, as mentioned earlier, this by no means precludes that effective systems for provision of damages also have positive side-effects on deterrence.

70. Given these different functions and primary objectives, in all Member States the level of civil damages (to the extent that they are intended to compensate victims) is independent of whether or not any public fines (or criminal sanctions) have been or are likely to be imposed, and the level of public fines is independent of whether or not any civil damages have been or are likely to be awarded.

71. Whilst courts are specialised and equipped to adjudicate in individual disputes between private parties, e.g. over payment of compensation, public enforcement authorities, by contrast, are not in a position to award damages to victims. They are neither empowered nor equipped to investigate and calculate the harm suffered by each individual victim and to determine the amount to be distributed to individuals as compensation. The task of competition authorities is to focus on the public interest, not on the interest of individuals. Requiring competition authorities to do the latter, would pose a risk of blurring their role and function.

72. In view of the foregoing, the Commission considers that enhanced private actions cannot and should not be intended to replace public enforcement and that public enforcement cannot and should not replace awards of civil compensation to victims.

Specific objectives

73. Given the variety of factors which contribute to the difficulties which victims have in obtaining compensation, the general objective of full compensation can be broken down into more specific objectives. These specific objectives will allow a more systematic and thorough assessment of whether the general objective is fulfilled.

74. Full compensation

75. Ensuring full compensation for the entire harm suffered: attainment of this objective requires no under-compensation of any victim. In particular, the damage awards should include pre-judgment interest in order to compensate the victims for the real value of the harm suffered.

76. While avoiding over-compensation: measures put forward as a result of this initiative should not lead to victims receiving damages higher than the entire loss suffered.

77. Greater awareness of the rules and deterrence, increased enforcement and improved compliance, to the benefit of Europe’s competitiveness

78. Improving compliance with the rules and deterrence: EC competition rules are a matter of public order and greater compliance will be achieved by rendering more credible the risk that infringers will have to compensate the victims and, in particular, by increasing the probability both of civil suits being brought and of infringements being detected.

79. Increasing victims’ awareness of their entitlement to damages and of the conditions for bringing a claim to court.

80. Increasing (potential) wrongdoers’ awareness of the rules governing actions for damages and clarifying the conditions for their liability.

81. Reinforcing European competitiveness by means of greater compliance with the EC competition rules.

82. At the same time, avoiding that the policy leads to over-deterrence, where the risk of claims for damages prevents undertakings from engaging in lawful conduct or where damages are to be paid by undertakings which have engaged in lawful conduct or where such companies face high costs to defend themselves against unmeritorious claims. The principle of proportionality must be observed.

83. Access to justice

84. Guaranteeing effective access to the courts for all victims, including those with scattered low-value damages, such as consumers.

85. Ensuring that potentially high costs do not deter victims from bringing their claims.

86. Facilitating access to the relevant facts and, hence, the truth in a case, in particular overcoming information asymmetry in terms of evidence.

87. Putting in place the conditions ensuring that meritorious claims can effectively be brought, and be successful, despite the complexity of antitrust damages cases.

88. At the same time, putting in place the conditions to avoid abusive litigation and ensuring that unmeritorious claims do not lead to the award of damages.

89. Appropriate and efficient use of the judicial system

90. Streamlining handling of antitrust damages cases by the courts by means of economies of scale, in particular by joining or grouping identical or similar claims.

91. Reducing the costs of litigation by improving the conditions for settlements: settlements are cost-efficient and, when possible, are to be preferred to court actions. However, as settlements are voluntary, attainment of this objective presupposes the existence of a credible court alternative if no settlement is reached. The credible court alternative will also serve as a benchmark leading to improvement of the quality of the settlements.

92. Limiting procedural abuses: while the victims should have better access to the courts, it is important that law-abiding undertakings do not bear the costs and burden of abusive litigation. It is therefore necessary to have appropriate safeguards to prevent such abuses.

93. Limiting the risk of multiple litigation on identical or similar issues: relitigation of issues already settled would entail unnecessary costs and delays plus the risks of a diverging outcome. As far as possible, relitigation should therefore be avoided.

94. A more level playing field and increased legal certainty for businesses operating throughout Europe

95. Ensuring a more level playing field in Europe: attainment of this objective will ensure that businesses across Europe compete on an equal footing and that European citizens and undertakings can enforce their rights conferred by the EC Treaty equally throughout Europe.

96. Increasing legal certainty for businesses: businesses operating throughout Europe will benefit from increased legal certainty as a result of setting minimum common standards for their liability for infringements of competition law.

97. At the same time, respecting national legal traditions and values: a more level playing field should not be achieved without taking due account of the national legal systems and the balance struck over time by each Member State in its national rules.

