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Antitrust Litigation in Italy SOCIAL

JONES DAY TALKS®: Private Antitrust Litigation in Italy

In the fourth installment in our series of programs on the private enforcement of competition law in European jurisdictions, Jones Day partners Mario Todino and Lamberto Schiona discuss how private enforcement has evolved in Italy in recent years, the types of actions available, recent precedents, and the advantages and disadvantages of legal action in Italy.

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Dave Dalton:

This Jones Day Talks series on private antitrust litigation is focused on how regulatory changes have led to increased enforcement actions across Europe. Today's program examines the situation in Italy as we talk with Jones Day partners, Mario Todino, and Lamberto Schiona. I'm Dave Dalton, you're listening to Jones Day Talks.

Dave Dalton:

Lamberto Schiona is a litigator and trial lawyer with more than 20 years experience. He has handled high stakes, complex, civil, commercial, and administrative disputes, including major class actions before Italian courts, including the Supreme Court and the Administrative High Court, as well as before arbitral tribunals and as a panelist.

Dave Dalton:

And Mario Todino has more than 25 years experience in EU and Italian competition law, including 15 years in governmental roles in Italy and Brussels, as well as the European Court of Justice. His practice focuses on mergers, cartels, abuse of dominance, state aid matters and litigation in Brussels and in Italy.

Dave Dalton:

Lamberto, Mario, thanks for being here today.

Mario Todino:

Thank you, Dave. Glad to be here.

Lamberto Schiona:

Thank you, Dave for this opportunity.

Dave Dalton:

Thanks so much. This is an interesting topic. This is the fourth in a series of Jones Day Talks programs we're doing about private antitrust litigation across Europe. And so far, the programs, the podcasts, very well received so we're happy to add this one.

Dave Dalton:

So let's jump right in. Mario, talk to us about how private enforcement actions have evolved in Italy over the last several years and the interaction with, I guess, the public enforcement of these sorts of infractions. How have things changed recently?

Mario Todino:

Thank you, Dave. Perhaps let me start with a funny anecdote in which I was actually involved. A number of years ago, about 10, 12 years ago, it was my very first case of a private antitrust litigation. So at the time, what happened was that the European Commission conducted a cartel investigation, following a leniency application. And at the end, the Commission took this decision, finding a number of companies active in a certain industry. I'm not going to name parties here for confidentiality reasons. But okay. But at the time, so the Commission took this decision, found these companies responsible for a cartel and imposed a very heavy fine over the cartelists.

Mario Todino:

Now, what typically happens is that the victims of the cartel would then lodge typically a follow-on damages action. And in Europe it was always one of the plaintiff friendly jurisdictions, primarily the UK. To a lesser extent, also the Netherlands. And on that occasion, so the infringers, the co-infringers of the cartel actually were quicker than the victims. And one in particular filed an action before an Italian court, Tribunale di Milano, asking the judge to declare that the alleged cartel found by the European Commission, in fact, never took place and in any event had no detrimental effect giving rise to a right to compensation.

Mario Todino:

So it was actually what we call in our jargon, negative declaratory action, and it was totally novel and unprecedented. It was never seen before in an antitrust private litigation in the EU, to my knowledge. It was very, very smart. And why? Because the very purpose of the action was to maliciously attract before the Italian judge, the jurisdiction over any damage claim filed by the victims of that cartel in other fora of the EU. And why was Italy chosen as a forum to litigate the case? Precisely because the Italian judicial system was notoriously slow and did not provide judges with adequate investigative tools, enabling an effective gathering of the evidence, the so-called discovery rules as we call it in the US in the context of damages action.

Mario Todino:

Nor did the Italian judicial rules contemplate the other typical mechanism designed to facilitate damage claims like you have in the US, contingency fees or travel damages. And on top of that, at the time, the competencies across the courts in Italy were scattered across different judges, and there were no specialized chambers. So this gives you a good flavor of what was the Italian judicial system at the time and how irrelevant was private enforcement. In fact, it was more than that. At such a point that someone devised the whole thing in order to prevent the victims of a cartel from taking advantage of more better fora. So, private enforcement was totally undeveloped, as I said. Antitrust enforcement was exclusively a matter of public enforcement at the time, but then things began to change at EU level. The European Commission discovered private enforcement as a tool for enforcement of competition law. So private anti-trust enforcement became a top priority in the agenda of the Commission.

