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Brussels, 19.12.2005

SEC(2005) 1732

COMMISSION STAFF WORKING PAPER

Annex to the GREEN PAPER Damages actions for breach of the EC antitrust rules {COM(2005) 672 final}

TABLE OF CONTENTS

Section I: Introduction 6

A. The subject of the Commission Staff Working Paper 6

B. The aims and advantages of private enforcement 6

1. Compensation 6

2. Deterrence 6

3. Bringing competition law closer to the citizen 7

4. Other advantages of private enforcement 7

5. A balanced approach 8

C. Private enforcement is a complement to public enforcement 8

D. Action for damages for breach of EC antitrust rules is an established right in Community law 9

E. Building on the reform of Regulation 1/2003 11

F. Obstacles to actions for damages 12

1. Collective actions 12

2. Fault 12

3. Burden and standard of proof 12

4. Collection and presentation of evidence 13

5. Evidential value of national competition authorities and national court decisions 13

6. Quantification of damages 13

7. Passing on defence and indirect purchaser claims 13

8. Amount of damages 14

9. Time limitations 14

10. Costs 14

11. Applicable law 14

G. Facilitating actions for damages for breach of EC antitrust rules 15

Section II: Access to evidence 18

A. Disclosure and production of documentary evidence 18

1. The general framework 18

a. The situation in the EU Member States 18

b. European and international initiatives 19

2. Measures against the refusal to disclose evidence and against the destruction of evidence 21

a. Sanctions for not disclosing evidence 21

b. The prevention of destruction of evidence 21

3. Witnesses in court 22

a. Summoning of witnesses to give evidence before the court 22

b. Examination and cross-examination of witnesses in court 23

4. Access to documents held by the Commission or by national competition authorities 24

a. Access under the rules concerning administrative openness 24

b. Access by national courts under the duty of loyal co-operation between the Commission and the Member States 24

B. Alleviating the claimant’s evidentiary burden of proof 25

1. The burden and the standard of proof 25

2. Alleviating the claimant’s burden of proving the infringement in case of information asymmetry 26

3. Alleviating the claimant’s burden of proving the infringement in case of a prior decision of a national competition authority 27

4. Evidentiary consequences of a refusal to disclose evidence 27

C. Policy options 28

1. Options in relation to disclosure of documentary evidence 28

2. Options in relation to access to documents held by the Commission or by a national competition authority 29

3. Options in relation to the alleviation of the claimant’s evidentiary burden of proving the antitrust infringement 30

Section III: Fault requirement 31

A. Introduction 31

B. Policy Options 33

Section IV: Damages 34

A. Introduction 34

B. Elements relevant to the definition of damage 34

1. Compensation 34

2. Recovery of illegal gain 34

3. Exemplary or punitive damages 35

4. Interest on damages 36

C. Quantification of damages 37

1. Introduction 37

2. Methods for calculation of damages 38

a. The simple calculation methods 39

b. More complex calculation methods 39

c. The sampling method 40

d. The ex aequo et bono quantification 40

3. Two special cases: calculating lost profits of the claimant and calculating damage on the basis of the defendant’s illegal gain 41

a. Calculating lost profits of the claimant 41

b. Calculating damage on the basis of the defendant’s illegal gain 42

D. Split Proceedings 42

E. Policy Options 42

1. Options in relation to the basis of defining the damage 42

2. Options in relation to methods of quantification of damages 43

3. Other options 44

Section V: The passing on defence and indirect purchaser standing 45

A. Introduction 45

B. The passing on defence 45

C. Indirect purchaser standing 49

D. Policy Options for the treatment of the passing on defence and indirect purchaser standing 50

Section VI: Defending consumer interests 52

A. Introduction 52

B. Collective and representative actions for antitrust damages cases in the Member States 54

C. Policy options 55

Section VII: Costs of actions 57

A. Introduction 57

B. The obligation of the Member States to provide for efficient costrules guaranteeing access to courts 57

C. Cost rules of the Community courts 59

D. Cost rules of the courts of the Member States 60

E. Cost rules as incentives for bringing an action 61

F. Policy Options 62

Section VIII: Coordination of public and private enforcement 63

A. Introduction 63

B. Leniency and civil actions as part of an optimum deterrence of infringements 63

C. Relationship between leniency programs and damage claims 64

D. Policy options 65

Section IX – Jurisdiction and Applicable Law 67

A. Jurisdiction and consolidation of claims 67

B. Applicable Law 68

1. Introduction 68

2. Factors determining the applicable law 68

C. Policy options 71

Section X: Other issues 73

A. Use of expertise in court 73

1. Introduction 73

2. Policy Option on Experts 74

B. Impact of limitation periods in the Member States 74

1. Introduction 74

2. Limitation periods in the Member States 75

3. Limitation periods in Community law 75

4. Policy option on limitation periods 76

C. Causation 77

SECTION I: INTRODUCTION

A. The subject of the Commission Staff Working Paper

1. The aim of the Green Paper and this Commission Staff Working Paper is to look at ways in which damages actions for breach of Articles 81 and 82 of the EC Treaty (EC antitrust rules) before national courts may be facilitated so as to better compensate victims and complement the enforcement activities of public enforcement authorities. Damages actions are part of “private enforcement” of Community competition law.

2. What is meant by “private enforcement” is enforcement by means of legal action brought by the victim of anti-competitive behaviour before a court. The courts charged with the responsibility of administering these actions in Europe are the national courts of the Member States. There is no court at EC level competent to hear damages actions brought by private parties for breach of EC antitrust rules.

3. Private enforcement and public enforcement are the two pillars of enforcement of EC antitrust rules. Private enforcement differs from public enforcement, whereby the public authorities (the Commission at EU level and the national competition authorities at the Member State level) investigate suspected violations of competition law and can impose certain measures and sanctions such as fines on infringing undertakings. Fines are paid into the public budget and the activities of the public enforcer are paid for by the state. Private enforcement actions are paid for by the individual bringing the action, and that individual can recoup the money paid out as part of the award of compensation if the action is successful.

B. The aims and advantages of private enforcement

1. Compensation

4. It is fundamental to the idea of private damages actions that the victim of a violation of the law is entitled to compensation for the loss suffered as a result of the violation in question. If competition law is to better reach consumers and undertakings and enhance their access to forms of legal action to protect their rights, it is desirable that victims of competition law violations are able to recover damages for loss suffered. Damages can be claimed both in actions between co-contractors, as well as in actions brought by third parties against infringers of the law.

2. Deterrence

5. Enhanced private enforcement will maximise the amount of enforcement as a means of enforcement additional to public enforcement. Increased levels of enforcement of the law will increase the incentives of companies to comply with the law, thus helping to ensure that markets remain open and competitive.

6. Increased private enforcement will enlarge the range of infringements for which competition law will be enforced as well as the level of enforcement generally. This will arise in particular from litigation which is not brought on the back of decisions adopted by public authorities (“follow-on” actions). In relation to follow-on actions, facilitating private enforcement will add more frequently than before to the fines imposed by public competition authorities the possibility for the victim of the anti-competitive behaviour to recover his losses. Both damages awards and the imposition of fines contribute the maintenance of effective competition and deter anticompetitive behaviour.

3. Bringing competition law closer to the citizen

7. By having better opportunities to enforce directly effective rights in the field of competition, the businesses and citizens in Europe, be they a corporation or an individual consumer, will be brought closer to the competition rules and be more actively involved in the enforcement of those rules. The same can be said for undertakings which would face the threat of litigation in the case of failure to comply with the obligations imposed on them by Community competition law. Bringing Community competition law closer to the citizen will encourage greater involvement in the enforcement of that law and thus a greater awareness of and engagement in competition law on the part of European citizens. It will help bring European citizens and undertakings into closer and more direct contact with laws and policies made at European Union level.

4. Other advantages of private enforcement

8. Private action can have a number of other advantages for private parties. For example, national courts may apply civil sanctions of nullity to contractual relationships at the same time as hearing a damages claim. National courts can order the defendant to pay the successful party’s legal costs whereas costs are not recoverable in the case of a complaint to a competition authority. It is possible to combine a claim before a national court with other claims.

9. Private enforcement is also important in the wider context of enhancing Europe’s competitiveness. Competition in the market encourages companies to innovate, operate efficiently, and contribute to a more efficient use of resources, leading to improved growth in productivity. Open and competitive markets are the main driver behind competitiveness, and ultimately the standard of living of citizens. This is explicitly acknowledged in the Commission’s Action Plans for the renewed Lisbon Strategy forming a Partnership with the Member States. The objective is to enhance Europe’s delivery of economic growth and jobs. Ensuring open and competitive markets is one key area where stronger action is needed both at EU and national level.

10. Enforcement of competition rules plays a key role in ensuring a level playing field for companies in the EU. It keeps private barriers to competition (e.g. cartels and the exclusionary abuses of dominant firms) in check by using competition law instruments to tackle individual cases. Facilitating and increasing private enforcement of EC antitrust rules would further add to the efficiency of competition law enforcement, and make an important contribution to the key objective of ensuring open and competitive markets in the EU’s internal market.

