In the wake of the seminal European Court of Justice (ECJ) ruling in case C-360/09 – Pfleiderer AG v Bundeskartellamt, Amtsgericht Bonn (Bonn local court), in a decision rendered on 18 January 2012 (case 51 Gs 53/09), has refused to give a damages claimant access to leniency submissions held by the German Federal Cartel Office (FCO). Although strongly welcomed by the FCO, the decision is a blow to potential damages claimants in Germany, especially as it is not open to appeal.
In response to a request from the English High Court, which is currently reviewing a cartel damage claim, the European Commission has submitted an amicus curiae brief on the disclosure of leniency documents. The Commission’s opinion is that national courts should not order the disclosure of leniency documents prepared specifically for the purpose of an application under the EU leniency programme. In contrast, the applicant’s reply to the statement of objections and the replies to requests for information could be ordered to be disclosed, insofar as they do not concern leniency material.
The European Commission has invited comments as it reviews the current regime for Technology Transfer Agreements. All stakeholders that have worked with the current set of rules will have a real interest in its improvement and should find it worthwhile to take part in the consultation process. In order to be involved in the shaping of these proposals and not just in the polishing of them, it is important to submit comments ahead of the 3 February 2012 deadline.
On December 2, 2011, the Seventh Circuit Court of Appeals granted plaintiffs’ petition for rehearing en banc and vacated the opinion issued by a Seventh Circuit panel in Minn-Chem, Inc. v. Agrium Inc., No. 10-1712. The Seventh Circuit panel had issued an order on September 23, 2011, directing the district court to dismiss a class-action price-fixing complaint against global producers of potash, a mineral used primarily in agricultural fertilizer.
The plaintiffs alleged a global price-fixing cartel among Canadian, Russian and Belarusian producers of potash, alleging that they fixed potash prices in Brazil, China and India, and the inflated prices in these overseas markets in turn influenced the price of potash sold in the United States. The defendants moved to dismiss the complaint under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, arguing first that the district court lacked subject-matter jurisdiction under the Foreign Trade Antitrust Improvements Act (FTAIA), 15 U.S.C. § 6a, and alternatively, that the complaint did not satisfy the pleading requirements of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). The district court denied the motion to dismiss and the defendants appealed.
On September 23, 2011, the Seventh Circuit panel reversed the district court and remanded with instruction that the district court dismiss the complaint. The Seventh Circuit panel held that the complaint failed to satisfy either of the import-related exceptions to the FTAIA. According to the panel, defendants’ anticompetitive conduct did not “involve” U.S. imports and did not “directly affect” the price of U.S. imports. The panel used the “plausibility” standard of Twombly and Iqbal to determine whether plaintiffs had adequately pled that the anticompetitive conduct fell within one of the FTAIA’s exceptions. However, the Seventh Circuit panel did not reach the question of broader sufficiency of the complaint under Twombly and Iqbal.
Plaintiffs then filed the current petition for rehearing en banc. In their petition, plaintiffs argued that the panel’s opinion conflicted with the Seventh Circuit’s decision in In re Text Messaging Antitrust Litigation, 630 F.3d 622 (7th Cir. 2010). Plaintiffs also argued that the panel misinterpreted the import-commerce exception in determining whether plaintiffs alleged sufficient anticompetitive conduct that “involved” U.S. import commerce. According to plaintiffs, the panel’s decision regarding the import-commerce exception conflicted with the Third Circuit’s decision in Animal Sci. Prods., Inc. v. China Minmetals Corp., No. 10-2288, 2011 WL 3606995 (3d Cir. Aug. 17, 2011).
The General Court rejects intervention of damages claimants in appeal before the European courts by taking a narrow and rather formalistic view of legal interest in the appeals. While it is true that damages actions are legally possible as stand-alone actions, the reality in Europe is that third parties’ damages actions stand and fall with the decision that finds an infringement.
Public Consultation on Settlement and Compliance Programs Launched by the French Competition Authority by Louise-Astrid Aberg and Lionel Lesur
On October 14, the French Competition Authority (FCA) launched a two-month public consultation for guidelines on settlement and compliance programs. Both these guidelines have been highly anticipated since they were first announced last May.
The draft settlement guidelines contain details on the FCA’s approach and decisional practices which were developed under the control of the French courts. Among the guidelines, the FCA determined that settlement is possible in all cases where infringement on competition law has taken place, including cartels, vertical restraints and single firm conduct. In the event of infringement, settlement becomes an option only after the parties have been formally charged. Once parties fully acknowledge their participation in anticompetitive conduct, the casehandler in charge of the matter would decide whether to respond positively to their request for a settlement. Parties retain the same procedural rights that they would in an ordinary procedure; in particular, they would be granted access to file. The FCA would reward parties who wish to settle with a fine reduction of 10 percent. In contrast to the settlement procedure of the European Commission (EC), it would not be possible to cumulate both a settlement reduction and a leniency reduction. However, parties settling with the FCA may decide to adopt behavioral or structural remedies which would enable them to benefit from an additional reduction of 5-15 percent. With regard to cartels, parties would benefit from a reduction up to 10 percent if they commit to changing their behavior in the future, in particular, by implementing a compliance program.
