Promotion of actions for claiming damages for competition infringements by private parties and administrations

Historical and regulatory framework

Despite being widespread in the United States, private actions for damages for infringements of competition law have historically been very rare in Europe. However, in recent years there has been a regulatory impulse from the European Legislator that makes this type of actions begin to make their way also in this side of the Atlantic.

Alongside the public action of the competition authorities, which was already well known, there is another pillar that supports the system: private action. This seeks compensation for damages caused to the victims of these infringements, both consumers and other companies in the sector or even public administrations that have been affected by anti-competitive practices in the market.

Since 2005 (with the so-called Green Book of the European Commission on damages for breach of EU antitrust rules), there has been a series of legislative changes and consultative elements that aim to provide those affected by anticompetitive practices with tools that allow them to restore, or at least try to compensate for the damages created by disturbances of free competition in the market.

Not only has this type of damage actions been developed through secondary legislation, but in the original law of the Union, Article 85.2 of the Treaty of the European Economic Community (currently Article 101.2 of the Treaty on the Functioning of the European Union), already provided that agreements contrary to the free market would be null and void and that damages could be obtained as a consequence of violations of competition law.

It is in this context that Directive 2014/104/EU of November 26, 2014, on Damages, which harmonizes national laws relating to actions for damages arising from infringements of national and European competition law, is approved, and which has been transposed in the Spanish State by means of Royal Decree-Law 9/2017, which amends Law 15/2007, of July 3, on the Defence of Competition, adding a new title and various provisions relating to actions for damages of those affected by infringements of competition law, and Law 1/2000, of January 7, on Civil Proceedings, for the purposes of access to mid-proof in this type of proceedings.

Damages actions for infringements of competition law are built from different perspectives. From the perspective of the injured private parties, it provides means to return to the initial situation and free competition in the market, and from the perspective of the public sector that participates in the market, it provides tools to ensure the general interest.

Finally, from the perspective of all market participants, it provides the necessary incentives for not engaging in collusive practices or abuses of a position of power, given the variety of mechanisms, both public and private, available to sanction this type of conduct and compensate the situation of those harmed.

Beyond Directive 2014/104/EU and the transposition rules, other legal instruments are emerging as an example of the regulatory momentum in the field. Indeed, different European competition authorities have proposed mechanisms to promote damages claims for competition law infringements, either from guides (such as those we will discuss below), or from other instruments, such as litigation funds, to ensure the financing of this type of actions, or specific damages claim bodies to exercise them jointly.

Guide of the Spanish National Markets and Competition Commission (CNMC) on the quantification of damages for infringement of competition law.

Like many of the actions for damages, the most complex part of the claim is no longer to prove it (it should be remembered that article 75.1 of the Law on Defence of Competition establishes that the infringements of competition law determined by a final resolution of a Spanish competition authority have “irrefutable” evidentiary value), but to quantify it. Damages include consequential damages (cost overruns), loss of profits and interest, as capitalization of the amount claimed for compensation of a past damage at the time of its valuation. The effectiveness of this type of action depends largely on its quantification, since only with an adequate compensation can it be returned to a position of true free competition.

Moreover, this compensation not only has the effect of restitution of the agents who have suffered damages as a consequence of collusive conducts (which, we recall, must be effective, i.e., they must not have been transferred “downstream”), but also has an important deterrent effect and is complemented by the actions of the competition authorities, which are of a public nature.

To facilitate the difficult task of quantifying the damage, the Spanish National Market and Competition Commission (CNMC) published a guide on July 11, 2023. A guide not only useful for lawyers, but also for judges, experts and, in short, agents participating in the markets, whether as consumers or users, private operators or public sector entities.

In this guide, the CNMC carries out an explanatory and advisory task, which, although not binding for any legal operator, does provide important guidelines and a wide variety of useful models for quantifying the damages caused by anti-competitive practices.

Firstly, the guide reviews the different types of collusive conduct and addresses general questions about the repercussion of cost overruns on the direct purchasers of the agents who have suffered the damage. It also discusses the access to information necessary to provide sufficient data to correctly quantify the damage.

