Private Damages Actions Research Articles

AVALIAÇÃO DE IMPACTO DE POLÍTICA DE DEFESA DA CONCORRÊNCIA: PROGRAMA DE LENIÊNCIA DA COMISSÃO EUROPEIA (DG-COMP) E DO CADE

Context: The article analyzes the Leniency Program of the European Commission and CADE, highlighting its positive and negative effects, considering the concepts of efficiency and effectiveness. Objective: The article seeks to undertake a critical analysis of the Leniency Program of the European Commission and CADE. Method: The article analyzes the Leniency Programs established by the European Commission and by CADE, using the available empirical and qualitative data, as well as data from OECD’s materials to verify the level of efficiency and effectiveness of both programs. Conclusions: An analysis is presented on the main challenges to be faced in Europe to improve the performance of the leniency programs, such as leniency inflation, the strategic use of leniency agreements and the effects of leniency on private damage actions. Regarding Brazil, the article provides some critical remarks. The article concludes that leniency programs have potential to become an even more powerful mechanism for fighting cartels by facing these challenges.

Private Damages Actions in EU Competition Law and Restorative Justice: Towards a New Streamlined Institutional Framework?

The transposition of Directive 2014/104 on private damages actions marks an important development in the setting up of a harmonised private competition law enforcement regime across different EU Member States. Coupled with deterrence-focused public enforcement, the European Union has taken a necessary and welcomed step towards enhancing justice for all those individuals and competitors damaged by competition law infringements. This article argues, however, that the current emphasis on balancing public and private enforcement of the European Commission focuses too little on the need and healing effects of restoration. At the same time, the Directive contains a promising restorative justice opening by virtue of its Article 18. Starting from that opening, the article will propose a more developed way forward, taking the form of the setup and development of so-called antitrust “trust funds”. Exploring the legal possibilities and limits of such funds, the article questions to what extent this approach could be a useful complementary way to overcome the limits identified. It will be submitted that, although it is legally possible to set up those trust funds under EU law, important practical questions have to be addressed prior to doing so. Having outlined the potential features and limits of this approach, the article additionally calls for more and comparative research to be performed in this area.

Combining cartel penalties and private damage actions: The impact on cartel prices

In many countries antitrust enforcement by Competition Authorities through prosecution and the imposition of penalties is complemented in price-fixing cases by private damage actions, which should affect both cartel deterrence and the prices set by those cartels that do form. We show that the impact of combining penalties and damages on cartel prices is not clearcut, and depends on both the nature of the penalty regime and the way that damages are calculated. We demonstrate this by focusing on two ways of calculating damages that have been advocated in practice and two different forms of the widely used revenue-based penalty regime. When the simple form of revenue-based penalties is in force, the standard method of calculating damages worsens its harmful pricing effects, whereas the proposed alternative method of calculating damages can overturn them. When a more sophisticated form of revenue-based penalties is in operation, imposing damages will improve its beneficial pricing effects under both methods of damage calculation, but the alternative method is more effective. In all cases combining penalties and damages improves deterrence.

Rebating Antitrust Fines to Encourage Private Damages Actions

To encourage private actions for damages in antitrust cases some jurisdictions subtract a fraction of the redress from the fine. We analyze the effectiveness of this policy. Such a rebate does not encourage settlement negotiations that would otherwise not occur. If, however, the parties settle without the rebate, the introduction of the reduction increases the settlement amount, yet at the price of reduced deterrence for those wrongdoers who are actually fined. Under a leniency program the rebate has no effect on the leniency applicant: she doesn't pay a fine that can be reduced. The overall effect of a fine reduction on deterrence is, therefore, negative.

