Does the Eu's Drive for Private Enforcement of Competition Law Have a Coherent Purpose?

By Stephan, Andreas | University of Queensland Law Journal, June 2018 | Go to article overview

Does the Eu's Drive for Private Enforcement of Competition Law Have a Coherent Purpose?


Stephan, Andreas, University of Queensland Law Journal


I INTRODUCTION

The Competition Laws of the European Union ('EU') have been a major influence on countless jurisdictions around the world, but their strength as a public enforcement regime have always contrasted with a perceived absence of private enforcement. Private parties cannot bring an action for damages or injunctive relief before EU courts. They can only make a complaint to the European Commission or National Competition Authority, to investigate an infringement of competition law, on their behalf. Therefore, a party's ability to recover damages falls on the national tort and civil liability rules of each Member State. Although most European legal systems can broadly be described as belonging to the civil law tradition, there are significant differences in procedure and legal culture when it comes to recovering damages. It is also important to remember that the EU has continued to grow in the last fifteen years, with the accession of ten new Member States in 2004, and a further three between 2007 and 2013. (1) These include states that have made a rapid transition from centrally planned economies and Communist-era legal systems.

This article critically analyses the European Commission's drive to encourage private enforcement of competition law, focusing on the purpose of the 2014 Damages Directive. (2) It begins by briefly identifying the objectives of private enforcement, the challenges associated with it (Part II), and the characteristics of US Antitrust Law that incentivise private actions there (Part III). The article then turns its focus to Europe, where it outlines the situation before the Directive (Part IV) and then maps how the debate in Europe developed from around 2004; exploring why certain policy areas were abandoned and objectives moved away from enhancing deterrence (Part V). Finally, the Directive's provisions are mapped against the issues identified earlier in the article (Part VI). The article concludes by arguing that the Directive is unlikely to significantly encourage private actions and may even be undermining the effectiveness of public enforcement.

II THE CHALLENGES OF PRIVATE ENFORCEMENT

In principle, the private enforcement of competition law serves two useful functions: deterrence and compensation. The first supplements public enforcement, either through the recovery of damages over and beyond public fines (follow-on actions), or by empowering parties to uncover and challenge infringements that have not been subject to public enforcement (stand-alone actions). While follow-on actions essentially amount to an extension of the existing public penalty in the form of damages, it is stand-alone actions that have the greater deterrence-enhancing effect. This is because they result in the uncovering of infringements that might otherwise go entirely undetected. (3) The second function is to ensure injured parties (be they other firms or final consumers) are compensated for the financial harm they have incurred as a result of the anti-competitive conduct, so that they might be restored to the situation they would have enjoyed absent the infringement.

While very significant sums of money are recovered from undertakings in the form of public cartel fines ([euro]26.5 billion in European Commission decisions delivered between 1990-2016), these go to the EU budget and so benefit the general taxpayer. None of this money is used to directly compensate parties affected by an infringement. Indeed, the vast majority of these cases are considered anti-competitive by 'object' under Article 101 TFEU, meaning that effects need not be shown. A Commission decision in relation to a cartel will not typically attempt to ascertain the extent of the harm caused, or the identity of the injured parties. Often it also fails to establish whether the cartel arrangement was properly implemented. This poses a major obstacle to prospective claimants in follow-on cases, as they must establish both causation and harm. …

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