Managing global risk in a rapidly evolving landscape
As appetite for antitrust litigation continues, defence strategies must increasingly cater for co-ordinating proceedings in multiple jurisdictions. Understanding the position in different jurisdictions is key to deciding how to challenge or defend cases.
In the EU, implementation of the EU Antitrust Damages Directive was intended to aid recovery of damages for breach of competition claims. However, the legislation has not yet created the anticipated level playing field across the region. Meanwhile, class actions regimes within the EU are developing (if slowly). Although in some countries, such as the UK, the first claims have not succeeded, we expect potential claimants to learn from these cases and continue to use the regimes.
And across Asia, we are seeing a trend of more antitrust damages litigation. Businesses operating in China and Japan, for example, need to be aware that the landscape – and risk level – is changing.
The claims against Pride (relating to mobility scooters) and Mastercard (concerning bank interchange fees) in the UK Competition Appeal Tribunal have been the first to test the limits of the UK’s opt-out and opt-in class action and class settlement regime for antitrust claims, introduced in 2015. In judgments given in 2017, neither claim continued past the class certification stage, leading some to question the prospects of the regime.
However, despite the slow start, the door remains very much open for future claims. By providing the proposed class representative with the opportunity to reformulate her claim, Pride showed that the Tribunal would be flexible at the certification stage if the claimants can reasonably overcome any obstacles. The claimants later withdrew the claim. And in the £14bn claim against Mastercard, although the Tribunal dismissed the claimants’ application for certification, it found that third-party funders could, in principle, be paid from any unclaimed damages – a significant pro-claimant outcome.
Both claims brought to date were difficult ones given the nature of the infringements and the broad classes proposed. Now that the Tribunal has clarified the expectations, the ground is ready for a suitable case. However, a cautionary note: future applicants should be prepared to take a rigorous approach to their proposed expert methodology, which the Tribunal will scrutinise carefully to test the viability of the claim as a class action.
Mark Sansom, Antitrust and Dispute Resolution Partner, London
Recent court decisions in the US make plaintiffs’ task of certifying their class increasingly difficult. First, new precedent requires courts hearing motions for class certification to give plaintiffs’ damages models a ‘hard look’ to assess: (i) consistency with their liability theory; (ii) whether plaintiffs have affirmatively proved the class criteria through rigorous analysis; and (iii) whether statistical models adequately satisfy the requirement that the questions common to class members predominate over any questions affecting only individual class members.
Second, the Supreme Court’s application of the Federal Arbitration Act gives companies the opportunity to avoid class actions entirely through incorporating mandatory non-class arbitration agreements. The provisions do not allow a class to bring arbitrations. US courts recently confirmed the enforceability of clauses requiring non-class arbitration in antitrust cases, even where the cost of individually arbitrating makes the bringing of such claims unlikely.
Where guilty pleas, or even active cartel investigations, make it unlikely that defendants will win a motion to dismiss (challenging the sufficiency of the allegations) or a motion for summary judgment (challenging the sufficiency of the evidence), contesting class certification may represent the defendants’ best chance to win the case.
Rich Snyder, Antitrust Counsel, Washington DC
Since December 2016, 25 EU member states have implemented the EU Antitrust Damages Directive (2014/104/EU), which seeks to facilitate claims for breaches of competition law. The Directive has, to some degree, levelled the procedural and substantive playing field between EU member states by, for example, harmonising limitation periods, prescribing certain minimum levels of disclosure and establishing a presumption that cartel infringements cause harm. However, uneven implementation has also created disparities that could affect where in the EU parties bring antitrust damages claims.
For example, the Directive states that only procedural provisions can have retrospective effect but it does not define what is substantive and what is procedural for this purpose. Different member states have therefore taken different, and inconsistent, approaches in implementing the Directive at the national level. In Ireland, both procedural and substantive changes apply only to competition law infringements that occurred after 27 December 2016. In comparison, in Germany, the new disclosure regime applies to litigation begun after 26 December 2016 even if the infringing conduct occurred before. Even when all the provisions of the Directive are in force across the member states, there will continue to be differences as some jurisdictions’ existing provisions go beyond the requirements of the Directive; therefore, some member states will continue, for example, to have longer limitation periods or more generous disclosure regimes than others. In every case, parties must carefully assess jurisdictional strategy both during and after the transition period.
Thomas Kreifels, Dispute Resolution Partner, Düsseldorf
In 2018, we expect EU legislators to pave the way for further large-scale antitrust litigation, particularly in the field of mass (consumer) damage claims.
According to the responsible European Commissioner, Vera Jourová, the Commission will adopt measures in 2018 enabling consumers to ‘defend themselves better in cases of mass harm’. These are likely to build on the Commission’s 2013 Recommendation on which a report of its implementation is expected imminently.
The Netherlands, already a very active jurisdiction for antitrust damages claims, is in the meantime seeking further to facilitate and streamline mass damages claims procedures through a legislative proposal that we expect to be adopted in 2018. The new rules would allow class actions seeking monetary damages, including in follow-on antitrust claims. The legislative proposal would also allow the courts, where there are parallel claims, to assign a leading plaintiff (with the possibility of opting out for those who wish to pursue their claims separately). If adopted, the law would apply globally yet simultaneously tighten existing admissibility requirements to try to ensure a nexus to the Netherlands and avoid abuses of the procedure.
Martin Klusmann, Antitrust Partner, Düsseldorf
A growing number of Asian jurisdictions are now providing a forum for antitrust damages claims, with an increasing trend towards more antitrust damages litigation.
In China, the courts are becoming an increasingly important battlefield for companies and individuals seeking antitrust damages, especially in those cases that involve intellectual property or consumer disputes. In 2014, Chinese courts heard around 70 antitrust cases; in 2016, this number was 161 in Beijing alone.
Although at this time the size of the claims remains generally small, many expect claims’ sizes to increase over time. China has established dedicated courts for antitrust cases across its major administrative regions, leading to increased sophistication and confidence in adopting complex competition analysis in trials. Follow-on claims are also developing, with China’s first case having received final judgment in 2016. Despite the high standard of proof, as Chinese courts become an increasingly popular avenue for seeking antitrust remedies, we expect more damages claims to occur.
Japan has traditionally seen limited antitrust damages claims beyond bid-rigging cases brought by public bodies. This is evolving, however, driven by rising shareholder derivative actions against listed companies and their directors for failures to claim antitrust damages, prevent antitrust violations, or file antitrust leniency applications with regulators. This evolving pressure to litigate is expected to lead to more damages claims in a country with a traditionally less litigious culture.
The Hong Kong Competition Ordinance came into force in 2015. Although the regime still does not permit stand-alone actions, one can expect an onset of follow-on damages litigation, once the first investigations have proceeded to enforcement action and appeals have been heard. In time, Hong Kong could become another important venue in Asia for antitrust damages claims.
Looking ahead in 2018