Policy options − the “HOW”

Identifying the policy options to be assessed

98. In order to determine whether, and if so to what extent, it is appropriate to recommend specific measures in the White Paper, the Commission considered the benefits and costs of a wide range of potential policy options. These are not only specific options identified in the Commission’s Green Paper but also options that emerged during the subsequent consultations and discussions. The Commission did not consider it appropriate, at the stage of preparing a White Paper, to concentrate on one narrow policy approach and to analyse only variations thereon in the impact assessment. Instead, the Commission believes that it is important to assess the full spectrum of possible options, ranging from introduction in Europe of legislative measures that would provide for a system similar to the one applied in countries with highly developed private enforcement of competition rules creating incentives at one end to the zero option of taking no EU action at all (be it legislative or non-regulatory) at the other.

99. Given the diverse causes for the current ineffectiveness of antitrust damages actions, the policy options assessed in this report consist of bundles of several specific measures that address, to different degrees, individual issues such as access to evidence, collective redress, passing-on, costs, etc. These bundles of specific measures are referred to as “Policy Options”.

Method for identifying and grouping the individual measures into bundles to form Policy Options

100. Each Policy Option (i.e. bundle) and its constituent parts reflect a common policy line, a similar degree of stringency and a comparable level of regulatory intervention. In other words, individual measures from the wide spectrum have been grouped together, with the result that the Policy Options analysed themselves range over a wide spectrum of possible policy lines and levels of regulatory intervention. To illustrate this, at one end of the spectrum a Policy Option was selected that pursues the policy of creating maximum incentives for claimants to bring damages actions by means of far-reaching legislative changes to the existing civil law systems. Towards the other end, another Policy Option aims at facilitating damages actions to a lesser degree and envisages achieving this by purely non-regulatory means. The most conservative Policy Option is, obviously, “no action at EU level”.

101. In the first step , five Policy Options − each comprising a set of individual measures each pursuing a comparable policy line and relying on a similar level of regulatory intervention − are assessed (see section 5). Assessment of these bundles of measures by no means precludes that, during this impact analysis, individual measures within these bundles might be identified as appropriate for inclusion in a new bundle that would ultimately become the Preferred Option. Indeed, in this case the balance of positive and negative impacts of the five Policy Options initially analysed did lead the Commission to the conclusion that one of these Policy Options is preferable to the others, but still shows room for improvement, in the form of adjusting some of its individual measures in order to obtain the desired results most effectively at the lowest possible cost (see sections 6.1.1 and 6.1.2). In the second step , the Preferred Option identified in this way is then subjected to the same full impact assessment as the five Policy Options initially analysed. This will allow an overall comparison and illustration of the impact of each of the options analysed. The Preferred Option is therefore subjected to the same steps of impact assessment as the other options. The two-step analysis is therefore primarily a question of presentation and order of analysis. The purpose is to show that the Commission has assessed bundles of measures pursuing a common policy line and similar level of regulatory intervention but is also open to consider a combination of measures from different bundles.

Individual measures not included in the Policy Options analysed

102. Although not every individual measure considered in the Green Paper could be included in the Policy Options analysed in this report, all those measures which received strong support from stakeholders during the consultation process are covered. The specific measures were selected and grouped into a Policy Option first on the basis of the detailed qualitative assessment of individual measures contained in the Impact Study and the results of the consultation process and, second, with a view to achieving a consistent overall policy line within each Policy Option.[65] Specific measures that are incompatible with Community law in the light of existing case law were discarded from the Policy Options at an early stage. This primarily concerned the issue of legal standing to sue.[66] In this context, some advocate concentrating damages actions on the level of direct purchasers (i.e. the direct customers of the company infringing competition law) and denying indirect purchasers (customers further down the distribution chain) the right to sue for any harm they may have suffered (indirectly) as a result of an antitrust infringement. In this respect, the Court of Justice has made it clear that “any individual” must have the right to seek “compensation for the harm suffered where there is a causal relationship between that harm and an agreement or practice prohibited under Article 81 EC”.[67] As a result, the option of excluding indirect purchasers from standing to sue has not been included.