It then provides guidance and advice on how to prepare the necessary expert reports to prove, where appropriate, the existence of the damage, the causal relationship with the infringement of competition law and the quantification of the corresponding damages. These must be complete, transparent and consistent. Their calculations must be replicable, and their degree of detail will depend on each case (data or time available, material, technical or financial means available, etc.).

After providing a series of good practices on the selection of relevant variables, data, the description of the counterfactual scenario and different techniques and presentation of results, the guide proceeds to analyse different methods for quantifying damage and its capitalization. These are technical sections that, depending on the circumstances of the case, will advise the use of one methodology or another.

Finally, the guide provides a list of general and specific checks to verify the reliability of the quantification of the damage. These checks are necessary to ensure that the quantification of the damage is firm and, therefore, the success of the claim and the effectiveness of the compensation, which is essential to return to a situation of free competition within the market.

To mention a well-known case of damages actions as a result of competition law infringements, one can cite the case of the truck cartel, in which the European Commission condemned in 2016 the major truck manufacturers and imposed on them a total of 2.93 billion euros in penalties. Following the publication of the decision to the OJUE and being already in force the regulations transposing the Damages Directive, a large number of claims for damages were filed by those affected by the cartel. Today, in Spain more than 2,600 judgments have been published in second instance derived from these follow-on actions on[1] , of which 94% have been favourable to the injured party. In June of this year, the Supreme Court already resolved the first extraordinary appeals filed against these rulings, confirming the existence of the damage.

Also noteworthy is the case of car manufacturers, who were fined by the CNMC between 2015 and 2016 for anti-competitive practices. In both cases consumers have organized themselves into groups of affected parties, also in Spain, to claim damages. The groups of affected parties are a mechanism for financing damage claims that also have great negotiating strength as they constitute platforms with a large number of affected parties.

Damages to public administrations: the ACCO report

It is not only consumers and companies that are victims of damages due to competition law infringements. The public sector is an important market actor that can be affected by competition infringements, particularly in the context of public tenders. Therefore, like private parties, public authorities are also entitled to compensation for damages suffered.

In February this year, the Catalan Competition Authority (ACCO) published a report on claims for damages caused to public administrations by anti-competitive practices with the aim of promoting this type of action by the public authorities.

According to ACCO, the pursuit of the public interest that should guide administrative action requires the Administration itself to promote the necessary actions to compensate itself for damages unduly borne (art. 31.2 of the Spanish Constitution and art. 3.1 of the Public Sector Legal Regime Law). In addition, the Public Sector Contracts Law also requires contracting bodies to safeguard free competition (art. 132.3).

In the aforementioned report, the ACCO states that any natural or legal person, whether private or public, who has suffered damage as a result of an infringement of competition law has standing to bring a claim for damages. This standing has been established since the CJEU Judgment C-453/99 (Courage v. Crehan) and is now also included in Article 1.1 of the Damages Directive and Article 72.1 of the Competition Act.

Even so, the ACCO notes that state and regional public entities do not bring actions for damages resulting from the infringement of competition law, despite the enormous damages suffered by the public sector because of collusive activities or abuses of dominant position. Hence the need to prepare a report to serve as a guide for claiming damages caused to public administrations by anti-competitive practices.

This guide focuses more on recommendations at the organizational, communicative and legal level and examples of public sector claims for competition law infringements and on promoting private action by governments against collusive practices that harm them. It also emphasizes ways of financing the Administrations to maintain a litigation for claiming damages resulting from infringements of competition law. All this without prejudice of exploring extrajudicial ways, also admitted in the Spanish legal system.

In addition, the prevention of competition infringements and compensation for the damages they cause is also articulated from the contractual aspect. Indeed, public authorities can introduce contract termination clauses for collusive practices and penalty clauses in public contracts when competition infringements have been committed. The ACCO also advocates the ex officio review of public contracts when their award has been affected by a competition infringement.

