TABLE OF CONTENTS
Chapter One: Leniency Regimes and Access to Leniency Statements 8
Section 1.1 Summary …………………………………………… 8
Section 1.2 What are Leniency Regimes and their position in Cartel Enforcement?……..8
Section 1.3 Protection of Confidentiality…………………………………9
Section 1.4 The Effectiveness of the Leniency Regime……………………….10
Section 1.5 Conclusion……………………………………………10
Chapter Two: Public v Private enforcement 11
Section 2.1 A General Overview……………………………………..11
Section 2.2 Public enforcement of EU Competition Law………………………11
Section 2.3 Private enforcement of EU Competition Law……………………..11
Section 2.4 Private enforcement of EU Competition Law and the 2014 Directive………12
Section 2.5 Conclusion……………………………………………14
Chapter Three: Access to Corporate Statements in Competition cases 15
Section 3.1 Summary…………………………………………….15
Section 3.2An uncertain balancing of interests by the European and National Courts ……15
Subsection 3.2.1 Pfleiderer the CJEU declines to strike a balance ………………15
Section 3.3 Impact of the Pfleiderer Judgment ……………………………16
Section 3.4 Application of Pfleiderer by Member State Courts ………………….18
Subsection 3.4.1 Application of the Pfleiderer test in Germany………………..18
Subsection 3.4.2 Application of the Pfleiderer test in the United Kingdom…………19
Section 3.5 Donau Chemie: A further opportunity for the CJEU …………………20
Section 3.6 Conclusion …………………………………………..21
Chapter Four: Statutory Framework and the European Damages Directive 22
Section 4.1 Background and Objectives ………………………………..22
Section 4.2 Access to Evidence ……………………………………..22
Subsection 4.2.1 Article 5………………………………………..25
Subsection 4.2.2 Article 6………………………………………..25
Subsection 4.2.3 Article 7………………………………………..25
Subsection 4.2.4 Article 8………………………………………..26
Section 4.3 Problems with the Directive ………………………………..27
Subsection 4.3.1 Problems for Leniency Applicants……………………….27
Subsection 4.3.2 Problems for Private Claimants …………………………28
Section 4.4 Conclusion …………………………………………….28
Building an effective private competition law enforcement system is no doubt dependent on its relationship with public competition law enforcement. The difficulty in balancing the interests of the damage claimants and the leniency regime becomes apparent when determining whether claimants should be granted access to self-incriminating statements. The judgments of the Court of Justice of the European Union have appeared to favour access to leniency statements. Despite this, Directive 2014/104/EU denies such access. Denying such access is inconsistent with the aims of the Directive and the aims of the European Union in achieving private enforcement by providing full compensation to victims of anti-competitive agreements. This paper will discuss the inconsistencies within the Directive and assess its differences from the ECJ judgments.
Aims and Objectives
The aim of this dissertation is to examine what effect the European Damages Directive is likely to have on the Commission’s leniency programme, and compensatory justice. To achieve this aim, this paper will discuss the difficulties in regulating the disclosure and access of leniency document, considering the judgments of the ECJ and Member States in contrast with the provisions laid out in the Directive. This paper will highlight the need for new reform, or amendments to the Directive to achieve a fair and effective balance between public and private enforcement. Moreover, the paper will draw attention to the balancing exercise contained within the ECJ judgments and support the view that this is necessary to ensure a complementary relationship between leniency regimes and effective compensation.
The initial reading for this dissertation came from the academic competition law textbook – ‘Competition Law and Policy in the EC and UK’ by Barry J. Rodger and Angus McCulloch – sourced from Andersonian Library. After having read the relevant material and gaining a basic, conceptual knowledge of the topic, the sources found in the bibliographies were extracted to identify further and deeper research areas.
Supplementary relevant academic material was sourced through online legal databases, including Westlaw, LexisNexis and Hein Online. Search terms such as “European Damages Directive”, “access to leniency statements”, “private enforcement” produced further results pertaining specifically to this dissertation’s focus.
Arrangement of Literature
The main body of the dissertation is broken into four chapters, presented in logical order: firstly, discussing the Commission’s leniency programme and its effectiveness in detecting cartel infringement; secondly, analysing the relationship between public and private enforcement; and in the final two chapters, assessing the case law of the ECJ and Member States courts contrasting with the provisions laid out in the European Damages Directive which fail to encourage private damage claims.
The law on competition law enforcement is generally well developed with continually evolving academic literature and legislative provisions. The effectiveness of the leniency regime and the private enforcement initiative is well researched. The move towards private enforcement is often discussed in reasonable detail in more general works. However, there are relatively fewer sources which focus on the impact of the European Damages Directive on access to leniency corporate statements alone.
Recommendations for Further Research
As previously mentioned, there appears to be relatively few sources focussing on the impact of the European Damages Directive alone. There are two areas that I would recommend for further research:
- Assessing possible solutions and legislative proposals to amend the current European Damages Directive to find a more compelling balance between public and private enforcement.
- Assess the possibility of limiting the liability of leniency recipients whilst granting access to leniency corporate statements under certain circumstances. This would follow on from the ‘balancing exercise’, and follow the regimes within the U.S and, acting in conformity with the ECJ judgments.
The balance and interplay between leniency programmes and confidentiality versus disclosure is one of the most delicate topics in antitrust law. The most complex balance to be struck is between the protection of the confidentiality of leniency submissions in Commission proceedings, and the effectiveness of investigations and rights of compensation. In other words, the balance between third parties’ interest versus leniency programmes and the Commission’s investigations. There is an obvious domination arising from public enforcement, however recent steps have been seen towards encouraging effective private enforcement.