Mario Todino:

And this, of course, then positively reverberated also into the judicial system of the other countries of the EU. I think we have discussed already in previous episodes of this podcast how this process unfolded and how this process then led to the adoption of the damages directive. Perhaps let me just recall here that the damages directive has been implemented in Italy by decree number three of 2017. Over the time of this 10 years, the landscape is completely changed. So now we see, I would say quasi systematic, full-on damage claim being filed in an Italian court, following the decision of the Italian competition authority finding an antitrust infringement. And just to give you an idea, Milan, which is the most important forum of these antitrust actions has recently reported that between 2013 and 2020, they dealt with 120 decisions, more or less, out of which around 80 were taken in first instance. So this give you the magnitude of the issue. So how actually incredible has being the development and the growth of antitrust private litigation in Italy.

Dave Dalton:

Absolutely. And certainly the situation has changed markedly. And as you say, exponentially, in terms of the number of cases pursued. From the situation you described earlier in your remarks, it's dramatic. And I think as a practicing lawyer in Italy, you probably couldn't predict this kind of escalation in activities, could you? Or did you expect that once the EU directive came in?

Mario Todino:

Only to some extent, I must say. This was surprising to most of us. I mean, it became clear over the last two or three years that something fundamental was about to change, but it was difficult to predict such an important, such a revolutionary change. Again, you have to bear in mind that the Italian judicial system was always considered still unfit in some respects, as far as these actions are concerned. However, not only I would say that this exponential increase depends to some extent, not only on the implementation of the directive, but also on a number of reforms in terms of organization of the courts and specializations of the courts that also have played a very important role in this respect.

Dave Dalton:

Interesting. Absolutely. A very dynamic time period, that's for certain. Let's go over to Lamberto for a second. Talk about the types of actions available to parties in the private antitrust work in Italy, Lamberto, if you could.

Lamberto Schiona:

Thank you, Dave. Well, in Italy, antitrust damage actions may be put forward by both individuals or legal entities. So alternatively, on a legal basis or on a class action basis. And in line with the EU legislation, standalone and full-on actions are equally allowed. In practice, actions, brought by individuals are very few because of the disproportion between legal and court expenses and costs versus the actual benefit that individuals may get at the end of the story. As we know, antitrust infringements determine damages that decrease over the damaged party's chain in a way that consumers, which stand at the very bottom of the chain actually suffer limited damages. And this is the reason why damage actions tend to be commonly performed under the umbrella of class actions. And class action is a, let's say a long story in Italy that dates back in 2006, where the Italian parliament enacted the so-called code of consumers, including a single provision governing class action.

Lamberto Schiona:

That was insufficient. That was, let's say, reshaped in July 2009. And such legislation has been recently further amended by Law 31 of 2019, that entered into effect in late November this year. So right two, three weeks ago. And the important, remarkably, this is in perfect synchro with the adoption of the new EU directive on class actions, which came into effect on November 24 this year. So there's a full overlap in terms of timing of the implementation.

Lamberto Schiona:

And the new Italian law is not only substantially aligned with the EU directive, but attempts to go several step farther by covering a broader range of infringement in different businesses, such as financial services, energy, environment, by extending its scope of obligation to anyone whose rights may be affected and not only consumers or user but also undertakings and professionals. And also by ensuring faster and more efficient solutions to prevent procedural costs from becoming a practical obstacle to bringing collective actions. And furthermore, providing different types of remedies, such as restitution, injunction, injunctive and compensatory redress, collective cease and desist orders, measures to remove the effects of infringement.

Lamberto Schiona:

So let's say that the new law on the one side mirrors the new EU directive and on the other side really goes several steps farther. Then, as you know, new laws always entail old and new issues. One of the main issue that still remains unsolved so far is the matter of the admissibility of class action. Just to give you some number. As you probably know, litigations cases are not public in eternity because of privacy reason, et cetera. But the Italian minister of justice from time to time make public certain metrics, certain statistics. And just to give you an idea, almost 50% of the class action carried out over the last 10 years were dismissed because of declaration of inadmissibility.

Lamberto Schiona:

So only 50% went to trial and only one action out of seven ended up with the award of damages. So the initial stage of class action in Italy was a kind of disaster, but things are changing and changing significantly. Class action are still subject to some kind of admissibility assessment by the competent civil court, which can reject the claim when the claim is, let's say, blatantly unfounded. Or a conflict of interest exists between the class action members or the right and claims of the class members are not homogenous. And additionally, claimant does not seem able to properly pursue the class interests throughout the whole proceedings, for instance, where it may lack the organizational and financial means and accessory to adequately support the action.