As remarkable examples and precursors, ACCO cites the case of the Servei Català de Salut (Catalan Health Service), which claims to companies that for years agreed on the selling prices of diapers for adults (a product subsidized by the Spanish Social Security in pharmacies) a compensation of 526 million euros, after the courts confirmed the millionaire penalty imposed by the CNMC to these companies in 2016 for having designed a method that fixed the selling prices to wholesale distributors of this product.

Two details are important in this case. The first is that the private action arises after the public action, in a complementary manner. It should be remembered that the sanctions of the competition authorities are “irrefutable” evidence for the actions for damages. And the second is that one of the manufacturers was exempted from payment of the fine, because it revealed the existence of the agreement (this is known as the leniency system), but the fact that it is exempted from payment of the fine does not prevent it from being liable for damages for infringements of competition law.

It also highlights the cases of ADIF against the security and communications cartel, or that of Deutsche Bahn (Germany’s main railway company) against Lufthansa for the air cargo cartel, which ended in an extra-contractual agreement.

A current and major issue: the Agreement GOV/261/2023, of the Generalitat de Catalunya (Government of Catalonia).

On December 12, 2023, the Government of the Generalitat de Catalunya approved the Agreement GOV/261/2023, by which it is agreed to promote the claim for damages arising from infringements of competition law caused to the Administration of the Generalitat de Catalunya and its institutional public sector.

The agreement is based on the ACCO guide and the European and internal regulations on the matter and contemplates the following measures:

• A Working Unit is created with the objective of analyzing the existence of possible claims by the Administration of the Generalitat de Catalunya or entities of its institutional public sector deriving from competition infringements and providing support to the competent management unit to file and follow up the procedures.
• A management unit is designated to coordinate claims for damages (Dirección General de Fons Europeus y Ajuts d’Estat de la Secretaria d’Afers Econòmics i Fons Europeus del Departament d’Economia i Hisenda, or the management unit that replaces it).
• The Legal Office of the Generalitat de Catalunya is given the competence to analyze the legal feasibility of legal actions and their interposition, as well as to draw up a protocol describing the procedure for claiming damages (in and out of court).
• The ACCO is given the duty to prepare and transmit to the Working Unit a preliminary report on cases of damages arising from infringements, especially when the sanctioning decision of the competition authority is final.

All in all, this agreement represents the practical application of the ACCO’s report of February, and thus configures a set of practices, obligations and actors with the aim of enforcing the rights of the Public Administration of the Generalitat and its institutional public sector when it is harmed by infringements of competition law.

THE CONCLUSIONS

1. Competition law is articulated as a set of rules to prevent anticompetitive practices but also as a system of guarantees to enforce its provisions. These guarantees are not only sanctions, but we find ourselves in a dual system, where the public and private parts fulfil a similar function from different perspectives, and by different actors.

2. The means of redress for private parties and administrations for infringements of competition law are necessary to restore a certain level playing field in the market and to guarantee free competition.

3. The success or failure of actions for damages for infringement of competition law depends to a large extent on the ability of the plaintiff to prove the damage and, above all, to quantify it. In the quantification of the damage, the results must be robust, consistent and replicable, and for this reason it is necessary to use a good methodology and a series of verifications that provide the model with sufficient firmness to stand up in court.

4. The CNMC’s guide on quantification of damages for infringements of competition law is a great tool in claims for damages for anti-competitive practices, and provides the necessary tools and knowledge to prove and quantify the damage and, thus, reach a correct compensation.

5. The forms of financing this type of action are important. The groups of affected parties are proving to be a common litigation channel for the injured parties, with low costs for each of them and a great negotiating strength. Clear examples are the platforms of those affected by the truck and automobile cartel.

6. According to ACCO, Public Administrations can, and have the duty to, bring actions for damages for infringement of competition law by application of the principle of good administration. To encourage such actions and to ensure respect for competition law in public procurement, the ACCO recommends implementing contractual measures, such as contractual termination clauses or penalty clauses in the contract documents.

[1] According to Professor Francisco Marcos https://almacendederecho.org/cartel-damages-claims-in-spain-lots-of-stuff-beyond-trucks-including-a-torpedo