Private enforcement

 

Author Definition

 

Definition

Many countries authorize private suits challenging conduct claimed to violate their competition laws. In some jurisdictions such suits are limited to cases that “follow-on” a successful government suit, but “stand alone” suits are permitted in the U.S., many EU Member States, and the UK. Suits generally may be instituted by competitors, suppliers, and customers. Such suits usually seek damages compensating plaintiffs for injury caused by the anticompetitive conduct and/or injunctive relief to force its discontinuance. The U.S. is unique in requiring treble damages to be awarded to successful plaintiffs. U.S. federal antitrust law generally disallows suits by indirect purchasers claiming damages passed on to them, but many other jurisdictions allow such suits.

 

Commentary

Private enforcement of competition laws is permitted in many countries. While some jurisdictions limit private enforcement to cases that ‘follow-on” from a successful government enforcement action, “stand-alone” private suits also are permitted in the United States (US), European Union (EU), and the United Kingdom (UK). As summarized below, the policies of all three jurisdictions provide for private enforcement in order to ensure that those injured by antitrust violations are fully compensated, but private enforcement is also intended to deter antitrust violations.

Jury trials are authorized for antitrust private damages suits in the US but are not authorized in the EU or UK. There is a four-year statute of limitations in the U.S., between one and five years in the EU (depending on the Member State), and six years in the UK for claims in the English High Court. The period is tolled in the US and certain EU Member States while governmental proceedings are pending and for a short time period thereafter.

The Competition Appeal Tribunal (CAT) is a specialized competition court in the UK that hears both stand-alone and follow-on damage claims. There is a “fast track” procedure available before the CAT pursuant to which hearings are to be held within six months for small or medium firms if the hearing can be concluded within three days and will not involve complex or novel issues. Different limitation periods also apply to CAT claims.

In the US, liability findings against a defendant in a federal government antitrust case are admissible in a follow-on private antitrust suit as prima facie evidence of a violation. In the EU on the other hand, the finding of a violation by the European Commission is binding in a follow-on private action in the national court of Member States that have adopted the 2014 EU Damages Directive. Post-Brexit, European Commission decisions are not binding in the UK, but infringement decisions issued by the UK’s Competition and Markets Authority remain binding on defendants in follow-on private suits.

Most jurisdictions, including the UK and EU Member States, provide for single damages. The U.S. is the only major jurisdiction providing a mandatory treble damage remedy to private enforcers of the Sherman Act. Additionally, a successful private plaintiff in the U.S. recovers its attorneys’ fees from the defendant. In the UK the same rule applies although only part of the successful plaintiff’s fees normally is recovered. Most EU Member States only allow successful parties to recover a relatively small portion of their cost, but mandatory interest is assessed from the inception of the wrongdoing in the UK and some EU Member States.

In the US, only direct customers generally have standing to sue cartel members or monopolists engaged in abusive conduct for overcharges under the Sherman Act. The impact of this judicially established federal rule has been somewhat muted, however, by the large number of states that permit indirect purchasers to recover under their state antitrust laws, which are not preempted by the federal antitrust laws. In UK and EU Member States that have adopted the EU Damages Directive, indirect customers of wrongdoers can bring claims but must prove that losses were “passed on” to them by direct purchasers. In 2019 the European Commission issued non-binding guidelines to national courts on how to estimate the overcharge that that was passed-on to indirect purchasers.

In the US, the determination whether a plaintiff may proceed with an antitrust claim is based on an evaluation of the following factors: (1) the causal connection between the alleged violation and the harm to the plaintiff; (2) the nature of the injury, including whether the plaintiff is a consumer or competitor in the relevant market; (3) the directness of the injury, and whether the damage claim is too speculative; (4) the potential for duplicative damages or complex damages apportionment issues; and (5) the existence of more efficient enforcers. In the UK and most EU Member States there is a proximate cause standard requiring a plaintiff to establish that its injury was caused in whole or substantial part by the alleged violation of the competition laws.

Defendants in cartel suits in all three jurisdictions are subject to joint and several liability. However, in the US there is no right to contribution from co-defendants while in the UK and many EU Member States, infringing companies do have contribution claims against each other. However, in those EU Member States where the EU Damages is followed, small and medium sized companies, as well as companies that have been granted amnesty, are liable only to their own (direct or indirect) customers.

In cartel cases in all three jurisdictions, the amount of damages is based on the amount of overcharge proven by the plaintiff, and in cases involving exclusionary abuses by dominant companies, damages are based on the profit the plaintiff can prove it would have made in a competitive market.

Calculation of damages to injured antitrust plaintiffs in all three jurisdictions need not be precise and can be determined on reasonable estimates based on relevant data. However, damages cannot be calculated by speculation or guesswork. Although specific rules on quantification vary among EU Member States, the European Commission has issued Practical Guides for Quantifying Harm in Actions for Damages.

Private damages claims are regularly filed in all three jurisdictions challenging cartels, but there are fewer private abuse of dominance cases. This is not surprising for three reasons. First, dominance cases are less frequently instituted by government enforcers, particularly in the U.S. Second, such cases require (more) economic analysis, including defining the relevant market, and assessing whether the alleged wrongdoer is dominant in that market. Third, the damage quantification in dominance cases is less straightforward than in cartel cases, where the basic issue is whether the alleged cartel members entered into the unlawful agreement at issue.

Claims for injunctive relief in antitrust suits to remedy actual or threatened harm are permitted in the US and UK, either with or without damage claims.

 

Bibliography

Herbert Hovenkamp, Federal Antitrust Policy, The Law of Competition and Its Practice, Ch. 16 (West Academic Publishing, 6th Ed. 2020).

Section of Antitrust Law, Antitrust Law Developments, Ch. 9 (ABA Book Publishing, 8th Ed. 2017).

Pier Luigi Parcu, Georgio Monti & Marco Botta (Editors), Private Enforcement of EU Competition Law (Edward Elgar Publishing 2018).

Ros Kellaway, Rhodri Thompson & Christopher Brown (Editors), UK Competition Law: The New Framework, Ch. 8 (Oxford Univ. Press 2016).

This article is being reviewed by the Editors of the Dictionary.

Author

Quotation

Michael D. Hausfeld, Private enforcement, Global Dictionary of Competition Law, Concurrences, Art. N° 86753

Visites 8606

Publisher Concurrences

Date 1 January 1900

Number of pages 500

 

Institution Definition

Public enforcement can be defined as the enforcement of antitrust laws by a government, for example by the competition authority or a prosecutor, to detect and sanction violators of competition rules. By contrast, private enforcement can generally be defined as litigation initiated by an individual, a legal entity, an organisation or a public entity (such as local government and procurement agency in the bid-rigging case) to have a court establish an antitrust infringement and order the recovery of the damages suffered or impose injunctive reliefs. Private enforcement can be triggered by a stand-alone action or by an action which follows on a public enforcement decision. In most jurisdictions, private enforcement is mostly represented by follow-on private actions. © OECD

See also Damages and Collective redress (class action)

 
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