The Role of US Courts in Facilitating Private Antitrust Enforcement: Exploring Substantive and Procedural Means for the European Union

Monday, January 09, 2012

By Eric Leemkuil

Interesting debates have been lingering in the European Union (“EU”) for a long time on the issue of enforcement of EU antitrust law. Practice and research show that the number of private antitrust actions brought in the EU Member States is persistently scarce as compared to the proceedings instituted by administrative agencies, such as the European Commission (“Commission”) on a European level, and the Member States’ antitrust authorities on a domestic level.[i] The scarcity of private antitrust litigation is exacerbated by the Member States’ procedural differences and the procedural autonomy[ii] that each jurisdiction enjoys. Extensive literature can be found on the disparities between national procedural laws in the context of private antitrust enforcement.[iii]

Practitioners, scholars and policy-makers recognize the importance of private enforcement for EU antitrust policy.[iv] After extensive debates on the Commission’s policy documents,[v] the discourse turned to procedural measures in the field of collective redress and the intention to establish a harmonized EU mechanism for aggregation of claims of victims of antitrust infringements analogous to class action procedures in the United States (“US”).[vi]

The EU legislature and the Court of Justice of the European Union (“ECJ”) could undertake various actions in order to solve the lack of private enforcement. One option would be a legislative proposal under Article 81(2)(f) in conjunction with Article 103(1) of the Treaty on the Functioning of the European Union (“TFEU”) for the creation of a class action procedure and/or harmonization of the Member States’ domestic laws to streamline the conditions for private enforcement. Under Article 288 of the TFEU, the Council can issue regulations or directives.[vii] As they are very specific, regulations do not generally require further implementation being directly applicable in all Member States, while allowing no discretion in their application. A directive is only binding as to the result to be attained for the specific Member States to which it is addressed, allowing the national authorities to choose the form and method of implementation. Consequently, a regulation would better guarantee full uniformity concerning the core principles of a class action procedure by not allowing for derogation under the Member States’ domestic law because of procedural autonomy. The exact course the EU will take is to be awaited, but a regulation was used to establish a European Small Claims Procedure, among others.[viii] The Commission is currently “planning to adopt a Communication setting out common principles on collective redress by the end of [2011].”[ix]

However, the Commission stresses that it does not wish to create either a litigious culture[x] or class action “abuse” as in the US.[xi] It is unclear from all the documents mentioned above what specific “abuse”[xii] the Commission is referring to. Nevertheless, the controversy on abusive class action litigation[xiii] might even be helpful as it would allow for ex ante identification of any flaws. This would help all actors involved to formulate an even better procedure, because procedure does not function on its own.

More importantly, neither the Commission Papers nor the discourse in general discuss the role of the courts in facilitating private enforcement of antitrust laws. The scarcity of private enforcement throughout the EU is not only an indication that private parties have not approached the courts but also that the reverse has not been the case either—the courts apparently have not ‘extended their hands’ to private individuals.[xiv]

A possible explanation could be the lack of pan-European civil-law principles that allow the courts in the EU Member States to create mechanisms to facilitate private antitrust actions. Admittedly, the ECJ could perhaps formulate European procedural antitrust law principles, thus achieving a certain level of harmonization based on case law. However, harmonization would then depend on the preliminary reference procedure[xv] and, therefore, be piece-meal and not as expeditious as harmonization through the legislative process.[xvi]

The lack of private antitrust litigation might also be related to the approach to statutory interpretation and historic background: while at common law there first was common law and then the statutes, most EU Member States first turn to codes for comprehensive principles and then to case law.[xvii] Consequently, absence of such EU statute implies absence of private enforcement.

This is in stark contrast with the US common law that facilitates enhancement of private antitrust litigation, because common law courts deciding a case not covered by statute can simply resort to the common law as a “repository of broad and comprehensive principles”.[xviii] This in turn allows them to “create” the new law needed to resolve a case.[xix] From that point, common law courts can analogize and distinguish, shift burdens, and so forth, thereby perpetuating the growth of common law and enhancing procedure. This repository of common law principles also facilitates sustained private antitrust litigation nationwide.

Therefore, it stands to argue that, either directly or indirectly, the US courts play an important role in facilitating and honing private antitrust litigation by, for instance, barring frivolous claims.[xx] Therefore, the fact that the US has been developing and enhancing its antitrust litigation procedures for a significantly longer time than the EU should in fact be encouraging for EU’s private enforcement. EU antitrust law starts with a ‘clean slate’ in creating substantive and procedural means for private antitrust litigation. This fully equips the EU to ‘nip’ any abusive conduct ‘in the bud.’[xxi] How? By analyzing and distilling methods used by the courts, which can be converted into legislation or principles, set forth in e.g. a directive as mentioned above, and that can be used by and before the courts throughout the EU. The advantage of this strategy would be that the results could be tailored to the specific procedural and legislative needs and structures of both the EU and the individual Member States, allowing for optimization of private antitrust litigation, collective action procedures and the design of new measures.

[i] See e.g. Waelbroeck, D., Slater, D., and Even-Shoshan, G., Study on the Conditions of Claims for Damages in Case of Infringement of EC Competition Rules, Comparative Report, August 31, 2004, Ashurst. The dates of these discussions not only show how old the debate is but, more importantly, the acute legislative inertia that has characterized it.