103. Another possibility considered was to discard from the outset, for reasons of legal compatibility, inclusion of multiple damages in any of the Policy Options. Multiple (punitive) damages (as opposed to purely compensatory damages) raise serious issues as regards their compatibility with the public policy and/or basic principles of tort law in many Member States.[68] Under Community law, the existence of exemplary or punitive damages in Member States may be acceptable as the Court clarified in its Manfredi judgment that “in accordance with the principle of equivalence, it must be possible to award particular damages, such as exemplary or punitive damages, pursuant to actions founded on the Community competition rules, if such damages may be awarded pursuant to similar actions founded on domestic law”[69] (however, this does not imply that such particular damages should be introduced in every Member State). Therefore, with a view to subjecting the full spectrum of possible (and sometimes supported) solutions to an impact assessment, it was decided not to discard a priori double damages from the Policy Options, without ignoring that in some Member States there are legal objections to punitive damages. Particular attention was therefore paid to assessing the feasibility under national law and the impact of such measures (see the tables in section 5 under the heading “implementation costs”).

104. Finally, it should be recalled that introducing higher fines for infringers or criminal sanctions on executives involved are no means of achieving the primary objective of this policy, namely more effective compensation of victims. Such measures may act as a stronger deterrent for potential infringers and, thereby, have the positive effect of limiting the number of victims suffering from breaches of EC competition law. However, they will contribute nothing to repairing the harm suffered by victims of (undeterred) antitrust infringements, who will remain uncompensated in the absence of measures enhancing the effectiveness of private actions for damages such as those proposed in the various Policy Options.

Measures regarding interaction with public enforcement

105. Finally, due to the policy consideration of avoiding possible negative consequences for public enforcement as a result of any system of enhanced actions for damages, all the Policy Options (except the zero action option) contain the same two measures in this respect: protection from disclosure of corporate statements made in the context of leniency programmes and limitation of civil liability on the part of successful immunity applicants to their direct or indirect contractual partners. As a result of the latter measure, the only persons entitled to receive compensation from the immunity recipient would be the victims who directly bought the cartelised products or services from the immunity recipient (“direct contractual partners”) and those further down the supply chain who bought the same products or services (directly or via intermediaries) from the direct contractual partners (“indirect contractual partners”). As a consequence, the immunity recipient would not be held liable for the damages attributable to cartelised products or services sold by co-cartelists.

106. Other forms of impact that some measures may have on public enforcement are taken into account wherever they are likely to lead to appreciable costs, in particular, litigation costs and administrative burden for competition authorities (see also section 5.3).

Provision of non-binding assistance for quantification of damages

107. The Policy Options described below relate to possible measures to be included in the White Paper. It should be noted that, alongside the White Paper, the Commission is also considering providing pragmatic, non-binding assistance in the difficult task (often on economic grounds) of quantifying damages in antitrust cases, for the benefit of both national courts and the parties.

Description of the Policy Options assessed

108. Based on the considerations set out above, the Commission focused on the Policy Options described below as the most likely potential policy choices in view of the current ineffectiveness of antitrust damages actions. At one end of the spectrum, Policy Option 1 envisages legislative measures providing for maximum facilitation and incentives for damages claims while, at the other, Policy Option 5 envisages the scenario of zero EU action, either legislative or non-regulatory. Table 1 provides an overview of all five Policy Options and their main components.

Policy Option 1: legislative measures maximising facilitation of claims and incentives for victims

109. Policy Option 1 envisages a set of legislative measures[70] that would not only remove almost all[71] the recognised obstacles to effective antitrust damages actions but also introduce strong incentives for claimants to bring an action. This approach is characteristic of countries which rely strongly on damages actions to perform a deterrent function in the public interest. To set such incentives, Policy Option 1 groups together measures that include, first, the availability of double damages for all types of infringement of Articles 81 and 82. As damages, in a European context, are understood as also covering payment of interest accrued since the damage occurred,[72] double damages can be as much as three times as high as damages in countries where no pre-judgment interest is awarded.[73] Introducing double damages for every type of infringement would not only create an incentive for victims to bring a claim, but also contain a punitive element aimed at increasing deterrence of infringers.

110. Beyond that, Policy Option 1 provides for “opt-out” class actions[74] allowing a small number of victims to sue and claim damages for the entire group they belong to, except for victims who decide not to be included in the class. It would also introduce mandatory one-way fee-shifting, so that the claimant would never be liable for the defendant’s costs, regardless whether the claimant loses or wins the case, unless the claim was frivolous or vexatious.

111. The rules on disclosure would provide for very broad access to evidence: the claimant would be allowed to request any relevant document from the defendant once he has passed the relatively low threshold of notice pleading.[75] Concerning the issue of passing-on and claims by indirect purchasers, the passing-on defence would be excluded in order to provide an additional incentive for direct purchasers to sue, while indirect purchasers would nonetheless, for legal reasons (see above), still be allowed to claim damages if they can show that they have suffered harm caused by the infringement.

