Regulations implementing EU Directive 2014/104 (the “Damages Directive”) have come into force in the UK. The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 (SI 2017/385) (the “Regulations”) entered into force on 9 March 2017 and were published on 14 March 2017. The Regulations amend the UK Competition Act 1998 by adding a new section 47F and new Schedule 8A.
The Damages Directive aims at harmonising access to private damages for competition law infringements across EU Member States. As a Directive, it requires implementation by Member States through national legislation. The UK has a comparatively well-developed private damages regime which already met many of the requirements of the Damages Directive. However, the Regulations make some significant changes to existing law, e.g. in relation to proving loss.
The key areas covered by the Regulations are as follows:
• Limitation: The Regulations provide that the limitation period for competition damages actions shall not start to run until the infringement has ceased and the claimant knows, or can reasonably be expected to know (a) of the infringer’s behaviour, (b) that the infringer’s behaviour constitutes an infringement of competition law, (c) that the claimant has suffered loss or damage arising from the infringement, and (d) the identity of the infringer. The Regulations also provide for the suspension of the limitation period during an investigation by a competition authority, which includes the European Commission and competition authorities of other Member States, and during a consensual dispute resolution process between the parties. This increases the period after an infringement during which infringers may be exposed to potential damages actions.
• Presumption of Loss: The Regulations introduce a rebuttable presumption that cartel infringements cause loss or damage. This concept did not previously exist in English law but will make it easier for parties who have suffered damage as a result of a cartel to bring claims where there already exists an infringement decision by a competition authority. Claimants will still need to prove the extent of their loss or damage.
• Indirect Purchasers: It is established law in the UK that indirect purchasers (i.e. those further down the distribution chain who did not purchase directly from cartel members) have a right to bring damages claims against infringers. The Regulations make it easier for indirect purchasers to show that they suffered a loss by introducing a rebuttable presumption that an overcharge levied on a direct purchaser was passed on to indirect purchasers.
• “Passing on” Defence: If defendants seek to employ the “passing on” defence (i.e. to claim that the claimant passed its loss down the supply chain), they will have the burden of proving this.
• Joint and Several Liability: As a general principle of English law, defendants will be jointly and severally liable for the damage caused by a cartel. The Regulations provide for certain exceptions to this principle for small and medium-sized enterprises (as defined in the Regulations) and undertakings which received immunity under the EU cartel leniency programme in return for co-operation with an investigation. Also, where an infringer settles with a claimant, the settling infringer will cease to be liable to the settling claimant unless the other infringers are unable to pay the outstanding value of the claimant’s claim, in which case the settling infringer will be liable for the other infringers’ shares (unless expressly excluded by the terms of the settlement). The Regulations also provide an incentive to early settlement by restricting non-settling infringers from seeking a contribution for damages from the settling infringer.
• Disclosure: The UK’s existing disclosure regime is wider than the minimum standards required under the Damages Directive. However, the Regulations place limits on the ability of the UK courts to order disclosure of certain categories of documents from a competition authority’s file. The courts may not at any time order disclosure of cartel leniency statements and settlement submissions that have not been withdrawn. In addition, the courts may not order disclosure of a competition authority’s “investigation materials” (such as Statement of Objections, RFIs, responses to RFIs and withdrawn settlement submissions) before the closure of the competition authority’s investigation.
• Proving Infringements: The Regulations provide that final decisions of Member States’ competition authorities are prima facie evidence of an infringement of competition law.
• Exemplary Damages: The courts and the UK Competition Appeal Tribunal (“CAT”) are prohibited from awarding exemplary damages in competition damages actions.
The Regulations apply both to actions based on EU and on UK competition law.
With regard to commencement, the Regulations distinguish between “substantive” and “procedural” provisions. The substantive provisions in respect of passing on, presumption of harm, joint and several liability, limitation, settlements and exemplary damages will only apply to claims relating to loss or damage resulting from infringements of competition law which took place on or after 9 March 2017. Given that cartels may take years to come to light, it is likely to be some time before these provisions are tested in the courts. The provisions relating to disclosure and use of evidence will apply to claims in relation to which the first proceedings before the court or CAT began on or after 9 March 2017.
The full text of the Regulations may be found here.