11. A higher level of private enforcement of competition law is, therefore, fully in keeping with the wider objectives of the renewed Lisbon Strategy to help Europe become more competitive to the ultimate benefit of European citizens and business alike.

5. A balanced approach

12. While private enforcement therefore has important advantages both for individuals and undertakings as well as for society in general, any debate on how private enforcement could be facilitated should carefully consider the costs which are associated with furthering private competition law litigation in the case of unmeritorious or not well founded claims. As the social costs of litigation outweigh the benefits in those cases, the bringing of such claims should not be facilitated. The Commission wants to use the debate to find ways to better compensate for antitrust injuries and increase deterrence, while avoiding the situation where defendants settle simply because litigation costs are too high. The ultimate objective should be to foster a competition culture, not a litigation culture.

C. PRIVATE ENFORCEMENT IS A COMPLEMENT TO PUBLIC ENFORCEMENT

13. Private actions before national courts are to a large extent a complement to public enforcement of EC antitrust rules. Private action should not and cannot replace public enforcement. The role of the public authorities will continue to be of critical importance in detecting anti-competitive practices such as cartels, where the special investigation powers vested in the public authorities and leniency programs are indispensable for efficient enforcement of competition law. Also, competition authorities will continue to play a strong role in cases in which a full economic analysis is necessary.

14. Private litigation can in particular deal with cases which the public authorities will not deal with, in particular due to resource constraints and other prioritisation needs.

15. The principle of private enforcement of Community law rights in addition to their enforcement by the public authorities goes back to the van Gend & Loos judgment. In that judgment the Court expressed the principle of the complementary nature of public and private enforcement of rights deriving from Community law as follows:

“The vigilance of individuals concerned to protect their rights amounts to an effective supervision in addition to the supervision entrusted by Articles [226] and [227] to the diligence of the Commission and of the Member States”.[1]

D. ACTION FOR DAMAGES FOR BREACH OF EC ANTITRUST RULES IS AN ESTABLISHED RIGHT IN COMMUNITY LAW

16. PRIVATE ENFORCEMENT OF EC COMPETITION RULES CAN TAKE DIFFERENT FORMS, ACTIONS FOR DAMAGES ONLY BEING ONE OF THEM. DAMAGES ACTIONS ARE BROUGHT AGAINST THE INFRINGER OF THE LAW TO SEEK A MONETARY AWARD TO COMPENSATE THE VICTIM FOR THE HARM HE HAS SUFFERED. NEXT TO THIS KIND OF ACTIONS, PRIVATE ENFORCEMENT CAN TAKE THE FORM OF ACTIONS FOR NULLITY OR ACTIONS FOR INJUNCTIVE RELIEF, E.G. ACTIONS TO STOP ANTICOMPETITIVE BEHAVIOUR OR ACTIONS FOR ENFORCEMENT OF A CONTRACT. INJUNCTIONS COULD BE AWARDED EITHER AS AN INTERIM MEASURE OR AS A FINAL AWARD.

17. Whereas nullity as a sanction for infringements of Article 81 EC has been explicitly foreseen by the EC Treaty itself (Article 81(2) EC), damages actions or actions for injunctive relief can be deduced from Article 10 EC. In addition, according to the case-law of the Community Courts, the full effectiveness of directly applicable Community law requires national courts to have jurisdiction to grant interim relief[2] as well as damages.[3]

18. The obligation for national courts to provide a remedy in damages was established by the European Court of Justice (ECJ) in its ruling Courage v Crehan which specifically concerned the enforcement of the rights and obligations created by Article 81 EC.[4]

19. The Courage judgment is based on a long established jurisprudence of the Community Courts relating to the effective protection of Community rights by the courts of the Member States. This case law is focussed on the protection of individuals’ rights against violations of Community law committed by Member States. This case law includes for instance the obligation on national courts to grant interim relief when a Community law right is under judicial examination,[5] to provide for restitution of charges levied by a Member State contrary to Community law,[6] or to provide damages for breach of Community law by a Member State.[7] The Courage ruling extends this case law to actions brought by a private party against another private party for breach of Community law by holding that national courts must under certain circumstances allow individuals to claim damages for breach of Community competition law committed by another individual.

20. The existence of a Community law remedy of damages against individuals for breach of Articles 81 and 82 EC follows from the same principles those that rise to such a remedy against Member States for breaches of other provisions of Community law. It is founded on the fact that, as is set out in the case law of the Court,[8] Articles 81 and 82 EC create directly effective obligations on, and rights for, individuals. The principle of direct effect means that individuals can assert these rights and enforce these obligations directly before a court in a Member State. Thus the Court held in the Courage ruling as follows:

“[j]ust as it imposes burdens on individuals, Community law is also intended to give rise to rights which become part of their legal assets. Those rights arise not only where they are expressly granted by the Treaty but also by virtue of obligations which the Treaty imposes in a clearly defined manner both on individuals and on the Member States and the Community institutions”.[9]

21. In order to ensure the effectiveness ( effet utile ) of directly applicable Community law rights, national courts must provide adequate remedies for their protection. This protection includes the right to claim damages. This applies equally to all obligations and rights arising as a matter of Community law, both those imposed on Member States and now, pursuant to the Courage ruling, those imposed on individuals. Thus the Court held as follows in the Courage ruling:[10]

“The full effectiveness of Article [81] of the Treaty and, in particular, the practical effect of the prohibition laid down in Article [81(1)] would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition.

Indeed, the existence of such a right strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community.”

22. The conditions for the exercise of this right to a remedy to damages are, in the absence of Community law rules on the matter, to be determined by national law, subject to the principles that those conditions be equivalent to the conditions governing similar national law actions and that they allow for the effective exercise of the Community law right.[11] The Green Paper and this Commission Staff Working Paper explore ways in which a remedy in damages for the protection of rights deriving from Community antitrust law can be made effective in Europe.

E. Building on the reform of Regulation 1/2003

23. The recent reform of the enforcement system of Community antitrust law set in place by Regulation 1/2003,[12] which came into force on 1 May 2004, pursued the objective of an enhanced enforcement by the competition authorities of the Member States and by national courts. This enforcement system leads to an increased possibility of private enforcement of competition law.

24. Article 6 of Regulation 1/2003 states that national courts shall have the power to apply Articles 81 and 82. Article 3 of the Regulation provides that national courts shall apply Community competition law to anticompetitive behaviour which may affect trade between Member States where they apply national competition law to such behaviour. In order to facilitate the application of EC antitrust rules by the national courts, Article 15(1) of the Regulation expressly provides for a number of mechanisms by which courts can ask for opinions or information from the Commission.

25. Recital 7 of the Regulation explicitly acknowledges the important complementary role played by private damages actions before national courts to the public enforcement of EC antitrust rules. It provides as follows:

“National courts have an essential part to play in applying the Community competition rules. When deciding disputes between private individuals, they protect the subjective rights under Community law, for example by awarding damages to the victims of infringements. The role of the national courts here complements that of the competition authorities of the Member States.”

26. The Commission Notice on complaints highlights that Regulation 1/2003 “ pursues as one principal objective that Member States' courts and competition authorities should participate effectively in the enforcement of Articles 81 and 82 ”.[13] The Notice indicates the importance of private actions to the enforcement of Community competition law.

27. Modernisation of Community competition law has opened the way for increased private enforcement of the competition rules by removing the Commission’s monopoly over Article 81(3) exemptions and by empowering national courts to apply those rules. To complete that process and to ensure the most efficient and effective enforcement of antitrust law in Europe, it is necessary to think about what else is required to make private enforcement a more effective means of enforcement.

F. OBSTACLES TO ACTIONS FOR DAMAGES

28. In order to assist in the identification of potential obstacles to damages actions in Europe, the Commission commissioned a study on the conditions for claims for damages in case of infringement of EC competition rules which was published on DG Competition’s website on 2 September 2004.[14] References to ‘the Study’ throughout this Paper should be understood as references to this study.

29. The conclusions of the Study were that not only is there “ total underdevelopment ” of actions for damages for breach of EC antitrust rules, but there is also “ astonishing diversity ” in the approaches taken by the Member States. It identified only a very limited number of successful damages awards for breach of EC antitrust rules since 1962. The Study also established that there has been a similarly limited number of damages awards under national competition law.

30. The Study identified inter alia the following principal obstacles to private enforcement of EC antitrust law currently existing in the EC Member States (in the order as presented by the Study):

1. Collective actions

31. The Study notes the restrictions on collective actions in the Member States. In particular, the Study notes the rarity of collective actions (by which is meant a single claim brought on behalf of a group of affected persons) and representative actions (actions brought by representative organisations, such as consumer organisations). The Study views this as an obstacle to private actions in so far as it reduces the litigation options open to potential claimants.

2. Fault

32. Proof of negligence or intent is required in some Member States, in addition to proof of the infringement. The Study notes that this is an obstacle to private actions since it constitutes an additional hurdle to be overcome by the claimant. The Study notes, however, that in the majority of Member States there is either no fault requirement or there is a presumption of fault, either rebuttable or irrebuttable, once a violation of competition law has been established, or the violation is in itself considered to constitute a fault.