112. In civil actions following a decision by a competition authority, Policy Option 1 would avoid costly and time-consuming relitigation by rendering the findings of a national competition authority in the EU (if not appealed against or if confirmed on appeal) binding on civil courts.[76] Similarly, Policy Option 1 would provide for strict liability once an infringement of Article 81 or 82 has been established. This means that in these cases claimants would not have to prove separately negligence or intent on the part of the infringer. Claims for antitrust damage would be time-barred only after a relatively long limitation period of twenty years from the occurrence of the harm or, if the claimant could reasonably have been aware of his right to compensation, five years as of that moment.

113. With the aim of avoiding the risk that enhanced damages actions might have a negative impact on public enforcement activities and, in particular, the functioning of leniency programmes, Policy Option 1 suggests two measures: protection from disclosure of corporate statements made in the context of leniency programmes and limitation of civil liability on the part of the successful immunity applicant to his direct and indirect contractual partners.

Policy Option 2: substantial facilitation and partial incentives for damages claims by means of legislative measures

114. Policy Option 2 envisages a range of legislative measures[77] addressing the recognised obstacles to effective antitrust damages actions in a less far-reaching/radical manner than Policy Option 1. Also, in terms of encouraging claimants to bring an action, Policy Option 2 differs from Policy Option 1 in that it offers a much smaller number of incentives: double damages would be introduced only for cartels as they are hardcore infringements, whereas for other types of infringement damages would be limited to compensation for the full harm suffered (including pre-judgment interest). The rule that the losing party pays the costs, prevalent in the EU, would remain, but be made subject to the courts’ discretionary power to shift costs to the defendant, e.g. where − in meritorious cases − there is a marked asymmetry in the financial resources of the parties.

115. The collective action mechanism under Policy Option 2 would not take the form of an “opt-out” class action, but, instead, of “opt-in” collective action, where only victims who have decided to join the group seeking compensation are included in the action. This collective redress mechanism would be supplemented by representative action, where a qualified representative body, such as a consumer association or trade association, claims damages for the harm caused to the interests of those it represents.

116. Disclosure of documents would be broad and follow an initial exchange between the parties of lists indicating all relevant evidence, but only after the claimant has presented reasonably available facts and evidence in support of the allegations (fact pleading). With regard to the passing-on defence and claims by indirect purchasers, both offensive and defensive use of the passing-on argument by claimants and defendants would be permitted. In the case of claims by indirect purchasers, a risk allocation rule would apply, facilitating proof of passing-on for the downstream victim. As regards the requirement in several countries’ national law that fault on the part of the infringer needs to be proven by the victim, Policy Option 2 would introduce a presumption of fault that can be rebutted if the infringer can show that the breach of competition rules was due to an excusable error.

117. As in Policy Option 1, decisions of all national competition authorities would have binding effect across the EU. The limitation period would be set at five years from the date on which the claimant should reasonably have been aware of the harm (subjective standard). If public proceedings are initiated, a new limitation period of two years would begin on conclusion of the proceedings (including any appeals).[78] With the aim of avoiding the risk that enhanced damages actions might have a negative impact on public enforcement activities and, in particular, the functioning of leniency programmes, Policy Option 2 also suggests the same two measures: protection from disclosure of corporate statements made in the context of leniency programmes and limitation of civil liability on the part of the successful immunity applicant to his direct and indirect contractual partners.

Policy Option 3: moderate facilitation by means of more limited legislative measures

118. Policy Option 3 is aimed at addressing the most significant obstacles to an effective system of damages claims by means of legislative measures[79] of more limited scope, but not at offering further incentives for claimants to bring a case. Under Policy Option 3, only single damages would therefore be available, with pre-judgment interest. Once claimants have passed the threshold of fact pleading (see paragraph 84) that can reasonably be required in the circumstances, access to evidence in the hands of the other party would be available. To avoid overly broad disclosure, claimants would have to identify specific categories of evidence to be disclosed and courts would monitor the proportionality of the request for disclosure.

119. As regards the requirement of fault, Policy Option 3 would introduce a rule that establishment of the infringement strongly suggests the existence of at least negligence on the part of the infringer.

120. As in Policy Option 2, both claimants and defendants could fully avail themselves of the passing-on argument. Discretionary fee-shifting by the court would be possible, although only for a portion of the legal costs.[80] Decisions of national competition authorities would be binding only on the courts of the Member State whose authority issued the decision. In terms of collective redress, only representative actions would become available. The limitation period under Policy Option 3 would be five years from the date on which the claimant should reasonably have been aware of the harm. In the event of public proceedings, the limitation period would be suspended pending a final decision and any appeals.[81] With the aim of avoiding the risk that enhanced damages actions might have a negative impact on public enforcement activities and, in particular, the functioning of leniency programmes, Policy Option 3 suggests two measures: protection from disclosure of corporate statements made in the context of leniency programmes and limitation of civil liability on the part of the successful immunity applicant to his direct and indirect contractual partners.