The 2014 Directive seeks a balance between the need to constrain cartel behaviour, and the right of full compensation to be awarded to private claimants. Prima facie, the Directive appears to relieve some of the tensions concerning access to leniency statements following the ECJ rulings, however offering a more critical analysis, the provisions contained within the Directive still appear to favour the public enforcement system. This is likely to encourage the phenomenon of forum shopping towards EU jurisdictions where private enforcement procedures are more efficient. One example is the United Kingdom which has been considered as an ‘attractive place in which to litigate antirust disputes’, due to its extensive rule on access to evidence based on ‘pre-trial adversary disclosure’.
This paper examines the main difficulties between the interaction between public and private competition law enforcement in the EU, considering the provisions of the 2014 Directive which deny access to leniency corporate statements. It will further be argued that the provisions contained within the Directive by themselves, has not resulted in a level playing field as far as the practice of access to evidence is concerned, as they only enable national courts to order disclosure, but do not mandate disclosure.
Chapter One outlines the main features of the leniency programme within the EU and shows its dominance in stifling cartel enforcement. The question whether victims of competition infringements should be granted access to leniency corporate statements will be discussed and whether this would prove detrimental to the EU’s public enforcement system.
Chapter Two will consider the difficulties in determining a balancing act between both public and private enforcement of EU Competition Law. A short discussion will be found on the 2014 Directive and its attempt to relieve the tension that exists, with a view to encouraging private enforcement.
Chapter Three will critically analyse the stance taken in the Pfleiderer and Donau Chemie judgments by granting access to leniency documents. The discussions arising from these judgments will be considered and applied to the Member States national laws and discuss whether the United Kingdom and Germany have followed the subsequent rulings.
Finally, Chapter Four will outline the main provisions of the European Damages Directive assessing the changes it has made to claimants looking to access leniency statements. The Directive will be critiqued due to its failure to utilise the aims of its original proposal effectively and the difficulty it may cause to claimants by denying access to self-incriminating statements.
Chapter One: Leniency Regimes and Access to Leniency Statements
Leniency programmes have been a long-standing tradition in the fight against anti-competitive agreements; the Commission’s Leniency Notice 2006 ‘Notice on Immunity from fines and reduction of fines in cartel cases’, has set out guidelines whereby a cartelist can volunteer their information in exchange for immunity, or a reduction in a fine. The Commission’s leniency regime enshrines the fundamental principle of confidentiality and has been described as a core feature of the leniency programme. This chapter will discuss the features of the Commission’s leniency programme discussing the principle of confidentiality, and examines to what extent the Commission’s leniency programme has proved effective in achieving its public enforcement objective.
1.2 What are Leniency Regimes and their position in Cartel Enforcement?
The introduction of leniency policies has been a significant advancement in identifying and prosecuting cartel infringers. A leniency programme is an investigative tool for detecting cartel activity. As a regulatory tool, leniency policies have proved effective as it accentuates the inherent instability and distrust within the cartel. Leniency programmes were created to allow cartel participants immunity, or reduction from a fine in exchange for valuable information concerning their involvement in a cartel and voluntarily reporting their unlawful behaviour. This deviated from more traditional methods of detecting cartel activity through means such as consumer or competitor complaints, and local authority investigations. Leniency regimes allow the Commission to reallocate resources in other areas of competition law enforcement whilst also receiving insider information on cartel processes and whereabouts.
Within the EU, the leniency policy is set out in the Commission’s 2006 Notice. The Commission will grant immunity from any fine to an undertaking that is the ‘first to blow the whistle.’ The undertaking applying for immunity must provide the Commission with information (such as a corporate statement) and evidence of its participation in the alleged cartel. Immunity will not be granted if, at the time of the submission, the Commission already had sufficient evidence to carry out an inspection or had already carried out an inspection. The applicant who is granted immunity is obliged to fully cooperate with the Commission throughout the whole procedure, share all investigation relevant documentation, and put an end to the infringement. The applicant cannot gain immunity if it took steps to coerce other undertakings to participate in the cartel. Moreover, the applicant is assured that submitted leniency corporate statements are afforded a specific level of protection at the time of submission.
- Protection of Confidentiality
The Commission identified that the protection of confidentiality of the information it is provided with as a crucial element of the EU leniency programme. Confidentiality is a key feature for the functioning of the programme and protection of leniency information is granted, depending on the phase of the proceedings and on the entities which may request or obtain disclosure of information (such as parties to the proceedings, third parties, Member States judges, etc.)
Corporate Statements, both in written and oral form are afforded specific protection. Paragraph 31 defines ‘corporate statements’ as ‘a voluntary presentation by or on behalf of an undertaking to the Commission of the undertaking’s knowledge of a cartel and its role therein prepared specially to be submitted under this notice’. The 2006 Notice set out the rules on granting access to corporate statements: they may only be granted ‘to the addresses of a statement of objections provided that they commit…not to make any copy by mechanical or electronic means’. Similarly, the oral or written statement may ‘only be used for the purposes of judicial or administrative proceedings’ for the application of the Community competition rules’.
The Commission called for enhanced protection for leniency corporate statements. It is accepted that some documents should be precluded under ‘investigative privilege’. Nevertheless, the Commission, or National Competition Authorities are required to demonstrate if certain pieces, or categories of evidence during a specified time would jeopardise the ongoing investigation. The Commission conceded that the mere fact of disclosure of evidence entailing unfavourable consequences for the addressee of the disclosure in parallel civil proceedings cannot constitute a reason to object to a disclosure order, so as to overcome the “information asymmetry” weighted against claimants in private damages cases. Whilst the Commission discourages the use of the Transparency Regulation on the part of damage claimants seeking access to the file, it cannot be excluded that damage claimants will pursue the transparency route to seek access to cartel evidence.