3. Burden and standard of proof

33. The Study notes that the fact that the burden of proof of causation and damage is on the claimant, which is the case in all Member States, is an obstacle to private actions. The high standard of proof required in some Member States also exacerbates the difficulties faced by claimants, particularly where the available evidence may not be very complete. Some Member States lower the standard of proof required in relation to quantification of damages, which can be difficult to demonstrate to the requisite standard.

4. Collection and presentation of evidence

34. The Study points out that in most Member States, the powers of national courts to order production of documents are very limited. In addition, very few Member States have mandatory pre-trial disclosure requirements. Parties are thus not obliged to produce relevant documents unless the requesting party can expressly identify the individual document he seeks, which makes it more difficult to obtain the evidence necessary to support a claim. The Study finds that restricted power on the part of the claimant to demand production of evidence constitutes an obstacle to successful claims.

35. Furthermore, the Study points out that in some Member States only the judge can question witnesses, and comments that this constitutes an obstacle to private actions in the event that questioning through the judge is a less effective way of obtaining information than direct questioning by the parties.

5. Evidential value of national competition authorities and national court decisions

36. The Study finds that the fact that decisions of national competition authorities (the home NCA and those of other Member States) and courts’ decisions of other Member States do not have binding effect on the courts in most Member States constitutes an obstacle to private actions. Claimants will as a result have formally to prove certain elements of the claim such as the infringement which would otherwise be taken as proven.

6. Quantification of damages

37. Proof of damages is complex and difficult which can make bringing a claim for damages very risky. The Study comments that quantifying damages is a “ key difficulty ” in bringing private actions and notes that there is a lack of generally recognised models for quantification. Differences of approach in relation to lost profits can result in considerably different awards. A restriction on this could operate as a disincentive to private actions. Many Member States allow for a reduction in the standard of proof required when damages are difficult to quantify.

7. Passing on defence and indirect purchaser claims

38. The Study finds that the existence of the passing on defence is an obstacle to private actions because it considerably complicates claims. To the extent that it reduces the award paid to the direct purchaser it also decreases the latter’s incentive to bring a claim.

39. The Study observes that in most Member States actions by indirect purchasers are in theory possible. However, the Study notes that the lack of clarity as regards the possibility for indirect purchasers to bring a claim, combined with difficulties of proof (in particular as regards establishing causation and damages), constitute serious obstacles to claims by indirect purchasers. The Study notes that a combination of the possibility for the defendant to rely on the passing on defence with the indirect purchaser actions would seriously restrict private actions.

8. Amount of damages

40. The Study finds that disincentives created by restrictions on the amounts that can be awarded, such as the unavailability of punitive damages, can also constitute an obstacle to private actions.

41. The Study notes the variety between Member States in approaches to interest on damages awards (variations on the level and duration of interest rates, e.g. whether interest should apply as from the date of the infringement or the date of the judgment). It comments that restrictions on the level and period of application of interest rates are a disincentive to private actions.

9. Time limitations

42. The Study observes that short limitation periods constitute obstacles to private actions. For instance, a short limitation period could time bar parallel actions brought after an original successful test case. Private actions brought in the wake of an administrative infringement decision could also be time barred by a short limitation period. A short limitation period could also be problematic where limitations on access to evidence are coupled with an obligation to present all evidence on filing a claim.

10. Costs

43. The Study notes the general rule that in all Member States the loser pays costs, although in practice fees are usually not fully recoverable. The high costs and risks involved in competition actions, as well as the length of proceedings, operate as a disincentive to bringing private actions. This is exacerbated by the likelihood of non-recovery of all costs (although this can also be seen as reducing the risk for the claimant in the event that the claim is unsuccessful).

11. Applicable law

44. The Study notes that the application by a national court of a variety of different national laws in an action involving injuries suffered in different Member States can complicate actions and constitute an obstacle to private enforcement. The Commission has presented a proposal for a Regulation on the law applicable to non-contractual obligations (the so-called “Rome II” proposal).[15] The issue of the law applicable to damages claims for breach of Community antitrust law should be reviewed in the light of the general rule foreseen in the Commission’s proposal (whereby the place where the damage occurs is determining the law applicable to the recovery of that damage) and the possibility to make a proposal for a specific rule for the law applicable to damage claims for breach of Community antitrust law.

G. Facilitating actions for damages for breach of EC antitrust rules

45. The Study found very few successful damages awards for breach of EC antitrust rules. Summarising the major obstacles to these private damages actions, one could say that that is basically due to issues of information asymmetry. The uncertainty of the outcome in many cases means that the potentially high costs are not necessarily balanced by correspondingly good prospects of recovery. There are certain legal, and other, questions which arise which involve considerable complexity and permit divergent and in some cases conflicting approaches. The risk/reward balance in antitrust litigation is skewed against bringing actions. This needs to be addressed in order to encourage claimants to enforce their rights and bring claims. Encouraging actions for damages has been acknowledged by the ECJ as “strengthen[ing] the working of [Articles 81 and 82 EC and thus] mak[ing] a significant contribution to the maintenance of effective competition in the Community.”[16]

46. In contrast to the current situation in Europe, the US system of antitrust litigation offers strong incentives to bring actions and thus addresses the difficult risk/reward balance in antitrust cases. The most notable features in the US system which have the effect of providing strong incentives to litigation include the availability of treble damages, adapted rules on costs and the possibility to amalgamate small claims into one effective claim under the class action procedural rules. Some of these features can be classified as “financial incentives” and are generally specific to antitrust litigation, while others are features common to the US litigation system as a whole.

47. The US system is often perceived as encouraging unmeritorious or vexatious litigation. This system should be examined carefully and lessons drawn from it, as well as from the experiences of other foreign jurisdictions in this field, as appropriate. The protection of rights deriving from Community competition law is important, but it is also important to keep excessive litigation in check and to try to achieve some form of moderation in the enforcement system.

48. In the European context, it is strongly arguable that increased clarity as to the rules will promote legal action. This applies not only to the substantive rules but also, in the context of damages actions for the enforcement of antitrust law, to the remedies and the procedures governing those actions. Clarity as to substance already exists in the form of a body of settled law at EC level on what constitutes a violation of Articles 81 and 82 EC. The existence of this settled case law was a sine qua non for the replacement of Regulation 17 by Regulation 1/2003. Without it, the Community could not have opened up the power to apply Article 81(3) to national courts and the competition authorities of the Member States.

49. Private enforcement of Community competition law is therefore to be distinguished from substantive competition law, i.e. what sort of behaviour constitutes a violation of the law. The focus of the Green Paper and of this Commission Staff Working Paper is on the rules as to the remedies and procedures governing damages actions, i.e. the rules for the enforcement in the courts of the substantive law. If potential claimants, undertakings and individual citizens alike, do not know what the rules are which they will face in court before they commence an action, this will deter them from litigating and enforcing their rights. These rules can make a big difference because they can influence the likelihood of a finding of liability in the first place or they can determine other issues as, for instance, the amount of the damages which the court is likely to award.

50. In the European context, not only is clarity desirable, but so too is the principle of creating a level playing field of EC rights enforcement across the Member States. If a litigant in one Member State faces a better chance of his national court making him a larger damages award than the litigant in another Member State, then the substantive body of Community competition law, itself uniform across the Union, will not be enforced in a uniform way across the Community. It is essential to ensure that the rights of European citizens are subject to the same protection across the whole Community.

51. Measures to improve the conditions for bringing damages actions for breach of Community competition law can be taken both at Community and national level. It is hoped that the Green Paper will stimulate debate on the issue of private enforcement of Community antitrust law in general, including discussion as to the possible methods of facilitation at all levels, Community and national, as appropriate.

52. Although some of the issues debated in the Green Paper and this Commission Staff Working Paper are common to a number of areas of civil litigation (of which civil claims for infringement of competition law is only one) it is appropriate to discuss these issues with reference to competition law alone. Civil litigation in the field of competition touches upon a particular public interest and offers a number of specific aspects which – taken together – mean that the bringing of an action is unusually difficult. Among the most important of these specificities are:

53. In the first place Articles 81 and 82 EC are fundamental provisions of the Treaty designed to protect competition in the single market.[17] In its Courage judgment the ECJ recognised that the right to claim damages strengthens the working of the EC competition rules and discourages agreements and practices which are liable to restrict competition. The ECJ also recognises that actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in Europe.[18] The right of private parties to bring an action for damages must be seen as being in the public interest. Therefore the first distinguishing aspect is the public interest element.

54. Secondly, there is the importance of market context. A wider review of the relevant facts will be justified in cases in which competition law is invoked. To establish an infringement of the competition rules it is generally necessary to define the relevant market and prove that the conduct complained of has negative effects as to prices, output or innovation on the relevant market. Also, quantification of damages may be particularly difficult as in the case of an overcharge the difference between the cartelized price and a fictional competitive price will have to be calculated. These difficulties will often require access to evidence describing the commercial activities of other actual and potential players on the market and a complex analysis requiring the gathering of a substantial number of facts. Therefore, the second distinguishing aspect is the scope of the evidential burden facing a potential litigant.

