TABLE OF CONTENTS

1........... The subject-matter of the impact assessment................................................................... 6

2........... Procedural issues and consultation of interested parties.................................................... 7

2.1........ Background.................................................................................................................... 7

2.2........ Public consultation on the White Paper............................................................................ 8

2.2.1..... Civil society.................................................................................................................... 8

2.2.2..... Institutional stakeholders................................................................................................. 9

2.3........ Public consultation on the quantification of damages......................................................... 9

2.4........ Public consultation on a coherent approach to collective redress.................................... 10

2.5........ Inter-service consultation.............................................................................................. 11

2.6........ The Impact Assessment Board...................................................................................... 12

3........... Problem to be addressed.............................................................................................. 14

3.1........ The interaction between public and private enforcement remains unclear under the current legal framework 14

3.2........ The current legal framework for damages actions in cases of competition law infringements is ineffective as victims experience major difficulties to obtain compensation...................................................... 17

3.3........ The current legal framework could endanger the proper functioning of the internal market 21

3.4........ Scope and costs of the uncertainty relating to the interaction between public and private enforcement and the ineffectiveness of the legal framework for actions for damages........................................ 23

3.4.1..... Scope and cost: ill-regulated interface between public and private enforcement............... 23

3.4.2..... Scope and cost: ineffective legal framework for compensation........................................ 24

4........... Objectives.................................................................................................................... 27

4.1........ General objectives........................................................................................................ 27

4.2........ Specific objectives........................................................................................................ 27

5........... Contents of the current Antitrust Damages Initiative....................................................... 32

5.1........ The 2008 IAWP and the choice of the 'Preferred Option'.............................................. 32

5.2........ The current Antitrust Damages Initiative - scope of the assessment................................. 32

5.3........ Description of the Policy Options assessed in the current initiative.................................. 33

5.3.1..... Option 1: the baseline scenario of no EU action in the field of antitrust damages actions.. 34

5.3.2..... Option 2: adopting the White Paper's suggested measures through a legislative instrument 34

5.3.3..... Option 3: legislative proposal based on the White Paper and additional safeguards......... 35

5.3.4..... Option 4: non-regulatory measures................................................................................ 39

5.4........ Provision of non-binding assistance for quantification of damages................................... 39

6........... Impact analysis............................................................................................................. 41

6.1........ Assessment criteria....................................................................................................... 41

6.1.1..... Benefits........................................................................................................................ 42

6.1.2..... Costs........................................................................................................................... 44

6.2........ Identifying and assessing the impact of each option........................................................ 45

6.2.1..... Option 1....................................................................................................................... 46

6.2.2..... Option 2....................................................................................................................... 48

6.2.3..... Option 3....................................................................................................................... 51

6.2.4..... Option 4....................................................................................................................... 53

7........... Comparing the options.................................................................................................. 56

7.1........ Comparing the policy options and assessment of the preferred option............................. 56

7.1.1..... Summary comparison of the options and identification of the preferred option................. 56

7.1.2..... Litigation costs of the preferred option........................................................................... 63

7.1.3..... Transposition costs for the Member States.................................................................... 66

7.2........ Choice of legal instrument............................................................................................. 68

7.2.1..... The options.................................................................................................................. 68

7.2.2..... Regulation.................................................................................................................... 68

7.2.3..... Regulation and Directive............................................................................................... 69

7.2.4..... Directive....................................................................................................................... 69

7.3........ Proportionality and EU added value of the Preferred Option.......................................... 69

7.3.1..... Subsidiarity: European added value............................................................................... 70

7.3.2..... Proportionality.............................................................................................................. 71

8........... Monitoring and evaluation............................................................................................. 72

ANNEX 1.................................................................................................................................. 74

1........... Overview..................................................................................................................... 74

2........... Functioning of the EU Leniency Programme.................................................................. 74

3........... Leniency programmes in the Member States.................................................................. 75

ANNEX 2.................................................................................................................................. 76

1........... Facts and background.................................................................................................. 76

2........... The preliminary question............................................................................................... 76

3........... The judgment of the Court............................................................................................ 76

ANNEX 3.................................................................................................................................. 78

1........... AUSTRIA.................................................................................................................... 78

2........... GERMANY................................................................................................................. 78

3........... UNITED KINGDOM.................................................................................................. 79

ANNEX 4.................................................................................................................................. 80

1........... Introduction.................................................................................................................. 80

2........... The IAWP's Policy Option 1........................................................................................ 80

3........... The IAWP's Policy Option 2........................................................................................ 81

4........... The IAWP's Policy Option 3........................................................................................ 81

ANNEX 5.................................................................................................................................. 83

ANNEX 6.................................................................................................................................. 84

ANNEX 7.................................................................................................................................. 86

ANNEX 8.................................................................................................................................. 90

1........... Main trends among respondents to the White Paper...................................................... 90

2........... Specific suggestions on individual sections of the White Paper........................................ 90

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT Damages actions for breach of the EU antitrust rules

Accompanying the proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (Text with EEA relevance)

1. The subject-matter of the impact assessment

1. Since 2001 the Court of Justice ("the Court") repeatedly stated that, as a matter of EU law, any individual must be able to claim compensation for the harm suffered as a result of an infringement of the EU competition rules.[1] More than 10 years later, most victims of a competition law infringement are still not able to effectively exercise that EU right to compensation. This is largely due to a lack of appropriate national rules governing actions for damages. Even where such rules exist, they are so different from Member State to Member State that it results in an uneven playing field for both infringers and victims of the illegal conduct. More recently, a new issue has arisen, showing that the EU right to compensation can sometimes be at odds with the effectiveness of public enforcement of the EU competition rules. For example there exists legal uncertainty as to whether information that a competition authority had obtained in the course of its enforcement of the EU competition rules, is disclosable in damages actions before national courts. Such disclosure could be particularly detrimental for the effectiveness of the leniency programmes and hence for the effectiveness of the fight against secret cartels.[2]

2. To remedy these two gaps in the enforcement of the EU competition rules, the current Antitrust Damages Initiative has two primary objectives:

(i) to maintain effective public enforcement of the competition rules by regulating some key aspects of the interaction between public enforcement of competition law by the Commission and national competition authorities and private enforcement of competition law through actions for damages before national courts; and

(ii) to ensure an effective exercise of the EU right to compensation.

The result of this initiative should be an effective system of public and private enforcement of competition law that contributes to fostering growth and innovation throughout the EU.

2. Procedural issues and consultation of interested parties

2.1. Background

3. On 19 December 2005 the Commission adopted a Green Paper on damages actions for breach of the EC antitrust rules, identifying the main obstacles to effective compensation.[3] The public consultation met a wide response[4] and also institutional stakeholders issued their opinion. The European Parliament ('the Parliament') adopted a Report and a Resolution in 2007,[5] in which it called on the Commission to prepare a White Paper with detailed proposals to facilitate actions for damages.

4. The Commission met a group of experts from the Member States on two occasions in autumn 2007, in preparation of the White Paper. Experts represented the Ministries of Justice, Ministries of Economic Affairs and national competition authorities ('NCAs'). Representatives of the EFTA and its members were present. The Commission also met a delegation of judges of national supreme courts, courts of appeal, courts of first instance and specialist competition tribunals from 12 Member States[6] to discuss specific issues related to antitrust damages actions.

5. Commission staff participated in a large number of events (conferences, expert panels, etc.) to discuss more effective EU antitrust damages actions and their implications. DG Competition, in particular, repeatedly met a wide range of stakeholders and experts, notably consumer associations, business representatives, lawyers and academics.

6. On 2 April 2008 the Commission adopted a White Paper on damages actions for breach of the EC antitrust rules[7], that put forward suggestions for specific measures that would ensure the effective exercise of the right to compensation of antitrust harm. The White Paper was accompanied by an Impact Assessment ('IAWP').[8]

2.2. Public consultation on the White Paper

2.2.1. Civil society

7. The White Paper was the object of an intense debate. A large number of public authorities and stakeholders from almost all Member States submitted comments.[9] Very few respondents questioned the idea underpinning the White Paper that in most cases victims of competition law infringements in practice do not obtain the compensation they are entitled to under EU law. Most agreed that something needs to be done to remedy this situation. Many respondents explicitly welcomed the approach of the White Paper to pursue, as a primary policy objective, the aim of effective compensation of victims (rather than punishment or deterrence of infringers) and to seek solutions that are balanced and rooted in the European legal traditions. Divergent opinions emerged as to the need for an initiative at EU level, the consequences in terms of increased litigation, the interaction with public enforcement, and the means by which the goal of more effective compensation can be most appropriately achieved.

