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EU’s Highest Court Confirms Wide Scope of Potential Claimants in Private Competition Law Damages Claims
On 12 December 2019, the EU’s highest court, Court of Justice of the European Union (CJEU), confirmed that an entity not operating as a supplier or customer on the market affected by a cartel finding may still bring a claim for compensation for loss caused by that cartel. This is the first time the CJEU has ruled on whether non-participants in the market should be able to seek compensation for a competition law infringement and further increases the likelihood of third-party claims in the EU for such infringements (including where there is no pre-existing regulatory decision).
This case arose out of a 2008 judgment of the Supreme Court of Austria upholding a fine on various companies for operating a cartel concerning the installation and maintenance of lifts and escalators in Austria. The province of Upper Austria and 14 other entities brought a civil damages claim in Austrian courts against the companies for alleged loss caused by the cartel. Unlike the 14 other entities, the province did not claim to have suffered loss as a direct or indirect customer of the cartelised products, but in its capacity as a body granting subsidies.
The province argued that increased construction costs caused by the cartel led it to grant subsidies, in the form of promotional loans for the purpose of financing construction projects affected by the cartel, in a higher amount than would have been the case in the absence of that cartel, depriving it of the possibility to use that difference more profitably. The CJEU was asked whether this type of loss could be claimed or whether it was too remote from the original cartel activity.
The CJEU held, consistent with previous judgments, that compensation is available whenever there is a causal connection between loss and the infringement of the competition rules (here, the cartel activity). Therefore, in principle, the loss in question could be claimed, although (as in all such cases) it is for the national court to determine whether on the facts the province had the possibility to make more profitable investments and whether it could establish the existence of a causal connection between that loss and the cartel in question.
UK Fines Estate Agents for Fixing Minimum Commission Rates
The UK Competition and Markets Authority (CMA) has shown on numerous occasions that it will not hesitate to take enforcement action under competition law against small local businesses and in relation to local geographic markets.
Just looking at one sector, there have been three cases in which estate agents were fined for anti-competitive behaviour. The most recent of these was announced 17 December 2019.
In this case, CMA found that four companies had infringed competition law and fined them a total of more than £600,000 for conspiring to set minimum commission rates for the sale of residential properties in five towns in Berkshire, UK. The firms, which were the leading agents in those towns at the time, exchanged confidential information on pricing and held meetings to make sure all members enforced and maintained the agreed minimum rates.
One company was not fined since it was the whistleblower and the fines imposed on two others were reduced because they admitted to illegal behaviour and agreed to cooperate with the CMA, thereby shortening the length of its investigation.
Given in particular the previous cases in the sector, it is difficult to understand this behaviour. In any event, the case shows once again that any business, whatever its size, should have a suitable competition law compliance programme in place.
New EU Rules on Whistleblower Protection Enter Into Force
On 16 December 2019, new EU-wide standards to protect whistleblowers formally entered into force. The rules apply to reporting on breaches of EU law in a range of fields. EU member states have two years to transpose the rules into their national legislation.
In addition to antitrust/competition law, coverage under the rules extends to areas including money laundering, corporate taxation, data protection, food and product safety and environmental protection. Member states are, however, free to extend the scope of the rules and the European Commission has encouraged them to establish comprehensive and coherent frameworks for whistleblower protection at a national level.
The main elements of the new rules are requirements for reporting procedures and related obligations for employers, the introduction of safe reporting channels, and provisions preventing retaliation and ensuring effective protection of whistleblowers.
The competition law community expressed concern about an early draft of the rules, which had required whistleblowers first to report concerns within their company. This was removed and, although whistleblowers are encouraged first to report internally, they may also report directly to the competent authorities as they see fit.
Companies need to be aware of these rules and incorporate the requirements into compliance programmes and internal procedures. This is advisable even before formal implementation of the rules so as to show the use of best practice.
Increasing Risk of Director Disqualification in the UK
The UK CMA has a clear policy that individual directors should be held accountable if their company breaks competition law. This is one of many reasons why any company active in the UK, of whatever size, should have a suitable competition law compliance programme in place.
The CMA has, since December 2016, secured the disqualification of 12 directors where their companies have broken competition law, in four separate cases. The CMA is intensifying its programme of disqualifications: nine of the 12 disqualifications were secured in 2019 alone.
In a recent case, a court backed up this policy and held that permission to continue acting as a director should not be given readily. Two disqualified directors applied to the court for permission to continue to act as directors and take part in the management of certain companies. The two were granted permission, but subject to strict conditions (including the companies retaining an independent non-executive director responsible for supervising the group’s compliance with competition law) and based only on the particular needs of the companies concerned.
The underlying director disqualifications remain in place. While they apply, the two individuals may not take on the directorship of any other company.
Additional European competition law news coverage can be found in our news section.
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