55. Furthermore, the evidential burden on the potential litigant is not only particularly high, the information required to successfully bring a case is also unevenly distributed: as proof is often required of the defendant’s market position and his trading practices, there is a marked asymmetry between the – potential – claimant and the defendant who is accused of engaging in anti-competitive behaviour.

56. Sections II to X of this Paper will address actions for damages on an issue by issue basis and identify options for the facilitation of damages actions in relation to each of the major issues identified. Responses will be invited on the options and questions identified in relation to each of the issues addressed in the Green Paper and this Commission Staff Working Paper. The Commission will assess what steps, if any, are necessary to promote further facilitation of actions for damages of EC antitrust law on the basis of responses received to the Green Paper and this Commission Staff Working Paper.

SECTION II: ACCESS TO EVIDENCE

A. Disclosure AND PRODUCTION OF DOCUMENTARY EVIDENCE

1. The general framework

a. The situation in the EU Member States

57. It has been generally acknowledged that the difficulty for the claimant of obtaining evidence of the alleged antitrust infringement constitutes one of the major obstacles to damages actions.[19] That is particularly the case when there is no prior decision from a competition authority finding the infringement. In these so-called ‘stand alone’ actions, a lot depends on the possibility for the claimant to oblige the defendant or even a third party to disclose documents in their possession, which may constitute evidence of the alleged infringement.

58. Judges in all EU Member States have at least some power to order both parties to the dispute and third parties to disclose documents, although this right may be more limited vis-à-vis third parties. Usually this is done at the request of the litigating parties, but it can also be done ex officio . Production is common to both common law and civil law jurisdictions in Europe. The main difference between these two legal traditions is that in the common law tradition, disclosure is to a large extent conducted by the parties with only minimal supervision by the courts. In contrast, under civil law systems, the parties generally only have limited power to compel the “production of evidence” or to elicit adverse testimony from adverse or third parties. They must therefore rely upon voluntary co-operation or seek intervention by the court. That being said, it has to be recalled that the judges in civil law procedures generally play a more significant role in fact-finding than under common law.

59. In some common law systems, disclosure is available ‘pre-trial’, which means that it takes place after the filing of a claim but before the final hearing on the merits.[20] Via this procedure, the parties to an action disclose to each other all documents in their possession or power, relating to matters at issue in the action. This process is best seen as the ordered exchange of evidence and statements between the parties with a view to eliminate surprises and clarify what the claim is about, allowing both sides to evaluate the merits of their respective cases, and promote settlement. If the lawyers do a thorough job in disclosure, they should not be surprised by any of the answers the opposing party’s witnesses give to their questions during trial. On the other hand, extensive pre-trial procedures can be expensive and time consuming. Such procedures can slow down litigation by requiring parties to spend large amounts of time and resources on producing and disclosing various documents to the other side. However, delays arising from disclosure can be minimised by effective case management on the part of the court. Where it appears that any proceedings would be facilitated by holding a case management conference or pre-hearing review, the national court should be able, on the request of a party or at its own initiative, to give directions for such a conference or review to be held.[21]

60. An argument against extensive procedures to obtain evidence is that such measures might be abused to obtain business secrets. However, in most EU Member States, both in jurisdictions which provide for disclosure and in jurisdictions which obtain evidence primarily through production orders, safeguards have been built into the rules on obtaining evidence.[22] The extent to which business secrets are protected from disclosure varies from Member State to Member State. For example, in Germany, the protection of business secrets extends to all technical work equipment and working methods. However, only third parties can invoke business secrets in order to refuse disclosure of documents.[23] In France, the grounds of refusal are limited to trade secrets or information on the structure of competitors and do not cover accounting documents. In some jurisdictions, under certain conditions, all or parts of the hearing can be held behind closed doors for reason of business secrets.[24] Under English procedural law, confidential documents may be prevented from disclosure by the Competition Appeals Tribunal (CAT).[25] In the ordinary English courts, there is no such express power, but if a party claims secrecy the court may order a controlled measure of disclosure deciding in each case what degree of disclosure is appropriate, for example, by restricting disclosure to the parties’ lawyers and requiring them not to disclose to their clients.

b. European and international initiatives

61. At European level, the disclosure of evidence has been dealt with in the Directive on the enforcement of intellectual property rights.[26] According to its Article 6(1)

“Member States shall ensure that, on application by a party which has presented reasonably available evidence to support its claims, and has, in substantiating those claims, specified evidence which lies in the control of the opposing party, the competent judicial authorities may order that such evidence be presented by the opposing party, subject to the protection of confidential information. For the purposes of this paragraph, Member States may provide that a reasonable sample of a substantial number of copies of a work or any other protected object be considered by the competent judicial authorities to constitute reasonable evidence.”

62. Some form of disclosure has also been recommended by two projects which examined the European and international harmonisation of civil procedural law, namely the European Code of Civil Procedure[27] and the ALI/UNIDROIT Principles of Transnational Civil Procedure.[28]

63. The draft European Code of Civil Procedure provides for limited disclosure obligations. Article 4 obliges a party to serve on all other parties a list of the documents in his possession, custody or power which relate to any question in issue in the action and which have not previously been communicated to the other parties, where a general rule of national law so requires or where the court so orders, after all the parties have been given the opportunity to be heard. Under Article 4.2.1 of the draft code, a party who has served such a list of documents shall communicate to or allow all other parties to inspect and to take copies of any of the documents listed, other than those in respect of which the party serving the list has made a claim of privilege against disclosure or communication. The grounds of privilege against disclosure or communication are to be determined by national law. Where the court is satisfied that the communication or the inspection and copying of a document would cause undue harm to the party serving the list or to any other person, it may relieve that party of the obligation to disclose that document. A court, on the application of a party, would also be able to order a third party to disclose or communicate any document which he has in his custody, power or possession and which relates to a question in issue in the action.

64. According to principle 16.2 of the ALI/UNIDROIT Principles of Transnational Civil Procedure, a national court should upon request of a party, “order disclosure of relevant, non-privileged and reasonably identified evidence in the control or possession of another party or non-party.” The fact that the evidence can be used against the one who disclosed it cannot justify a refusal to disclose. According to the comment attached to this principle, “‘relevant’ evidence is probative material that supports, contradicts, or weakens a contention of fact at issue in the proceeding. A party should not be permitted to conduct a so-called ‘fishing expedition’ to develop a case for which it has no support, but an opposing party may properly be compelled to produce evidence that is under its control. These Principles thereby permit a measure of limited ‘discovery’ under the supervision of the court.” This comment is linked to another principle which requires the parties to set out “in reasonable detail” the relevant facts of their case and to describe “with sufficient specification” the available evidence to be offered in support of their allegations, the so-called fact-pleading.[29]

65. Finally, mention should be made of Regulation 1206/2001 on the co-operation between the courts of the Member States in the taking of evidence in civil or commercial matters.[30] On the basis of this regulation a court of a Member State may request a court of another Member State to take evidence or request to take evidence directly in another Member State.[31] The wording of the regulation, in particular Article 1(2), seems to suggest that such request could relate to a pre-trial disclosure of evidence.

2. Measures against the refusal to disclose evidence and against the destruction of evidence

a. Sanctions for not disclosing evidence

66. In the majority of Member States, a person who refuses to produce a document following an order to do so, will be subject to penalties.[32] These are usually financial penalties[33], but sanctions can also take other forms. In Denmark and Germany, third parties refusing to disclose documents can be imprisoned for up to six months in the case of repeated disobedience. In England and Ireland, a person making a false disclosure statement without an honest belief in its truth or refusing to make disclosure may be held to be in contempt of court.[34]

67. In some Member States, the refusal to disclose evidence may have consequences for the ongoing procedure.[35] In Ireland, for example, any party failing to comply with an order for disclosure is liable to an order of attachment and, if a claimant, to have his action dismissed for want of prosecution or, if a defendant, to have his defence struck out.[36] In France, a defendant’s refusal to disclose may result in damages being awarded. In England, a party that is dissatisfied with the extent of his opponent’s disclosure, can obtain a court order requiring the opponent to give further specific disclosure or conduct a further search. If such an order is made, failure to comply can amount to contempt of court and may have serious consequences including the dismissal of a party’s claim or judgment being entered against him.

b. The prevention of destruction of evidence

68. A weakness of evidence taking in the context of private action is that the lodging of an action which is necessary to trigger disclosure or production of documents entails the risk that the defendant destroys incriminating materials. This problem is only partly addressed by the above-mentioned sanctions for non-disclosure. To be properly addressed, this problem may require sanctions for the destruction of such materials which have a sufficient deterrent effect.[37]

69. Another way of addressing this issue is to have procedures to ”secure” evidence, whereby evidence is recorded and preserved in order to ensure its continued existence or availability, for example, by taking copies of documents that may otherwise be destroyed. In the Czech Republic, evidence may be secured on a motion before proceedings on the case proper are initiated, if there is concern that such evidence might not be available later or only obtainable with great difficulty. In Italy, Lithuania, Luxembourg and Slovenia, one can secure evidence if there is a risk that by the time proceedings have started, the witness concerned has died or the place or thing to be inspected has altered. In Spain, if there are reasonable grounds for believing that evidence may no longer be available at the time of the trial, an early assessment of the evidence may be sought. If such early assessment is granted, the claimant has then to serve its claim within two months; otherwise the evidence will cease to be valid. This provision seems to allow for measures to be taken even before the action is filed.