8. Different groups of stakeholders belonging to civil society expressed different opinions on the White Paper and its suggested measures. Below is a summary of the opinions of the three groups of stakeholders that submitted most replies.

(a) Businesses and Business Associations

9. Among civil society, business associations were generally negative both on the need for a Commission initiative and on the substance of the proposals. However, proposed measures which are favourable to the position of defendants, such as the passing-on defence and protection of corporate statements from disclosure in actions for damages, were received positively by the business community.

10. There are two groups of exceptions to the generally negative opinion of the business associations. The first exception is that of business associations representing only small and medium sized enterprises. These associations generally welcomed the focus on SMEs, which often suffer harm from anticompetitive behaviour that they are not able to recover, and expressed an overall positive view on the White Paper.

11. The second exception is given by a number of companies that had allegedly been victims of anticompetitive conduct, such as customers of cartelists in the beer, the paper and the elevator cartel. The submissions of these companies are broadly supportive of the White Paper’s proposals, and in some cases even encourage the Commission to advance broader proposals (for instance by loosening the conditions to obtain a disclosure order).

(b) Consumer Associations

12. Consumer associations fully endorsed the White Paper’s proposals. They supported the White Paper’s objectives and suggestions and supported the idea of a legislative proposal from the Commission. In some cases, they even encouraged the Commission to do more in order to set up a truly effective framework for antitrust damages actions.

13. Consumer associations identified the following issues as main obstacles to an effective right to compensation for victims of antitrust violations: (i) lack of collective redress mechanisms and (ii) difficulties in obtaining disclosure orders. Consumer associations argued that the preservation of public enforcement (and leniency programmes in particular) does not justify a restriction on the rights of the victims and were against any form of limitation of liability for immunity recipients. They largely contested the need for protection of corporate statements, while claiming broader rules on access to the files of competition authorities.

(c) Lawyers, Law firms and Bar associations

14. The submissions received from law firms and lawyers’ associations presented a broad range of views, often influenced by the legal culture they come from and by whether they generally represent claimants or defendants. As a general trend, there was wide agreement on the need to establish rules on the protection of corporate statements. Respondents also urged the Commission to exclude from disclosure documents covered by legal privilege. Apart from these issues, submissions from the legal community were very heterogeneous.

2.2.2. Institutional stakeholders

15. The Parliament[10] welcomed the White Paper and stressed that EU competition rules and their enforcement require that victims of breaches of those rules should be able to claim compensation for the damage suffered. It also stressed that individual consumers and small businesses are often deterred from bringing individual actions. In particular the Parliament stressed the "need for the Commission to propose legislation, without watering it down unnecessarily, to facilitate individual and class-action claims for effective compensation for damages resulting from breaches of EU antitrust law."[11]

16. The EESC[12] also welcomed the White Paper and stressed the need to promote people's access to effective judicial protection as a fundamental right laid down in the European Charter of Fundamental Rights ('the Charter'). It considered that a legal framework was necessary and provided detailed comments on different aspects.

2.3. Public consultation on the quantification of damages

17. One of the suggestions made in the White Paper was to "provide pragmatic, non-binding assistance in the difficult task of quantifying damages in antitrust cases, both for the benefit of national courts and the parties."[13] In 2009, an external study on the quantification of damages was prepared for the European Commission.[14] The results of the Quantification Study were taken into account in the Draft Guidance Paper on the quantification of damages which the Commission submitted to public consultation in 2011.[15] This draft paper set out insights into a range of methods and techniques used to quantify harm in damages actions and explains strengths and weaknesses of these methods.

18. Institutional and other stakeholders generally welcomed the idea of issuing non-binding guidance on quantifying harm caused by antitrust infringements.[16] The Commission organised two workshops on the topic with a number of renowned economists[17] and sought the advice of specialised judges from the Member States.

2.4. Public consultation on a coherent approach to collective redress

19. In response to the Parliament resolution on the White Paper calling for an integrated approach to collective redress, the Commission held in 2011 a public consultation on a coherent approach to collective redress in different areas of EU law.[18] The purpose of this consultation was, inter alia, to identify common legal principles on collective redress in all areas of EU law and to examine how such common principles could fit into the EU legal system and into the legal orders of the Member States. The consultation also explored in which areas different forms of collective redress (injunctive and/or compensatory) could improve the enforcement of EU legislation or the protection of victims' rights.

20. The consultation attracted more than 300 replies from a wide range of stakeholders and over 18,000 replies from citizens supporting the position of consumer organisations. 15 Member State governments replied, of which 10[19] favoured a binding EU instrument on collective redress, while 5[20] preferred a non-binding approach. 6[21] Member States supported policy-specific legislation at EU level, explicitly mentioning competition policy, while 4[22] preferred horizontal initiatives. While consumers were strongly in favour of binding EU measures on collective redress, the majority of businesses were opposed.

21. Almost all stakeholders agreed with the following basic parameters of a collective redress system: it should be capable of (i) effectively resolving a multitude of individual claims which raise the same or common issues and relate to a single infringement of EU law; (ii) delivering legally certain and fair outcomes within a reasonable timeframe, while respecting the rights of all parties involved; and (iii) providing for safeguards against abusive litigation and avoiding any economic incentives to bring abusive claims.

22. The public consutation showed that there is a consensus across all stakeholder groups that private collective redress and enforcement by public bodies are two different instruments that pursue different objectives. Business tends to put greater emphasis on the role of public enforcement. Other stakeholder groups are generally of the view that both instruments are in principle equally important and that they should be independent and complementary mechanisms.

23. Most stakeholders agree that in policy fields where public enforcement plays a major role – particularly in competition – specific rules are required to ensure a smooth interplay between public enforcement and private collective redress. Many replies mention rules on the binding effect of infringement decisions by national competition authorities for follow-on collective actions, limitation periods for bringing follow-on actions and protection of the effectiveness of public enforcement (specifically leniency programmes).

24. The Parliament resolution on collective redress[23] recognizes the importance of collective redress in ensuring effective compensation for victims of EU law infringements. The resolution favours a separate horizontal EU framework including a common set of principles over a sector-specific approach towards collective redress. Nevertheless, the resolution acknowledges that there can be a need for certain competition law specific provisions on collective redress, which could be laid down in a separate chapter of a horizontal instrument or in a separate legal instrument.

2.5. Inter-service consultation

25. The Directorate-General for Competition is the lead service on the current Antitrust Damages Initiative, with the involvement of the Secretariat-General, the Legal Service, DG Economic and Financial Affairs, DG Enterprise and Industry, DG Internal Market and Services, DG Health and Consumers and DG Justice. An Impact Assessment Inter-Service Group was set up on 26 September 2008. It met two times in 2008 to discuss earlier drafts of the Impact Assessment report and met once in 2012 to discuss the present draft, which takes account of the additional public consultations held in 2011, of the views expressed by the Parliament since 2008 and of recent developments at the European Courts.

2.6. The Impact Assessment Board

26. A draft of the present Impact Assessment was submitted to the Impact Assessment Board on 21 November 2012. Responding to the resulting recommendation in the Board's first opinion of 20 December 2012, a revised draft was submitted in January 2013. The Board issued a second, positive opinion on the resubmitted report on 28 February 2013, with further suggestions for improvement. The Board expressed the following main recommendations, which were considered in the present report:

(1) Better substantiate the problem definition;

(2) Report in more detail the stakeholder response to the public consultation on the White Paper;

(3) Clarify the objectives of the initiative;

(4) Improve the presentation of the options;

(5) Clarify the differences between Options 2 and 3;

(6) Better present the analysis of impacts and the comparison of options;

(7) Further define the monitoring criteria.

For (1), the first part of the Report has been further elaborated to provide more concrete evidence of the problems targeted. Quantitative data from an external impact study on compensation foregone by victims of a competition law infringement have been quoted. The interaction between public and private enforcement has been further clarified, and its background is explained in three annexes on the functioning of the leniency programmes, the Pfleiderer case-law and initiatives currently considered at Member State's level. The problem has further been specified by increased analysis of the baseline scenario of no EU action, also through reference to Member States' legislation and the inefficiencies of the current legal framework, as well as the current lack of comparably efficient alternatives to leniency programmes in the detection of secret cartels.

For (2), extensive reference has been made to stakeholders opinions throughout the document. A summary overview on the public consultation on the 2008 White Paper has also been added (Annex 8).

For (3), the formulation of the objectives has been made more clear. All the objectives and sub-objectives are currently discussed with the same structure, including an introduction where detailed reference is made to the relevant sections of part 3, to allow the reader to clearly link the targeted objectives to the problems addressed by the initiative. The objective of fostering full compensation while avoiding over-compensation has been clearly defined.