The Looming Crisis in Antitrust Economics

As in so many areas of law and politics in the United States, antitrust’s center is at bay. From the right it is besieged by those who would further limit its reach. From the left, it faces revisionists who propose significantly greater enforcement. What the two extremes share, however, is denigration of the role of economics in antitrust analysis. The Supreme Court’s two most recent antitrust decisions at this writing reveal that economic analysis no longer occupies the central role that it once had. On the left, some proposals display indifference to their economic impact on important participants in the economy. The antitrust laws speak of the conduct they prohibit in economic terms, such as “restraint of trade,” “monopoly,” or lessening of “competition.” They do not embrace any particular economic ideology, such as the Chicago School or institutionalism. Nor do they require the use of any particular economic model, such as perfect competition or oligopoly. This openness gives policy makers a great deal of room, but it is not an invitation to economic nonsense. Further, economics should not be a tool for picking a winning interest group and then manipulating the doctrine to get that result. The Supreme Court’s 2019 Apple decision slighted the economics of passed on consumer harm, a central component in the analysis of private damage actions for more than forty years, and critical to measuring competitive injury. In AmEx, the Court neglected the kind of transactional analysis that would have uncovered the true injuries in that case, defined the “relevant market” in such a way as to make that term economically incoherent, rejected a superior methodology for assessing power in favor of an inferior one, completely misunderstood the meaning and appropriate scope of free riding, and lost sight of the fact that marginal rather than total effects are central. Although the progressive wing of antitrust does a better job of identifying the economic problems that the economy faces, some of its proposed solutions are calculated to make them worse. The pursuit of business concentration or bigness for its own sake will injure consumers far more than it benefits small business, the intended beneficiaries. A proposal to forbid large platforms from selling their own products in competition with the products of others will harm both consumers and small business, although it will benefit some large firms. When used correctly and without excessive ideology, economics is a powerful, neutral tool for helping people identify injuries to competition and appropriate fixes. Indeed, that is the first and best use of antitrust economics. Both extremes in this debate have ignored the first rule of rational antitrust policy: figure out who is getting hurt, and how.

European Union Competition Law Developments in the Aviation Sector: January to June 2019

The first half of 2019 has been dominated by the significant number of mergers being decided with no less than 6/7 mergers having been approved by the European Commission (‘Commission ’) in the six-month period. Interestingly, the commitments offered in three previous merger cases have been revisited, and while it would appear novel that the Commission released Air France Koninklijke Luchtvaart Maatschappij N.V. (KLM) from the commitment on one long-haul city pair, the Commission noting that parallel commitments given in the transatlantic joint venture (JV) antitrust case would enable the Commission to review the functioning of the market in the period 2020–2025. The other merger case worth noting is the CityJet/Aer Lingus wet lease arrangement. It was looked at from a merger perspective and where with the UK’s Competition and Markets Authority (‘CMA ’) considering the ‘exiting firm’ strategy and it cleared the transaction on that basis. The first half of 2019 has been dominated by the significant number of mergers being decided with no less than 6/7 mergers having been approved by the European Commission (‘Commission’) in the six-month period. Interestingly, the commitments offered in three previous merger cases have been revisited, and while it would appear novel that the Commission released Air France Koninklijke Luchtvaart Maatschappij N.V. (KLM) from the commitment on one long-haul city pair, the Commission noting that parallel commitments given in the transatlantic joint venture (JV) antitrust case would enable the Commission to review the functioning of the market in the period 2020–2025. The other merger case worth noting is the CityJet/Aer Lingus wet lease arrangement. It was looked at from a merger perspective and where with the UK’s Competition and Markets Authority (‘CMA’) considering the ‘exiting firm’ strategy and it cleared the transaction on that basis. The adoption and entry into force of Regulation 2019/712 on safeguarding competition in the air transport sector is potentially also a milestone. Whether this will be used by EU air carriers and/or the Commission remains to be seen. Litigation also features heavily in the first half of 2019, with Ryanair being on the successful side twice (being successful in the appeal of a Commission decision, but also successfully supported the Commission in defending its decision against an appeal of a Commission decision brought by Lufthansa. Of particular note for private damages actions is the UK litigation involving British Airways before the Court of Appeal where the air cargo cartel damages claimant was unsuccessful at widening the scope of its damages claim to include the period from 2001 to 30 April 2004 (a period not covered by the Commission’s decision but where there was arguably evidence of cartel behaviour) because the Court of Appeal did not have jurisdiction to hear a claim unless and until the Commission or a national competition authority had taken a decision. The dearth of new State aid investigations in the aviation sector might be the result of the Commission’s modernisation regime having a positive effect. We will wait and see if this trend continues.

Skanska: are jurisdiction challenges now an impossible undertaking?