70. Finally, Directive on the enforcement of intellectual property rights[38] also contains measures for preserving evidence. Article 7 of that Directive requires Member States to ensure that a court may order prompt and effective provisional measures to preserve relevant evidence in respect of the alleged infringement, subject to the protection of confidential information. The court may do so on application by a party who has presented reasonably available evidence to support a claim that their intellectual property rights have been infringed, even before the proceedings on the merits of the case have started.

3. Witnesses in court

a. Summoning of witnesses to give evidence before the court

71. In several jurisdictions there are limitations on calling parties and their representatives as witnesses. These limitations can constitute an obstacle to obtaining evidence, especially in antitrust cases where the statements of the representatives of the companies involved can provide significant and important information. In nine EU jurisdictions, neither parties nor their representatives may be called as witnesses as such, although most of these jurisdictions provide for the possibility for parties to make statements.[39] In practically all Member States people subject to professional secrecy and (close) relatives of the parties may refuse or are even under a duty not to testify. Finally, in some jurisdictions witness statements cannot take written form.[40]

b. Examination and cross-examination of witnesses in court

72. Examination is the questioning of a witness in court. There are three possible stages of examination. Examination in chief is the examination of a witness by a party who has called him. This first stage is normally followed by cross-examination, which is the questioning of a witness by a party other than the one that called him to testify. Cross-examination is usually made with the objective of diminishing the effect of the evidence of the witness. The third possible stage is re-examination, this is the further examination of the witness by the party who called him, with a view to explaining or contradicting any false impression arising from the cross-examination.

73. Examination will be particularly important in establishing facts where documentary evidence is not available or in establishing the truth where facts are in dispute. In the common law countries, cross-examination appears to carry particular importance in court proceedings. Cross-examination makes it possible to check the reliability and accuracy of the evidence of a witness. In competition cases, cross examination is thus said to be a useful tool in cases where there are major factual disputes, e.g. in the case of cartels.[41]

74. In most Member States some form of cross-examination is permitted.[42] Cross-examination by the parties is not available in four countries, namely Belgium, France, Italy and Luxembourg. However, even in these four countries the parties may request the judge to put questions to the witnesses. In Italy, these questions must be submitted in advance. In this system the parties themselves are thus not afforded the possibility to check the veracity of witness statements as is possible in direct cross-examination.

75. It should also be noted that most of the countries that allow direct cross-examination have also built in mechanisms to protect the witness. For example, in the Czech Republic, Germany, Greece, Austria and Slovakia, the judge will first question the witness to ensure an opportunity to give a complete and coherent statement.[43] Also in the cross-examination a judge can dismiss questions which he considers to be irrelevant for the case or confusing. The possibility of re-examination also allows rectification of any false impression arising from the cross-examination.

4. Access to documents held by the Commission or by national competition authorities

a. Access under the rules concerning administrative openness

76. Most, if not all Member States have rules concerning the administrative openness of their institutions. For the European Union, that principle of transparency is laid down in Article 255 EC, which allows EU citizens and those residing in the EU to have access to the documents of the European Parliament, the Council and the Commission. The principles, conditions and limits of this access have been laid down in Regulation 1049/2001.[44] The main purpose of this Regulation is, in the words of its third recital, to improve “the transparency of the decision-making process” of EU institutions. The Regulation is part of an effort to increase openness and accountability of the work of the EU institutions. Persons making an application for access to documents under this Regulation do not have to give reasons for their request[45] and any document which has been released following an application enters into the public domain.

77. Although the interest of the applicant is not relevant for the purpose of assessing whether or not a document should be disclosed,[46] the protection of private interests in claiming damages is clearly not the objective of this Regulation. Therefore, it might be appropriate to create a specific right for private litigants to obtain directly from the other parties in the private litigation the information they supplied to the Commission or to a national competition authority.

b. Access by national courts under the duty of loyal co-operation between the Commission and the Member States

78. The access to documents held by the Commission follows different rules where a national court makes the request. The basic rule for the co-operation of the Commission with the national courts is based on the duty of loyal co-operation between the Commission and the Member States as laid down in Article 10 EC as interpreted by the Community Courts.[47] The issue is specifically addressed in Article 15(1) of Regulation 1/2003 which stipulates that national courts in proceedings for the application of Article 81 or 82 EC “may ask the Commission to transmit to them information in its possession”. The Commission’s accompanying Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC contains a specific section on the Commission’s duty to transmit information to national courts.[48]

79. When transmitting information to national courts, the Commission is under an obligation to uphold the guarantees given to natural and legal persons by Article 287 EC. This Treaty provision obliges all staff of the Commission not to disclose information covered by the obligation of professional secrecy. Article 28(2) of Regulation 1/2003 repeats this obligation and extends it to officials of the Member States. The obligation of professional secrecy mainly seeks to protect business secrets and other confidential information. When transmitting such information to a national court, that protection becomes a matter for that court. The Commission, however, has to take the necessary precautions to protect the business secrets and other confidential information. Such precautions include, in particular, informing the national court of the documents or parts of documents which contain business secrets or other confidential information. It also implies that prior to transmitting documents which contain business secrets or other confidential information to a national court, the Commission has to make sure that the national court will guarantee the confidentiality of those documents. In the “exceptional cases” that the court cannot provide such a guarantee, the Commission must refuse the transmission.[49]

80. Apart from this ultimate protection of business secrets and other confidential information, the Commission can also refuse to transmit information to national courts for overriding reasons relating to the need to safeguard the interests of the Community or to avoid any interference with its functioning and independence, in particular by jeopardising the accomplishment of the tasks entrusted to it.[50] On the basis of this exception, the Commission announced in its notice on co-operation with national courts that it will only transmit to national courts information voluntarily submitted by a leniency applicant with the latter’s consent.[51]

B. ALLEVIATING THE CLAIMANT’S EVIDENTIARY BURDEN OF PROOF

1. The burden and the standard of proof

81. The normal rule under the national laws of the Member States is that the burden of proving all elements of the claim rests on the claimant. This means that the claimant in all cases has to prove the infringement, the causal connection between infringement and damage, and the quantum of damages. The burden of proving a defence to an action rests on the defendant. As a matter of Community law, Article 2 of Regulation 1/2003 states these rules for actions based on EC antitrust rules.

82. Article 2 of Regulation 1/2003, however, does not regulate the standard of proof. The standard of proof thus remains regulated by national laws. The civil law jurisdictions tend to operate with a test such as the need for the claimant to “win the conviction” of the judge.[52] In the common law jurisdictions, on the other hand, the test tends to be a “balance of probabilities” test for the establishment of the conditions of violation under Articles 81 and 82 EC.[53] In the individual case there may not be any significant difference between these two tests, since the judge may require being convinced that one explanation is more likely than the other.

83. The standard of proof as put forward in the above-mentioned ALI/UNIDROIT draft Principles of Transnational Civil Procedure[54] bridges the civil law and common law jurisdictions by stating that “[f]acts are considered proven when the court is reasonably convinced of their truth.”[55] This test adopts the civil law test of the subjective conviction of the court and incorporates some element of the common law probabilities test through the use of a reasonableness test.

2. Alleviating the claimant’s burden of proving the infringement in case of information asymmetry

84. Information asymmetry exists when one party (usually the defendant) has in its control or has access to more evidence relating to a given claim than the (potential) claimant. There are indications both in national law and under Community law that in case of information asymmetry, the claimant’s burden of proving the antitrust infringement is being alleviated.

85. In German competition law, Section 20(5) Gesetz gegen Wettbewerbsbeschränkungen (“GWB”) alleviates the claimant’s evidentiary burden in abuse actions brought by SMEs. Where the claimant is able to establish a prima facie case, the defendant is required to clarify those issues relating to its field of business which cannot be clarified by the claimant, but which can be easily clarified, and may reasonably be expected to be clarified, by the defendant. Similarly, under Austrian civil procedural rules, it is sufficient for the claimant to bring some basic evidence relating to an issue within the defendant’s sphere of control. The latter then bears the burden of rebutting this evidence.[56]

86. The alleviation of the claimant’s evidentiary burden was also addressed by the ECJ in the Aalborg Portland judgment. After having paraphrased Article 2 of Regulation 1/2003, the Court continued that

“although according to those principles the legal burden of proof is borne either by the Commission or the undertaking or association concerned, the factual evidence on which a party relies may be of such a kind as to require the other party to provide an explanation or justification, failing which it is permissible to conclude that the burden of proof has been discharged.”[57]

87. It is arguable that the case presented in situations of information asymmetry by the claimant, e.g. information on price and commercial strategy, would be covered as “factual evidence (…) of such a kind”. As a result, in situations of information asymmetry, it would be sufficient for the claimant to present facts which may constitute evidence of an infringement of the EC competition rules. The burden would then be on the defendant to adduce the necessary explanations or justifications to proof that those facts do not constitute an infringement of the EC competition rules.