- The Effectiveness of the Leniency Regime
It is argued that the incentives for firms to cooperate with the Commission could be negatively affected by enhanced private enforcement. One possible tension relates to the question of whether a third party should be granted access to the competition authority’s internal file to obtain evidence for its claim for damages. Where the file includes information submitted by a leniency applicant, there might be a risk that allowing such disclosure would discourage companies from applying for leniency. EU legislation and the case law of the Court of Justice of the European Union have not established any de jure hierarchy between public enforcement of EU competition law and private actions for damages. In this context, the question remains where to strike the balance between the effectiveness of existing leniency programmes in the context of enforcement of competition law through competition law authorities and the courts (public enforcement) and protection of the rights of third parties in cartel cases (private enforcement).
Undoubtedly, leniency regimes have played a vital role in identifying anti-competitive agreements and providing the Commission with valuable information. It has been identified that the principle of confidentiality is a crucial element of the programme and leniency statements are afforded a specific protection. Moreover, it has been suggested that if third parties are to be granted access to the self-incriminating statements, the Commission’s leniency programme could potentially be less appealing to infringers of competition law.
Chapter Two: Public v Private Enforcement
2.1 A General Overview
This chapter analyses the general features of public and private competition law enforcement and the relationship between them. It intends to discuss the aims of the two systems, the deterrent effect of actions for damages and the legal debate prior to the 2014 Directive.
- Public Enforcement of EU Competition Law
Public enforcement has been considered the principal form of enforcement of competition law since the very first decades of the European Economic Community. Public competition law enforcement refers to the system where Article 101 – prohibiting agreements, decisions by associations of undertakings and concerted practices that are restrictive of competition – and Article 102 – prohibiting abuses of dominant position – of the Treaty on the Functioning of the European Union are enforced by the European Commission and by the National Competition Authorities of the Member States when the anti-competitive practices affect trade between Member States. Articles 101 and 102 TFEU and their national equivalents can be enforced by private parties in domestic courts or by arbitration. The European Union has intended to build an enforcement culture with more preventative administrative regulations being found within its core characteristics. In Europe, there is a much stronger tradition supporting public enforcement opposed to private, and damages primarily serve a compensatory role.
- Private Enforcement of EU Competition Law
There is a prevailing view amongst some academics that private enforcement simply concerns private interest rather than the public interest. However, it has been a long held belief that efficient private enforcement of competition law is a vital complement to public enforcement, both acting as prerogatives for the proper functioning of the EU internal market. Morais supports this view by suggesting that private enforcement should play ‘an extremely important complementary and subsidiary role, which should gradually be consolidated.’ The difficulty for policy-makers is to ensure that both private and public enforcement can effectively co-exist without undermining each other. An effective private enforcement system allows for the creation of a ‘culture of competition’ among EU citizens. An effective private enforcement system can have an overall macroeconomic positive impact due to the creation of a more competitive market and a reduction in allocative efficiencies. A large part of private enforcement is the view that an efficient system of damages actions is a cornerstone in the protection of individual rights by ensuring full compensation.
The right to claim for damages and the direct application of Articles 101 and 102 TFEU have been inherently established by the ECJ, in particular in the judgments of Courage and Manfredi. In Courage, the ECJ held that ‘Articles 101 and 102 TFEU produce direct effects in relations between individuals and create rights for the individuals concerned which the National Courts must safeguard.’ The ECJ also emphasised the role of private enforcement as a deterrence tool, holding that ‘the existence of such a right to damages strengthens the working of the Union competition rules and discourages agreements or practices which are able to restrict or distort competition and actions for damages before the National Courts can make a significant contribution to the maintenance of effective competition in the Union.’ Similarly, in Manfredi the ECJ recognised the compensation function of private enforcement stating that the ‘full effectiveness of Article 101 would be put at risk if it were not open to any individual to claim damages for loss claimed to him by a contract or by conduct liable to restrict or distort competition.’ Despite this recognition of its importance private enforcement has so far played a secondary role in the EU with the damage-action landscape proving ‘ineffective and uneven’.
- Private Enforcement of EU Competition Law and the 2014 Directive
Prior to the Directive, numerous concerns were made regarding whether access to leniency documents would jeopardise the leniency programme. Two key issues were identified: firstly, the evidence provided by the leniency applicant – despite not being protected against civil law consequences – may be used by the claimants in the damage action to prove immoral and illegal behaviour. Secondly, leniency applicants (particularly those who receive immunity) do not challenge in court the infringement decision by the competition authority, at least regarding the existence of the cartel, while other cartel members typically do. Each member of the cartel is jointly and severally liable; each victim is entitled to claim full compensation from each liable party, including leniency applicants. The incentive to apply to the leniency programme for reduction of the fine, or immunity may be hindered if there is a risk of being condemned to pay damages. This issue raises two questions: firstly, whether leniency applicants should be afforded the same level of liability in line with other cartel members; and secondly whether access to leniency statements and related documents should be granted to the claimants in the damage claim.
The objective of the 2014 Directive attempts to alleviate these issues by proposing a harmonised regulation of private enforcement. Prior to the Directive, there were concerns as to the underdevelopment of private enforcement expressed by EU institutions. Whilst private enforcement should guarantee full compensation to victims, the Green Paper released in 2005 identified the aim of both public and private enforcement as being ‘to deter anti-competitive practices forbidden by competition law and to protect firms and consumers from these practices and any damages caused by them’. This was followed by a White Paper in 2008, accompanied by a Commission Staff Working Document and an Impact Assessment Report. The Commission did not give clarification on the deterrent aim of private enforcement, but recognised that it ‘inherently produces beneficial effects in terms of deterrence of future infringements’, being a system that ‘complements, but does not replace, or jeopardise, public enforcement’.