Lamberto Schiona:

But this situation changed drastically in 2017 as mentioned by Mario with the adoption of the decree number three, implementing the EU directive on antitrust damages. And the main reason is that the decree introduced too some point of burden of proof, effectiveness on the antitrust decision, discovery of key implementation, which basically facilitated claimant's job, which is not an easy job under Italian law given that claimant, in general civil litigation is entirely burdened with proving that a certain conduct is unlawful and certain damages arose out of this conduct that's direct and immediate consequence thereof. So the standard of proof is very high, but the combination between the decree adopted in 2017 and the new class action makes things easier now. So we expect a significant increase of class action in the future.

Dave Dalton:

So that's the forecast. Do you think the number of cases will continue to escalate?

Lamberto Schiona:

Exactly. Exactly. Exactly. We can see that the new pieces of legislation somehow tend to simplify things for claimants. So I would also say that these new legislations are somehow claimant friendly. And this is one of the reason why Italy is a natural candidate for future antitrust damage actions. The main reason is the combination of a couple of specific provisions included in the decree and the new class action law. My reference is particularly two Article seven, mirroring Article nine of the directive, according to which the decision of a national trust authority and the European Commission are binding for nationals, say the judge, your relation to the finding of the infringement, provided that such a decision ascertain the existence on the infringement and are final in the sense that they cannot be subject to appeal any longer. This makes things easier because you have already there the basis for your claim. And then it's just a matter of highlight to the court the causal link between the unlawful conduct and the damages, and then it's a matter of quantification of damages.

Dave Dalton:

Interesting developments. So it kind of goes back to what Mario said earlier about how much the environment in Italy has changed in terms of being a forum for these kinds of cases moving forward. And I think as you point out, Lamberto, we're only going to see more as we move forward. Let's talk about recent precedents, recent relevant precedents. Mario, what's happened recently that future litigants might need to know about in terms of some precedents regarding recent cases and actions?

Mario Todino:

So I'm going to stay high level again, Dave, in order not to mention the name of the parties of the cases, all the more that in some of these cases, we are indeed involved. So what we see now lately, we see that the rules of evidence disclosure, this disclosure mechanism, which was introduced by the damages directive as Lamberto said and then implemented into our legislative decree. So these rules of disclosure are increasingly being used, handled by the judges. And the reason why is that these are an efficient tool to collect evidence. So we see that the judges are now exercising these powers toward disclosure, even vis-a-vis the Italian competition authority. So they actually go and they order the disclosure of the documents in the file of the Italian competition authority. Of course, this happens only in those cases which have already been closed. So where the investigation has handed into the kind of decision by the Italian competition authority.

Mario Todino:

The other thing that we see a lot is passing on. Passing on is very often a centerpiece of the defense strategy of the defendant, but also so the attack because depending on the standpoint, because as you know, passing on under the EU rules can be used as both a shield, meaning that the defendant can actually claim that the purchaser has actually passed on to its customers the overcharge that he suffered as a result of the cartel. Right? But passing on can also be used as assault by an indirect purchaser, the consumer, an end consumer, for instance, to argue and claim that he actually received from his supplier the overcharge, that it was passed on in the first place to the purchaser. So it works both ways.

Mario Todino:

This is why it is so important. And we see the Italian courts familiarizing more and more with these mechanisms. The other interesting topic in my view, where we have seen interesting developments over the last couple of years, regards the quantification of damages. So this is an important topic. It's to some extent the battleground in most of these damages actions. And here what we see, we see on one hand the court increasingly familiarizing with even sophisticated methodologies to quantify damages, take inspiration from the methods which have been highlighted in the European Commission guidelines in point. So you see cases where actually the court has applied the before and after method, the yardstick method and others. And I think this is a positive development because it means that the court are increasingly equipped with approaching the issue of quantification of damages in a scientific way, so to say.

Mario Todino:

Now. We see also, on the other hand, an opposite, a dangerous trend, which comes in my view from the combined applications of two ill-conceived principles of the damages directive. So let me perhaps explain here what I mean. So we have these two principles, which, if you take them separately, they are sensible. But if you put them together, they make a kind of short circuit. They can cause very damaging side effects. And why? Because the first principle is that when it comes to a cartel, being decided by being found by the competition agency, there is always a presumption of harm being suffered by the victim of the cartel.