For (4), the assessed Options have been re-ordered to start from the base-line scenario of zero EU-Action (Option 1), and then the different forms of action proposed. As regards collective redress, Option 2 builds on the 2008 White Paper and assesses two different collective redress mechanisms (opt-in group actions and representative actions), whereas Option 3 and Option 4 are based on the assumption that collective redress is dealt at EU level in a horizontal framework that is yet to be determined. Therefore, the current impact assessment does not address the issue of collective redress for these two options. The assessment of the role of collective redress in the field of competition law enforcement and its relationship with a possible horizontal initiative on collective redress is separately discussed as part of the assessment of the Policy Options.

For (5), the differences between Option 2 and 3 have been spelled out more clearly. In particular, the Report explains why certain safeguards or additional measures compared to the White Paper options have been assessed as a bundle in Option 3.

For (6), the analysis of impacts has been explained in more detail. Options are also clearly and independently assessed against the base-line scenario. The pitfalls of the options already excluded in the IAWP, which have not been reconsidered in the current exercise, are recalled in an Annex, which details the risks of a number of solutions chosen in other jurisdictions and not fully in line with European legal traditions. In order to improve readability and comparison of the options, the scoring system has also been simplified.

For (7) the chapter on monitoring and evaluation has been enriched with reference to more specific criteria to assess the progress achieved through the initiative.

In addition to the above, a glossary of technical terms used in the text is added as Annex 7 to make the report more accessible to non-specialist readers.

3. Problem to be addressed

27. The Antitrust Damages Initiative adresses two key issues, namely (a) the interaction between public and private enforcement of the EU competition rules and (b) the difficulties for victims of competition law infringements to obtain compensation. In case the baseline scenario of no action at the EU level is followed (see further the description of the baseline scenario or option 1 in section 5.3 below), the problems described in sections 3.1 until 3.3 will continue to exist or deteriorate, and the costs described in section 3.4 will be incurred.

3.1. The interaction between public and private enforcement remains unclear under the current legal framework

28. The EU competition rules are a matter of public policy. They are primarily enforced by the Commission and NCAs, which have a number of investigative and enforcement powers, including the power to impose fines on undertakings for the infringement of these rules.[24] This type of enforcement, which is exercised by competition authorities in the public interest, is generally referred to as "public enforcement". In addition, the EU antitrust rules – Articles 101 and 102 TFEU – have direct effect, which means that they create rights for individuals that can be enforced before national courts. This type of enforcement is generally referred to as 'private enforcement'. Among these rights is the EU right for victims of an infringement of EU competition law to be compensated for the harm they have suffered. The means by which the right to compensation is put into practice are civil damages actions brought before national courts. Given the subject-matter of this initiative, the notion of private enforcement in this report is used in the narrower sense of antitrust damages actions.

29. The two kinds of procedures – private enforcement actions under national civil law and public enforcement by competition authorities – are complementary tools serving the objective of an effective enforcement of the EU competition rules. There is a consensus among all stakeholder groups that responded to the public consultations on the White Paper and on collective redress (consumers, business and business representatives, legal experts and public authorities such as Member States and competition authorities) that public and private enforcement are two different instruments that pursue different objectives. All stakeholder groups apart from business are generally of the view that both instruments are in principle equally important and must hence be independent and complementary mechanisms.

30. Given that antitrust damages actions are often triggered by a competition authority's investigation and are brought either while an investigation is pending or, more typically, after an infringement decision had been adopted (in the latter case referred to as 'follow-on' actions), the interaction between public and private enforcement can be significant. A smooth interplay is vital to ensure maximum effectiveness of both tools. This can be best achieved by regulating certain key aspects of the interplay, such as access to information held by competition authorities (the disclosure of certain documents from the competition authorities's files could negatively affect the effectiveness of public enforcement), binding effect of infringement decisions (to avoid re-litigation of the finding of an infringement) or limitation periods (to ensure that they do not expire while potential follow-on claimants are waiting for an infringement decision). The need to provide for rules ensuring a smooth interplay between the public and private enforcement of competition law was confirmed by most stakeholders responding to the public consultation on collective redress.[25]

31. Stakeholders generally regard the need to regulate the public/private interface as particularly acute in the case of documents linked to leniency programmes.[26] In the public consultations on the White Paper and on collective redress, business representatives, legal experts and public authorities warned against undue disclosure of leniency related documents for the purpose of antitrust damages actions. They held in particular that the protection of corporate statements is an essential condition for the success of leniency programmes. Only a few submissions (mainly by consumer associations) contested the need to protect leniency corporate statements.

The Pfleiderer judgment

32. In June 2011, the Court held in Pfleiderer that – in the absence of EU law – it is for a national court to determine on a case-by-case basis and according to national law the conditions under which disclosure of leniency-related information to victims of a competition law infringement must be permitted or refused.[27] Therefore, leniency applicants cannot know in advance whether documents submitted to competition authorities in the context of a leniency application might be disclosed to claimants in antitrust damages actions and if so, what categories of documents would be disclosable. Although one cannot bring direct evidence that the Pfleiderer judgment has had or will have a negative impact on the number of leniency applications (as it is impossible to know how many leniency applications would have been received without the judgment), the current legal uncertainty could affect the willingness of cartel participants to cooperate with the Commission and NCAs under the leniency programmes and thus negatively affect the public enforcement of competition law.[28] More generally, the lack of legal certainty as to the (non-)disclosability in antitrust damages actions of leniency-related documents and other information from competition authorities' files is detrimental for all involved parties, including claimants and the competition authorities.

33. It should be noted that in Pfleiderer the Court reached its conclusion on the case-by-case application of divergent national laws "in the absence of binding regulation under European Union law on the subject", i.e. in the absence of any "common rules on leniency or common rules on the right of access to documents relating to a leniency procedure".[29] A common EU standard providing for an appropriate protection of leniency documents would remove both the uncertainty for potential leniency applicants and the diversity of national rules on the subject. NCAs agree to this solution and they have therefore been urging the Commission to introduce without delay an EU rule that would protect their leniency programmes. The Heads of the European Competition Authorities have repeated this message in a recent resolution.[30] Also European businesses have called for such a rule to ensure legal certainty in this regard.

Legal uncertainty and risks for public enforcement

34. Under the baseline scenario of no EU action, the legal uncertainty and the risk of negative consequences on the public enforcement of EU competition law would continue to exist. This is due to the persisting risk of diverging or inconsistent court practice between different Member States or even within the same Member State with regard to disclosability of leniency related documents from the file of competition authorities. Such divergence in national judgments is already visible to date: whereas in Germany the first instance court protected in Pfleiderer all leniency documents from disclosure[31], the Düsseldorf Appeal Court[32], in a different case, was not ready to protect the information contained in leniency documents in so far as that information was referred to in the infringement decision. In the UK, the High Court in the National Grid case found that partial disclosure of certain documents (such as a reply to the Statement of Objections and replies to Requests for Information) is justified and some parts of the confidential verions of the Commission decision are to be disclosed, whereas documents specifically prepared for the purpose of the Commission's leniency programme should not be disclosed.[33] If more national courts are required to make the case-by-case assessment as described in Pfleiderer, the likelihood of diverging rulings on the disclosability of documents from the file of a competition authoritity increases. As stated in paragraph 33 above, a common EU standard providing for an appropriate protection of such documents would remove both the uncertainty for undertakings potentially involved in proceedings before competition authorities and the diversity of judgments by national courts on the subject.

35. In the absence of adequate protection of leniency programmes, the negative consequences arising from the uncertain legal framework outlined above cannot be offset by efficient alternatives. In particular, it would not be possible to offset the negative effects of impaired leniency programmes by increased ex-officio investigations into suspected infringements by the Commission or NCAs. Such an attempt would not only be more costly both for public enforcers and undertakings alike, but would not enable public enforcers to uncover comparably useful evidence with a view at proving infringements. On the one hand, leniency programmes allow the Commission and NCAs to pursue a targeted enforcement on conducts where the likelihood to find an infringement is much higher, and free resources for the pursuit of ex officio cases while maintaining an adequate degree of deterrence. On the other hand, divesting resources from leniency cases in order to pursue more ex officio cases would impose a significant administrative burden on businesses, as there would be a higher chance of being subject to an investigation while no infringement is later found. Moreover, because of the higher costs and administrative burdens of ex officio cases, in the absence of cooperation from leniency applicants and of the targeted evidence they provide, the number of secret cartels uncovered would be significantly lower.

