Paucity of Consumer Redress Actions: A Critical Appraisal in Light of the Damages Directive for Competition Infringements

Tüketici Tazminat Davalarının Sayısının Yetersizliği:
 Rekabet İhlallerinden Kaynaklanan Zararlara İlişkin
Direktif Kapsamında Eleştirel Bir Değerlendirme

Eda ŞAHİN

The studies carried out for and by the European Commission have demonstrated that one group of victims harmed by competition infringements, i.e. consumers, have never or rarely claimed compensation. This gave rise to an ongoing work in the EU to enhance private competition law enforcement and to raise awareness among victims for over a decade. In 2014, the European Commission’s work on the enhancement of private competition law enforcement has led to the publication of ‘The Directive on Certain Rules Governing Actions for Damages Under National Law for Infringements of the Competition Law Provisions of the Member States and of the European Union’. The article aims to show that the Directive has failed to address the main issues resulting to the paucity of consumer damages claims, and therefore argues that the Directive falls short of providing necessary means to compensate consumers.

Private Enforcement of Competition Law, Actions for Damages, Consumer Loss, Directive on Damages Actions, Collective Redress Mechanisms.

Avrupa Komisyonu tarafından veya Avrupa Komisyonu için yapılan araştırmalar, rekabet ihlalinden zarar gören bir grubun, bir diğer deyişle tüketicilerin söz konusu zararlarının tazminini mahkemeden hiç talep etmediklerini ya da çok ender durumlarda talep ettiklerini göstermiştir. Bu sebeple, geçtiğimiz on yıldan daha uzun bir süredir Avrupa Birliği’nde rekabet ihlali nedeniyle tazminat davalarının açılmasını kolaylaştırmak ve bu konuda mağdurları bilinçlendirmek üzere çalışmalar yürütülmektedir. 2014 yılında Avrupa Komisyonu’nun çalışmaları meyvesini vermiş ve ‘Üye Devletlerin ve Avrupa Birliği’nin Rekabet Hukuku Hükümlerinin İhlali Nedeniyle Açılacak Tazminat Davalarına Uygulanacak Kuralların Belirlenmesi Hakkında Direktif’ yayınlanmıştır. Çalışmamız tüketicilerin tazminat talep etmelerini engelleyen ana konuların Direktif’te yer almadığını, bu nedenle Direktif’in tüketicilerin tazminat elde etmesi bakımından yeterli olmayacağını göstermektedir.

Rekabet İhlallerinin Özel Hukuk Bakımından Sonuçları, Tazminat Davaları, Tüketici Zararı, Tazminat Davalarını Düzenleyen Direktif, Kolektif Dava Mekanizmaları.

INTRODUCTION

In the context of European Union (EU) competition law enforcement, public and private enforcement are regarded as mutually complementary¹ and reinforcing one another.² However, in practice, actions for damages are rarely brought before national courts and victims of competition infringements are generally uncompensated for loss suffered. In the last decade, the Commission’s efforts have been concentrated on changing this private enforcement landscape. The rationale behind the modernisation and decentralisation of competition enforcement between the years of 1999-2004³ was the Commission’s desire to share its enforcement tasks with national competition authorities and courts,⁴ particularly in an enlarged EU.⁵ An increased use of private enforcement is regarded as a support for the Commission’s own enforcement efforts,⁶ to which the Court of Justice of the European Union has also contributed with its landmark judgments. Indeed, the Courage decision,⁷ for the first time, and then Manfredi⁸ explicitly established that any individual can claim damages for the harm arising from EU competition infringements.

In order to enhance private competition law enforcement, the Commission first published the Green Paper in 2005.⁹ The main aim of this paper was to make recommendations to overcome identified obstacles to damages actions for competition infringements, and by so doing i. render the recovery of losses easier for victims and ii. strengthen competition law enforcement.¹⁰ In 2008, the Commission published the White Paper¹¹ with the purpose of proposing “[b]alanced measures that are rooted in European legal culture and traditions.”¹² Subsequently after the White Paper, the Commission launched a proposal for a directive on damages actions, but it was withdrawn in October 2009.¹³

In 2014, the Directive on actions for damages signed into law.¹⁴ The Directive aims to achieve effective enforcement of EU competition rules by structuring the coordination between public and private enforcement and by ensuring victims to obtain full compensation for the harm suffered.¹⁵ In addition, its provisions intend to enhance the conditions for the exercise of the right to damages of consumers and create a more level playing for them.¹⁶ Despite these aims, the Directive does not provide for all the issues identified as the reasons for the paucity of consumer damages actions in the previous papers of the Commission. As a result, the Directive does not consider where the real need lies. Competition infringements inflict harm on diverse stakeholders, such as competitors, suppliers, direct and indirect purchasers. However, the situation is not the same for all claimants. The study for the Directive demonstrated that mainly large companies bring actions for damages, but the Directive does not act upon it and provide measures for consumer claims.

This article first examines the studies that submitted the paucity of damages actions in competition law and shows how very rare consumers seek redress when they are harmed by competition infringements in order to present that there is a genuine need to facilitate consumer damages claims. However, in this respect, this article does not intend to discuss whether private actions should be increased in order to make an in-depth examination of issues of its focus. Therefore, its analysis is based on the main policy point underpinning the publication of the Directive, which is more damage claims being needed.

The second part of this article scrutinises the reasons why consumers do not bring an action for damages against infringers. This article then draws attention to the issues that cause the paucity of consumer damages but that are left outside the scope of the recently enacted Directive. In this regard, the fifth section of the article analyses the fault requirement, litigation costs and collective redress mechanisms and states that the Directive should have made provisions for these issues.¹⁷ On this note, the fifth part of the article offers ways to facilitate consumer damages actions for competition infringements with respect to these three issues. The last section presents the conclusions of this article.