Policy Option 4: moderate facilitation by means of non-regulatory measures

121. Policy Option 4 can be dubbed the “non-regulatory approach” as it entails no legislative measures at EU level. Instead, this option would identify, mainly from the experience in Member States, a range of useful solutions and best practices, which would be recommended to all Member States for consideration for implementation in their own legal systems.

122. Under Policy Option 4, the same individual rules (e.g. on collective redress, passing-on and access to evidence) would be envisaged as under Policy Option 3, although not as legislative measures at Community level, but as non-binding recommendations. Policy Option 4 therefore relies, to a large extent, on the Member States to carry out the action suggested.

Policy Option 5: zero action at EU level (baseline option)

123. The fifth and final option − as the baseline option − entails taking no action at all at EU level with regard to antitrust damages actions. It is possible that further developments could arise as a result of Community action in other areas, such as consumer protection. Unilateral action by Member States in this or other areas, along with interpretations of Community law by the Court of Justice, could also affect the status quo with regard to damages claims. For the foreseeable future, however, the Commission would refrain from proposing any legislation or non-regulatory measures specific to antitrust damages actions in Europe. The assessment of the impact of Policy Option 5 examines the status quo and any developments considered likely without any EU action.

Table 1: Overview of the Policy Options analysed

Access to evidence | Broad disclosure, low threshold | Initial provision of lists + broad disclosure, both based on fact-pleading threshold | Disclosure of specified categories, based on fact-pleading and proportionality |

Indirect purchaser | Standing allowed | Standing allowed | Standing allowed |

Passing-on | Defence excluded | Defence allowed; facilitation of proof of pass-on in favour of indirect purchaser | Defence allowed |

Effect of NCA decisions | Binding across EU | Binding across EU | Binding in own Member State |

Fault (once infringement established) | Strict liability | Rebuttable presumption; exoneration for excusable errors | Strong probative value of finding of infringement |

Collective redress | Opt-out class actions | Opt-in collective + representative actions | Representative actions |

Limitation period | 20 years as of damage or 5 years as of reasonable knowledge | Minimum 5 years as of reasonable knowledge + restart + two years | Minimum 5 years as of reasonable knowledge + suspension |

Cost rule | One-way shifting | Loser pays, but judge may shift all costs | Loser pays, but judge may shift part of costs |

Interaction with leniency | Protection of corporate statements from disclosure; limitation of liability on the part of successful immunity applicant | Protection of corporate statements from disclosure; limitation of liability on the part of successful immunity applicant | Protection of corporate statements from disclosure; limitation of liability on the part of successful immunity applicant |

ANALYSIS OF IMPACT

Assessment criteria

124. A multi-criteria analysis was used to assess and compare the impact: each Policy Option was assessed against a set of criteria relating to different potential benefits and costs. These are explained in more detail below (see section 5.1.1 for potential benefits and section 5.1.2 for potential costs). Because of the non-availability of statistics, it is not possible to quantify the likely impact of each Policy Option in monetary terms. Therefore, for each Policy Option, the impact expected in respect of a range of potential benefits and costs has been assessed in qualitative terms.

Benefits

a. Ensuring full compensation of the entire harm suffered

125. Though an important assessment criterion, the degree to which this specific objective is considered achieved will largely coincide with the degree to which a given Policy Option allows victims of an infringement of competition law to bring an action and enables them to prove the infringement, the harm and the causal link between the two. Once those hurdles are cleared, little room for manoeuvre is left as regards the scope of the damages award, in the light of the Manfredi judgment of the Court of Justice.

126. According to this judgment, “it follows from the principle of effectiveness and the right of any individual to seek compensation for loss caused by a contract or by conduct liable to restrict or distort competition that injured persons must be able to seek compensation not only for actual loss ( damnum emergens ) but also for loss of profit ( lucrum cessans ) plus interest.”[82] Any award of damages that would not fully compensate for the entire harm falling within the scope of this judgment would therefore violate the principle of effectiveness.

127. Since the objective is full compensation for the entire harm suffered, Policy Options will score lower on this criterion to the extent that they are likely to lead to under- or over-compensation of the claimant. Claimants are under- or over-compensated when they receive less or more damages than the harm actually suffered. The latter is a fortiori the case if the claimant receives damages but has suffered no harm whatsoever. Since full compensation in the greatest possible number of cases is the first and foremost objective, good scores on achieving the goal of full compensation will weigh heavily in the impact analysis and in identification of the Preferred Option.

b. Increased awareness, enforcement, deterrence and legal certainty

128. Policy Options will score higher to the extent that they make economic operators more aware of their rights and obligations under EC competition rules. Clear and explicitly formulated rules add to such awareness, just as much as they clarify the conditions applicable to claims for damages and the conditions of liability on the part of offenders.