Claimants in private damages actions following on from European Commission cartel decisions are often faced with a choice of jurisdiction in which to pursue their claims. However, seising jurisdiction in the national court of a desired Member State can require the claim to be pursued against an anchor defendant that is not an addressee of a Commission decision. This may, in the English courts, give rise to various disputes as to the role of that non-addressee defendant in the cartel and, accordingly, whether a claim can in fact be sustained as against that defendant. The Court of Justice's recent judgment in Vantaan Kaupunki v Skanska Industrial Solutions potentially relieves claimants from the burden of having to establish that the non-addressee defendant participated in, or implemented, the cartel in order to sustain a claim against it, by holding that it is entire undertakings that are liable for compensation in private damages actions. The Skanska judgment harmonizes the scope of liability under the public and private spheres of EU competition law enforcement and has potentially significant ramifications for competition litigation in the English courts.

The Antitrust Damages Directive: Facilitating Private Damages Actions in the EU?

The Antitrust Damages Directive: Facilitating Private Damages Actions in the EU?

Pass-on and volume effects in private damages actions: an economic perspective

Pass-on and volume effects in private damages actions: an economic perspective

Pass-on and volume effects in private damages actions: an economic perspective

Pass-on and volume effects in private damages actions: an economic perspective

More Intel on the territorial limits of EU competition law

The recent increased focus of the European Commission on cartels formed and operated outside of the EU, which nonetheless harm competition in the internal market, has led to a corresponding increase in private damages actions being pursued in the English courts for losses occasioned by those cartels. Those private damages actions have tested both the jurisdictional reach of the English courts and the territorial scope of EU competition law. This article discusses the successful appeal by iiyama against the partial strike out of its private damages claims in the English High Court for losses occasioned by the CRT Glass and LCD cartels. The impact of the Court of Justice's decision in Intel, which was handed down between iiyama's damages actions being struck out and its successful appeal, is also discussed, together with the High Court's subsequent decision in Unlockd, which followed Intel and iiyama. Taken together, these cases provide significant increased clarity on the issues of jurisdiction and applicable law in private damages actions before the English courts.

It's Time to Dust Off the Safe Harbor Approach to 10b-5: The SEC Should Adopt More Rules that Exclude Failure to File Specific Securities Exchange Act Reports from the Reach of Rules 10b-5

The Securities and Exchange Commission (“SEC”) has often adopted regulations that effectively exclude specified conduct from the scope of particular provisions of the securities laws or that describe conduct that is deemed not to violate the law. Some rules exclude conduct from the scope of the prohibition on deception imposed by SEC Rule 10b-5. This article examines the nature of and rationales for the provisions that have narrowed the reach of Rule 10b-5, and proposes that this approach be applied more broadly, further reducing the exposure of the issuers of securities and other persons to claims under Rule 10b-5 without impairing the SEC’s enforcement of the securities laws. This will also reduce uncertainty regarding the scope of Rule 10b-5, especially in the arena of private damage claims. Several specific proposals are made here. The intention is to focus attention on the utility of the safe harbor approach in today’s litigation landscape and generate discussion that might lead to broader application of this concept. The proposals made here parallel actions the SEC has already taken to remove failures to file certain reports from the scope of Rule 10b-5, sometimes called pure omissions. This approach may seem to be of limited utility because claims based on so-called pure omissions that would be excluded as a result of the proposed additional safe harbors could be few and far between. However, because the SEC has seen fit to adopt rules that exclude disclosure failures from the scope of Rule 10b-5 based on its view that a complete failure to comply can give rise to a Rule 10b-5 claim, other mandatory disclosure regulations merit comparable protections. Unless and until the Supreme Court rules that a failure to file is outside the ever-narrowing bounds of Rule 10b-5, the proposals advanced here deserve serious consideration, if only to sweep away the chaff. These proposals do not advocate that the SEC make a sweeping effort to decimate the Rule 10b-5 private cause of action in particular by fiat. Rather, it is a modest suggestion, consistent with rules the SEC has already adopted, to limit the reach of Rule 10b-5 in a narrow category, with the intent of focusing claims on established areas of liability. Part II of this article explains what safe harbors are. Part III describes, in general terms, the scope of Rule 10b-5, in particular how the rule has been applied in private damage actions alleging a failure to make a required disclosure. Part IV describes the existing rules that have a direct impact on potential claims under Rule 10b-5, including the background of each rule. Part V presents specific suggestions for additional safe harbors vis-a-vis Rule 10b-5 with supporting analysis. Part VI is the conclusion.

