Companies that do not comply with competition rules may be obliged to pay millions of euros in damages.
The European Commission estimated that the annual damage at the European Union level caused by competition violations reaches €23 billion. With effect from 8 June 2017, when Emergency Ordinance (OUG) No. 39/2017 on compensation actions for competition law infringements entered into force, harmed persons by anti-competitive acts can more easily obtain monetary damages.
The ordinance transposes Directive 2014/104/EU and introduces both procedural instruments and substantive legal norms intended to harmonize regulation at the European level and to facilitate obtaining compensation for all persons harmed by anti-competitive practices.
Damage actions for competition law breaches may be of the follow-on type — subsequent to a prior finding of violation by the competition authority — or stand-alone — not preceded by any formal finding of infringement. Because the burden of proof for the unlawful act and the damage is simplified when the breach has already been established, parties will generally initiate follow-on damage actions.
Who May Bring the Action?
Any person who has suffered damage caused by a competition law violation may file the action. These may be:
- direct purchasers (who bought goods or services directly from the infringer), or
- indirect purchasers (who acquired products or services from a direct purchaser).
Thus, any company or consumer who acquired services or goods from the infringer — whether at the national or EU level — is a potential beneficiary of compensation. The ordinance recognizes the procedural standing even of those who have acquired such litigation rights.
Joint Participation in Proceedings
Multiple persons harmed by the same anti-competitive act may join together in a single damage action. Such collective approach is desirable to spread litigation costs and risks.
Collective Actions
Currently, at the national level, the legal framework for launching collective actions in the competition domain has not yet been adopted. Their necessity is evident in cases of incidental damages, of relatively low value, suffered by small businesses and consumers. At the European level, efforts are being made for each Member State to implement collective damage action mechanisms.
Purchasers of Litigation Rights
The ordinance allows specialized entities to purchase litigation rights from harmed direct or indirect purchasers, so that these entities may pursue the compensation claim in their own name. Such entities typically have litigation expertise, may finance the action, and absorb the high risks and costs of litigation, supported by investors with sufficient resources.
Procedural Tools in the Ordinance That Facilitate Access to Compensation
- Harmed persons will have easier access to evidence, because courts can order disclosure from the infringer, a third party, or the Competition Council. If a company refuses to present the evidence, the court may sanction it with a fine of 0.1% to 1% of the previous year’s turnover.
- The unlawful act no longer needs proof when there is a final decision from the Competition Council, a court, or the European Commission establishing a competition infringement.
- A rebuttable presumption is established that cartel violations cause damage, and—under certain conditions—that a portion of the overcharge from the infringement has been passed on to the indirect buyer.
- The right to compensation prescribes in 5 years from the time one becomes aware of the infringer, the damage, and the fact that the act constitutes a competition law breach. This 5-year term is paused during investigation and sanctioning proceedings.
- Infringing companies will be jointly and severally liable for the damage, so the harmed party may claim full compensation from any of them.
- Entities granted leniency or those who made arrangements with the Competition Council are not excluded from liability for the damage caused.
What Does Compensation Cover?
The ordinance allows for full compensation for the harm suffered, including:
- Actual loss (the difference caused by higher price or inability to reduce price due to the anti-competitive practice — studies estimate an overcharge of 18–22%),
- Lost profit (damage from reduced sales),
- Interest from the moment the damage occurred until full payment.
In EU precedent jurisprudence formed before Directive 2014/104, about 60 cases have been identified where damages actions were brought for competition infringements — for example, in Italy (2003, ~€2 million against Telecom Italia), Germany (2004, ~€10 million in an abuse of dominance case), and others.
National Jurisprudence
The Bucharest Court of Appeal, in a follow-on action, ordered Poșta Română to pay approx. 4 million lei in damages following a decision by the Competition Council (Decision 52/2010).
Specialized entities like Cartel Damages Claims have obtained tens of millions of euros (exact amounts confidential) as litigation right purchasers via extrajudicial settlements with infringers in Germany or the Netherlands (e.g. under Decisions COMP/38.695 on potassium chlorate cartel or COMP/39181 on paraffin cartel).
Temporal Application
The substantive rules of the ordinance apply only to infringements occurring after its entry into force. Procedural rules apply to all new damage actions. In practice, effects of the new norms may take years, because there is usually a long delay between the beginning of the infringing conduct and its discovery.
Conclusions
Until the substantive damage provisions become effectively applicable, refinement of the auxiliary legal framework (collective actions, damage estimation) and court specialization is needed. Eventually, we may see a greater number of damage actions filed in courts by harmed companies or consumer associations seeking compensation from infringers of anti-competitive practices. Likewise, in the market there may emerge specialized entities that purchase litigation rights partially or fully, with profit motivation.