Mario Todino:

So here you have a remarkable presumption. It makes sense, you would argue. It's a sensible idea. After all, it is difficult for victims of cartel infringement to prove they have suffered harm as a result of cartel. So the legislator has established this principle of rebuttable presumption. Fair enough. But then you have the second principle within the directive, which is, okay on the ground that it is difficult to quantify harm in competition cases and this exercise can be very costly, very fact intensive and maybe why the application of a complex economic models, and some, especially end consumers are totally unequipped.

Mario Todino:

And very often, the evidence of the wrongdoing rests with the infringers. Then the legislator says, as a last resort, courts should always be entitled to award damages to cartel victims on an equitable basis, meaning without any accurate calculation of the real damage being suffered. So it's a kind of approximate, common sense quantification, which is not based on scientific and accurate criteria. But the problem is that if you put together these two principles, then you risk a short circuit. Because, as a matter of fact, it's very tempting for a plaintiff and then for the judge to go for these shortcuts. Because in a way what you could do as a claimant, you're a victim of a cartel, you don't have the evidence to prove that you have suffered harm as a result of this cartel. So what do you do?

Mario Todino:

You go and you lodge a claim where you say? "Okay, judge, listen, here I have a decision of the Italian competition authority finding a cartel. So based on the directive and implemented decree, if there is a cartel, there is presumption of harm. I suffered hard. I don't know how much it is, but in any event, you judge, you're entitled to award damages, even on an equitable basis. So please award me 20% of the price that I paid, because that must be the damage that I suffered." Without bringing any piece of evidence whatsoever. Now, it may sound to you a little bit exaggerated, or the way I'm actually representing the fact to you, but I can tell you that we have at least a couple of cases in which we are precisely assisting to what I told you. So the risk that we see here, that the judges will be tempted from taking the shortcut. And I hope this is not going to be the case.

Dave Dalton:

Right. This is different to some things I've heard on the other podcasts on this subject. This is potentially a real issue and a risky issue for people involved in these cases. Isn't it? I mean, there's just too much uncertainty, I think.

Mario Todino:

It is very risky. All the more that we do have in our civil code this principle that the judge should be entitled to award damages on an equitable basis. And in fact, there are a couple of precedents. One very important, a Supreme Court ruling a few years ago, even before the directive was adopted and implemented in Italy, Supreme Court ruling that the judge should be entitled to award damages to end consumers even without having any knowledge whatsoever of the quantification of the damage.

Dave Dalton:

Right. Interesting time. All right. Well, this has been terrific so far. We're learning a lot. This is a great addition to this podcast series on private antitrust litigation throughout Europe. Let's wrap it up with Lamberto. Tell us about some of the advantages and disadvantages of an action in Italy relative to other jurisdictions, especially in Europe.

Lamberto Schiona:

Good question, Dave. I think that the starting point here is kind of historical reluctance of market players to litigate in Italy because of the alleged duration of Italian court proceedings, which is probably true for the past, but it's no longer an issue. Just to give you some numbers. The average duration of private antitrust damage actions in Italy over the past year has been around two years. Now, just consider that an arbitration proceeding before the ICC in Paris lasts not less than three years. So as you can see, we can say that Italy is currently aligned with the average duration of this kind of litigation across Europe.

Lamberto Schiona:

Pros and cons to litigate in Italy. Well, I think that one of the main point to consider is the perfect interplay that we have in Italy between damage actions before civil courts and pending judicial review of antitrust decisions before the administrative courts. Let me mention in that respect an hallmark decision that was issued by the state council, which is the administrative court of second instance with exclusive jurisdiction on antitrust cases.

Lamberto Schiona:

It's a recent case if I'm not wrong, early 2019, the case as public was Laroche Novartis versus Antitrust Authority. And the state council addressed a long debated thorny issue, which is the breath of the administrative court's judicial review of the facts underlying antitrust fines. The state council focused on how to perform an effective judicial review in a way to ensure that the antitrust authority and the fine entity stand against each other on a level playing field under the umbrella of fundamental principle and due process principles. And without undermining the independence of the public body. In that respect, in line with a solid trend of European Court of Justice precedents, the solution to the equation for the state council was to perform an in-depth review by directly and wholly addressing the underlying question of fact in order to establish whether it is intrinsically true.