As a result of these discussions, the Commission introduced the 2014 Directive aimed at ensuring that claimants can effectively exercise the right to claim full compensation for harm caused to them by an undertaking or an act of association. Full compensation includes actual loss and loss of profits, along with the payment of interest, but ‘shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages’. Any deterrent effect of private enforcement is therefore excluded, since ‘sanctioning EU competition law infringement is and should remain the exclusive task of competition authorities’.
Therefore, according to the 2014 Directive, a complimentary balance point is required to negate whether to order the disclosure of evidence held by competition authorities. As a result, this would balance the interests between public enforcement (aimed at deterrence), and private enforcement (aimed at effective compensation).
Chapter Three: Access to Corporate Statements in Competition cases
Chapter Three examines the approach that EU Member States have taken with regards to access to leniency documents. The European Courts have been asked to provide unambiguous rules on when a victim of cartel infringement has the right to access leniency files. Thereafter, the case law of the National Courts will be analysed to evaluate the steps they have taken and whether they have followed the Pfleiderer judgment.
- An uncertain balancing of interests by the European and National Courts
The ECJ was confronted with the controversial argument which undermines private enforcement: the discovery of cartel infringement against effective compensation to victims of the infringement in the Pfleiderer and Donau Chemie cases. In Pfleiderer, the ECJ had to decide whether the disclosure of leniency material may be prohibited to protect the leniency program under EU competition law. The ECJ affirmed that, in the absence of European Union law, it is for the National Courts to decide on a case-by-case basis whether to allow the disclosure of leniency documents. Unfortunately, the ECJ failed to offer specific criteria of assessment which should be considered when determining whether the access to leniency documents should be granted. Similarly, in Donau Chemie, the ECJ extended its earlier ruling in Pfleiderer and held that in the absence of EU legislation, it would be contrary to the principle of effectiveness if member states were to refuse the case. Consequently, member states can rely on their own national laws to provide courts with an opportunity to weigh the interests of victims of cartel infringement against the effectiveness of the EU’s flagship leniency policy.
- Pfleiderer: the CJEU declines to strike a balance
The Pfleiderer case is the first case where the Court of Justice has been requested to answer whether third parties could claim access to the file of an NCA containing documents submitted under a national leniency programme. In 2008, the Bundeskartellamt imposed fines equal to EUR 62 million on producers of décor paper and individuals who were personally liable for their agreements on prices and capacity closure. With a view to preparing a private action for damages, Pfleiderer sought access to the file of the Bundeskartellamt. The Bundeskartellamt granted only partial access and refused to disclose documents that contained confidential business information, internal documents and self-incriminating leniency statements. Pfleiderer challenged this refusal before the Ambtgericht Bonn which initially ruled in favour of Pfleiderer; access was to be granted to parts of the file in which the leniency applicants voluntarily provided to the Bundeskartellamt and to the incriminating material and evidence collected. The Ambtsgericht Bonn requested the ECJ to clarify whether Articles 11 and 12 of Regulation 1/2003 are to be interpreted as meaning that parties adversely affected by a cartel may not ‘be given access to leniency applications’ voluntarily submitted to a NCA by a leniency applicant.
In an alarming decision for regulators and potential leniency applicants the CJEU held, private claimants were not prevented from gaining access to documents submitted to the Commission by a leniency applicant. The Commission and national regulators themselves guarantee that leniency materials will be treated on a strictly confidential basis precisely because they recognise that the risk of disclosure is likely to deter a leniency applicant from coming forward. The CJEU acknowledged the difficulty in balancing the interest of effective enforcement of competition law through the leniency regime, and interests of claimants in obtaining evidence to facilitate damages for losses that have been caused to them. Crucially, the CJEU refused to strike that balance at EU level, or indeed give any clear guidance on how that balance ought to be struck. Indeed, it issued the National Courts of the twenty-seven Member States a rather imprecise instruction to ‘weigh the respective interests in favour of disclosure on a case-by-case basis, according to national law, taking into account all the relevant factors in the case’. In his judgment, Advocate General Mazák concluded that it was necessary to examine the circumstances in which a NCA may legitimately refuse to disclose information and documents submitted by a leniency applicant. AG Mazák considered that access to voluntary self-incriminating statements (i.e. corporate statements) made by a leniency applicant should not be granted since it could be potentially detrimental to the attractiveness of the leniency programme thereby reducing its effectiveness.
It has been accepted as a matter of EU law that it may be appropriate for leniency materials to be disclosed in certain circumstances. However, the Pfleiderer test does not provide the basis for a harmonised approach. This leaves the potential leniency applicant unable to assess the risk of disclosure of their leniency documents with any accuracy.
- Impact of the Pfleiderer Judgment
The ECJ did not want to afford absolute protection to leniency documents. The judgment of the ECJ in Pfleiderer runs the risk of different decisions being passed by the Courts of the individual Member States as the balancing of interests should be made based on the relevant national law.
The CJEU’s decision identified the competing objectives of ensuring that cartelists are not deterred from submitting evidence under leniency programmes and fulfilling the aim of full compensation, thereby strengthening the working of competition rules. The ECJ concluded that a potential cartelist could be discouraged from submitting a leniency application if they are faced with the risk of disclosure. Nevertheless, the ECJ stressed the importance of an individual’s right to claim damages for a loss caused to them by conduct which is liable to restrict or distort competition. The ECJ held, national rules cannot make it ‘practically impossible or excessively difficult to obtain such compensation’. Much of the interest in the decision stems from the fact that the CJEU did not draw such a distinction. It authorised National Courts to weigh the public and private objectives for all leniency documents.