I. PROBLEM REVIEW: PAUCITY OF CONSUMER DAMAGES ACTIONS

The Ashurst study in 2004 explored the barriers to successful competition damages claims in the then 25 Member States and found a ‘total underdevelopment’ and ‘astonishing diversity’ between the national laws and their attitudes.¹⁸ The study observed 60 judged damages actions¹⁹ on the basis of either EU or national competition law, out of which only in 28 a damages award was granted.²⁰ Following the Ashurst study, the welfare impact report analysed the level of private enforcement through damages actions in the then 27 Member States between the years of 2004 and 2007²¹ and observed 96 cases in only ten Member States.²² Although the majority of these were follow-on cases,²³ the report found only 18 cases that resulted in an award at final judgment.²⁴

In 2013, the study carried out for a directive demonstrated that since Courage still many victims were unable to bring damages claims against infringers and obtain compensation through individual or collective actions.²⁵ The great majority of actions for damages were observed in three Member States: the United Kingdom (UK), Germany, and the Netherlands.²⁶ Only 28% of the Commission infringement decisions between the years of 2006 and 2012 resulted in actions for damages that were brought mostly by large businesses.²⁷ No actions following a Commission decision were found in 20 Member States.²⁸ The study then concluded that victims of competition infringements each year forego between €5.7 billion and €23.3 billion in the EU.²⁹

It is seen from the above that the Commission’s studies drew attention to the general paucity of damages actions and only the study for the Directive mentioned that large businesses bring individual actions. However, the external studies explicitly show that consumers almost never claim damages. According to Danov, large companies currently pursue damages claims in the EU.³⁰ Walle notes that actions for damages have primarily been brought by businesses in the EU³¹ and these actions resulted in significant damages due to the significant value of their loss, but consumers have rarely filed a claim.³² A study on private enforcement of any remedy in Spain identifies only one consumer-initiated case out of a high number of 323 cases.³³ Another study states that the level of competition litigation is high in Germany³⁴ but finds only one consumer and indirect purchaser claim.³⁵ Rodger’s study on EU private enforcement analyses all competition-related cases between 1999-2012³⁶ and demonstrates that the paucity of private enforcement is limited to damages actions - only 17.1% of all cases.³⁷ Unsurprisingly, it finds only 41 individual consumer cases out of 1263 cases.³⁸ On the basis of the foregoing findings, it is possible to argue that any private enforcement initiative should be concentrated on enabling consumers to recover damages.³⁹ The next section explores the reasons why consumers abstain from filing a damages claim when they are harmed by competition infringements.

II. THE REASONS FOR THE PAUCITY OF CONSUMER DAMAGES ACTIONS

The problems that result in paucity of damages actions differ from victim to victim. It is therefore sensible to draw a distinction between consumer and business losses because the latter will usually be direct and large.⁴⁰ Businesses can be competitors or customers. Competitors can only incur loss of profits and benefit from an infringement that leads to a price increase or reduced output, as per cartels or exploitative abuses, by raising their own prices and/or output.⁴¹ However, exclusionary abuses directly cause harm to competitors by way of reduced revenues and/or increased costs.⁴² Considering the number of harmed competitors, their injuries tend to be concentrated⁴³ and of large value.⁴⁴ Customers are intermediaries further down in the supply chain who purchase directly from the infringers or who purchase from the intermediaries in the same supply chain. They thus act in the pursuit of trade. They incur loss in the forms of loss of profits and overcharge. Their harm is also larger than that of consumers and they have more resources compared to consumers to pursue their claims in court.

Consumers are less likely to bring individual actions for damages due to the way in which they are harmed and the type of the loss they suffer. Indeed, consumers are the persons who make a purchase for purposes outside trade or business, i.e. end-users.⁴⁵ Consumers are at the bottom of the distribution chain, purchase for personal use, sustain damages related to price increase and cannot incur loss of profits. Their losses will be individually smaller and, in some cases, very difficult to quantify. For instance, competitors are hit by exclusion, margin squeezes and predation but, in these cases, it is very difficult to identify what the consumer impact is.⁴⁶ In addition, competition infringements entail the investigation of a broad set of facts⁴⁷ containing complex and economic analysis.⁴⁸ This gives rise to the fact that the outcome of competition cases is too uncertain⁴⁹ and that these cases are more complex and costly than any other civil case.⁵⁰ The resolution of the dispute in competition cases takes very long⁵¹ and requires the use of experts.⁵² Thus, courts and lawyers must exert more effort in competition cases.

Consumers as end-users i. are not in a position to detect a change in market conditions, ii. do not have necessary understanding of competition law and how to suspect an infringement, iii. are generally unaware that competition infringement inflicts harm on them. Financial positions of consumers also do not allow them to sue and their individual loss at stake does not motivate them to pursue such a complex, risky and time-consuming litigation. Hence, in order to ensure that consumers seek redress for their loss, measures to overcome barriers to compensation must be adopted. The main barriers have been identified as difficulties in obtaining access to evidence, short limitation periods, high litigation costs, lack of effective collective redress mechanisms and the uncertainty of a number of important legal issues. These are the passing-on defence, the binding effect of national competition authorities’ decisions, fault requirement, and the calculation and allocation of damages.⁵³ The next section examines the issues that are left outside the Directive although they contribute to the paucity of consumer actions for damages.