3. Alleviating the claimant’s burden of proving the infringement in case of a prior decision of a national competition authority

88. According to Article 16(1) of Regulation 1/2003 “[w]hen national courts rule on agreements, decisions or practices under Article 81 or Article 82 EC which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission.”[58] That means that in a subsequent proceeding before a national court, a claimant can rely on the Commission’s infringement decision in relation to the same behaviour as proof of the infringement.

89. Some national provisions have extended this principle to decisions of national competition authorities. In Germany, Section 33(4) GWB provides that in actions for damages for breach of EC or national competition law, the court is bound by the finding of an infringement by the Commission or by a national competition authority, be it the German competition authority or the competition authority of another Member State. It also provides that the court is similarly bound by a decision of the court of another Member State in so far as that court has the function to issue a finding of an infringement in the capacity of public enforcer or to decide on an appeal against an administrative decision.

90. Similarly, in damages proceedings before the UK ordinary courts or before the Competition Appeals Tribunal (CAT), the court/tribunal is bound by a European Commission infringement decision, or by a decision of the Office of Fair Trading (OFT, the UK competition authority) that either national or Community competition law has been violated, or by a decision of the CAT on appeal from a decision of the OFT to either of these two effects.[59]

4. Evidentiary consequences of a refusal to disclose evidence

91. The weight to be given to restrictions on access to evidence placed by one of the parties in the way of the other appears to vary as between Member States. In some Member States, the refusal to disclose evidence appears to be taken as proof of the alleged facts relating to those documents.[60] In other Member States, where one party makes it impossible for the other to prove a fact, the burden of proof is explicitly reversed.[61] This is only the case where access to evidence is made impossible, not if such access is merely made more difficult. In a last group of Member States, the refusal to disclose would not in itself be sufficient to establish proof of the alleged facts but the judge would require further persuasion on the point.[62] In such a situation, the refusal to produce documents will be taken into account by the judge in his evaluation of the evidence[63] and when determining whether the burden of proof has been discharged.[64]

C. POLICY OPTIONS

1. Options in relation to disclosure of documentary evidence

92. Claimants may fail to bring a successful action for damages because they are not able to give sufficient evidence of (one of) the constituent elements of a damages claim. When that evidence is in the possession of someone else, be it the defendant or a third party, one may consider allowing the claimant access to that evidence. In designing a system allowing for such access, one should carefully assess the proportionality of any such option. Paragraphs 90 to 92 present a gradation of options for disclosure of documentary evidence. They describe a form of disclosure between the parties to an antitrust damages claim, but all options should also be read as extending to disclosure of documents which lie in the control of a third party. Paragraph 93 contains an option of effective sanctioning for the destruction of evidence, whereas paragraph 94 presents an option aimed at preserving the evidence.

Option 1 : The disclosure of relevant and reasonably identified evidence by court order

93. Most Member States already have rules governing the production by parties of specified documents during the trial. It might be appropriate to have all Member States introducing some form of disclosure. Once a party has set out in detail the relevant facts of the case and has presented reasonably available evidence in support of its allegations (fact pleading), a court should be able to determine the scope and relevancy of any further information sought which lies in the control of the adverse party and order the disclosure of that information. This limited form of court ordered disclosure of relevant and reasonably identified individual documents would avoid excessively broad disclosure.

Option 2 : Mandatory disclosure for classes of documents by court order

94. Consideration could be given to extending the existing disclosure rules by introducing, subject to fact pleading, a mandatory disclosure requirement for classes of documents between the parties, under some form of supervision of the court.

Option 3 : An obligation to provide parties with a list of accessible documents

95. Under this option a party would, subject to fact pleading, be obliged to serve on all other parties a list of relevant documents in his possession. Unless the court is satisfied that disclosure would cause undue harm to the one who serves the list, all documents on the list would be accessible for the parties to the case.

Option 4 : Sanctions for destruction of evidence

96. One could provide for sanctions for the destruction of evidence following the start of legal proceedings or in anticipation of legal proceedings. There could be provision for monetary or criminal sanctions and/or procedural consequences, such as, with regard to the claimant, the striking out of the statement of claim or, with regard to the defendant, the striking out of the defence.

Option 5 : Preservation of evidence

97. Courts could be allowed to order prompt and effective provisional measures to preserve relevant evidence in respect of the alleged infringement. In order to make this possibility effective and proportional, a party should be able to ask a court for such an order even before the commencement of proceedings on the merits of a case. That party should, however, present reasonably available evidence to support a prima facie infringement case.

2. Options in relation to access to documents held by the Commission or by a national competition authority

Option 6 : Access to documents submitted by litigants to the Commission or to a national competition authority

98. It should be considered whether to give the litigant the right to request other parties to the procedure to let it have a copy of all documents handed over to the Commission or to a national competition authority in the course of the administrative procedure, with the exception of any leniency application, business secrets or other confidential information. Issues relating to disclosure of business secrets and other confidential information as well as rights of the defence would be addressed under the law of the forum.

Option 7 : Access by the national court to documents held by the Commission

99. Under the case law of the Community courts, the Commission is required to transmit to national courts all information they ask for. However, the Commission can refuse to send information for overriding reasons relating to the need to safeguard the interests of the Community or to avoid any interference with its functioning and independence. The Commission is also barred from sending confidential information to a national court that cannot guarantee the confidential treatment of that information. Taking these constraints into account, the Commission would like to foster the co-operation with national courts and thus invites feedback from stakeholders on how to ensure the usefulness of this co-operation. Feedback would be particularly welcome on (a) how national courts consider they are able to guarantee the confidentiality of business secrets or other confidential information, and (b) on the situations in which national courts would ask the Commission for information that also parties could provide.

3. Options in relation to the alleviation of the claimant’s evidentiary burden of proving the antitrust infringement

100. Each of the following options could alleviate the claimant’s evidentiary burden of proving the competition law infringement. The option dealt with in the next paragraph aims at assisting the claimant in follow-on actions, whereas the options in the following paragraphs are particularly useful in stand-alone actions. Although the latter options would each of their own merits contribute to an alleviation of the claimant’s burden of proving the antitrust infringement, a combination of both would be most effective in helping the claimant discharge his burden of proof.

Option 8 : The evidential value of an infringement decision of a national competition authority

101. A prior infringement decision of a national competition authority, whether domestic or of another EU Member State, or of its review court, could be used to alleviate the claimant’s burden of proving the infringement. A first option would be that such a prior decision shifts the burden of proving the absence of an infringement onto the defendant. A further option would be to make this infringement decision binding on the civil court.

Option 9 : Shifting the burden of proving the infringement in situations of information asymmetry

102. It could be considered whether to shift the burden or, as the case may be, to lower the standard of proving the infringement where there is information asymmetry as between claimant and defendant. For example, once the claimant has made a prima facie case for an infringement, it would be up to the defendant to explain and if necessary, justify issues relating to evidence within his control.

Option 10 : Evidentiary consequences of an unjustified refusal to disclose evidence

103. There are three options in relation to this issue: the unjustified refusal to disclose evidence (a) equates to proof of the facts alleged (irrebuttable presumption), (b) leads to a reversal of the burden of proof (rebuttable presumption), and (c) it can be taken into account by the judge to some extent in his evaluation of the evidence.

SECTION III: FAULT REQUIREMENT

A. INTRODUCTION

104. Member States take diverse approaches as to the interaction between competition law and the general rules of liability, in particular on the question of fault. A first group of Member States does not require any fault element whatsoever for a damages claim based on the infringement of competition law, or provide that the infringement constitutes, on its own, the fault. In these countries fault does not need to be proven.[65] A second group of States appears to require fault in addition to illegality, but fault is presumed (rebuttably or irrebuttably) if illegality is shown. Therefore, these legal systems seem to facilitate private enforcement of competition law since fault does not present a hurdle to the claimant in these countries.[66]

105. Hence in the majority (18 out of 25) of Member States the fault requirement does not form an obstacle to private enforcement of competition law. The remaining seven countries (Denmark, Greece, Spain, Poland, Portugal, Finland and Sweden) all appear to require fault either in relation to the infringement or in relation to the effects of the infringement. Therefore, fault is an additional obstacle in these countries for any damages action.

106. Where the legal system requires an element of fault for a damages action, there is usually a distinction between intention and negligence. In all countries where fault is a precondition to liability, negligence will suffice.[67] Negligence exists where undertakings fail to exercise the requisite degree of care. In this respect the terminology used vary between Member States.

107. In EC competition law, there is no requirement of fault to show that there has been a violation of Article 81 or 82 EC. In the case of Article 81 EC, this flows as much from the text of the provision itself (which condemns agreements having the “object” or “effect ” of restricting competition) as from the case law of the Community courts. In the case of Article 82 EC, the case law makes it clear that abuse is an objective concept.[68] Under Article 23 of Regulation 1/2003, the Commission may impose fines on undertakings or associations of undertakings only where they acted intentionally or negligently. However, it must be recalled that the provisions and case law are only relevant for the imposition of fines by a public authority (and not for the finding of the infringement). The question remains to what extent these provisions and case law can be applied mutatis mutandis to the awarding of damages for violation of the EC antitrust rules.

