Antitrust Alert: European Commission Promoting Class Action in European Union

The European Commission has made facilitating private enforcement of competition laws a priority, especially in the area of class actions to complement public enforcement of European Union competition and consumer protection laws. Although some of the key developments remain in the hands of the EU Member States, the Commission is working to promote changes in national laws to enable private damages litigation across Europe. In particular, the EC currently is running two parallel initiatives to develop class actions.

The first initiative is headed by the directorate-general competent for competition (DG COMP) within the framework of private enforcement of competition law. In April 2008, DG COMP published a White Paper setting out its proposed measures and policy choices. DG COMP suggests two complementary mechanisms of collective redress:

The possibility for « qualified entities » – consumer associations, state bodies, trade associations – to bring collective actions on behalf of identified individuals (or, in restricted cases, identifiable victims). These entities would be designated in advance by Member States or certified on an ad hoc basis by a Member State for a particular competition law infringement.

The introduction of opt-in collective actions, in which victims of antitrust violations combine into a single action their individual claims of harm by a single defendant or set of defendants.

In addition, the White Paper suggests a limited system of discovery between parties.

The European Parliament is set to vote on its own report on the White Paper around 20 March 2009. This report is likely to give DG COMP the green light to go ahead with the introduction of antitrust class actions, without waiting for the second, consumer protection initiative described below. However, the report is likely to advocate that the Parliament should be involved in the legislative process, under the co-decision procedure, which is likely to further delay the process. On the basis of the Parliament’s report, DG COMP will proceed with more detailed proposal of legislation.

The second initiative is headed by the directorate-general competent for health and consumers (DG SANCO). This effort aims at introducing a system of collective redress for victims of consumer law violations. DG SANCO published a Green Paper on Consumer Collective Redress in November 2008. This Green Paper suggests four options, one of them being introduction of a judicial collective redress procedure on a pan-European basis.

Jones Day has commented on the Green Paper on behalf of several clients, who have argued that, contrary to the Commission’s assertions, the introduction of collective redress will not boost cross-border trade and that the introduction of class actions is likely to cause more harm than good. The Commission should focus on more effective ways of solving disputes between traders and consumers, notably the establishment of a better framework for handling consumer complaints by businesses and for alternative dispute resolution mechanisms. Harmonizing national consumer legislations would be more effective in boosting cross-border trade.

Later in 2009, DG SANCO is expected to present another policy paper, reflecting the comments it has received. It is likely that stakeholders will have be able further to comment on any proposal.

One policy question is whether in practice it would be workable to have two different systems, one for competition law violations and one for consumer law violations. In some cases, a victim may want to bring claims based on both a consumer law and a competition law violation. In response to this question, this week Competition Commissioner Neelie Kroes stated that continuing with a separate approach for competition law infringement was likely to be more efficient than implementing a horizontal framework for collective redress applicable to all infringements.

Although aggressive, U.S.-style private litigation will not soon be introduced in Europe, the EC and some Member States are advocating new litigation regimes that will bring significant changes to the legal landscape. Private litigation in England already is especially active (as discussed in this prior Alert on damages in private cartel actions in England). This will be closely watched by the EU legal and business communities.

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