Although competition authorities condemn companies to pay penalties running into the millions, hardly anyone ever talks about the real victims of antitrust law infringements, who are often clients and consumers. The hurdles which need to be successfully overcome in order to win damages against companies which violate antitrust law are high.
According to current international law, injured parties, often consumers and SMEs, are rarely in a position to bring a law suit against a company in order to claim damages for losses suffered.
The damages suffered by the individual person or entity are often too small in comparison to the cost of the proceedings, the risks too large and the procedural hurdles are almost impossible to overcome. This is especially the case when it comes to so-called "dispersed damages".
As far as the geographic spread is concerned, the following can be observed:
Class action lawsuits or similar process instruments are to be found in the USA, in South American countries, Canada, Russia and India. In the United States, private enforcement claims make up more than 90% of all antitrust proceedings.
In Europe, there are efforts underway to introduce class action lawsuits. In the Green Paper, the European Commission has stressed that it does not intend to introduce class action lawsuits in the same way in which they are organized under U.S. law.
The subject matter of antitrust law class action lawsuits is applied in the following manner:
Once the competition authority has established that an infringement of antitrust law has taken place, a civil law action is initiated (follow-on claim).
The stand-alone claim is carried out regardless of the public law procedure on the part of the competition authorities. In practice, the civil law approach is hardly ever used.
Antitrust class action lawsuits bring the following advantages when compared with individual claims:
The administration of justice is simplified, with one single decision a wide variety of legal issues can be resolved (administrative efficiency).
It is more cost-effective to have only one set of legal proceedings as opposed to several or many. The defendant has the advantage of not having to set aside further provisions since - providing there are no opt-outs - all claims are settled.
In this way, identical decisions are reached for a variety of similar situations. This prevents a defendant from having contradictory codes of conduct imposed upon him by means of divergent individual decisions.
Those entitled to bring an action often do not have the necessary resources to initiate an action by themselves (compensation). The use of class action lawsuits eliminates any imbalance of power between the injured parties and the defendants and ensures that they are kept at arm's length. Especially in the case of mass and dispersed damages, it can often be that damages are very finely fragmented, thus making the litigation value very low. In such cases, the costs of the legal proceedings for the individual are not in proportion to the damage caused, in other words the costs of legal proceedings exceed that which would be received should there be a successful outcome.
It can be in the public interest to hinder further violations (deterrence) by using a class action lawsuit with its deterrent effect. Finally, class action lawsuits would lower the possibility of litigation tourism to the USA and make Europe/Switzerland more attractive for investors.
The disadvantages of class action lawsuits primarily affect the defendant companies, as well as certain investigative tools of the competition authorities.
The risk of liability and the financial consequences for companies rise considerably due to class action lawsuits. In the case of antitrust law infringements, civil law actions would increase (with higher compensation payments). Effective compliance programs for SMEs would also have to become a must, thus increasing financial costs.
The competition authorities' leniency notice could be undermined or threatened by class action lawsuits. Although leniency applicants are exempted in administrative proceedings from possible fines, they can still be sued in civil law. With the introduction of class action lawsuits, even leniency applicants would have to carry a high financial risk, which might serve to disincentivize them from making a leniency witness statement.
The de facto absence of defenses leads to the defendant settling in well over 50% of class action lawsuits. Instead of publishing sensitive data, companies prefer to make a cash payment within the framework of a settlement (legal blackmailing). In addition, the defendant must bear the costs of their own legal representation. Since the pre-litigation procedure already involves considerable outlay in terms of staff and time, the defendant prefers to make a settlement even where the claim would have little chance of success.
A substantial strengthening of antitrust civil law would require the introduction of class action lawsuits.
- First of all, an analysis shall be made regarding the functioning of antitrust class action lawsuits in jurisdictions where such lawsuits are already implemented.
- Based upon the findings, the "Best Practices Class Action in Competition Law" will be established.
To that end, it will also need to be deliberated as to how it is "technically" possible to integrate the advantages of class action lawsuits into different legal systems without it leading to "over the top" claims for damages, as is the case in America.
It is essential that this is approached with a different style of analysis with regard to the development of the class action lawsuit as a process instrument (e.g. punitive damages, contingency fees for lawyers, fishing expeditions).
|Phase 1:||Survey the relevant legal systems and case studies to identify the substance and implementation of class actions in competition law regimes.|
|Phase 2:||Evaluate the results and create "Best Practices Class Action in Competition Law Regimes".|
|Phase 3:||Propositions for an implementation of class actions in specific competition law regimes|
|Phase 4:||Evaluate tools and tricks to assist the legal framework guaranteeing class actions.|
Attorney (Zurich | New York)
Zurich University ZHAW
Juan Luis Crucelegui
Chief, Capacity Building and Advisory Services Section
Competition and Consumer Policies Branch (CCPB)
Legal Officer, Competition and Consumer Policies Branch (CCPB)