Other issues in the interaction between public and private enforcement

36. Apart from leniency programmes, the regulation of access to information held by competition authorities is also needed to safeguard the effectiveness of other public enforcement tools. As stakeholders to the public consultations on the White Paper and on collective redress confirmed, the importance of ensuring the willingness on the part of undertakings to produce voluntary statements acknowledging their participation in an infringement is equally relevant in the context of a a settlement procedure; therefore, settlement submissions need to be protected in the same way as corporate statements that are made for the purpose of leniency programmes.

37. Moreover, to ensure that disclosure of information does not unduly interfere with an ongoing investigation, it is appropriate to allow the disclosure of documents prepared specifically for the purpose of such investigation only after the investigation by a competition authority has been closed. By protecting the effectiveness of public enforcement in this way, the effectiveness of private damages actions is also strengthened, given that the majority of these are follow-on actions relying on an infringement finding by a competition authority.

3.2. The current legal framework for damages actions in cases of competition law infringements is ineffective as victims experience major difficulties to obtain compensation

38. To date, citizens and businesses encounter difficulties in obtaining compensation for the harm they have suffered because of an infringement of the EU competition rules. Stakeholders have identified the following main obstacles standing in the way of obtaining compensation more effectively: difficult access to the evidence that is necessary for proving a case, absence of effective collective redress mechanisms, lack of clear rules on the passing-on defence (i.e. a defence against a direct purchaser's damages claim, relying on evidence showing that the overcharge resulting from a cartel was passed on – fully or partially - by the direct purchaser to its own customers further down the distribution chain), no uniform rules on the binding effect of infringement decisions adopted by an NCA, legal uncertainty about limitation periods, the calculation of damages and the rules concerning the costs of a damages action.[34]

39. As a consequence, a large number of victims of infringements of competition law remain uncompensated and see their right to damages under EU law frustrated. There is therefore a clear deficit in terms of compensatory justice. This is difficult to reconcile with the fundamental right to access to effective judicial protection.[35] The divergence in national legislation may also affect the decision of undertakings to use the freedom of establishment, the free movement of goods or the freedom to provide services, avoiding those Member States where the right to compensation is most effectively enforced.

40. Furthermore, the Comparative Study on the conditions of damages claims has shown that the differences between national legal systems cause legal uncertainty at several levels. For a number of important legal issues, e.g. the availability of the 'passing-on defence',[36] existing national law is unclear about which rule applies in the specific context of antitrust damages cases. Additional legal uncertainty stems from the significant differences between the procedural and substantive rules governing actions for damages in the different Member States (e.g. with regard to access to evidence, limitation periods and the binding effect of NCA decisions). These are described in the 2004 Comparative Study on the conditions of damages claims and in the 2008 Commission White Paper on antitrust damages actions and its accompanying Impact Assessment.[37]

41. The marked differences (described as "astonishing diversity" in the 2004 Comparative Study)[38] continue to exist in relation to many of the topics to be adressed in this policy initiative:

· As regards the binding effect of an NCA's finding of an EU competition law infringement on national courts in a subsequent antitrust damages action, legislation in only one Member State (Germany) recognises the binding effect of final NCA decisions of both the domestic and other European NCAs. In 10 other Member States only the final decision of the domestic NCA is binding on national courts. In the remaining 16 Member States, NCA decisions have no binding effect. In those Member States their evidential value ranges from a rebuttable evidentiary presumption of an infringement to normal evidential value or even to being regarded as just a view on the facts and the law.

· As regards the limitation period for bringing an antitrust damages action, some Member States provide for specific limitation periods allowing for follow-on cases. In the vast majority of Member States, however, there are no specific rules on limitation periods for follow-on cases. In these Member States, expiry of the ordinary limitation period before a competition authority renders an infringement decision can form an important obstacle preventing follow-on action from being instituted. The specific limitation periods in some Member States are either based on a suspension of the ordinary limitation period during an investigation by the authorities, in combination with an ensured time period to bring an action after the suspension finishes or a specific limitation period for follow-on cases. The length of these limitation periods differs from 6 months to 5 years.

· As to the passing-on defence, it should be noted that in most Member States there is no legislative provision or case-law on the topic. It is therefore yet to be established if and under which conditions the passing-on defence is available. In those few Member States where the legislator or the judiciary has pronounced on the passing-on defence, judgments vary between explicit acceptance and explicit prohibition of the defence. In those Member States where it is allowed, the burden of proving the defence varies. On one side of the spectrum, there are Member States (such as France) where passing-on of overcharge from the direct to the indirect purchasers is presumed to be a common commercial practice and where, as a consequence, the direct purchasers will have to prove that no passing-on has taken place.[39] On the other side of the spectrum there are Member States such as Germany, that allow the passing-on defence only under specific conditions and in case the defence does not lead to an unjust benefit for the defendant.[40]

· Finally, as regards disclosure of evidence, the overwhelming majority of Member States' legal systems provide for some form of disclosure, varying between a system whereby the required documents have to be precisely described (such as Germany) to one which allows for the disclosure of classes of documents (such as the UK). Some Member States also limit the possibilities to request disclosure to parties to the proceedings, excluding third parties, or require separate proceedings.

42. The described differences have even increased since 2004. While the rules applicable to antitrust damages actions have not changed in the majority of Member States, a few Member States have adopted amendments, such as the 2007 amendment to the Danish Competition Act, including a new statute of limitation periods for antitrust damages claims; the 2008 amendment to the Hungarian Competition Act, introducing a rebuttable presumption that a hard-core cartel has caused a 10% price increase on the market; or the 2008 amendment to Bulgaria's Law on the Protection of Competition, making final infringement decisions by NCAs binding on national courts in private actions.

43. In addition, proposals to modify some of the national rules on antitrust damages actions are currently pending in Austria, Germany and the UK. As regards the topics covered by the current policy initiative, the Austrian proposal contains rules on the binding effect of NCA decisions and on the suspension of the limitation period during an investigation of the competition authorities. The German proposal does not directly concern any of the topics of the policy initiative. As regards the interaction of the public and private enforcement of competition law, the UK Government decided not to intervene because it expects measures to be adopted on this issue at the EU level. An overview of the main features of the Austrian, German and UK proposals are contained in Annex 3.

44. This diversity and legal uncertainty leads to ineffective enforcement of the competition rules. The diversity in the legal systems is not only a problem for victims. Also defendants may suffer disadvantages in terms of imponderability and costs, mainly because they risk being sued for damages in different Member States or in the Member State where the substantive or procedural rules are most favourable for claimants, which is not necessarily their place of establishment (but for example the domicile of a co-infringer).[41] For these reasons, a more level playing field is in the interest of both potential victims and potential defendants.

45. The above factors, combined with the fact that antitrust cases, by nature, often require an unusually high level of very costly factual and economic analysis and present specific difficulties for claimants regarding access to crucial pieces of evidence that are often kept secret in the hands of the defendants, deter many victims from bringing actions as they consider the risk/reward balance to be negative.[42]

46. In that context, many stakeholders (both in response to the public consultation on the White Paper and in response to the 2011 public consultation on collective redress) have – besides remedying the obstacles to effective private enforcement as identified above – insisted on the importance of encouraging consensual dispute resolution mechanisms.

47. If the baseline scenario of no EU action applies, this situation would not change. The diversity between the rules applicable to actions for damages in the Member States as described above would persist and even increase should some Member States adopt new legislation. Due to the continued existence of important obstacles which prevent victims of EU competition law infringements from obtaining full compensation, the current situation of undercompensation of victims and their problematic access to justice would equally persist. Since the situation has not significantly changed since the adoption of the Green Paper in 2005, there is no reason to believe that – in the absence of any EU action in the field – significant improvements will be made.

48. In the baseline scenario, undercompensation of victims of EU competition law infringements is the main problem. Risks of overcompensation have not been observed in any EU Member State. Despite this, stakeholders from the business community responding to public consultations contended that an EU initiative on actions for damages may lead to a risk of unmeritorious or abusive litigation or overcompensation. Any initiative to facilitate actions for damages should contain the necessary safeguards to avoid such undesirable side effects.

3.3. The current legal framework could endanger the proper functioning of the internal market

49. The EU competition rules are a matter of public policy, which lie at the heart of the functioning of the internal market.[43] Shortcomings in the effective enforcement of Articles 101 and 102 hinder not only the achievement of the goals of workable competition, such as better allocation of resources, greater economic efficiency, increased innovation and lower prices. They also have a direct impact on the functioning of the internal market, which relies on a system of undistorted competition. In this context, Article 3(3) of the Treaty on European Union ('TEU') provides that the internal market shall be based on "a highly competitive social market economy".

