Companies are not allowed by law to agree between themselves to fix prices and hinder competition in the market place for goods or services. This type of behaviour and price fixing arrangement is called a cartel and usually results in purchasers of goods and services paying more than they would normally pay if such practices had not taken place. The European Court of Justice ruled a number of years ago in the Courage case (Case C-453/99) and the Manfredi case (Case C-295-98/04) that victims must be accorded the right to claim damages against the perpetrators of such infringements. Such unlawful agreements are generally kept secret by those involved and it is not easy for victims to get their hands on the evidence in order to substantiate their claim for compensation in the event they have suffered loss. Not surprisingly, therefore, it is usually very difficult for the victims of such unlawful business practices to exercise their right to claim damages.
The Commission of the European Union and national competition authorities have the task of investigating and punishing infringements of the competition rules. In order to assist in this task they operate very successful leniency policies whereby if an offender involved in a cartel blows the whistle on the illegal conduct and who else is involved, they will be spared from being punished. The Commission and national competition authorities therefore gather and have in their investigative file much of the evidence that would be very useful to victims who wanted to bring a claim before a national court for damages against the perpetrators of the offence, including the whistle blower. Not surprisingly, the Commission and national competition authorities do not favour giving access to their investigative file to victims to bring private follow-on actions if they also have to hand over the evidence provided by the whistle blower. They fear that, in essence, this would deter whistle blowers from collaborating with the Commission as it would make them particularly vulnerable to damages claims by the victims. They argue that the result would be very damaging to their fight against cartels which would damage the general economic good as many more infringements of the competition rules would be undetected and therefore unpunished.
During the last decade, a fierce debate has raged between those who, on the one hand, support the view of the public enforcers (the Commission and national competition authorities) that it is more important to protect the general good by refusing giving victims access to the confessions of companies granted leniency for having blown the whistle on their fellow infringers; and on the other hand, a number of academics and the legal representatives of many victims who feel that access should be granted in order for victims to be able to effectively exercise their fundamental right to a remedy, namely a claim for damages as established by case law of the European Court of Justice. The proponents of the latter view also argue that rendering the right to claim damages practically effective also contributes to the objective, in the public interest, of combating infringements of the competition rules by deterring infringements. A view that is also shared by the European Court of Justice.
Not surprisingly, the European Court of Justice has been drawn into this debate. It has been asked in a number of recent cases, but most notably the Pfleiderer case (Case C-360/09) and in the EnBW Energie case (Case T-344/08) to rule on the matter by clarifying where the balance should be struck. In essence, the Court of Justice has confirmed that all victims must be accorded the right to claim damages and that the rules governing such actions must not render the exercise of that right practically impossible. The Court has recognised that leniency policies are useful in combating cartels and that granting systematic and unfettered access to the investigative file may indeed undermine the usefulness of the leniency as an enforcement tool in the public interest. However, the Court of Justice has not ruled out victim access to the confessions of whistle blowers if that is the only means available to victims to substantiate their claim to damages.
The Commission has recently, brought forward for adoption long awaited legislation in the form of a so-called Directive on Damages that in essence seeks to limit victim access to leniency confessions and therefore overturn, by legislative means, the right of access to this evidence subject to the condition that no other means is available to the alleged victim, established by the recent interpretation of European Union Law on this matter by the Court of Justice in the Donau-Chemie case (Case C-536/11). The Directive is currently being considered by the European Parliament. The Council of Ministers has already agreed its common position. There are indications that the original Commission proposal on victim’s access to evidence provided by whistle blowers is likely to be amended to reflect the position established by the Court of Justice.
The author of this Insight, Professor Francesco Rizzuto, has written extensively on the subject of European Union Competition Law enforcement.