Private Antitrust Enforcement at a Roundabout

Abstract

Private enforcement of EC competition law has reached a new stage with the publication of the European Commission’s Green Paper entitled ‘Damages actions for breach of the EC antitrust rules’. Even though it is unclear whether any legislative action at the Community level will follow, the Green Paper has triggered a lively debate. Private enforcement faces a number of external challenges, such as the possibility of introducing a ‘plea bargaining system’ into EC competition law, the ‘more economic approach’ and coordination with public enforcement. Private enforcement is furthermore beset with a number of intrinsic difficulties, the passing-on problem arguably being the central one. This article attempts to find a solution to that problem, i.e., to the difficulties raised by the passing-on of damages through the various levels of the distribution chain. After evaluating the options proposed by the European Commission in its Green Paper, it comes to the conclusion that a ‘factor approach’ is the most appropriate. A draft provision for potential secondary EC legislation addressing the passing-on problem is offered, attempting to reconcile the insights of economic theory with the exigencies of civil litigation in the courthouse. This provision stipulates the unavailability of the passing-on defence against direct purchasers unless the direct purchaser has entered into a fixed-quantity, cost-plus contract with his purchaser. Indirect purchasers are entitled to damages provided there is no break in the chain of causation. Their damages should be quantified on the basis of the price difference at the direct purchaser level, i.e., the difference between the price actually paid by the direct purchaser and the hypothetical price the direct purchaser would have paid but for the cartel. This amount is multiplied by a certain factor (fraction) taking into account the likely pass-on rate.