50. Sections 3.1 and 3.2 explain that overall effective enforcement of EU competition law consists of its effective public and its effective private enforcement. It is furthermore explained why private enforcement of competition law is currently not effective and how certain aspects of the private enforcement of competition law risk negatively affecting the effective functioning of public enforcement. As set out in section 3.2, the marked differences between Member States regarding the rules governing actions for damages concerning infringements of national or EU competition law that were already described in the 2004 Comparative Study, in the 2008 White Paper and its accompanying Impact Assessment have further increased due to developments in legislation and jurisprudence in a limited number of Member States, as opposed to the lack of developments in other Member States.

51. The primary example of divergence, also with an impact on the functioning of the internal market, is given by the different national rules applying to access to evidence. With the exception of a few Member States (most notably the UK), the lack of adequate rules on inter partes disclosure of evidence in court means that there is no effective access to evidence for victims of a competition law infringement seeking antitrust damages. Also the differences concerning access to information held by competition authorities are significant (e.g., in Austria such information is in practice entirely exempted from access). Other examples concern rules on passing-on (differences having major implications for the ability of direct/indirect purchasers to claim damages effectively and, in turn, for the defendant's chances of avoiding the obligation to compensate for harm caused), the binding effect of NCA decisions (only Germany acknowledges the binding effect of infringement decisions by the NCAs from all Member States), or on issues relevant for the quantification of antitrust harm (e.g. the existence of a rebuttable presumption of harm, or the power of judges to estimate the amount of damages).

52. The fact alone that, according to the Commission's knowledge,[44] the vast majority of large antitrust damages actions are currently being brought in 3 European jurisdictions – namely in the UK, followed by Germany and the Netherlands – indicates that the rules applicable in these Member States are considered by claimants to be much more suitable for effectively bringing such claims than in other Member States. Out of the 54 final cartel and antitrust prohibition decisions taken by the Commission in the period 2006-2012, only 15 were followed by one or more follow-on actions for damages in one or more Member States. In total, 52 actions for damages were brought in only 7 Member States. In the 20 other Member States, the Commission is not aware of any follow-on action for damages based on a Commission decision. Among those 7 Member States where actions were brought, the vast majority was brought in the 3 above mentioned Member States. The relative preference for a legal system in order to bring an action, or the relatively higher likelyhood of victims of competition law infringements to claim compensation in the UK, Germany and the Netherlands depend on more effective procedural rules for antitrust damages actions. Thus, successful measures from these jurisdictions such as the binding effect of NCA decisions or mechanisms for evidence disclosure are included in the options considered in the present report.[45]

53. These differences lead to inequalities and uncertainty concerning the conditions under which injured parties can exercise the right to compensation deriving from the Treaty and may affect the substantive effectiveness of this right. As injured parties often choose the forum of their Member State of establishment to claim damages (one reason being that consumers and smaller businesses cannot afford to choose a possibly more favourable jurisdiction of another Member State), the discrepancies between the rules of the different Member States risk leading to an uneven playing field as regards actions for damages and may affect competition on the markets on which these injured parties operate. The existence of this risk is, by way of example, demonstrated by the fact that the vast majority of the 52 known actions for damages following a Commission decision in the field of competition are brought by large undertakings.

54. Similarly, these differences in applicable rules mean that undertakings established and operating in different Member States are exposed to significantly different risk of being held liable for infringements of competition law. This uneven enforcement of the EU right of compensation may result in a competitive advantage for some undertakings that breached Articles 101 or 102 TFEU, and a disincentive to the exercise of the rights of establishment and provision of goods or services in those Member States where the right to compensation is more effectively enforced. As such, the differences in the liability regimes applicable in the Member States may negatively affect competition and risk to appreciably distort the proper functioning of the internal market.

55. It is necessary to ensure a more level playing field for undertakings operating in the internal market and to improve the conditions for injured parties, in particular citizens and small businesses, to make use of the rights they derive from the internal market. This more level playing field will not be realised when applying the baseline scenario of no EU action in the field, as explained in section 3.2. It is therefore appropriate to increase legal certainty and to reduce the differences that exist between the Member States as to the national rules governing actions for damages by harmonising certain relevant key rules applicable to actions for damages such as access to evidence, passing-on and the bindig effect of NCA decisions. These measures would avoid divergence of applicable rules, which risks to appreciably distort the proper functioning of the internal market.

3.4. Scope and costs of the uncertainty relating to the interaction between public and private enforcement and the ineffectiveness of the legal framework for actions for damages

56. The scope of both the problem of the uncertainty relating to the interaction between public and private enforcement of competition law and the problem of the ineffectiveness of the legal framework for actions for damages is considerable.

3.4.1. Scope and cost: ill-regulated interface between public and private enforcement

57. The potential effect on public enforcement (ongoing as well as future investigations) applies in all Member States: the Commission as well as all Member States[46] have cartel leniency programmes, which have proven to be of great importance in the detection and prosecution of cartels. Leniency programmes grant immunity from and reduction of fines to those cartel participants who actively cooperate with the competition authority.[47] Because of the secret nature of cartels, the vast majority of cartels is discovered on the basis of a leniency application of one of the cartel participants. As regards Commission cases, when looking at the period 2008 to 2011, 21 out of 24 decisions (i.e. 88% of decisions) were based on leniency applications. In these years, a total amount of fines of €7,3 billion was imposed on cartel infringers, of which around 83% was imposed in cases based on leniency applications. When looking at the NCAs represented in the ECN, in 2010 18 out of 30 and in 2011 13 out of 21 cartel decisions, imposing a significant amount of fines, were based on leniency applications.[48]

58. The uncertainty concerning the interface between public and private enforcement has been revealed quite recently, through the 2011 judgment of the Court in the Pfleiderer case, and in its various offsprings at national level. If the EU legislator were not to act on this problem, substantial problems for the public cartel enforcement could ensue. Fewer leniency applications would mean more undetected cartel activity and would lead to a welfare loss across the EU.

59. The importance of settlements in cartel cases is also increasing. From June 2008 (introduction of the Settlement Notice) until 2011, 5 cartel cases have been settled. In broadly the same period (2008-2011) the Commission took 24 cartel decisions.

60. If the baseline option of no EU action in the field would be followed, there is a risk that less leniency applications are submitted and less cartels are thus discovered and fined. Equally, undertakings may be less willing to cooperate with the competition authorities in settlement procedures. If these negative effects materialize, this would lead to a lower discovery rate for of EU competition law infringements, less effective public enforcement and, overall, less cases being dealt with. The effectiveness of public enforcement of EU competition law would thus be at stake, with a negative knock-on effect on private enforcement by further reducing the possibilities for and the likelihood of follow-on actions for damages.

3.4.2. Scope and cost: ineffective legal framework for compensation

61. As to the second problem, the ineffectiveness of the legal framework for antitrust damages actions is observed in every Member State, although to differing degrees as the applicable national rules differ significantly. Infringements of competition law, be they hardcore cartels, other infringements of Article 101 TFEU or abuses under Article 102 TFEU, occur in almost every sector of the economy.[49] The problem concerns both actions for damages brought following a decision by a competition authority and actions brought on a stand-alone basis.

62. The lack of an effective compensation mechanism means that the costs of competition law infringements are currently borne by the victims: in the case of harm in the form of a price overcharge, this means that there is a direct transfer of money to the infringers, which they would keep if they do not have to compensate the harm caused by the infringement. In case of a loss of profit because of the infringement (for instance in the case of a competitor illegally foreclosed from a market), the law-abiding undertaking – to which no compensation is paid – has to bear the price of the infringement while the infringer benefits from his illegal act. While fines imposed by competition can serve as a deterrent for infringements, they cannot alter these effects. In the baseline scenario of no EU action, these problems would persist.

63. The ineffective legal framework especially affects SMEs and large groups of consumers: as they are often at the end of the distribution chain, they face particular difficulties in identifying and proving the harm they suffered (causal link and quantum). They often perceive the uncertainties, risks and costs of a damages action as disproportionate to potential benefits.[50]

64. Even though the absence of reliable empirical data makes precise quantification impossible, there is general agreement that infringements of competition law cause substantial harm to consumers and undertakings. Looking alone at hardcore cartels with effects across the EU,[51] the Impact Study estimates that the annual direct cost to consumers and other victims in the EU ranges from approximately €13 billion (on the most conservative assumptions) to over €37 billion (on the least conservative).[52] This estimate comprises both the harm resulting from consumers and other victims having to pay a higher price due to the illegal conduct of the cartelists (the “overcharge”) and also the economic benefits forgone by consumers and other victims who do not purchase, or purchase a smaller quantity, due to the unlawfully inflated price (the “deadweight loss”). It therefore covers the direct costs of cartels to consumers and other victims. It takes no account of more indirect macro-economic effects, such as the absence of greater allocative, productive and dynamic efficiency, which contribute to growth and employment, but are extremely difficult to estimate.