DOES THE EUROPEAN DAMAGES DIRECTIVE MAKE CONSUMERS BETTER OFF?

In the enforcement of European competition law, both public and private actors play a role. Public enforcement dominates. Leniency programs give cartelists incentives to reveal the cartel and disclose relevant information to the competition authority. The incentives originate from a reduction in sanctions. Directive 2014/104/EU aims at removing practical obstacles to compensation for victims of infringements of EU competition law. The literature suggests that facilitating private damages actions tends to limit the effectiveness of leniency programs. If victims are able to claim compensation, the incentive to apply for leniency may vanish. In addition to the literature, this paper not only considers the effect of private damages on incentives to apply for leniency, but also explores the consequence for deterrence and consumer welfare. Specifically, this paper investigates the implications of an improvement in the claim position of victims for (1) decisions to start or continue a cartel, (2) decisions to apply for leniency, and (3) consumer welfare. Cartelists’ behavior is analyzed in a dynamic setting. The paper finds that a marginal improvement in the position of victims in most cases leads to an increase in consumer welfare but not in deterrence. In some cases, it also leads to an increase in deterrence, and, in exceptional cases, makes consumers worse off because cartelists refrain from applying for leniency.

Buyer cartels and private enforcement of antitrust policy

Collusion among buyers leads to social welfare losses, which provide the economic rationale for public enforcement of the antitrust law. This conduct also imposes losses on the victimized sellers, which provide the foundation for private enforcement through private damage actions. In this paper, we present a rigorous economic analysis of buyer cartels. This effort includes both full participation and partial conspiracies. We review the antitrust treatment of collusive monopsony in the United States, the European Union, and Asia, offer a measure of antitrust damages, and examine the necessary precision of the damage estimate. We also suggest that the proper use of modern econometrics should allay judicial concerns with speculation.

Private Enforcement of Competition Law in the UK

Will the Claims in respect of Loss or Damages arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 20171 have an impact upon private damages actions in the UK? The aim of the EU Damages Directive2 was to encourage consumers and businesses to claim damages or compensation following harm caused by infringements of competition law. The UK Regulations brought in on 9 March 2017, implements the EU Directive into UK law; however, will these Regulations have an impact upon private damages actions in the UK?

Private Enforcement of EU Competition Law: A Comparison with, and Lessons from, the US

This paper examines the core features of the EU reform package designed to encourage greater volumes of private enforcement of the EU competition rules, particularly 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. Its principal objective is not, however, to scrutinize these provisions in detail. Rather, its purpose is to reflect on the questions of why, especially when compared with the position in the US, it has proved so difficult for a culture of antitrust litigation to develop in the EU, why the Commission believed that EU measures were necessary to kindle it and to consider, against that backdrop, whether the EU package is likely to achieve its stated goals. Section 2 commences by exploring how private enforcement has developed in the US, examining not only the factors that have facilitated and encouraged it, but the extremes widely-believed to have bedeviled and undermined it, and the steps which have consequently been taken to limit and curtail private actions there. Section 3 then examines the EU system and seeks to unpick the different factors that have operated over time as barriers to private litigation in the EU Member States and to identify those that still exist. Having set out the factors that have encouraged and hindered litigation in the US and the EU respectively and examined some of the pros and cons of each system, it is possible to reflect more fully on the questions of whether private litigation should be further encouraged in the EU, what measures might be desirable or required to overcome the obstacles which exist to it, what measures should be avoided, whether the current package is likely to succeed, what pitfalls might be anticipated and/or what further developments and clarifications are likely to be required in the future. Section 4 concludes that the package of reforms is not likely to lead to over-enforcement or to the encouragement of unmeritorious antitrust actions in the EU. What may be more of an issue, however, is whether it has done enough to boost and facilitate private damages actions and to create the level playing field across the EU sought by the Commission. Not only does the Directive not institute a completely harmonised framework, leaving a number of potential obstacles to national actions and areas of legal ambiguity outstanding, but a number of the Directive’s provisions are liable to introduce considerable complexities into national proceedings. Further, scope for some significant divergences between national rules remain; such differences are likely to continue to affect where litigants choose to commence their actions and to result in forum-shopping.

