Abstract: This article discusses recent developments in antitrust damages actions in Europe. Years ago, antitrust damages actions were the exception rather than the rule, particularly in continental Europe where disclosure / discovery were largely unfamiliar concepts. This has considerably changed. We will consider two aspects: Firstly, we take into account the impact of the Directive on Antitrust Damages Actions and its further guidance. Secondly, we observe that the lack of disclosure / discovery in the legal process has its advantages, which explains why jurisdictions like Germany have become a popular forum for bringing such claims.
For more than 15 years, the European Commission (EC) has followed its so-called “more economic approach” in the application of the competition rules of the EC Treaty, which aligned EC policy and practice more closely with current economic thinking. In line with this approach, the Commission has also sought to make antitrust damages actions more effective in the European Union. Following years of discussions and preparatory work, the Directive on Antitrust Damages Action was signed into law on November 26, 2014, giving the member states two years to implement the directive in their national legal systems. The Directive aims to harmonize the conditions for effective antitrust damage actions. The Directive is also accompanied by further guidance, in particular by the Commission Staff Working Document – Practical Guide on Quantifying Harm.
These developments, along with initiatives at the member state level, have led to an increasing number of actions against violation of the EC antitrust rules and, in particular, in an increasing number of actions against cartels. Presently, most damages claims are brought in Germany, England and the Netherlands.
The Commission’s Guidance on Quantifying Harm
Guidance in the Commission Staff Working Document – Practical Guide on Quantifying Harm is consistent with economic and academic literature on the quantification of harm. Therefore, from an economic perspective there are no surprises with regard to the proposed methods for quantifying antitrust damages. Although non-binding in nature, the document nevertheless plays an important role in that it serves as a point of reference in national courts and litigation proceedings as to what is considered a sensible way of performing such calculations.
The proposed approaches to quantifying harm can be categorized into two broad categories: comparator-based and model-based approaches. In practice, comparator-based approaches dominate by far. The simple reason is that comparator-based approaches are based on “real data” and hence are more intuitive than model-based approaches. The application of a comparator-based approach (be it over time, regions or markets) usually requires the use of advanced econometric methods, i.e., mathematical-statistical knowledge. Markets and competitive conditions usually do not remain stable over the course of several years so that shifters in cost, demand and the competitive landscape need to be controlled.
There is, however, no a priori preference for one method that is intuitive. In particular, the use of any method will depend on availability of data, standards of proof, idiosyncrasies in national civil law, etc. In practice we see dominant approaches such as regression analyses, often over time, but also over unaffected markets and products. Model-based approaches might, however, still be helpful in corroborating a case whether or not results are in line with what could have been expected.
It is also clear that it is impossible to know with certainty exactly how a market would have evolved in the absence of the infringement. Consequently, any damage calculation relies on a number of assumptions. Quantification of harm in competition cases is, by its very nature, subject to considerable limits as to the degree of certainty and precision that can be expected. This is not idiosyncratic to competition disputes – it applies to any complex damage quantification. The principle of effectiveness and the general right for compensation therefore require the application of a standard of “reasonable certainty,” a standard reflected and recognized in all jurisdictions in which we have worked. Consequently, it is the robustness of the approach that matters. Damage calculation needs to be based on credible data and the applications of recognized and suitable methods.
The structure of follow-on claims follows a very clear path. The first step is always the calculation of the overcharge and the determination of the affected commerce. This leads to a nominal damage amount that needs to be uplifted or discounted to a present value. Some jurisdictions prescribe a statutory interest and some jurisdictions are flexible in this regard. The choice of the interest rate (if any) can make an enormous difference to the overall damage amount, and each choice represents a theory of harm to the plaintiff. This on its own would be a worthwhile subject for a whole publication. Suffice it to say that the interest rate merits consideration since, depending on the jurisdiction, the nominal damage amount is often less than the single or accumulated interest.
Another aspect to consider is whether parts of the cost increases were passed through to downstream customers. There are some general considerations about what indicates a high or a low pass-through rate. However, the methods that can be applied to answering this question are very similar to the ones that are used to quantify the overcharge. What differs by jurisdiction is who would have to prove pass-through.