65. If one adds to the figures on EU-wide cartels the annual cost to consumers and other victims of domestic hardcore cartels, the total annual cost for hardcore cartels in the EU can be estimated to range from approximately €25 billion (on the most conservative assumptions) to approximately €69 billion (on the least conservative).[53] Expressed as a proportion of the EU’s gross domestic product, the negative consumer welfare impact of all these hardcore cartels is estimated as ranging from 0.20% to 0.55% of the EU’s GDP in 2011,[54] which does not include the harm caused by abusive practices and infringements of Article 101 TFEU other than hardcore cartels. More effective redress would lead to a larger percentage of this harm being compensated to the victims, whereas application of the baseline scenario would at best lead to a continuation of the current situation.

66. However, even in the most effective system of private enforcement, not all the harm to consumers and other victims reflected in the above estimates will be compensated. This is, amongst others, because a considerable number of antitrust infringements will remain undetected. For hardcore cartels, the detection rate is generally assumed to be somewhere between 10% and 20%.[55] For other infringements, the detection rate is higher, but the 'conviction' rate (i.e. the rate of successful damages actions) is likely to be much lower, since claimants often find it very difficult to produce proof that the contested conduct produced actual anti-competitive effects.[56] It also has to be assumed that some victims do not come forward to claim compensation, for instance because they prefer not to disrupt an ongoing business relationship with the infringer. Moreover, in some instances, victims will find it rather difficult to convince courts of a sufficiently close causal link between the damage and the infringement.[57]

67. Any realistic estimate of how much compensation victims could expect under a more effective legal framework for antitrust damages actions is therefore necessarily lower than the total harm to consumers and other victims from detected and undetected infringements estimated (for cartels) above. The Impact Study assesses the potential benefit of a more effective compensation system in the EU by comparing the current ineffective legal framework in Europe with a legal system where private enforcement of competition rules by means of damages actions is very effective, i.e. where victims of antitrust infringements no longer encounter the same obstacles to claiming compensation in court for the damage suffered.[58] On this basis, the Impact Study estimates that the total amount of compensation (single damages plus pre-judgment interest) that victims of antitrust infringements are currently forgoing ranges from approximately €5.7 billion (on the most conservative assumptions) to €23.3 billion (on the least conservative) each year across the EU.[59] These estimates relate to all types of infringements of Articles 101 and 102 TFEU. They provide an approximate idea of the amount of compensation that victims are currently forgoing and do not provide a precise calculation of the magnitude of future antitrust damage awards.

68. Effective remedies for private parties would not only increase the likelihood that infringers are held liable, but would also increase the likelihood of detection of illegal restrictions of competition. Therefore, improving the effectiveness of the legal framework for actions for damages would also produce beneficial effects in terms of deterrence of future infringements and greater compliance with EU antitrust rules,[60] as the Court emphasised.[61] If more effective compensation mechanisms were to lead to a reduction of hardcore cartels by, for example, 5%, the negative consumer welfare impact would be reduced by €1.25 to €3.45 billion per year.

4. Objectives

69. This section sets out the general policy objectives pursued, along with several more specific underlying objectives. Section 6.1 sets out and explains a set of specific assessment criteria that make it possible to measure, in qualitative terms, to what extent the various policy options considered are capable of contributing to achieving the general and specific objectives pursued.

4.1. General objectives

70. This policy initiative has two primary objectives:

(i) In order to address the problems described in section 3.1 and avoid the costs and effects described in section 3.4.1, this policy initiative aims to ensure that the Commission and NCAs can apply a policy of strong public enforcement of competition law, without this public enforcement being unduly affected by the private enforcement before national courts. One of the key elements is to protect leniency and settlement programmes as well as ongoing investigations of the Commission and NCAs. This requires a strict judge-controlled system for access to evidence, which also protects the files of competition authorities. In order to achieve this purpose, common rules should be established relating to the key aspects of the interaction between public and private enforcement.

(ii) In order to address the problems described in sections 3.2 and 3.3 and to avoid the costs and effects described in section 3.4.2, this policy initiative aims to ensure that victims of infringements of EU competition law have access to truly effective mechanisms for obtaining full compensation for the harm they suffered. By pursuing this objective, the Commission wishes to guarantee, in every Member State, certain standards allowing victims to effectively obtain full compensation from the infringers of Articles 101 and 102 TFEU, thereby giving full effect to such provisions. More effective compensation will ensure that the costs of infringements of competition law are borne by the infringers, and not by the victims, by compliant businesses and, indirectly, by society as a whole. This is in line with the competitiveness objectives for the EU.

4.2. Specific objectives

71. To allow for a more systematic and thorough assessment of whether the general objectives are fulfilled, the latter can be split up in the following specific objectives.

· Protection of effective public enforcement

As described in section 3.1, there is a risk that private enforcement of EU competition law by national courts may unduly affect the currently strong public enforcement of these rules, especially in relation to certain important enfocement tools like the leniency and settlement programmes. Stakeholders have confirmed the existence of this risk and have called for a solution. Therefore, one of the specific objectives of this policy initiative is the protection of effective public enforcement. The following elements shall be taken into account in the context of this specific objective:

– Ensuring effective public enforcement of competition law by the Commission and NCAs by regulating the key aspects of interaction between public enforcement and actions for damages before national courts. Leniency and settlement programmes as well as ongoing investigations of the Commission and NCAs should be appropriately protected in all Member States in order to ensure the effective public enforcement of competition law.

– Providing for specific liability rules for immunity recipients in actions for damages before national courts, in order to foster the leniency programmes of the Commission and NCAs.

· Full compensation

As indicated in section 3.2, there is an EU right to full compensation for the harm suffered as a result of infringements of EU competition law. Section 3.2 also states that, currently, a large number of victims of EU competition law infringements remain uncompensated. Nevertheless, as also indicated in section 3.2, stakeholders (predominantly businesses) have equally stated that abusive litigation and overcompensation should be avoided. Overcompensation within the meaning of a systematic burden to pay compensation in excess of the harm caused, can effectively be avoided by excluding punitive or multiple damages awards. However, if overcompensation is defined as a case-specific risk of a damages award higher than the harm actually suffered, it must be borne in mind that a trade-off exists between a higher chance of full compensation and a risk of overcompensation, but that the latter risk is offset by the risk of undercompensation resulting from the lack of action or from the absence of appropriate substantive and procedural rules governing damages actions. It must also be borne in mind that the distinction between full compensation and under- or overcompensation in the latter sense may be difficult if not impossible to establish in a given case: in the absence of an empirical measure of the harm suffered, the actual harm suffered is given by definition through reference to the damages obtained from a court.

In conclusion, the objective of full compensation consists of two elements:

– Ensuring an effective system of compensation of harm, thereby allowing full compensation for the entire harm suffered. In particular, the damage awards should include pre-judgment interest in order to compensate the victims for the real value of the harm suffered.

– Need to avoid over-compensation: measures put forward as a result of this initiative should not lead to victims systematically receiving damages higher than the entire loss suffered.

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

As described in section 3.1, public and private enforcement of the EU competition rules coexist as complementary tools serving the objective of an effective enforcement of these rules. Both mechanisms need to function effectively to achieve optimal deterrence and compliance with the EU competition rules. Currently, private enforcement of competition law is not functioning effectively (as described in section 3.2): strengthening this enforcement strand will have important positive effects on the overall effective enforcement of and compliance with the EU competition rules. Raising awareness is necessary in order to ensure that victims of competition law infringements make use of their right to full compensation and, hence, contribute to achieving the purpose of an effective private enforcement of competition law. Therefore, the following elements are to be taken into account under this objective:

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

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

– Improving compliance with the EU competition rules and deterrence by increasing the likelyhood of civil suits being brought, thus rendering more credible the risk that infringers will have to compensate the victims of their illegal behaviour.

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

– Reinforcing European competitiveness by means of greater compliance with the EU competition rules.

· Access to justice

As described in section 3.2, the fact that a large number of victims of infringements of competition law currently remain uncompensated and see their right to damages under EU law frustrated, leads to a clear deficit in terms of compensatory justice and cannot be reconciled with the fundamental right to access to effective judicial protection. In order to guarantee the respect of this EU fundamental right, access to justice should be facilitated, while at the same time putting in place safeguards to avoid abusive litigation. Under this specific objective, the following elements shall be taken into account:

– Guaranteeing effective access to the courts and an effective remedy for all victims, as required by Article 47, first paragraph of the Charter and Article 19(1), second subparagraph, TEU, including for those who suffered scattered low-value damage, such as SMEs and consumers.

