Public Consultation – Antitrust Damages Directive

The Office for Competition has recently launched a public consultation on the implementation of the Antitrust Damages Directive in Malta.

The draft legislation relates to Malta’s obligation to transpose Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 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. The Directive is commonly referred to as the “Antitrust Damages Directive”.

The Antitrust Damages Directive is intended to enable compensation for persons suffering damages as a result of infringements of EU antitrust law. It applies to all actions for damages, whether individual or collective, which are available in the Member States of the European Union.

Maltese law already contemplates the recovery of damages to undertakings that have been victims of violations of competition law. This is the subject of Article 27A of the Competition Act (read in conjunction with the procedural rules in the Code of Organisation and Civil Procedure), which sets out some basic rules for such actions for damages. In fact, in a recent case, damages were awarded for an abuse of competition law.

The Directive – and the draft legislation – fine-tunes the interplay between private and public enforcement of competition law, and will allow private enforcement of competition law decisions taken by the national competition authorities of all Member States, wherever such private enforcement is commenced.

The main changes introduced by the Directive and implementing legislation are the following:

· Parties will have easier access to evidence they need to prove actions for damages in competition law. In particular, if a party needs documents that are in the hands of other persons or entities in order to prove a claim or a defence, it may obtain a court order for the disclosure of those documents. Disclosure of categories of evidence, described as precisely and narrowly as possible, will also be possible. The judge presiding over the case for damages will be required to ensure that disclosure orders are proportionate and that confidential information is duly protected according to applicable laws.

· Similar to a Commission infringement decision, a final infringement decision of a national competition authority will constitute full proof before civil courts in the same Member State that the infringement occurred. Before courts of other Member States, it will constitute at least prima facie evidence of the infringement (prima facie being an indication that at face value, the decision would constitute proof of the fact that competition law has been violated, and thus that the plaintiff may have suffered damages as a result; it would be subject to being rebutted).

· Clear limitation period rules are established so that victims have sufficient time to file an action for damages. In particular, persons suffering damages as a result of such infringements will have a minimum of 5 years to file a claim for damages, which period commences when they had the possibility to discover that they suffered harm from an infringement. This period will be suspended or interrupted if a Competition Authority commences infringement proceedings, so that claimants can decide to wait until the public proceedings are concluded. Once a Competition Authority’s infringement decision becomes final (res judicata), claimants will have at least 1 year to file an action for damages suffered.

· The Directive clarifies the legal consequences of ‘passing on’ of harm. Direct customers of an infringer sometimes offset the increased price they paid by raising the prices they charge to their own customers (indirect customers). When this occurs, the infringer can reduce compensation to direct customers by the amount they passed on to indirect customers. Compensation for that amount is in fact owed to indirect customers, who ultimately suffered as a result of the price increase. However, since it is difficult for indirect customers to prove that they suffered damages as a result of the passing-on of harm, the Directive facilitates their claims by establishing a rebuttable presumption that they suffered some level of overcharge harm, to be estimated by the judge. The Directive contains provisions to avoid that claims, by both direct and indirect purchasers, lead to overcompensation. Claims concerning harm resulting from loss of profit are not affected by the Directive’s passing-on rules.

· The Directive clarifies that victims are entitled to full compensation for the harm suffered, which covers compensation for actual loss and for loss of profit, plus payment of interest from the time the harm occurred until compensation is paid.

· The Directive establishes a rebuttable presumption that cartels cause harm. This will facilitate compensation, given that victims often have difficulty in proving the harm they have suffered. The presumption is based on the finding that more than 90% of cartels cause a price increase (as established by a study carried out by the Commission). In the very rare cases where a cartel does not cause price increases, infringers can still prove that their cartel did not cause harm.

· Any participant in an infringement will be responsible towards the victims for the entire harm caused by the infringement (joint and several liability), with the possibility of obtaining a contribution from other infringers for their share of responsibility. However, to safeguard the effectiveness of leniency programmes, this will not apply to infringers which obtained immunity from fines in return for their voluntary cooperation with a competition authority during an investigation; these immunity recipients will normally be obliged to compensate only their (direct and indirect) customers. Furthermore, a narrow exception from joint and several liability is foreseen under restrictive conditions for SMEs that would go bankrupt as a consequence of the normal rules on joint and several liability.