Lamberto Schiona:

And the judicial tool to achieve such goal is a whole court review. This is on a soundness stress test of the facts on which the antitrust authority relied upon. And in the same decision, the state council also tackled another crucial topic, which is the interplay between the administrative court's judicial review in public enforcement cases and the judicial review performed by civil court cases in private enforcement, both in full-on and standalone. And in the state council view where public enforcement is concerned, the administrative court's factual review of anti-competitive conduct is necessary to counterbalance the civil court's lack of powers in private enforcement full-on proceedings to independently review any alleged misconduct as found by the antitrust authority.

Lamberto Schiona:

While on the contrary, in standalone actions, only private enforcement is concerned and thus, the civil courts are entrusted with extensive powers to assess alleged antitrust sensitive conducts. So this perfect combination of the activities performed at the level of the administrative court and the civil court is an asset in Italy. In addition to that, I think that also we should focus on the existence of specialized sections within our first instance courts, a highly skilled judge who had collected a lot of experience over the past years. Another reason is that as mentioned before, Italy is a class action pioneer in the EU and it's also the member state, which has adopted the most up to date class action model, which somehow mirror the US model, which has a long story and a long line of court assessment.

Lamberto Schiona:

And other reasons are also in case a decision finding antitrust violation is issued by the Italian antitrust authority, generally, it's more convenient to commence private enforcement proceedings in Italy in order to take advantage of the certain convenient procedural tools stemming from both the private enforcement decree and the class action law. On top of that, I would also say that Italy is known on the market for being a very litigious country. Litigious country entail litigious consumer association. So they are very aggressive and this entail more chances for consumers to be supported on a broad scale.

Lamberto Schiona:

And something that is arising over the past, let's say, couple of years, courts have shown broad openness to class actions and to the admissibility rate. This, in our view, or at least in my view, will further increase as a result of the new class action whose underlying goal is exactly in reality to open the court to collective redress. And along these lines, the new class action provide for collective enforcement proceedings via the consumer association, which is an element of novelty and materially simplifies consumer redress. And this for now appears to be unique to Italy. We are sure that other member state will follow, but in the end, exactly right today, we are a pioneer in that respect.

Dave Dalton:

Right. I think we just found a title for this podcast, Class Action Pioneer. I liked that a lot. It sounds like you gentlemen are going to be busy in the months and years ahead. That's for certain. Sounds like, as you pointed out earlier in this program, the situation is completely turned and cases are escalating. So it's going to be very interesting to watch in months and years ahead.

Lamberto Schiona:

You got the point, Dave. We expect an increasing number of litigation, particularly through the class action. For at least two or three years, we will be still using the former class action, the one set forth by the code of consumers. Because while the new piece of legislation entered into effect in late November, it applies only in relation to conduct, which took place after the entry into force of the new piece of legislation. And then you see, if we try to construe a timeline, let's say that tomorrow there is a new candidate, then we have to expect the investigation process from the antitrust authority, which will take at least five, eight months, and then the review of the administrative court of first instance, second instance. So we will see the real effects of the new class action in approximately three, four years. But what we have already in terms of combination between the former class action and the steps put forward by the Italian courts make particularly efficient to put forward damage actions in Italy right now.

Dave Dalton:

Very good. All right. We will leave it right there. Hey, great program. Gentlemen, I apologize, I kept you longer than I said I would, but there was so much information. You covered a tremendous amount of material in a relatively short period of time. So I really appreciate your being here today. As we told the listeners, this is part of a series on private antitrust litigation and enforcement across Europe. This is going be a great addition to that series. So we thank you so much for your time today.

Mario Todino:

Thank you, Dave.

Lamberto Schiona:

Thank you, Dave. It was a pleasure.

Dave Dalton:

This was the fourth in a series of Jones Day Talks podcasts focusing on private antitrust litigation in jurisdictions across Europe. You can find our big picture overview as well as our programs on antitrust litigation in Germany and The Netherlands at Jonesday.com. The series will continue through the middle of 2021, and will conclude with a round table discussion featuring Jones Day lawyers representing multiple jurisdictions.

Dave Dalton:

Contact information for Mario and Lamberto can be found at Jonesday.com. While you're there, check out our insights page for more podcasts, publications, videos, blogs, newsletters, and other content. Subscribe to Jones Day talks at Apple podcast, Google Play, Stitcher and wherever else quality podcasts can be found. We thank you as always for listening. I'm Dave Dalton. We'll talk to you next time.

Speaker 4:

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