Rydelski believes that the Pfleiderer ruling appears to ‘strengthen private enforcement’. This view is predominantly based on the ECJ’s refusal to accept that the protection of leniency evidence should take primacy over the fundamental right of a cartel victim to remedy. Likewise, Rizzuto interprets the ruling as the ECJ emphasising the importance of the leniency programme to detect cartel infringement, but in the absence of common EU law rules, it cannot displace the right to claim damages. Accordingly, Rizzuto believes the Pfleiderer ruling favours the fundamental right to an effective remedy. Such a view would be deemed an ‘over-interpretation’ according to Völcker who states that the ECJ does not create any fundamental right to access for private claimants. Nevertheless, Völcker’s argument fails to acknowledge that although the Pfleiderer ruling does not create fundamental protection for a claimant’s right, it also does not protect the leniency procedure. Moreover, there have been suggestions that the uncertainty created by Pfleiderer may not in reality influence the effectiveness of the leniency programme. Although the judgment in Pfleiderer may undermine the leniency programme, it is unlikely to ‘destroy the programme’. Consequently, the potential damage done to the leniency programme by the Pfleiderer ruling could be somewhat ‘overstated’. The academic debate between Rydelski, Rizzuto et al. cannot be used to draw conclusions on how the balance ought to be struck. It is acknowledged that too much exposure could deter leniency applicants, however it is unequivocal that there is a need to establish whether the ‘balancing act’ on a case-by-case basis would prejudice the leniency regime.
- Application of Pfleiderer by Member State Courts
The Courts of Germany and the United Kingdom – two of the European jurisdictions currently preferred by claimants in follow-on damages actions – have already faced the challenge of applying the Pfleiderer test. The inconsistent approaches taken in these early decisions confirm that the probability of disclosure of leniency material is likely to vary between national jurisdictions within the European Union. This factor is likely to influence a private claimant’s choice of jurisdiction when bringing a follow-on damage claim encouraging forum-shopping in jurisdictions where private enforcement is seen to be favoured.
- Application of the Pfleiderer test in Germany
Following the Pfleiderer ruling, the Amtsgericht Bonn applied the weighing exercise and refused the disclosure of leniency documents. The German courts have taken a strong viewpoint defending the public enforcement of competition law through the effectiveness of the leniency regime. The private interests of potential claimants in securing access to leniency information are generally considered to be outweighed by the public interest in an effective leniency regime. Like the Commission, the Bundeskartellamt emphasises to leniency applicants that it will use its discretionary powers to protect leniency materials by refusing applications by third parties for file inspection or the supply of information. The Amtsgericht Bonn held, the leniency applicant had a legitimate expectation that the authorities would not disclose any evidence volunteered. Similarly, the court held that potential claimants were not disadvantaged if access to leniency documents was not to be granted. They arrived at this decision on the basis that claimants had access to decisions over fines and evidence that was collected throughout the proceedings. Ultimately, they concluded that the interests of the leniency applicants’ and the protection of the leniency programme outweighed the interests of the claimants.
Likewise, in the case of Oberlandesgericht Düsseldorf, the court also chose to protect leniency materials due to the ‘overriding interests worthy of protection’. The Düsseldorf court agreed with the Local Court of Bonn that disclosure of the fining decision would indirectly disclose part of the leniency application whereby claimants could seek the decision of the allocation of fines to each company.  In applying the Pfleiderer test, the Düsseldorf Court held that the evidence submitted contained business secrets worthy of protection. The court held the view that access to leniency applications was not necessary. In this regard, the court stressed that confidentiality was integral to an effective leniency programme. The German Courts have emphasised the importance of protecting the leniency procedure and have interpreted the Pfleiderer weighing test as largely protecting leniency submissions. It is therefore questioned as to what effect this would expose claimants to information asymmetry.
- Application of the Pfleiderer test in the United Kingdom
The position in Germany is quite different from the more refined approach taken by the English High Court in the National Grid case. In that case, the English Court undertook the Pfleiderer balancing exercise for the first time in the context of an application for disclosure for various leniency materials.
In January 2007, the Commission fined 20 companies over €750 million for cartel participation with regards to the gas insulated switchgear sector. National Grid commenced a follow-on claim for damages against many of the named companies – including ABB, Siemens, Alstom and Arevain – in the Commission’s decision, claiming losses suffered because of overcharges. National Grid applied for disclosure in 2011 of the confidential version of the Commission’s decision, including the Commission’s Statement of Objections and responses. Disclosure of the corporate leniency statements proved unproblematic as the statements were made orally and as a result, no transcript was held. National Grid’s initial request was whether the High Court could ask the Commission to provide those documents pursuant to Article 15 of Regulation 1/2003. The High Court raised concerns over the clarity over the Pfleiderer judgment. The Commission acknowledged that the principles stipulated in Pfleiderer were to be applied regarding the disclosure obligations of leniency documents submitted to the Commission.
The judgment in National Grid came from Roth J. who considered four relevant factors, including factors brought to light by the Commission.
- Roth J. did not accept that the defendants had a legitimate expectation that their leniency documents would be protected from disclosure. The Commission provides that leniency statements will not be disclosed without consent, although it is evident within the leniency notices that a leniency status cannot protect a party from civil law actions.
- Roth J. accepted that it was relevant to consider whether disclosure would increase the leniency applicant’s exposure to liability compared to those parties who did not seek leniency.
- The damage to the effectiveness of the leniency programme was also considered. Roth J. implied that given the seriousness of the Commission’s fines, parties would continue to be incentivised to apply for leniency to mitigate their exposure.
- Finally, it was said that proportionality was a relevant factor in assessing whether the disclosure of files should be granted. Two factors were offered as guidance: (i) The availability of other sources of information; and (ii) The relevance of the required leniency documents.
The judgment confirms the English Courts willingness to order the disclosure of leniency materials, albeit determined on a case-by-case basis. It was anticipated that the judgment may have had consequences for the Commission in terms of ‘increasing the attractiveness to the parties of settlement as a means of concluding cartel cases’ and prompted the Commission to implement new legislation to protect the leniency policy.