The draft guidelines elaborate further on the benefits of implementing a compliance program. The FCA clarifies several instances in which a compliance program would enable a party to benefit from a reduction of its fine. In the course of ordinary proceedings resulting in the imposition of a fine, the existence of a compliance program or the lack of it would not act as an attenuating or an aggravating circumstance. However, in the case of a settlement procedure, the commitment to implement a compliance program would be considered a commitment by the company to change its behavior in the future and would, thus, enable the party to benefit from a reduction of its fine. In this sense, the FCA and the EC agree that implementing compliance program would not have a significant effect on a fine that is set outside of a settlement procedure. The FCA only differs with respect to the specific context of a settlement procedure.
A fine reduction of up to 10 percent may not be easy to obtain. A compliance program would only be considered by the FCA if it includes the following characteristics: (i) the company’s top executives are strongly committed to the program, (ii) the company has designated persons to oversee the program and take charge of its implementation, (iii) the company has taken effective [...]
The European Commission’s new guidelines for best practices during antitrust procedures introduce some new elements that could be beneficial for companies under investigation, complainants and interested third parties if handled in the right way.
A French court has added another layer of complexity to cartel cases in the European Union. The Commercial Court in Paris has ordered the French competition authority to disclose documents relating to an antitrust investigation. The order concerns non-confidential versions of written and oral statements gathered during the investigation.
The ruling may strengthen plaintiffs’ position in damages actions. The French court’s ruling only concerns settlements before the French competition authority but other European countries may follow France’s lead. According to the European Court of Justice’s recent Pfleiderer judgement, national courts must decide whether plaintiffs may have access to documents submitted to national Member State authorities.
The number of private damages actions in the European Union is constantly increasing. Most of these actions are "follow-on action," based on an infringement decision by the European Commission or the antitrust authority of an EU member State. Plaintiffs can rely on the infringement decision as proof for the antitrust infringement but must further substantiate and prove the harm suffered as a result of the cartel. They are therefore seeking access to information contained in the antitrust authorities’ files, in particular to leniency applications, the confidential version of the infringement decision and also settlement documents. It is still unclear whether plaintiffs will have access to leniency documents submitted to national antitrust authorities.
The German Supreme Court, in a landmark ruling handed down on 28 June 2011, has held that members of a cartel are able to defend themselves against a claim for damages by raising the defense that the relevant applicants have passed on the damage caused by higher prices onto a downstream market (the so-called "passing-on defense"). At the same time, the Supreme Court held that indirect purchasers have standing to claim damages following a violation of the antitrust rules.
The judgment is of considerable practical importance. In parallel with efforts at EU level to encourage private antitrust enforcement, actions for damages in Germany against members of a cartel have increased in number and significance. In the majority of cases, it is the amount of damages which is the subject of proceedings, since the relevant infringement of the rules has already been established pursuant to a legally binding administrative decision in accordance with § 33(4) ARC.
Cartelists, therefore, face in addition to fines also damages claims potentially reaching into the millions. The level of damages is assessed on the basis of the difference between the cartel price and a given hypothetical market price. As a result of the passing-on defense, the level of damages claimed can, however, be considerably reduced. Economic studies show that in theory direct purchasers pass on to a large extent higher (cartelised) prices on to their customers. In practice, however, the passing on of damage can be difficult to prove, since the defendant does not have information at its disposal relating to the prices charged by damages claimants on downstream markets.
The admissibility of the passing-on defense was, on a number of grounds, denied by both the first instance court and the Berlin High Court. It was, however, accepted by the Düsseldorf Higher Regional Court. Indeed, in the literature, the issue has been extensively debated. It was, inter alia, open to question whether § 33(3)(2) ARC ("If a good or service is purchased at an excessive price, a damage shall not be excluded on account of the resale of the good or service") excludes the possibility to plea the passing-on defense. It was also argued that the passing-on defense would undermine the effectiveness of private antitrust enforcement. In contrast, the Supreme Court made it clear that in accordance with the general principles underlying the calculation of damages, the passing on of damage must be taken into account.
Given the lower sums of damages available and the clear difficulties relating to the discharging of the burden of proof, it is questionable whether indirect purchasers will make use of their right to bring a claim. It is therefore expected that the passed on part of the damage resulting from a cartel will in practice remain unclaimed.
On June 24, 2011, Assistant Attorney General Christine Varney announced that the U.S. antitrust enforcement agencies will be signing a cooperation agreement with their Chinese counterparts. As a consequence, companies can now expect to see the Chinese authorities participating in coordinated “dawn raids” and related cooperative enforcement initiatives with the U.S. and EU antitrust enforcers in international cartel cases.
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