129. Likewise, Policy Options will score higher to the extent that they widen the scope or increase the: intensity of enforcement (by simply increasing the number of cases for which infringers are held responsible, by addressing different types of infringement or by involving a wider variety of economic operators); likelihood of detection and of having to bear the financial consequences of anti-competitive behaviour; and, assuming that the optimum level has not yet been reached, the level of those financial consequences.

130. A higher degree of awareness of the EC competition rules, combined with better enforcement of them (by means of private actions), may contribute to greater compliance with these rules and, hence, to better achievement of their objectives. Any impact inherent in more effective compensation of victims obviously has to be taken into account as a potential benefit, given that more effective deterrence and greater compliance with the rules will contribute to achieving the results of fair competition.

131. Policy Options will therefore score higher if they are likely to lead, all other things being equal, to an increase in deterrence rates. However, because increasing deterrence is not one of the primary objectives, in the final stage of comparing Policy Options and determining the Preferred Option less weight will be given to positive scores on deterrence, particularly compared with good scores on the central objective of compensation.

132. Policy Options will score lower on this category to the extent that they lead to a situation where the risk of damages claims prevents undertakings from engaging in lawful conduct or where damages are to be paid by undertakings that did not infringe the competition rules.

c. Access to justice

133. Policy Options will score higher on this criterion to the extent that they ensure more effective access to justice for all victims of an infringement of competition law. That is particularly relevant for victims who have only small claims and/or have difficulties in gaining access to the evidence necessary to prove their case. Policy Options will score well if they adequately address the reasons why these victims decide not to bring a damages case, although they would like to claim the damages they are entitled to.

134. At the root of these reasons is the fact that victims fear the opportunity cost and the financial consequences of losing a meritorious case. More than the former factor, which is largely a matter of personal judgment, the latter is the key to ensuring adequate access to justice, e.g. by reducing the financial risks or the likelihood that meritorious cases will be lost. Consequently, Policy Options that, for instance, allow effective and efficient collective redress and facilitate access to evidence and provide for accuracy in fact-finding will score well on the “access to justice” criterion.

d. Efficient use of the judicial system

135. Efficient use of the judicial system means avoiding unnecessary delays, multiple proceedings and contradictory outcomes. Policy Options will therefore score higher to the extent that they allow related cases to be dealt with together. Cases are considered related when they concern the same infringement, whereas identity of claimant and/or defendant is not really required. Key issues raised by the case, like establishment of the infringement, damage calculation, etc., may indeed be similar, independent of the litigating parties. Even if some of these issues vary between the parties, claims concerning the same infringement are likely to be interrelated and would therefore benefit from being handled jointly.

136. As the judicial system should not be overburdened, Policy Options will, paradoxically, also score higher to the extent that they allow cases to be settled adequately out of court.

137. Policy Options will score lower on this criterion to the extent that they offer claimants excessive incentives. Incentives can be considered excessive if they encourage claimants to bring damages claims although they have suffered no harm whatsoever. Policy Options that offer incentives to claimants who suffered only minor harm are not considered to encourage procedural abuses and therefore do not score lower on this criterion for that reason alone, even if the harm is outweighed by the litigation costs that go with the claim.

e. A more level playing field

138. Having similar rules for antitrust damages claims throughout Europe is considered beneficial, as it leads to equal treatment for businesses and consumers who are in a similar situation. Particularly for businesses, exposure to antitrust damages claims may have an influence on their market behaviour. Fair competition on the internal market would therefore require comparable exposure to damages claims, which can be brought about only by similar procedural rules governing actions for damages.

139. Since antitrust damages actions are put forward by the Court of Justice as a remedy stemming directly from European law, claimants of antitrust damages should all be able to use this remedy effectively. Although the effectiveness of the remedy may allow some divergence between Member States, it does require compliance with certain minimum standards. Those minimum standards would have to be the same across Europe.

140. As a result, Policy Options will score higher to the extent that they create a level playing field in Europe for claimants and defendants in antitrust damages actions.

Costs

a. Litigation costs

141. This broad category of costs covers both the litigation costs for parties to proceedings (both settlement costs and costs incurred when the case is brought to court) and the enforcement costs for public authorities (such as courts and competition authorities). Policy Options will therefore score higher on these costs to the extent that they offer incentives to litigate and/or suggest measures that increase the costs (resources, opportunity cost and money) of litigation for the parties or for public authorities.

b. Administrative burden

142. In line with the European Commission’s Impact Assessment Guidelines, this category includes costs incurred by businesses, consumers and public authorities in order to meet legal obligations to keep information and to provide it, either to public authorities or to private parties. Only the net costs are taken into account, i.e. excluding those that would be incurred anyhow, even without any legal obligation.