108. In the field of damages claims based on violations by Member States of their Treaty obligations (liability of public authorities) the ECJ specified in Brasserie du Pêcheur that Community law confers a right to claim for compensation if three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious;[69] and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.[70] The ECJ held further that

“the obligation to make reparation for loss or damage caused to individuals cannot, however, depend upon a condition based on any concept of fault going beyond that of a sufficiently serious breach of Community law. Imposition of such a supplementary condition would be tantamount to calling in question the right to reparation founded on the Community legal order.”[71]

109. A sufficiently serious breach of Community law is a prerequisite for liability of acts of public authorities. But if that public authority has acted with only considerably reduced, or even no, discretion, like all private undertakings, the mere infringement of Community rules may suffice to establish this sufficiently serious breach according to the Camar judgment.[72]

110. Breach of EC competition law, which belongs to the public order,[73] is a serious breach of law which can have significant negative effects on the internal market. Consideration should therefore be given to the question of whether or not a fault requirement separate from the proof of the infringement is needed.

111. A comparable approach was taken with the Product Liability Directive.[74] Under this Directive a producer is liable for any damage caused by its products irrespective of the existence of fault with possible defences (inter alia) laid down in Article 7 (b) and (e) of the Directive. The absence of a fault requirement in the Directive was based on risk creation and on information asymmetry. In product liability law information on the production process is extremely difficult for the claimant to adduce. This reasoning can by analogy be applied to antitrust cases, for example to information on price and commercial strategy. A competitor of the tortfeasor usually has no insight into the relevant documents and every infringement of Art. 81 and 82 EC likewise may create a risk for competition.

B. POLICY OPTIONS

Option 11 : Liability based on the infringement itself

112. One option to facilitate private damages actions would be to remove fault as a condition of liability for a breach of competition law or to consider that the infringement constitutes on its own the fault as it is currently the case in five Member States or to introduce an irrebuttable presumption of fault. In this case illegality (violation of competition rules) would suffice for non-contractual liability. It can be argued that such an approach would be in line with the existing case law of the ECJ. Given the serious consequences of an infringement of competition law, a system where the infringement would constitute by itself a fault, would appear justified.

Option 12 : Liability based on the infringement itself in relation to the most serious infringements

113. Another option would be to confine the system whereby the infringement would constitute by itself a fault to so-called hard core violations. In non clear cut cases it is questionable whether undertakings should be held liable in the absence of any intention or negligence.

Option 13 : Defence of excusable error where illegality is shown

114. A third option could be to presume fault where a violation of competition law is shown but there would be a possibility for the defendant to introduce a defence of excusable error of law or fact. While the ruling of infringement would still stand against the defendant, there would be no liability for damages in those cases where he had, in good faith, acted on the basis that his conduct was in compliance with the law. Such a defence would of course implicate a lower degree of certainty for the claimant than an irrebuttable presumption and would result in some cases where injured parties do not receive compensation for injuries arising from an infringement of competition law. These negative aspects could, to a certain extent, be negated by requiring that the standard of care for undertakings be set at a high level.

SECTION IV: DAMAGES

A. INTRODUCTION

115. Damages are traditionally considered to compensate a victim for the loss suffered because of an antitrust infringement. It seems, however, that pure compensation of the loss does not always constitute a sufficient incentive for antitrust claimants to bring a case before the court. As a result, thought should be given to other methods of approaching damages. Paragraphs 114 to 124 present different approaches that Member States have taken to calculate the basis of the damage in a way that makes it more attractive for claimants to file a damages claim. In doing so, the award may have as its purpose not only the compensation of the victim’s individual loss but also the recovery of benefits gained by the defendant as a consequence of the tortious act. In addition, some Member States pursue beyond the mere deterrent effect of compensation, a distinct aim of punishing or deterring the wrongdoer by the grant of punitive or exemplary damages.

116. Apart from defining the basis of the damage, difficulties often arise with regard to the calculation of damages. Paragraphs 125 to 144 focus on different methods of quantification, showing both various models for the calculation of damages and a more equity based approach. Independent from the quantification method chosen, the risk remains that the mere fact that damages have to be quantified may serve as a disincentive for potential claimants. The final paragraphs 145 and 145 therefore consider a procedural alternative by splitting the finding of the liability from the calculation and the award of the exact quantum of damages.

B. Elements relevant to the definition of damage

1. Compensation

117. Compensation is the grant of an equivalent in kind or in money for the harm suffered. It differs from restitution, that aims at putting the victim in the situation he was in prior to the infringement. In some Member States compensation may only be given where full restitution is impossible or excessively difficult.

2. Recovery of illegal gain

118. Alternatively, the action can be structured as an action for recovery of illegal gain made by the infringer as a result of the infringement. In this case, the claimant’s claim is not for subjective loss suffered, but for the illegal gain that the defendant has made from the infringement. Where the illegal gain made by the infringer exceeds the loss of the claimant, using the former as a basis for calculating the damage is more advantageous to the claimant than pure compensation. The German competition law contains an example of this approach by allowing the national competition authority (Bundeskartellamt) to order an undertaking that infringed the competition rules to pay an amount that corresponds to the gain made as a result of the antitrust infringement.[75]

3. Exemplary or punitive damages

119. Exemplary or punitive damages are damages awarded by way of punishment of the defendant for breach of the law and in order to deter repetition of wrongful conduct. The punitive element of a damages award can be viewed in part as simply compensating for aspects of real damage that are difficult to estimate. But usually, punitive damages deliberately go beyond compensation in order to achieve more deterrence or other policy goals.

120. In Brasserie du Pêcheur , the Court of Justice held that

“[i]n the absence of relevant Community provisions, it is for the domestic legal system of each Member State to set the criteria for determining the extent of reparation. However, those criteria must not be less favourable than those applying to similar claims or actions based on domestic law and must not be such as in practice to make it impossible or excessively difficult to obtain reparation. National legislation which generally limits the damage for which reparation may be granted to damage done to certain, specifically protected individual interests not including loss of profit by individuals is not compatible with Community law. Moreover, it must be possible to award specific damages, such as the exemplary damages provided for by English law, pursuant to claims for damages founded on Community law, if such damages may be awarded pursuant to similar claims or actions founded on domestic law”.[76]

Therefore, if domestic law allows for exemplary damages for actions similar to damages actions for beach of the competition rules, it should also be possible to award exemplary damages for the latter actions.

121. In England, case law has established categories for determining which claims allow for the award of exemplary damages. One of these categories is “wrongful conduct which has been calculated by the defendant to make a profit for himself which may well exceed the compensation payable to the claimant”.[77] An action for breach of competition law is considered to fall into this category in extreme cases, such as where there was evidence that the defendant had calculated that his illegal profit would outweigh any damages awarded against him.[78]

122. In Ireland, exemplary damages are available in actions for breach of national competition law.[79] In accordance with the principle of equivalence, exemplary damages should thus also be available to a claimant in an action concerning a breach of Article 81 or 82 EC. Exemplary damages may be awarded where there has been a conscious and deliberate violation of rights or where the court is satisfied that the wrongdoer intended to make a profit over and above what would be awarded to the injured party. In Donovan v Electricity Supply Board , the court stated that, in compensating injured parties for damage suffered as a result of a breach of Irish competition law, ”[it] is not concerned with the motives or the intention of the party in default unless the question of exemplary damages arises”.[80] Exemplary damages are rarely awarded in Ireland and are, usually, relatively modest.[81]

123. Under German law, exemplary or punitive damages are deemed to be contrary to public policy.[82] Nevertheless, the recent report of the Monopolkommission, Das allgemeine Wettbewerbsrecht in der Siebten GWB-Novelle , lists a number of measures which it considers not to be purely compensatory in nature.[83] In particular it refers to provisions that have a sanctioning character such as damages claims for copyright infringements that are monitored by the collecting society GEMA. GEMA is entitled to recover double damages under which a 100% addition to the ordinary licensing fee can be made. This has been upheld by the Federal Court of Justice (Bundesgerichtshof) in Germany, that justified the sanctioning character of the double damages claim on the basis that potential infringers would have otherwise no incentive to comply with the rules.[84]

124. It should be borne in mind that most Member States exclude exemplary or punitive damages as contrary to their public policy. For that very reason, those Member States may refuse to recognize and to enforce decisions providing for such damages.[85] Despite this situation, one has to consider whether it would be appropriate to allow the national court to award more than single damages in case of the most serious antitrust infringements. In doing so, one would create a clear incentive for claimants to file a damages claim. Such an incentive would be most apparent were the national court to automatically award more than single damages in case of the most serious antitrust infringements. One could, however, also make the award dependent on the existence or the absence of predefined conditions or, alternatively, leave it completely to the discretion of the national court.