The National Grid judgment accentuates the uncertainty surrounding access to leniency material, taking a completely opposing view from the German Courts; both in relation to the likelihood of usefulness of leniency materials to the private claimant and the potential threat that disclosure poses to the Commission’s leniency programme. The judgment demonstrates the English Courts willingness to order disclosure of leniency materials to private claimants in certain circumstances. It also indicates that the types of factors that the English Courts will take into consideration when making this assessment are simply not matters which can be assessed at the time when a potential leniency application is weighing up the merits of an application. Faced with such uncertainty, a potential leniency applicant may well be deterred. It is therefore not at all clear that the English court’s confidence in the continuing effectiveness of the leniency incentives in the face of disclosure risk is well-founded.
- Donau Chemie: A further opportunity for the CJEU
The CJEU was offered a further opportunity to clarify the compatibility of national rules with regards to the disclosure of files of leniency applicants. The CJEU seemed to elude from the question in Donau Chemie. Third parties were permitted to obtain access to the file providing that the consent of all parties to the proceedings had been received. The stated objective of the provision under Austrian law was to promote disclosure of infringements of competition law. The Austrian Cartel Court asked the CJEU whether the national rule was compatible with EU law. The ECJ in Donau Chemie followed the Pfleiderer ruling, and once again emphasised the importance of damages actions in ensuring the maintenance of effective competition. The ECJ noted that the argument that the risk of disclosure of leniency evidence may undermine the effectiveness of the leniency programme, but it could not justify a blanket refusal to grant access to such evidence. Many scholars. had anticipated that the ECJ in Donau Chemie would reduce ambiguity, however the ECJ did not state any clear guidance as to what factors should be considered when performing the weighing exercise. The court recalled the importance of private enforcement and its deterrent effect, and reiterated its belief that the Pfleiderer weighing exercise is necessary. It held that a national rule forbidding access to leniency corporate statements is liable to undermine the right to compensation in the absence of the being unable to obtain evidence. The judgment crucially reinforces the ECJ’s stance that the protection of leniency documents is not absolute.
From the case law of the European Courts and the National Courts, there is a common theme of reluctance to grant full access to leniency documents with two prevailing common arguments: (1) claimants already have access to evidence used throughout the proceedings and have access to the Commission’s decision regarding the fine each company is to receive; (2) there is a fear and a difficulty in determining a balance between the attractiveness of the leniency programme to cartel infringers and potential claims looking to be compensated for the loss they may have suffered as a result of the infringement. The next chapter looks to explore the new changes that the Commission have endeavoured to improve opportunities for effective redress to victims of cartel infringement, abuse of dominance or vertical restraints through the introduction of the European Damages Directive.
Chapter Four: Statutory Framework and the European Damages Directive
- Background and Objectives
The European Commission began to explore the options for reforms in 2005, leading to the provision of the 2005 Green Paper. Thereafter, the Ashurst Report informed the Commission about the legal situation in the Member States, identifying the issue of ‘forum shopping’. This was then followed by a consultation on the White Paper proposals in 2008 on private enforcement which analysed noticeable deficiencies which led European law makers to propose a minimum standard for cartel damages. One of the main goals of the 2014 Directive has been ‘to increase legal certainty and to reduce the differences between the Member states as to the national rules governing actions for damages.’ The Directive embraces a rigid approach and considers the Pfleiderer ruling to have created discrepancies between Member States regarding the disclosure of files of competition authorities. Accordingly, the Directive includes leniency statements in the ‘black list’ of documents which National Courts can never order a party or third party to disclose in order to ensure that leniency applicants continue to approach competition authorities with leniency statements or settlement submissions.
The initiative should be welcomed, especially considering the difficulty in trying to find a balance between public and private enforcement. However, the solutions adopted in the 2014 Directive raises concerns regarding the Commission’s consistency with the right to access documents as provided by Regulation 1049/2001. Some concern can be expressed regarding the issue of ‘forum shopping’ and thereby trying to achieve the ‘full compensation’ objective.
- Access to Evidence
The new statutory framework aims to improve opportunities for effective redress in relation to those affected by cartels, abuses of dominance or unlawful vertical restraints. For this paper, the emphasis lies with cartel infringements and to what extent the directive has altered claimant’s access to leniency documents. The Directive’s attempt to alleviate the tension between public and private enforcement of competition law by exempting certain documents from disclosure contrasts with the rulings of the ECJ in earlier cases. Without guidance or a legislative framework from the European authorities, Member States have been seen to have established opposing opinions concerning access to leniency documents. The Directive seeks to address the legal uncertainty created by the ruling in Pfleiderer with an aim to create a harmonised rule which all member states would adhere to.
The Damages Directive aims for better compensation for victims of competition law infringements, and simultaneously attempts to strengthen both public and private enforcement. In its proposal for the Directive, the European Commission stated that: “the overall enforcement of the EU competition rules is best guaranteed through complementary public and private enforcement”. The proposal advanced two goals: (1) optimizing the interaction between public and private enforcement of competition law; and (2) ensuring that victims of infringements of EU competition rules can obtain full compensation for the harm that they suffered. Prima facie, the Directive proved to be a significant advancement for private enforcement.
The Directive made a distinction between three different categories of leniency evidence:
- Self-Incriminating Statements by Leniency Applicants.
- Temporary restriction documents which are specifically prepared for public enforcement proceedings or documents drawn up during proceedings.
- Any other forms of leniency evidence which does not fall under the first two categories theoretically can be disclosed subject to specific guidelines.
To strike a balance between necessary disclosure of evidence and burdensome ‘fishing expeditions’, the Directive introduces the rule that the Courts should be able to order the disclosure of evidence when several requirements are met, and in particular when the plaintiff –
- has represented a reasoned justification;
- containing reasonable available facts and evidence;
- which is sufficient to support the plausibility of the claim.