[ii] This EU case law principle means that, in the absence of relevant EU law, each Member State has the autonomy to lay down the procedural rules to protect the rights that individuals acquire under EU law, provided, however, that such rules are not less favorable than those governing similar domestic actions and are not framed in such a way as to render practically impossible the exercise of rights conferred by EU law. Case C-33/76 Rewe v. Landwirtschaftskammer [1976] ECR 1989, ¶¶ 5 and 6; and Case C-45/76 Comet v. Produktschap voor Siergewassen [1976] ECR 2043, ¶ 13.

[iii] Wyatt, D., Dashwood, A. and Arnull, A., Wyatt and Dashwood's European Union Law, fifth edition, London: Sweet & Maxwell, 2006, p. 232. Dougan, M., National Remedies Before the Court of Justice: Issues of Harmonisation and Differentiation, Oxford: Hart, 2004, p. 387.

[iv] E.g. Jones, C.A., Private Antitrust Enforcement in Europe: A Policy Analysis and Reality Check, World Competition: Law and Economics Review, 2004, Vol. 27, No. 1, pp. 13-24.

[v] Green Paper — Damages Actions for Breach of the EC Antitrust Rules, COM (2005) 672, December 19, 2005, final; See also European Parliament Resolution of April 25, 2007 on the Green Paper on Damages Actions for Breach of the EC Antitrust Rules (2006/2207(INI)); White Paper — Damages Actions for Breach of the EC Antitrust Rules, COM (2008) 165, April 2, 2008, final.

[vi] Commission Staff Working Document Public Consultation: Towards a Coherent European Approach to Collective Redress, Brussels, 4 February 2011, SEC (2011)173, final.

[vii] Article 288 of the TFEU: “A regulation shall have general application and that it is binding in its entirety and directly applicable in all Member States. A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.”

[viii] Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure, Official Journal L 199, July 31, 2007.

[ix] Speech/11/598 of September 22, 2011 by J. Almunia, Vice President of the European Commission for Competition Policy, Public Enforcement and Private Damages Actions in Antitrust, European Parliament, ECON Committee, Brussels.

[x] See also Martin, J. S., Private Antirust Litigation in Europe: What Fence is High Enough to Keep out the US Litigation Cowboy?, European Competition Law Review, 2007, Vol. 28, Issue 1. See also Joint Information Note by V. Reding and J. Almunia, Vice-Presidents, and J. Dalli, Commissioner: Towards a Coherent European Approach to Collective Redress: Next Steps, SEC (2010) 1192, Brussels, October 5, 2010, Official Journal 1932, page 6.

[xi] Some points of (European) criticism on American antitrust litigation: “private plaintiffs have misused the right of action for purposes not consistent with antitrust policy, increased litigation puts excessive burdens on the court system and on private litigants, the risk of stiff penalties and the uncertainties of litigation deter firms from pursuing aggressive but pro-competitive activities, the selection of cases brought by private parties has lead to the development of poor legal precedent.” The authors conclude on p. 60, however: “[T]he [US] courts have been fairly successful in fashioning doctrines that apparently further the goals of antitrust policy through private enforcement while at the same time reduce some of the costs of private enforcement.” Slot, P. J. and McDonnell, A., Procedure and Enforcement in EC and US Competition Law: Proceedings of the Leiden Europa Instituut Seminar on User-Friendly Competition Law, Europa Instituut, Leiden, London: Sweet & Maxwell, 1993, pp. 52-60.

[xii] Comments of the American Antitrust Institute in response to the public consultation: Towards a Coherent Approach to Collective Redress, April 2011, pp. 6-8, 13-18. Comments of the ABA Sections of Antitrust Law and International Law to the European Commission Staff’s Working Document: Towards A Coherent European Approach To Collective Redress, April 30, 2011, pp. 4, 10.

[xiii] Comments of the ABA Sections of Antitrust Law and International Law to the European Commission Staff’s Working Document: Towards A Coherent European Approach To Collective Redress, April 30, 2011, p. 3.

[xiv] Ibidem.

[xv] This procedure is set forth in Article 267 TFEU: “The [ECJ] shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties[.] . . .Where such a question is raised before any court or tribunal of a Member State, that court may, if it considers that a decision on the question is necessary to enable it to give judgment, require the Court of Justice to give a ruling thereon.”

[xvi] Van Gerven, W., The ECJ Case-law as a Means of Unification of Private Law?, in Hartkamp, A. and Joustra, C., Towards a European Civil Code, Second Revised and Expanded Edition, Kluwer: The Hague, 1998, p. 92.

[xvii] W. Burnham, Introduction to the Law and Legal System of the United States, 4th ed. 2006, p. 50.

[xviii] Ibidem atp. 52, citing Norway Plains Co. v. Boston & Maine R.R. 67 Mass. 263 (1854).

[xix] Ibidem at p. 51.

[xx] Cf. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (on the standard for dismissal under Rule 12(b)(6) in relation to an allegation of parallel conduct); Comments of the ABA Sections of Antitrust Law and International Law to the European Commission Staff’s Working Document: Towards A Coherent European Approach To Collective Redress, April 30, 2011, pp. 9 and 14 (on Federal Rule of Civil Procedure 23(a) & 23(b)(3) and 11, respectively).

[xxi] Ginsburg, D., Comparing Antitrust Enforcement in the United States and Europe, Journal of Competition Law and Economics 2005, 1, (3), pp. 435, 436. Wælbroeck,D. and Slater, D., The Commission’s Green Paper on Private Enforcement: “Americanization” of EC Competition Law Enforcement? in Ehlermann, C. and Atanasiu, I. (eds.), European Competition Law Annual 2006: Enforcement of Prohibition of Cartels, Hart Publishing, Oxford 2007, pp. 425-445.