Factors to consider in the private (effective) exercise of a civil damage claim for infringement of competition law

The cartel of the manufacturers of paper envelopes, but above all that of the manufacturers of large tonnage trucks, has led to an initial contact of the Commercial Courts and Specialized Hearings with Directive 2014/104/EU of the European Parliament and the Council, of 26 November 2014, and its subsequent transposition by means of Royal Law 9/2017, of 26 May, generating a body of doctrine that seeks to provide solutions to issues of great practical relevance, not specifically resolved by the Legislator.

The temporary coincidence of the European Commission’s resolution in the truck manufacturers’ cartel case – 19 July 2016 – with the enactment of Directive 2014/104/EU and its subsequent transposition into our national legal system in the Defence of Competition Act and the Civil Procedure Act, has promoted the effective and massive exercise of the so-called private enforcement of competition law in our Courts, which are gradually generating a specific body of resolutions that will serve as a guide to the victims in future claim procedures.

With these brief lines we start a sequence of articles by means of which, without being exhaustive, we intend to offer a summary of the main elements or factors to be considered before the exercise of a legal action, which is far from being accessible to the legal operator not specialized in the matter.

Thus, we begin the series with an approach to the conduct that can give rise to a claim for damages for infringement of competition law, the concept of full compensation, the liability regime of the offenders, and the time limit for the exercise of the action.

The conducts classified as infringements of competition law that give rise to full compensation by an injured party are only those provided for in Articles 101 or 102 of the Treaty on the Functioning of the European Union (TFEU) -when the conducts affect the common European market-, or in Articles 1 or 2 of the Law on the Defence of Competition (LDC), when the conduct affects the national market. Other conducts restrictive of competition foreseen in the Law, such as control of concentrations, public aid, distortion of free competition due to unfair acts or conducts of minor importance, are outside the scope of the action for damages.

Consequently, the conducts that restrict or may restrict competition in the market and that may be the object of a claim for damages by any injured party are

• Agreements, decisions, collective recommendations and concerted or consciously parallel practices (the latter not provided for in Community regulations), which have the object or effect of preventing, restricting or distorting competition, and which cannot be protected by some of the exceptions provided for in the third paragraph of Article 101 TFEU or Article 1 of the LDC.The typical conduct that is sanctioned is that of the so-called “cartels”, that is, and according to the definition offered by the 4th additional provision of the Law on Competition: “any agreement or concerted practice between two or more competitors whose objective is to coordinate their competitive behavior in the market or to influence the parameters of competition through practices such as, among others, fixing or coordinating purchase or sales prices or other commercial conditions, including in relation to intellectual and industrial property rights; allocating production or sales quotas; allocating markets and customers, including collusion in tenders, restrictions on imports or exports or measures against other anti-competitive competitors“. However, agreements between competitors are not the only ones that come under the scope of competition law, as agreements between independent undertakings that are not competitors but have as their object or effect the prevention, restriction or distortion of competition may also fall under the prohibition. These are the so-called vertical agreements between, for example, a manufacturer and a distributor.
• The abusive exploitation that a company, or several companies acting in a coordinated manner, can or may exercise in a certain market where they hold a dominant position. A dominant position is deemed to exist when the undertaking(s) can act autonomously in a given market without regard to its competitors, suppliers or customers. It is not sufficient that such a dominant position exists; it also requires that it be abused.

The unlawful conduct – be it a collusive arrangement or an abuse of a dominant position – must be proven by the injured party in order to obtain compensation. To this end, the injured party may be faced with the situation that the conduct has been proven in advance by a final administrative decision, either by the Community body or by the competent national, in which case he will initiate a ‘Follow-on action’, and no proof of the infringement will be required. If, on the other hand, the unlawful conduct has not been declared, it will have to be proven in a “Stand-alone action”, which is an extremely complex and inadvisable matter, since, although the Procedural Law provides for a series of tools designed to facilitate the access of the injured party to sources of evidence in this type of action, it will not be at all easy in practice because of the special care, zeal and concealment with which the offenders execute the restrictive agreement.

Once the conduct has been accredited, and the administration has sanctioned it with substantial fines in the exercise of the so-called “public enforcement“, Directive 2014/104/EU also aims to facilitate the exercise of private enforcement actions by all persons, natural or legal, who have been harmed by the illegal conduct. It thus introduces the concept of full compensation of the injured party for the infringement of competition law, which will consist in returning the person who has suffered damage to the situation in which he would have been if the infringement of competition law had not been committed, including the right to compensation for the consequential damage and loss of profit, plus interest. Thus, in the case of the recent truck manufacturers’ cartel, the full compensation referred to will consist of a direct purchaser (e.g. an independent dealer), both the consequential damage suffered by the excess cost paid to the offending manufacturer, which may be between 5 and 15 per cent in this particular case; and the loss of profit due to the contraction of demand resulting from passing on the excess cost suffered to its customers. However, it should be borne in mind that the right to full compensation has as its limit, in any case, the prohibition of overcompensation for the infringer, as well as the prohibition of obtaining enrichment by the injured party, beyond the damage actually suffered.

Violators are jointly and severally liable for full compensation, so that any injured party may bring an action against any violator, regardless of who acquired the input, product or service. The solidarity regime is exempted in Article 73 LDC for certain companies that meet a series of requirements as to their size, as well as for those companies that benefit from exemption from payment of a fine under a leniency programme.

Finally, it should be pointed out that the action to demand responsibility for damages suffered as a result of infringements of competition law will be time-barred after five years, this period being calculated from the moment in which the infringement of competition law has ceased and the plaintiff is aware or could reasonably have been aware of the following circumstances (article 74.2º LDC): a) the conduct and the fact that it constitutes an infringement of competition law; b) the damage caused by the said infringement; and c) the identity of the infringer. The period shall be interrupted if a competition authority initiates an investigation or sanctioning procedure in relation to an infringement of competition law related to the action for damages; or when any procedure for out-of-court settlement of disputes on the claim for damages is initiated, the interruption in the latter case affecting the parties involved in the out-of-court settlement.

In the next article, we will devote a few lines to reviewing the issues that are currently controversial with respect to jurisdiction and the standing of the parties in civil proceedings for damages claims for violations of competition law.