4. Interest on damages

125. In the Marshall II case, the Court of Justice acknowledged that

“full compensation for the loss and damage sustained (…) cannot leave out of account factors, such as the effluxion of time, which may in fact reduce its value. The award of interest, in accordance with the applicable national rules, must therefore be regarded as an essential component of compensation”.[86]

126. What matters in the award of interest are both the interest rate and the point in time from which interest is awarded. In order to attain a genuine form of compensation, both elements have to be determined at a level that ensures that at least real values, as opposed to mere nominal values, are being compensated. There are a number of possible points in time from which interest can be awarded, such as the date of the infringement, the date of the injury, the date of a demand for payment, the date of the notice to stop the breach, the date of the filing of a claim or the service of a writ of summons and finally the date of judgment.[87] Courts frequently have discretion in this matter. For example, in Crehan v Inntrepreneur Pub Company , the English High Court ruled that although the normal rule under English law is that damages are assessed at the date of loss, this is not an invariable rule of law and it may be that the justice of the case requires damages to be measured at the date of judgment, e.g. “in times of high inflation when interest would not be any form of acceptable compensation”.[88]

127. When set at a level that goes beyond compensating real value, interest may serve as a technique to increase deterrence. That technique was used in the Directive on combating late payment in commercial transactions.[89] The Directive recognises the problem of late payments and the resulting heavy administrative and financial burdens which they place on businesses, particularly SMEs. It finds that late payment has been made financially attractive to debtors in most Member States by low interest rates. The Directive therefore aims at reversing this trend of late payments and ensuring that the consequences of late payments are such as to discourage late payment.[90] The Directive does so by establishing the interest rate at a level where it becomes financially more interesting to borrow at lower interest rates than to extend ones debts by way of late payment.

C. Quantification of damages

1. Introduction

128. In an action for damages for breach of Community competition law, as in any damages action, the claimant will need to quantify the damages suffered. Quantification of damages in competition litigation can be particularly complex given the economic nature of the illegality and the difficulty of reconstructing what the situation of the claimant would have been absent the infringement, as usually required under tort rules.

129. Typically the measure of loss which shall be compensated in an antitrust damages case is taken to be the difference between the claimant’s actual position and the situation he would have been in “but for” the illegal conduct (the counterfactual). The former encompasses actual losses as well as profits that have not been gained, while the latter refers to the hypothetical situation in which the claimant would be had no competition law infringement occurred. The loss is thus compensated if the claimant is put into the financial situation he would have been in “but for” the infringement. A number of methods are used to establish this “but for” scenario, e.g. the prices, profits, costs, and the market situation etc., that would have prevailed in the absence of the infringement, to allow a comparison between the hypothetical and the actual situation.

130. The most commonly claimed types of antitrust damages are likely to be overcharges (i.e. increased prices in case of cartels or excessive prices in case of a dominant position) and damages claimed for other anti-competitive conduct (i.e. predatory pricing or refusal to supply) which has led to lost net profits to a continuing business or even lost going concern value of a terminated business.

131. A damage due to overcharge can consist of two parts, the damage due to the infringement (i.e. the higher price paid due to the cartel), but also lost profits due to the fact that the purchaser might have bought fewer input goods or services, e.g. for production purposes, and thus made less profit as he only could produce and sell fewer products.

132. When awarding damages, the court may also have to take into account effects that result from the behaviour of the claimant. That is particularly the case when the claimant is under an obligation to mitigate any losses. In addition, there is a question as to whether the claimant would have had to pay taxes in relation to the revenues he lost as a result of the antitrust infringement and for which he now asks compensation. If so, a court order would normally take these taxes into account by reducing the award.

2. Methods for calculation of damages

133. A variety of damage quantification methods are available to the parties, as described in part II of the Study (the Economics Report). There is no reason why any Member State should require the use of one quantification method over another, though the claimant will often (in the common law jurisdictions in particular) need to bear in mind that his quantification will be disputed by the other side and to this extent will need to “defeat” the evidence put forward by the other side. In civil law jurisdictions investigation of quantum may to a greater degree be undertaken by the court, if necessary assisted by an expert.

134. Although in what follows, the methods for calculation of damages are presented separately, they are complementary in the sense that several methods may be considered depending on the facts of the case in order to see whether they yield similar estimates of the quantum of any damage. To a certain degree an overlap of the methods can not be avoided and does not diminish the value of one method over the other. The simple methods can be used as a cross-check for the more complex methods. The existing case law from the Member States to date appears to show that the courts prefer the simple methods. There appears to be no case law to date in which econometric evidence has been considered by the court as the basis for an award.

135. A crucial question from a policy perspective is whether the accuracy brought by the more complex methods (assuming that this is the case) is sufficient to outweigh the extra cost and time involved in bringing and assessing this evidence. It might be desirable for courts to rely on simpler techniques, underpinned by the presumption that an equity estimation is sufficient or even, in some respects, preferable.

a. The simple calculation methods [91]

136. There are basically three simple methods to calculate the damage caused by an antitrust infringement:

137. the before-and-after method involves a simple comparison of prices during the infringement with the situation before and after the infringement to provide a reasonable assumption of the real price levels in the absence of an infringement;

138. the yardstick approach compares the distorted market with similar markets that were not affected by the infringement. Ideally the structure as to prices, costs and other characteristics is more or less similar to allow the assumption that price differences in the distorted market are the result of the anticompetitive action;

139. the cost based approach is based on information produced by those responsible for the infringement about their average unit production cost, to which a reasonable profit margin is added to obtain a price which can be considered to be reasonable under competitive conditions.

b. More complex calculation methods [92]

140. The following two calculation methods may lead to a more accurate result, but are more time-consuming and data-intensive:

141. the price prediction approach uses econometric modelling to seek to predict prices in a “but for” scenario on the basis of historical determinants of prices or yardstick comparisons with other markets. This approach is a more sophisticated version of the before and after and yardstick approaches but is heavily dependent on the quality of the data available;

142. the theoretic modelling approach simulates an oligopolistic model to ascertain the effects of the distortion. Econometric modelling and other data are used to estimate key model parameters to feed them into a theoretical model.

c. The sampling method

143. Sometimes it may be disproportionally difficult or even impossible to exactly calculate the damage suffered as a result of an antitrust infringement. In those circumstances, it should be acceptable to show reasonable approximations of the damage suffered. One method to reach an approximation is the sampling method. This technique may be particularly effective in litigation involving large groups, such as certain indirect purchaser classes or consumer associations.[93]

144. In Société anonyme des laminoirs the European Court of Justice supported the technique to calculate damage via sampling. It held that

“[w]hen it is necessary to consider a situation as it would have been if there had been no wrongful act or omission, the court must, whilst insisting that all available evidence be produced, accept realistic approximations, such as averages which have been established by means of comparisons. (…) In assessing their loss the applicants have used the only method possible. This consists in imagining the position which would have arisen for each factory concerned as regards the purchase of ferrous scrap, if the promises relating to the transport parity had not been made. Although in using this method it is not possible to arrive at an exact assessment of the damage, nevertheless the sampling methods habitually used in economic surveys make it possible to reach acceptable approximations provided that the basic facts are sufficiently reliable.”[94]

d. The ex aequo et bono quantification

145. The basic rule, operating in many Member States, is that where exact quantum is difficult to prove, proof of exact damage can be waived and the court can award a reasonable amount in its place (this is often called an ex aequo et bono estimation). In a few Member States, this possibility only applies to certain categories of damage, most notably loss of future profit.[95]

146. In a few Member States, this lowering of the required standard of proof of the claimant in relation to the quantification of damages does not exist. That means that if the claimant is unable to prove the exact loss, the claim fails. That is the case, e.g. in Spain, where a civil court may request the Competition Court to issue a report on the origin and quantum of damage.[96] The Competition Court is, however, not obliged to produce such a report and the findings of the report do not bind the requesting court.

147. Ex aequo et bono estimation of damages could be used in conjunction with, or to underpin from a legal perspective the use of simple calculation methods as outlined above. The principle is less compatible with complex models, that attempt to quantify damages with precision on the basis of econometric or statistical techniques.

3. Two special cases: calculating lost profits of the claimant and calculating damage on the basis of the defendant’s illegal gain

a. Calculating lost profits of the claimant

148. To calculate losses sustained in cases of anticompetitive conduct other than price increases, such as refusal to supply or predatory pricing, different methods are used. In such circumstances, damages may be assessed in terms of lost profits arising from the misconduct where the objective is to value that portion of a business that has been lost as a result of the antitrust infringement. A calculation will involve accounting, finance and economic methodologies to estimate the difference between what the claimant’s profit was and what it would have been but for the infringement.

149. The following methods could be used for calculating lost profits.[97] These methods also appear to presuppose the use of one of the methods outlined at paragraphs 133 and 134 in the calculation of the counterfactual (i.e. the hypothetical price against which lost profit is measured):

150. the earnings based approach involves discounting sales, costs and cash flows from the income statement in order to provide an estimate of the “but for” scenario;

151. the market based valuation approach uses financial multiples to value the injured business, such as stock market value or profits of comparable businesses whose shares are publicly traded on stock exchanges;

152. the assets based valuation approach uses information from the balance sheet to value a business. Measures include the book value of tangible net worth, fair market value of tangible net worth and liquidation value.

153. A number of generic