Cartels As Rational Business Strategy: New Data Demonstrates that Crime Pays

This article is the first to analyze whether cartel sanctions are optimal. The conventional wisdom is that the current level of sanctions is adequate or excessive. The article demonstrates, however, that the combined level of current United States cartel sanctions is only 9% to 21% as large as it should be to protect potential victims of cartelization optimally. Consequently, the average level of United States anti-cartel sanctions should be approximately quintupled. The United States imposes a diverse arsenal of sanctions against collusion: criminal fines and restitution payments for the firms involved and prison, house arrest and fines for the corporate officials involved. Both direct and indirect victims can sue for mandatory treble damages and attorney's fees. This multiplicity of sanctions has helped give rise to the strongly held - but until now never seriously examined - conventional wisdom in the antitrust field that these sanctions are not just adequate to deter collusion, but that they are excessive. We analyze this issue using the standard optimal deterrence approach. This model is predicated upon the belief that corporations and individuals contemplating illegal collusion will be deterred only if expected rewards are less than expected costs, adjusted by the probability the illegal activity will be detected and sanctioned. To undertake this analysis we first calculate the expected rewards from cartelization using a new and unique database containing 75 cartel cases. We survey the literature to ascertain the probability cartels are detected and the probability detected cartels are sanctioned. We calculate the size of the sanctions involved for each case in our sample. These include corporate fines, individual fines, payouts in private damage actions, and the equivalent value (or disvalue) of imprisonment or house arrest for the individuals convicted. Our analysis shows that, overall, United States' cartel sanctions are only 9% to 21% as large as they should be to protect potential victims of cartelization optimally. This means that, despite the existing sanctions, collusion remains a rational business strategy. Cartelization is a crime that on average pays. In fact, it pays very well. Accordingly, our concluding section suggests specific ways cartel sanctions should be increased to become more nearly optimal. This should save consumers many billions of dollars each year.

Commitment Decisions and Private Enforcement of EU Competition Law: Friend or Foe?

The entry into force of the Private Damages Directive might raise questions on the balance that should be struck between public and private enforcement of EU competition law. Although many aspects could be debated, this article will focus on the use of commitment decisions in Article 102 TFEU cases and their impact on the development of the private enforcement of EU competition law. Commitments have emerged as the preferred remedy in abuse of dominance cases. Whether this course of action has been appropriate or not remains to be seen. However, this practice has an indirect impact on the development of the private enforcement of EU competition law. In a damages action, the claimant faces different obstacles such as bearing the burden of proof of the infringement, the harm and the causal link between the illicit deed and the harm suffered. An infringement decision can be relied upon before the court in a damages claim. However, this is not applicable to a commitment decision. Against this background, this article explores the nexus between the increased use of commitment decisions in Article 102 TFEU cases and their effects on potential private damages actions. This article concludes that the European Commission seems to have mixed feelings about the private enforcement of EU competition law and that further steps should be taken towards a more stand-alone-oriented enforcement policy.

Private Damages Actions in the Wake of a Commitment Decision: New Risks after the Judgment of the Paris Commercial Court in Eco-Emballages?

Private Damages Actions in the Wake of a Commitment Decision: New Risks after the Judgment of the Paris Commercial Court in Eco-Emballages?

Halliburton II: What It's All About

Rule 10b-5 private damages actions cannot proceed on a class basis unless the plaintiffs are entitled to the fraud-on-the-market presumption of reliance. In Halliburton II , the US Supreme Court provides defendants with an opportunity, before class certification, to rebut the fraud-on-the-market presumption through evidence that the misstatement had no effect on the issuer’s share price. It left unspecified, however, the standard by which the sufficiency of this evidence should be judged. This article explores the two most plausible approaches to setting this standard. One approach would be to impose the same statistical burden on defendants seeking to show there was no price effect as is currently imposed on plaintiffs to show that there was a price effect when the plaintiffs later need to demonstrate loss causation. The other approach would be to decide that defendants can rebut the presumption of reliance simply by persuading the court that the plaintiffs will not be able to meet their statistical burden. If the courts choose the first approach, Halliburton II is unlikely to have much effect on the cases that are brought or on their resolution by settlement or adjudication. If they choose the second approach, the decision’s effect will be more substantial. The article concludes with a brief discussion of some of the considerations that should be relevant to courts in their choice between the two approaches.