Lastly, if a pass-through effect were to be found, a volume effect needs to be assessed. The reasoning is simple and intuitive. If a plaintiff raised its output prices and normal price elasticity is assumed, this would lead to a decline in sales. So where pass-through decreases the damage amount, the volume effect increases the damage, depending on the sensitivity of customers to output prices.
A Jurisdiction without Disclosure / Discovery: Cartel Civil Claims in Germany
One clear differentiator between actions in Germany and cases in the U.K. and U.S. is that there are no discovery or disclosure proceedings in Germany, neither pre-trial nor during trial. This means that no party is obliged to disclose documents and each party has to produce its own evidence in support of its claim or defense. In jurisdictions with no obligation to disclose, documents are generally protected. In such cases, the concept of a legal privilege as an exception to discovery or disclosure request is unnecessary. In Germany, as compared to jurisdictions that adhere to discovery/disclosure, both plaintiff and defendant will likely have less data to substantiate or rebut a claim.
What might appear as a disadvantage at first blush is not necessarily one. In typical follow-on claims, often the product and main cost components are relatively well known by the purchaser. Moreover, German law allows for damage estimates according to §287 ZPO as a way to ease the standard of proof. However, a damage estimate must not be completely speculative but needs to be derived in a sensible way; in other words, it has to meet a standard of reasonable certainty, the threshold of which will depend on national law. Therefore, the Commission Staff Working Document – Practical Guide on Quantifying Harm and its recommendations are extremely helpful as a point of reference in order to assess what is and what is not sensible.
Leniency programs also have proven to be powerful tools that contribute to the effectiveness of actions for damages in cartel cases. As an example, the Directive proposes protection of leniency applicants that received immunity by relieving the immunity recipient from joint and several liability and by reducing exposure to the amount of harm caused to their own direct or indirect purchasers.
The success of follow-on actions and the magnitude of pending litigation are obvious and strong indications that a lack of disclosure and / or discovery does not make it impossible to bring a claim. Rather, it seems that plaintiffs consider the pros and cons of each jurisdiction to reach an informed decision. The harmonizing effect of the EC’s Directive and its guidance on quantifying harm will also inform plaintiffs’ forum decisions.
Follow-on antitrust damages actions are on the rise, and we do not expect them to abate anytime soon. Both the increasing number of decisions as well as the significant damage amounts involved will likely contribute to this development.
Jochen Benz, Managing Director, (+49) 897 104 0600
Markus Salge, Director, (+49) 69 710 487 144
Steven Lee, Managing Director, (+1) 212 328 8716
Steven Lee, a Managing Director with Alvarez & Marsal’s Global Forensic and Disputes Services, leads the Forensic Technology Services practice in the U.K. He brings more than 14 years of experience in information technology management, database management, forensic investigation, electronic discovery and forensics examinations.
 See Nicholas Forwood, “The Commission’s ‘More Economic Approach’ – Implications for the Role of the EU Courts, the Treatment of Economic Evidence and the Scope of Judicial Review,” in European Competition Law Annual 2009: The Evaluation of Evidence and Its Judicial Review in Competition Cases, ed. Claus-Dieter Ehlermann and Mel Marquis (Oxford: Hart, 2011), 255.
 See “Directive of the European Parliament and of the council 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,” European Commission, Brussels, October 24, 2014, paragraph 7, accessed December 16, 2015, athttp://ec.europa.eu/competition/antitrust/actionsdamages/damages_directi...
 See “Commission Staff Working Document: Practical Guide, Quantifying Harm in Actions for Damages Based on Breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union,” European Commission, Strasbourg, November 6, 2013, accessed December 16, 2015, at http://ec.europa.eu/competition/antitrust/actionsdamages/quantification_...
 Ibid., paragraphs 16 et seq.
 See “Directive of the European Parliament and of the council 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,” European Commission, Brussels, October 24, 2014, paragraph 38.
 For example, defendants may have the opportunity to raise a pass-on defense, but they also have the obligation to prove it.