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

– Facilitating access to the relevant evidence in a case, thus overcoming information asymmetry.

– Ensuring that meritorious claims can effectively be brought, and be successful, despite the complexity of antitrust damages cases.

– At the same time, avoiding abusive litigation and ensuring that unmeritorious claims do not lead to the award of damages.

· Appropriate and efficient use of the judicial system

As indicated in section 3.2, the high level of very costly factual and economic analysis required in antitrust cases constitutes a factor deterring many victims from bringing actions for damages, as they consider the risk/reward balance to be unfavorable. Next to measures which aim at optimising this risk/reward balance, an effective possibility to engage in consensual dispute resolution would equally reduce these costs and thus serve the effective private enforcement of competition law. In order to ensure optimal effectiveness of the private enforcement of competition law, it is necessary not to overburden courts and to avoid procedural abuses. The following elements relating to the use of the judicial system will be taken into account:

– Streamlining handling of antitrust damages cases by the courts by means such as joining or grouping identical or similar claims.

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

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

– Limiting the risk of multiple litigation on identical or similar issues: re-litigation of issues already settled should be avoided since they entail unnecessary costs and delays plus the risks of a diverging outcome.

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

Sections 3.2 and 3.3 describe the currently existing diversity in national legal systems in relation to the conditions under which actions for damages can be brought. This diversity causes an uneven playing field both for victims, who seek to exercise their right to full compensation, and for infringing companies, who should be held liable for their infringing behaviour. Furthermore, this diversity could endanger the proper functioning of the internal market. Section 3.1 describes the current legal uncertainty, resulting from the Pfleiderer judgment, in relation to the discosure of evidence from the file of a competition authority in actions for damages and the risk of negative effects on the strong public enforcement of EU competition law. In order to ensure the proper functioning of the internal market, the following elements shall be taken into account:

– Ensuring a more level playing field in Europe so that businesses across Europe compete on an equal footing and that EU citizens and undertakings can rely on a minimum standard to enforce the rights conferred upon them by the EU Treaties.

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

– Increasing legal certainty for businesses operating throughout Europe through common standards for their liability for infringements of competition law.

– Increasing legal certainty as to which documents from the file of a competition authority can be disclosed as evidence in actions for damages.

· Providing benefits for SMEs

The studies conducted on demand of the Commission have widely shown how SMEs often suffer from the difficulties in recovering antitrust damages. As described in section 3.2, this is caused by obstacles to effective compensation such as the lack of legal certainty and an unfavourable balance between benefits expected from an action for damages and costs incurred. Individual SMEs might even be less likely to claim damages if they have to engage in litigation with an actual contractual partner, with whom the business relationship should be continued after the proceedings (fear of retaliation). In order to improve the situation of SMEs and put them in a position where they are realistically able to claim damages for competition law infringements, thus also contributing to the objective of full compensation, the following elements should be taken into account:

– Improving the evidentiary position of SMEs in litigation, especially as regards the quantification of the damages. In the framework of the public consultation, SMEs and their associations have explicitly welcomed such measures.

– Improving the possibilities for collective redress.

· Stimulating economic growth and innovation

In order to provide for the initiative which maximises the functioning and overall enforcement of the EU competition rules as well as the functioning of the internal market, the policy initiative should maximise its long term benefits on growth, productivity and innovation. The following elements play a role in this context:

– Improving the possibilities for SMEs by putting them in a position where they are realistically able to claim damages for competition law infringements.

– Providing for a balanced initiative providing for both effective public and effective private enforcement of EU competition law.

– Ensuring the proper functioning of the internal market by providing for harmonised minimum standards across the Member States in relation to the essential features of actions for damages.

5. Contents of the current Antitrust Damages Initiative

72. The impact assessment of the current Antitrust Damages Initiative builds on the assessment carried out in the 2008 IAWP and should therefore be read in conjunction with it. Annex 4 to this impact assessment offers a summary of the 2008 IAWP. Four Policy Options are analysed in this Chapter, focusing both on their substantive content and on the more general issue of the type of action required. The appropriate choice of the instrument will be addressed in Chapter 0.

73. In order to better understand the four Policy Options set out in section 5.3 below, an overview of the main results of the 2008 IAWP is presented in section 5.1, while the scope of the assessment of the current Antitrust Damages Initiative is presented in section 5.2.

5.1. The 2008 IAWP and the choice of the 'Preferred Option'

74. The 2008 IAWP assessed different bundles of several specific measures aimed at ensuring the effectiveness of the victims' right to compensation guaranteed by the EU Treaties. These policy options ranged from the baseline option of no action at the EU level to legislative measures maximising facilitation of claims and incentives for victims, as recalled by Table 12 in Annex 5 hereto.

75. The 2008 IAWP led to the elaboration of a Preferred Option, put forward in the White Paper. Its main elements were as follows: full single damages; disclosure of specified categories of evidence, based on fact-pleading and proportionality; indirect purchasers' standing allowed; passing-on defence allowed, accompanied by a facilitation of proof of passing-on in favour of indirect purchasers; binding effect of NCA decisions across EU; rebuttable presumption of fault (once an infringement is established); collective redress in the form of opt-in collective actions and representative actions; rules on limitation periods concerning follow-on actions; and rules on interaction with leniency, namely protection of corporate statements from disclosure and limitation of immunity recipients' civil liability. For a detailed overview of the 2008 IAWP Preferred Option see Table13 in Annex 6 hereto.

5.2. The current Antitrust Damages Initiative - scope of the assessment

76. In order to address the problems identified in Chapter 3 and to achieve the objectives referred to in Chapter 4, it is necessary to assess different policy options that imply a different degree of intervention at EU level. The Commission put forward in the White Paper a policy approach to overcome the current inefficiencies of antitrust damages actions. Stakeholders widely acknowledged and endorsed this general approach.

77. On the basis of the input of other EU institutions, in particular the Parliament, and after a further round of consultations and studies, the current Antitrust Damages Initiative considers a number of adjustments to the White Paper's policy approach. Those adjustments are meant to address the problems identified in Chapter 3 and to further the objectives referred to in Chapter 4 in a cost effective manner.

78. In addition, the current Antitrust Damages Initiative aims at clarifying the relationship between private and public enforcement of the EU competition rules, in particular the balancing between the protection of leniency programmes and the need for an appropriate access to evidence to ensure efficient compensatory redress. This is reflected in the options discussed below.

5.3. Description of the Policy Options assessed in the current initiative

79. The baseline scenario, presented below as Option 1, considers no EU action at all in the field of antitrust damages actions (neither soft law nor legislation). Option 2 aims at codifying the measures suggested in the White Paper in a legislative instrument. Option 3 builds on Option 2, while taking due account both of the main comments received during the public consultations since the White Paper and of recent legislative and jurisprudential developments in the EU and in the Member States. It therefore includes additional safeguards for access to evidence, provides for a rebuttable presumption as to the existence of harm in cartel cases and provides for an effectiveness requirement in relation to the quantification of harm by the claimant. Option 4 considers the adoption at the EU level of non-regulatory measures only. Options 2 to 4 must be all read together with the provision of a non-binding framework on the quantification of damages, as explained below at 5.4.

80. When considering an appropriate legal framework for antitrust damages actions, experience in other jurisidictions shows that more far reaching measures are available than those considered in this report. These measures are, in particular: multiple damages, extensive discovery among the parties, automatic fee-shifting, opt-out class actions brought by any individual. These measures have been assessed in the IAWP. The result of that assessment was that they were excluded in view of an unsatisfactory cost/benefit ratio (high costs entailed in exchange for a higher rate of achievement of the objectives), as summarised in Annex 4. For these reasons, the above-mentioned measures have been excluded also from the spectrum of available policy options in the present exercise. As a result, all measures included in policy options 2 to 4 contemplate less costly means means to achieve the set objectives.