143. Policy Options will score higher on this cost to the extent that they require businesses, consumers or public authorities to keep information for a long period of time (storage costs) and that they impose an obligation to provide that information to one of the parties (disclosure costs). Policy Options will score high on disclosure costs to the extent that they have a low threshold triggering disclosure and/or wide scope of disclosure.

c. Error costs

144. Error costs means costs related to the possibility of courts issuing a mistaken decision. That could take the form either of incorrectly awarding damages (type I error) or of incorrectly rejecting a claim for damages (type II error). Policy Options will score high on error costs to the extent that they suggest measures that increase the likelihood of error and/or measures that amplify the impact of the error.

145. Errors in quantification of damages are not included in this category because the resulting under- or over-compensation already has a negative impact on the corrective justice objective (see point 95).

d. Implementation costs

146. Implementation costs means costs incurred by businesses, consumers and national public authorities to adapt to new rules (e.g. training costs, compliance costs, etc.). Although real, these costs are therefore transitory. Policy Options will score high on these costs to the extent that they lead to a big change in the regulatory context in which businesses, consumers and public authorities operate.

Other impacts

147. Apart from these categories of costs and benefits, this report also assesses the impact of the different Policy Options on consumers and SMEs on the one hand and on macro-economic variables, such as competitiveness, innovation, growth and jobs, on the other. The latter impact coincides largely with the expected level of compliance with the competition rules. In particular, the more that undertakings comply with the rules, the more competitive markets will be and the lower any allocative inefficiency. Policy Options that are more likely to achieve that result are therefore more likely to contribute positively to growth and employment. Such positive overall effects are likely to outweigh certain negative effects in those rare cases where the breach of competition law and the resulting public fines and liability for civil damages pose a financial threat to the survival of the infringing firm.

Identifying and assessing the impact of each Policy Option

148. As explained in section 1.2.5, the assessment presented in this report is based on the Commission departments’ own analysis, the results of a broad consultation of stakeholders and, in particular, the findings of the Impact Study. This section sets out, in the form of tables, the conclusions of the Commission’s assessment of the positive and negative impacts that Policy Options 1 to 5 would be likely to have if implemented.

149. The point of reference, for the purposes of this assessment, is the absolute impact of the various Policy Options. In other words, each option is assessed on its own merits, including Policy Option 5, which is the “no policy change” or “business as usual” (BAU) scenario. The reason for choosing this method is that, in the context of claims for damages for breach of the EC antitrust rules, it is important to illustrate the significant costs and benefits that taking no action at all (“business as usual”) would have. This approach will, in particular, make it possible to compare all Policy Options with each other, including Policy Option 5.

Policy Option 1

150. The legislative measures envisaged under Policy Option 1 would aim at maximum facilitation of damages claims and offering very strong incentives for victims. Central components of this Policy Option include double damages for all types of infringement, “opt-out” class actions, mandatory one-way fee-shifting, a rule excluding the passing-on defence, very broad disclosure of evidence at a relatively low threshold, binding effect of all NCA decisions, strict liability and a potentially long limitation period.

151. Tables 2 to 4 set out the main conclusions of the Commission’s analysis of the likely positive and negative impacts of Policy Option 1.

Table 2 − Benefits of Policy Option 1

Benefits achieved/ problem addressed | Impact: zero (0) to high (((((() | Explanation of rating and aspects of the policy option most relevant to the benefits |

1. Ensuring full compensation of the entire harm suffered | (((( | Overall, most effective for obtaining damages, but high risk of over-compensation: opt-out class actions and the various incentives lead to a large increase in number of victims compensated • double damages create likelihood that (at least) full harm is compensated, even if cases are settled at a lower amount than claimed • more accurate fact-finding (very broad disclosure) allows more precise quantification of loss suffered and increases number of victims compensated • very long limitation period makes compensation for entire duration of infringement more likely • one-way fee-shifting can allow victims to settle for an amount that is closer to the actual harm; • but risk that double damages might lead to over-compensation, although this risk is mitigated in settlements • in opt-out class actions, possible difficulties in identifying victims and distributing damages compensation may be averaged • in opt-out class actions, the very large group of victims included in the class may not always be able to control the lawyers acting for the class (principal/agent problem) misalignment of their interests could lead to under-compensation •absence of passing-on defence may lead to over-compensation of direct purchasers • limitation of liability on the part of successful immunity applicants may reduce available compensation (if other infringers are insolvent), although this risk is limited.[83] |