The Directive has attempted to find the right balance between public and private enforcement without detracting from the goal of compensatory justice. To some extent, the Directive can be seen to relieve the tension between public and private enforcement and does provide claimants with greater access to certain documents. However, despite the emphasis put on the need to facilitate private damages claims, the new Directive is also concerned with preserving the effectiveness of the leniency program as a mechanism to uncover cartels.
The Damages Directive tries to overcome the above problems in the following ways:
- Private parties will have no access to leniency corporate statements;
- A cap is put on the damages payments due by immunity recipients; and
- A rebuttable presumption is introduced that cartels caused harm, and judges are empowered to estimate the harm suffered.
By making it clear that access to leniency documents will be refused, the Directive has reduced the legal uncertainty arising from the decisions in Pfleiderer and Donau Chemie. The ECJ created scope for divergent national rules of procedural law on this issue. The European Commission did not opt in favour of full immunity or a percentage reduction, but chose a different way of limiting liability claims. According to the Directive, an undertaking that has been granted immunity from fines under a leniency program is liable only to its direct and indirect purchasers. However, this limitation of liability does not apply if injured parties are unable to obtain full compensation from other undertakings. Hence, leniency applicants may be held liable in case of insolvency of the other cartel participants. When the above conditions are met, the national courts should be able to order the disclosure not only of specified items of evidence but also ‘relevant categories of evidence circumscribed as precisely and as narrowly as possible’.
The question is whether the protection of public enforcement and of leniency can be considered as a proper justification to derogate to the wide right of access documents granted to EU citizens. Recent case law proves controversial and resembles the approach in Pfleiderer in favour of a degree of disclosure of leniency corporate statements and the idea that private enforcement can also have a deterrent effect, as stated in Courageand Manfredi. However, the ECJ in EnBW Energie Baden-Württemberg AG ruled that the Commission is allowed to rely on a general presumption that access to documents by third parties in cartels would undermine the protection of the commercial interests of the undertakings involved. The 2014 Directive solution is questionable as it creates an additional burden on claimants who are already burdened by ‘information asymmetry’ and creates a significant hurdle to the establishment of an effective private enforcement system.
- Article 5
Article 5 of the Directive states that for evidence to be disclosable it must be proved that such evidence is relevant to the case. Member States must limit disclosure of evidence to what is proportionate. The Directive also provides factors that should be considered by National Courts when determining whether evidence is proportionate. Article 5 establishes the basic rule (and minimum standard) that Member States should ensure that National Courts are able to order defendants, claimants, third parties to disclosure relevant evidence upon request of either of the parties. In contrast to the 2013 Commission’s Proposal, the Directive does not explicitly mandate a court to order disclosure, despite the contradicting provision found in Recital 15 of the 2014 Directive highlighting the claimant’s right to obtain disclosure of evidence.
- Article 6
Article 6 however sets clear limits on the disclosure of leniency evidence. Article 6 provides for the protection of leniency statements. A claimant may present a request that the National Courts access the documents for the sole purpose of ensuring the contents fulfil the definition given in Art 4(1) (16). Article 6 has mandated that for actions for damages, the national courts are unable to order a party or third party to disclose leniency statements and settlement submission. Director General Italianer confirmed that it is only regarding the ban of leniency statements where the legislator will intervene due to the ‘prevailing public interest to protect the leniency programme’. Moreover, Article 6(6) of the Directive has entrenched the confidentiality of corporate leniency statements into Europe-wide legislation. The proposal in Article 6(6) of the Directive to grant corporate leniency statements absolute protection is currently subject to intense debate. Ultimately, the Act fails to consider the usefulness of such statements in court proceedings for damages claims.
- Article 7
In some cases, claimants may try to seek disclosure of evidence from a defendant or third party which has been obtained by the defendant/third party via the access to file process. The European Commission is understandably concerned that claims should not be able to circumvent the protection set out in Article 6 relating to “black-list” and “grey-list” documents. Articles 7(1) and 7(2) of the Directive provide that if such documents are obtained via the ‘access to file process’ then they are deemed to be inadmissible in actions for damages or otherwise protected under applicable national provisions. Documents obtained solely through the access to file process ‘may only be used by the person who was originally granted access to the document via the access to file process. This provision has been intended to act as a prevention from competition authority’s becoming ‘an object of trade’. However, recital 32 goes on to state that this ‘limitation to avoid trading of evidence does not…prevent a national court from ordering the disclosure of that evidence…’
- Article 8
Article 8 provides that ‘Member States shall ensure that National Courts are able to effectively to impose penalties on parties, third parties and their legal representatives’ where they fail or refuse with a disclosure order, destroy relevant evidence, fail or refuse to comply with confidentiality order, or use the evidence outside the permitted limits. These penalties have to be ‘effective, proportionate and dissuasive.’ Article 8(2) provides that the available penalties shall include the ‘possibility to draw adverse inferences, such as presuming the relevant issue to be proven or dismissing claims and defences in whole or in part, and the possibility to order the payment of costs’. Interestingly, the Directive does not require Member States to introduce other penalties in the case of non-compliance. This is astonishing in so far as the failure of some civil law regimes for penalties other than adverse inferences where a party fails to disclosure was one of the issue that the prospect of an adverse inference may indeed be a dissuasive penalty to a party. However, where the document whose disclosure is requested is, for example, essential for the claimant to establish a sufficient basis for damages to be estimated, an adverse inference or the imposition of costs on the defendant would not help the claimant to the same extent as actual disclosure would. In this regard, an obligation on member states to provide for penalties such as periodic penalty payments or personal sanctions would arguably be more effective.