Table 1: Overview of the Policy Options assessed in the current Antitrust Damages Initiative

|| Option 1 (baseline scenario) || Option 2 || Option 3 || Option 4

Damages || No EU action || Full single (no multiple damages) || Soft law recommending full single damages

Access to evidence || No EU action || Rules on disclosure of specified categories of evidence, based on fact-pleading and proportionality Protection from disclosure of corporate statements made in the context of leniency programmes || Rules on disclosure of specified categories of evidence, based on fact-pleading and proportionality No access to corporate statements and settlement submissions. Access to other categories of information only after closure of public proceedings || Soft law recommending rules on disclosure of specified categories of evidence, based on fact-pleading and proportionality Soft law recommending not to give access to corporate statements and settlement submissions and recommending access to other categories of information only after closure of public proceedings

Limitation of civil liability of Immunity recipient(s) || No EU action || limitation of liability of the immunity recipient to claims by its direct and indirect contractual partners || Soft law recommending limitation of liability of the immunity recipient to claims by its direct and indirect contractual partners

Indirect purchaser || No EU action || Standing allowed || Soft law recommending that standing is allowed

Passing-on || No EU action || A passing-on defence for the infringer that shows that the damages claimant has passed-on part or the whole of the illegal overcharge, as well as a rebuttable passing-on presumption in favour of the indirect purchaser || Soft law recommending a passing-on defence for the infringer that shows that the damages claimant has passed-on part or the whole of the illegal overcharge, as well as a rebuttable passing-on presumption in favour of the indirect purchaser

Rebuttable presumption of harm || No EU action || No presumption || Rebuttable presumption of existence of harm caused by cartels || Soft law recommending a rebuttable presumption of existence of harm caused by cartels

Effect of NCA decisions || No EU action || Binding effect for the final infringement decisions of NCAs || Soft law recommending binding effect for the final infringement decisions of NCAs

Fault (once infringement established) || No EU action || Rebuttable presumption; exoneration for excusable errors. || No EU action || No EU action

Limitation period || No EU action || A specific limitation period for damages actions that rely on an infringement decision by a competition authority || Soft law recommending a specific limitation period for damages actions that rely on an infringement decision by a competition authority

Cost rule || No EU action || No legislative measure || No EU action || No EU action

Consensual dispute resolution || No EU action || No legislative measure || Rules on suspensive effect of consensual dispute resolution, effect of settlements on other injured parties and on subsequent actions for damages || Soft law recommending rules on suspensive effect of consensual dispute resolution, effect of settlements on subsequent actions for damages

Collective redress || No EU action || Two different collective redress mechanisms: opt-in group actions and representative actions || No competition-specific EU action, separate horizontal initiative on collective redress which is outside the scope of this impact assessment || No recommendations on this topic in the competition-specific soft law

5.3.1. Option 1: the baseline scenario of no EU action in the field of antitrust damages actions

81. Option 1 contains the baseline scenario, entailing no action at all at EU level regarding antitrust damages actions. Some respondents in the public consultation on the White Paper, as well as in the 2011 public consultation on collective redress have suggested to follow this option on grounds of general inappropriateness for EU action in an area that is mostly governed by national substantive and procedural rules. The assessment of the impact of Option 1 examines the status quo and likely developments in the absence of EU action (prospective analysis).

5.3.2. Option 2: adopting the White Paper's suggested measures through a legislative instrument

82. Option 2 envisages a legislative instrument incorporating the measures that the Commission has put forward in its White Paper. Such instrument would include: a confirmation that compensation of full single damages can be obtained; two different collective redress mechanisms (opt-in group actions[62] and representative actions); rules on disclosure of specified categories of evidence, based on fact-pleading and proportionality; a limitation of liability of successful immunity applicants; binding effect for the final infringement decisions of NCAs; standing for the indirect purchaser; a passing-on defence for the infringer that shows that the damages claimant has passed-on part or the whole of the illegal overcharge, as well as a rebuttable passing-on presumption in favour of the indirect purchaser; minimum requirements for limitation periods for damages actions, also when they are brought after an infringement decision by a competition authority; and a rebuttable presumption regarding fault once the infringement has been established, unless the infringer can prove that the infringement was due to an excusable error. To avoid the risk that enhanced damages actions might have a negative impact on public enforcement activities, in particular on the functioning of leniency programmes, Option 2 suggests protecting from disclosure corporate statements made in the context of leniency programmes.

5.3.3. Option 3: legislative proposal based on the White Paper and additional safeguards

83. Option 3 consists of a legislative instrument that is still based on the White Paper (i.e. Option 2), while optimising the relation between public and private enforcement and introducing a number of other modifications. Option 3 contains the following measures: the right to full single damages; rules on disclosure of specified categories of evidence, based on fact-pleading and proportionality with an enhanced protection for documents from the file of a competition authority; a limitation of liability of successful immunity applicants; binding effect for the final infringement decisions of NCAs; standing for the indirect purchaser; a passing-on defence for the infringer that shows that the damages claimant has passed-on part or the whole of the illegal overcharge, as well as a rebuttable passing-on presumption in favour of the indirect purchaser; rules on the beginning of limitation periods as well as a specific rule for limitation periods after the finding of infringement by a competition authority or a review court; a rebuttable presumption relating to harm in cartel cases; and measures facilitating consensual dispute resolution.

84. Whereas Option 2 does not include any legislative measures on consensual dispute resolution, Option 3 foresees rules meant to facilitate such outcome and to remove legal uncertainties existing about it, for instance on the effect of settlements on subsequent actions for damages.

(a) Access to evidence: special rules concerning access to the file of a competition authority

85. After the 2011 Pfleiderer ruling of the Court, Member States, NCAs and representatives of the business and legal community asked explicitly for an EU-wide clarification of the interaction between public enforcement (in particular through leniency programmes) and private damages actions, where access to evidence plays a key role. Option 3 provides for such clarification by suggesting further safeguards concerning the disclosure of documents in the file of a competition authority. It is suggested never to disclose corporate statements and settlement submissions, because disclosure of those documents would jeopardise enforcement instruments at the disposal of the competitition authorities (particularly the leniency programme and the settlement programme). To protect ongoing public investigations, it is also suggested to allow the disclosure of documents that were especially prepared for the purpose of public enforcement proceedings only once those proceedings are finished. All other information (called 'pre-existing information') would remain disclosable. In doing so, Option 3 provides for an appropriate protection of effective public enforcement, while allowing claimants to obtain the information required to successfully bring a damages action.

86. An alternative regime would have been to leave it to the discretion of the national court whether or not to disclose corporate statements or settlement submissions in the context of a damages action that is brought after public enforcement proceedings are closed. That option, however, would not have given the undertakings that want to engage in leniency or settlement discussions with the competition authority, the desired upfront legal certainty regarding the disclosibility of the said documents. That absence of legal certainty would be to the detriment of the success of those public enforcement instruments and is thus not offering an appropriate balance between protecting both public and private enforcement of the EU competition rules. This alternative regime is therefore not further considered. The benefits and costs of this status quo option are shown in tables 2 and 3 below.

(b) Rebuttable presumption as to the existence of harm in cartel cases

87. The studies and consultations referred to in section 2 have shown that proving harm and the quantification thereof often constitutes an important barrier for effectively obtaining compensation for the harm caused by a competition law infringement. To remedy these evidentiary problems of the claimant associated with the quantification of harm, Option 3 considers the introduction of a rebuttable presumption of the existence of harm in cartel cases. The defendant, who is most likely to possess the evidence that is necessary to prove whether or not the cartel caused harm, is free to rebut the presumption. The presumption would thus respect the principle that an information advantage of one party should lead to that party holding the burden of proof. Option 3 considers to limit the rebuttable presumption to cartels because of their secret nature which makes it more difficult for parties to obtain the necessary evidence to prove harm.

88. Studies in relation to overcharge in cartel cases support the introduction of such rebuttable presumption as to the existence of harm. The Quantification Study[63] and a study by Connor and Lande[64] conclude that the average overcharge in cartel cases is respectively 20% and 23%. Moreover, a study conducted by Boyer and Kotchoni[65] in which a meta-analysis of cartel overcharge estimates is carried out in reaction to potential errors and biases in the model used by Connor and Lande, came to a corrected mean overcharge in all cartel cases of 17,5% with a median of 14%. The studies hold that there are some cartel cases (around 5%) in which no overcharge harm is caused. However, as the presumption is rebuttable and the evidence of the absence of harm is likely to be in possession of the defendant, this small percentage of cases, where the presumption could be rebutted, do not prevent its introduction.

89. After the existence of harm has been established, the claimant still has to prove the amount of that harm. The burden of proof for the quantification of harm normally lays with the claimant. To further facilitate this burden, one could consider introducing a rebuttable presumption that cartels lead to an overcharge of X% (with 'X' being a figure supported by the studies referred to above). However, such a specific presumption risks becoming a disincentive for victims of a cartel to engage in further quantification of the harm suffered. Such presumed overcharge figure may thus paradoxically lead to structural under-compensation of harm, in particular when it is at the lower end. That negative effect is increased by the fact that defendants will invest heavily into rebutting, i.e. defending the presumption, depending on whether they caused a lower or a higher overcharge harm. Therefore, this option would not even reduce litigation costs.

90. To ensure the effectiveness of the right to claim damages and to keep litigation costs