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 Directive) was implemented in France by the Ordonnance 2017-303 of 09 March 2017.
Directive 2014/104/EU of 26 November 2014, which covers 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 Directive), has been implemented in France by the Ordonnance 2017-303 of 09 March 2017 (the Ordonnance) and by the Decree 2017-305 adopted on the same day. Both entered into force on 11 March 2017.
What is the objective of the new proceeding?
The objective is to facilitate the compensation of damages suffered by direct competitors and direct or indirect purchasers before judiciary and administrative courts (private enforcement).
The possibility to introduce a damages claim did already exist for victims of infringement. In France, since the “Loi Hamon” of 17 March 2014, consumers that are gathered within a consumer association (class action) may bring an action against an infringer. However the Ordonnance introduces measures that ensure better efficiency.
Who is able to bring an action for damages?
The Ordonnance does not modify the law regarding which persons may bring a claim for damages for harm resulting from anticompetitive practices.
French law already allows direct or indirect purchasers legal to take action before Courts, including consumers individually or collectively (within a class action).
Who can be prosecuted for damages?
All natural or legal persons forming an “undertaking” or an “organism”, which may be subject to lawsuits before competition authorities, may be prosecuted if liable for harm caused by committing an anticompetitive practice.
The notion of “undertaking” is known under French competition law. It is new under French tort law. It raises the question of liability of the mother company, prosecuted for anticompetitive practices carried out by its subsidiary. Does the action for damages have to be brought against both the subsidiary for anticompetitive practices and the mother company for the control it exercises over its subsidiary?
What are the practices targeted by the Ordonnance?
The Ordonnance targets all type of cartel, abuse of dominant position, abuse of economic dependency, agreement on import exclusive rights overseas, agreements and practices in the field of transport and predatory pricing practices. Therefore it has enlarged the scope of the Directive, which targeted only cartel and abuse of dominant position.
What are the conditions governing liability?
Conditions governing liability comply with French tort law, as the claimant must prove the operative event (ie an anticompetitive practice), the harm and the causal link between the operative event and the harm.
However, French law is designed to integrate different presumptions in the demonstration of the liability of the infringer and to facilitate the compensation of the damage suffered by the victim (see below).
Could anticompetitive practices be presumed?
This is one of the major changes introduced in French tort law.
The claimant does not have to demonstrate the existence of an anticompetitive practice if it has already been established by a decision of the French Competition Authority (the FCA) or, in case of appeal of the decision, of a decision ruled by the Court of Appeal of Paris. The practice is irrefutably presumed. There is also an irrefutable presumption for a final decision of the European Commission.
The claimant may also rely on a decision ruled by a competition authority or a court of another Member State, which constitutes a piece of evidence and not an irrefutable presumption of an anticompetitive practice.
This new tool is not unknown in French law since an irrefutable presumption has already been introduced for class action in “Loi Hamon” of 17 March 2017.
It may raise some difficulties of interpretation that the decision on which the claim is based can't be (or can no longer be) appealed by ordinary means. In fact the ordinary means is not clearly defined in the Directive or the Ordonnance:
- If the claimant relies on a decision from another Member State, it will be necessary to determine the definition of the ordinary means of appeal within the national law of the Member State concerned.
- Under French law, the appeal before the French Supreme Court (Cour de Cassation) is an extraordinary means of appeal whereas the appeal before the Court of Appeal is an ordinary means of appeal. It is very usual that the Cour de Cassation overrules a Court of Appeal decision. In this instance, what would be the consequences of a decision of the Cour de Cassation where the perpetrators of the irrefutably presumed anticompetitive practices would have been ordered in the meantime to pay damages, on the ground of the previous overuled decision of the Court of Appeal?
What is the scope of damages to be compensated?
The Ordonnance confirms the principle of full compensation.
Damages cover the loss resulting from an overcharge or a reduction of price paid by the infringer, the lost profit, the loss of opportunity and the non-pecuniary harm. It covers also the payment of interests to take into account the duration of the anticompetitive practice and its impact on purchasers or direct or indirect providers.
The Ordonnance introduces a presumption of the existence of harm because of a cartel. It is up to the participants of the cartel to prove the absence of harm.
In order to evaluate the scope of damages, the judge will be able to solicit the FCA to obtain guidance on the evaluation of harm to be compensated. The FCA will be able to accept or refuse to deliver an opinion within a two month period. The FCA is likely to provide the only elements that it has been able to gather during the examination of the case in the framework of public enforcement.
What is the impact of the “passing-on defense”?
The Ordonnance introduces a presumption on the passing-on of the overcharge by the direct purchaser and victim of the infringement.
