Cartel damages claims: how is the UK going to implement the Damages Directive?

On 28 January 2016, the Department for Business Innovation and Skills (BIS) issued its long-awaited consultation on the implementation of the EU Damages Directive, which relates to claims for harm arising from cartels and the abuse of a dominant position.

This is a hot topic in the tech, media and comms world in particular, with Amazon and Google both facing EU scrutiny. With the European Commission having issued fines for cartel offences across a range of industries, however, businesses in any sector could find themselves with a potential cartel claim. If so, the changes being brought in by the Directive could have a significant impact across the EU.

What are the key changes being proposed?

The Directive aims to encourage businesses to tackle anti-competitive behaviour by harmonising Member States’ laws on bringing competition-related damages claims (see our previous article here). The UK regime is already aligned with many aspects of the Directive. However, some changes to the UK regime are needed to ensure that UK cases following on from European competition decisions meet the requirements of the Directive. BIS is also proposing to apply these rules to purely UK cases, despite this not being a requirement of the Directive.

 The BIS consultation highlights the following areas for change:

• Limitation: the harmonised minimum limitation periods for bringing claims in the Directive will not affect the UK, which already meets the minimum prescribed length of time. However, the date that the period starts will depend on when the claimant must know that a company’s behaviour “constitutes an infringement of competition law”. In practice, this is likely to mean that in most follow-on cases, the limitation period will not start until the date of the infringement decision of the competition authority. Limitation will also be suspended during the new statutory “Consensual Dispute Resolution” process as well as the period of investigation by the competition authorities. These changes will reduce the scope for defendants to rely on limitation defences.

The provisions likely to attract most attention in this area are the transitional rules that determine which claims are caught by the new limitation rules and which are not. If the new rules only apply to wrongful acts taking place after the date of implementation, the changes will have little impact in the near future.

• Disclosure of documents: many of the Directive’s provisions relating to disclosure will be familiar to UK practitioners and will not require any changes to the current regime. The Directive does, however, introduce rules on which documents produced as part of the competition investigation can be made available to claimants. This is a highly contentious issue which has been fought in the English courts on several occasions, and which will now be largely settled by the Directive’s provisions.
• “Passing-on”: The “passing-on defence” concerns the question of whether a claimant actually suffered loss from the higher cartel prices, or simply passed these costs on to its own customers in full. This defence is already recognised in English law, but in future there will be a new rule specifying that a defendant will need to prove that the claimant passed on the overcharge if it wants to use the defence. If it cannot do so, the claimant will not have to prove the opposite. This may assist claimants in getting their case off the ground, but the final outcome is likely to continue to depend on expert evidence about the nature of the market.
• Scope: As mentioned above, BIS is proposing that the new rules will apply in the same way to actions relating to breaches of UK as well as EU competition law. This goes beyond what is required by the Directive, but aims to avoid confusion and potential arguments about which regime applies.
• Timing: BIS is consulting on whether to introduce the changes on 1 October 2016 or to wait until the Directive’s implementation deadline of 27 December 2016.

What will this mean for businesses? 

The impact of the Directive on the UK competition litigation regime will be relatively limited. However, cartel damages claims commonly have a cross-border element, and can result in claims being brought in one of a number of jurisdictions. The move towards harmonisation of different national regimes will therefore have an impact for potential claimants based in the UK or elsewhere in the EU when deciding where to bring their claims. Nevertheless, significant differences between national regimes will remain, and the choice of where to bring a claim will continue to be a complex one.

The deadline for responses to BIS’s consultation is 9 March 2016.

If you would like more information on cartel damages or the impact of the new rules on you, please speak to one of our experts.