Claims for Damages under Competition Law – Legislature strengthens Claimant rights

The 9th amendment to the ARC makes it easier to bring claims for damages against cartel members

The implementation of the EU directive on actions for damages under competition law through the adoption of the 9th amendment to the Act Against Restraints to Competition (ARC) is intended to motivate injured parties to bring suit.

Parties who are injured by cartels and file suit against cartel members are nothing new. Furthermore, the ARC has included special regulations favorable to claimants since the 7th amendment was enacted in 2005. According to this amendment, decisions by the competition authorities are binding for the courts when determining whether a violation of competition law has taken place. Interest must be paid on claims for damages from the time of the violation. The initiation of proceedings against cartel members by the EU Commission or national competition authorities, such as the Federal Cartel Office, stops the statute of limitations for the duration of the proceedings plus an additional six months. Many parties that were injured due to competition law violations and pricing collusion among major truck manufacturers have already benefited from this regulation. Without this suspension of the statute of limitations, many of these claims would have already expired.

The 9th amendment to the ARC, which serves to implement the EU directive on actions for damages under competition law (directive 2014/104/EU), reinforces the rights of parties injured under competition law. The amendment will come into force after this legislative session. However, claimants injured by cartels will already benefit from some of the advantages provided under the directive even before the amendment comes into force.

In particular, the 9th amendment provides the following advantages for injured parties:

Legal assumption of causation and the passing-on of damages/surcharges

There is an assumption that the cartel has caused damage (Sec. 33a ARC RegE). Cartel members are responsible for proving the opposite. There is, however, no assertion as to who has been affected by the cartel.

Even indirect customers – in the case of pricing collusion between truck manufacturers, for instance, a subsequent market or a freight company customer – can more easily bring claims directly against cartel members. The court assumes to their benefit that surcharges were passed on to these customers.

The argument concerning the passing-on of damages/surcharges can also work in favor of a cartel member. A truck manufacturer, for instance, may accuse a direct customer of passing on damages to its customers. However, the manufacturer would have to demonstrate and prove that the passing-on of such damages/surcharges did occur – they cannot base their arguments on the assumption described above (if a claim is made against them by a party who suffered direct damages).

Right to recovery and right to information

Assumptions that damages have occurred are not useful in determining the amount of a claim. The law provides some relief here: Sec. 33g ARC RegE includes an obligation to surrender evidence and provide information. It requires that evidence be described as precisely as possible and be based on facts that are accessible with a reasonable amount of effort. A weighing of interests must be used to determine whether evidence is to be disclosed,
although the interests of the parties against whom claims for damages are being made are not taken into account.

Exceptions from disclosure obligations

Certain documents – including ones especially valuable for injured parties – are excluded from the claim for restitution. These include principal witness statements and statements made during settlement proceedings, which are statements recognizing or waiving a challenge to accusations that were specifically made for the purpose of allowing the competition authorities to use a simplified or accelerated proceeding. Disclosing documents with certain content is also excluded if proceedings have not yet been concluded with all cartel participants. Proceedings against Scania are still not concluded in the truck manufacturer cartel case.

Statute of limitations and suspension

The statute of limitations – measured from the time parties become aware of a violation – is extended from three years to five. The statute of limitations is not dependent on any awareness of the violation and amounts to ten years from the time that the violation has ended, and a maximum of 30 years from when the violation occurred. The longer statutes of limitations will apply to all claims that have not yet expired on the date the ARC amendment comes into force. The statute of limitations can also be suspended by a claim for information or the provision of evidence under § 33g. The suspension will no longer end after only six months, but rather a full year after a final and legally binding decision has been reached. However, the old suspension regulations are still applicable to claims related to the truck manufacturer cartel.

Risk of legal expenses

To protect themselves against repeated claims and to secure claims for compensation against other members of the cartel, cartel members frequently notify other members and their customers on lower market levels of disputes. Claimants cannot predict the number of third-party interventions / interveners in advance of a claim. In addition, case law concerning the amount in dispute in third-party interventions is not uniform. All of these factors can lead to uncertainty surrounding actual process risks, and this uncertainty scares off many claimants. The new amendment is intended to resolve this uncertainty: If the claimant is responsible for costs, the claimant must now only reimburse attorney fees for the third-party intervention up to the value of the matter at hand, which the court determines at its own discretion. If there are multiple third-party interventions, the total value of the individual third-party interventions cannot exceed the value in dispute for the primary case.

Relief for principal witnesses and cartel members that are ready to settle

The rights of injured parties are also being directly reinforced. Principal witnesses, who are already shielded from paying fines, are only responsible for damages suffered by their own customers. However, for example, – and to stay with the truck manufacturer cartel case – MAN also has to pay for the damages suffered by their own customers due to purchases from other cartel members. All other cartel members are liable as joint and several debtors, and injured parties can choose whom they want to bring their claims against.

Cartel members who signal a willingness to settle are protected against having multiple claims brought against them. If they settle with an injured party, the injured party must pursue the other cartel members if the damages are not fully compensated by the settling cartel member. These other cartel members, in turn, have no claims for compensation against the cartel member who agreed to the settlement if they pay the injured party an amount more than the damages.

Recommended action:

The ARC amendment significantly strengthens the rights of claimants and also creates incentives for cartel members to reveal cartels or at least to enter into settlement proceedings with injured parties once cartels are exposed. With all the positive aspects, however, we cannot forget that the biggest hurdle remains proving a concrete amount of damages, and that we will have to wait and see whether the new disclosure and informational rights for injured parties will help rectify this situation, especially in view of the many exceptions.

evertheless, if companies learn – as they often do from the press – that any of their suppliers belonged to a cartel, they should certainly review whether it could make sense to assert claims for damages. Violations may have often taken place long in the past, but claims for damages do not expire during antitrust proceedings, which are often long-drawn-out affairs, – and interest is charged on claims from the time of the violation itself. The recently extended statutes of limitations will be an additional aid to companies.

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