- Problems with the Directive
Although the Directive can be said to have eradicated the uncertainty created in Pfleiderer, in refusing the complete disclosure of leniency corporate statements, it is unclear to see how the Directive would achieve its aim of ‘ensuring that victims of infringements of EU competition rules can obtain full compensation for the harm they suffered’. Buccirossi has asserted that there is no conflict between the objectives of maximising deterrence and allowing full compensation to victims and has urged the EU to consider a legal regime in which the immunity recipient’s liability is minimised (even eliminated), whilst granting victims full access to all files of the competition authority, including leniency statements. The Directive can be seen to prove problematic for both leniency applicants, and private claimants. Often these academic debates arise from: (1) Those in favour of the leniency regime and support public enforcement fully; or (2) Those in favour of private enforcement who support the position that victims of cartel infringement should have the resources to claim damages.
4.3.1 Problems for Leniency Applicants
There are academics who support the Directive and its aims. Wardhaugh states that the Pfleiderer ruling and its subsequent case law has ‘made a mess of the leniency programme.’ Wardhaugh believes by protecting corporate statements from disclosure, the Directive goes some way to eradicating the legal uncertainty created in Pfleiderer. Wils, in the same manner, suggests that the exclusion of the disclosure of corporate statements could be justified due to the importance of the leniency programme. Similarly, several academics believe the principles in the Directive fall short of sufficient protection for the leniency programme. Geradin and Frelier argue that the proposal leaves sensitive information largely unprotected. It is argued that under the Directive, leniency applicant’s responses would be accessible to claimants. Morais shares this view and believes a more detailed version of the Directive should be released to ensure most leniency documents are protected by law. If not, disclosure could deter leniency applicants from being more forthcoming in their responses.
4.3.2. Problems for Private Claimants
Another possible infringement of the primary law principle of effectiveness can be found regarding the limitation of the leniency applicants’ liability in Article 11(2). While it does generally make sense to privilege successful leniency applicants regarding civil liability, it is problematic to do so at the expense of the injured parties. The ECJ expressed concerns regarding a rule that privileges successful leniency applicants in relation to injured parties. Yet, Article 11(2) stipulates that victims can claim compensation from successful immunity applicants subject to evidence that they are unable to obtain full compensation from the other cartelists. This puts a significant burden on them which renders their right to full compensation less effective. Christian Kersting suggests that the solution is to ‘privilege successful leniency applicants not in relation to the injured parties but in relation to their co-infringers.’ He states that this rule could even be extended to leniency applicants who receive a partial reduction of a fine by decreasing their contribution of the damages to be paid to the victims, in accordance with their co-infringers. Consequently, disclosure of the documents would not be a deterrent to potential leniency applicants because they would be immune from civil liability. This would refrain from the need to grant special protection for certain documents, and would be left to the national courts to determine whether disclosure should be granted, in conformity with the ECJ’s judgments. Some authors argue that to enable courts to take special circumstances of individual cases into consideration, judges should be given discretion to adjust the extent of the privilege granted to successful leniency applicants. However, giving discretion to judges would mean more uncertainty for leniency applicants and might be a disincentive to leniency applications.
Optimising the effectiveness of antitrust enforcement against cartels is undeniably a priority to ensure effective public enforcement, and the 2014 EU Directive has indeed facilitated private claims effectively by providing greater access to certain files held by competition authority’s. As to the desired complementarity of the two systems, the 2014 Directive still seems to favour public enforcement rather than to the right of victims to be compensated. Article 6(6) categorically denies access to files from leniency applicants, contrasting with the ruling in Pfleiderer and Donau Chemie. The Directive makes it unnecessarily complicated to gain access to NCA files. It is contended that the complete refusal to disclose leniency corporate statements raises concern over the Directive’s initial aim to fulfil the goal of full compensation of victims.
Undeniably, much progress has been made by the EU towards an efficient system of private competition law enforcement. The relationship between public and private enforcement is particularly frail and becomes apparent when determining whether claimants should be granted access to self-incriminating statements. Scholars such as Morais, and the judgments of Courage and Manfredi signify the importance of private enforcement, sustaining that damages should also have an important deterrent effect. To achieve such deterrence, claimants should have the ability to properly base their claims, overcoming the information asymmetry of which they suffer.
Self-incriminating statements provided by infringers in the context of the leniency mechanisms would be key for claimants. Granting such access would strengthen claimants position to achieve full compensation; however, it may act as a deterrence to members of cartels from ‘whistleblowing’ thereby weakening public enforcement of EU Competition law. The 2014 Directive tries to achieve such a balance by strengthening the position of claimants seeking to preserve and encourage the leniency system. However, it has been shown that the Commission can be seen to be very protective of documents submitted under the EU leniency programme.
The 2014 Directive has failed to create a level-playing field within the EU. Claimants who can afford to bring their claims before a court granting broader access to evidence – thus ‘compensating’ the denied access to leniency statements – would be more likely to receive that full compensation envisaged by the 2014 Directive. On the contrary, those who cannot afford to forum shop would struggle to prove their claims if their National Courts have no comparable provisions. This contrasts with the original aims of the Directive and fails to ensure claimants rights to full compensation.
This paper has emphasised the need for new reform, or amendments to the Directive to achieve a fair and effective balance between public and private enforcement. The ‘weighing exercise’ as supported by the Pfleiderer and Donau Chemie judgment could be re-established and provide the opportunity for claimants to be granted access to leniency statements if, for example, there is a scarcity of general evidence available. Such amendments would likely eradicate the current concerns of the 2014 Directive and would create a levelled access to evidence in all EU Member States, thereby removing the need to ‘forum shop’.
International Antitrust Law & Policy: Fordham Competition Law 2012 (Juris Publishing Inc. 2012), Chp.3.