2. Increased awareness, enforcement, deterrence and legal certainty | (((( | Overall, enforcement, deterrence and legal certainty highly increased, but risk of over-deterrence in non-cartel cases: double damages: opt-out class actions increase potential liability of infringers per case and in total • no over-deterrence in cartel cases, inter alia as the detection rate for cartels is likely to remain very low (but improved, although due to secrecy less than for other types of infringement), i.e. not higher than 20% • rules enforced much more frequently, increasing deterrence: the various incentives may stimulate monitoring and detection by market players and consumers • opt-out class actions necessitate publication of claims and that raises awareness• exclusion of passing-on defence increases the number of claims by direct purchasers and their chances of success• comprehensive clarification of conditions for exercising rights and liability • but significant risk of over-deterrence in abuse and vertical cases, although somewhat mitigated by settlements • high risk of strategic/unmeritorious lawsuits.[84] |

3. Access to justice | ((((( | Overall, very broad access to justice, especially for indirect purchasers: high incentives and opt-out class actions will lead to compensation of very much higher number of victims (including those who suffered scattered damages)• greatly facilitated access to evidence and greater accuracy in fact-finding• legal costs are removed as a hurdle to access to justice due to one-way fee-shifting• binding effect of NCA decisions/strict liability facilitate proof significantly • access to justice for longer time due to limitation periods.[85] |

4. Efficient use of the judicial system | ((( | Overall improvement in efficiency, but significant potential for abuses and excesses: binding effect of NCA decisions and strict (no-fault) liability clearly improve efficiency in follow-on cases • absence of pass-on defence simplifies proof/calculation of damage • opt-out class actions simplify small-claims actions • but, especially, very broad discovery at low threshold and automatic fee-shifting create high risk of strategic lawsuits • unmeritorious cases impose significant burden on courts.[86] |

5. A more level playing field | ((((( | Equal protection of right to damages across the EU a practically level playing field for consumers and businesses alike. |

Table 3 − Costs of Policy Option 1

Costs | Costs: zero (0) to high (((((() | Explanation of rating and aspects of the policy option most relevant to the costs |

1. Litigation costs | ((((( | Overall, very high increase in total litigation costs and high increase per case: opt-out class actions, double damages and one-way fee-shifting highly increase number of lawsuits • opt-out class actions and very broad discovery at low threshold make cases costly, although opt-out class actions are more efficient than individual suits • strong risk of unmeritorious litigation • abuses such as “discovery blackmail” can impose significant burdens on undertakings • limitation of liability on the part of successful immunity applicants may increase litigation costs for victims, although for the defendants some costs are likely to arise even without this measure from the additional litigation by the cartelist first held liable who will seek a contribution from the co-infringers • but binding effect of NCA decisions reduces parties’ costs in follow-on claims • early disclosure/strict liability reduce costs during trial • early disclosure and limitation of liability on the part of successful immunity applicants may stimulate cost-efficient early settlements.[87] |

2. Administrative burden | ((((( | High increase in administrative burden: more frequent litigation/early and very broad discovery at low threshold/long limitation period mean that a much greater number of companies must screen and produce many more documents more often over (in many MS) a longer period (until end of limitation period).[88] |

3. Error costs | ((( | Overall, costs of errors likely to rise (few errors with high impact): double damages, fee-shifting and opt-out class actions imply high cost impact of each error • in addition, the increased magnitude of potential errors might sometimes induce judges wrongly to reject claims in close cases (to avoid the enormous negative impact of a wrong finding of liability) • but greater accuracy in fact-finding binding effect of NCA decisions/strict liability may reduce errors in follow-on cases.[89] |

4. Implementation costs | ((((( | A very costly change for all MS, with major legal hurdles for several (especially as regards double damages): various measures under this option require very significant changes to the law of all MS, which implies a very significant need for training of judges and the legal community • double damages, opt-out class actions, very broad discovery rules at low threshold and absence of passing-on defence raise public policy or even constitutional concerns in several MS, which may be difficult to overcome • early (automatic) disclosure at low threshold without judicial involvement clashes with conception of civil procedure in many MS with a civil law tradition • limitation of liability on the part of successful immunity applicants may be difficult to implement in various MS (e.g. because in a cartel the contribution by each participant is crucial for the cartel’s success and can therefore be causal for the damage suffered by every victim) • although many of these are one-off costs, they are nonetheless extremely high.[90] |

Table 4 − Other impacts of Policy Option 1

Other impacts | Benefit: zero (0) to high (((((() | Explanation of rating and aspects of