The direct or indirect purchaser must only prove the existence and the size of the overcharge contrary to the case law of the Cour de Cassation (Com., May 15th, 2012, n°11-18.495), in which the judge imposed that the purchaser also demonstrate the absence of passing-on. Now the burden of proving the passing-on of the overcharge down the supply chain rests with the infringer. It is worth noting that this will be difficult to prove.
Under certain conditions, the Ordonnance also provides a presumption in favour of the indirect purchaser, regarding the existence of overcharging. It will be sufficient for the indirect purchaser to demonstrate that:
- the direct purchaser had been overcharged, and
- he purchased the products from the direct purchaser.
This logic also applies when the practice would have affected the upstream supply market, in favour of direct or indirect providers. In this case, the reduction of price paid by the infringer is presumed.
Despite the "passing on defense" implemented under French tort law, the infringer of an anticompetitive practice may allege a fault of the victim contributing to his own prejudice, or an umbrella effect, ie when third parties would have set their own prices in the wake of an anticompetitive practice at a level higher than that which would have resulted from undistorted competition.
What is the mechanism of liability of co-infringers?
The Ordonnance provides a joint liability of the harm caused by the co-infringers. The claimant may claim full compensation of damages from all the co-infringers, and not an “in solidum” liability as traditionally provided in French tort law.
Therefore, an undertaking may be sued and condemned to pay damages that will compensate in full the loss suffered by the claimant and not only the damages resulting from its participation to the anticompetitive practice.
Regarding the “contribution to debt” (which corresponds to the damages allocated), the condemned participant to the cartel may pursue other co-infringers. Defined by the Directive as a “relative responsibility” of co-infringers, the Ordonnance provides that co-infringers contribute to “debt” (whole harm) in proportion of “the gravity of their respective fault and their causal role in the occurrence of the damage”.
By exception, small and medium-sized enterprises (SMEs) are exempt if they have a market share less than 5% for the duration of the infringement and if the application of the normal rules of joint and several liability would irretrievably jeopardize its economic viability and cause its assets to lose all their value. However, the exemption will not apply where the SME has led the infringement of competition law or has coerced other undertakings to participate therein. Moreover, there is also a derogation for the infringer who had been fully exempt under a leniency program.
What are the new tools of evidence at the victim and the judge disposal?
The aim of the Directive is to facilitate disclosure evidence proceedings for the victims of anticompetitive practices, without reducing the efficiency of existing competition law proceedings.
Most of the principles regarding disclosure of evidence in the Directive already exist in the French Code of Civil Procedure. Nonetheless, the Ordonnance adds new rules, in derogation from the general tort law, by adapting them to the specificities of competition law.
Regarding the protection of business and security secret, the judge will have at their disposal a range of measures to protect confidential information when the disclosure of evidence may infringe the protection of business secret principle: hearings on camera, providing ex parte proceedings…
Regarding the disclosure of evidence included in the file of a competition authority, the Ordonnance distinguishes between the pieces or categories of evidence that cannot, at any time, be subject of a judge’s disclosure order (blacklist) and pieces or categories of evidence that can be disclosed under certain conditions (greylist). Pieces of evidence of the blacklist are subject to an absolute prohibition of disclosure, such as leniency statement and settlement submissions, whereas pieces of evidence of the greylist are subject to a temporary prohibition of disclosure.
Regarding sanctions in case of failure to comply with rules regarding disclosure of evidence by one of the parties, the judge will be able to impose a civil fine of up to €10,000 and draw all the consequences of a refusal to disclose.
What is the limitation period for bringing actions for damages?
The five year limitation period complies with general law regarding limitation periods under Article 2044 of the French Civil Code.
The limitation period starts to run when the claimant knows or could have been aware of: (i) the behaviour and the fact that it infringes competition law; (ii) the infringement of competition law causing harm; (iii) the identity of the infringer and (iv) the infringement of competition law having ceased.
The behaviour and the fact would constitute an infringement of competition law when it has been issued by a decision. If no decision has been issued, the limitation period would not run. Therefore, what would be the starting point of time period in case of a standalone legal action when no decision was ruled by competition authorities?
In any event, the limitation period is interrupted if a competition authority takes action for the purpose of the investigation or its proceedings with regards to an infringement of competition law to which the action for damages relates. In case of a follow up legal action, the claimants have a “new” limitation period of five years from the date of the final ruling of the competition authority or the review court.
What is the effect of consensual settlements between the claimants and a co-infringer on a subsequent decision of competition authorities?
The amount of the penalty will be reduced by a decision of the competition authority when there is a consensual settlement between one or more claimants and a co-infringer of anticompetitive practice.
Before the FCA, this is an attractive incentive for a co-infringer to enter into transaction with the claimant.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.