The Private Enforcement of Competition Law in Ireland

David McFadden

• Publisher: Hart Publishing
• Year: 2014
• Print ISBN: 9781849464130
• eBook ISBN: 9781782251231
• Edition: 1
• Topic: Diritto
• Subtopic: Antitrust

Competition is recognised as a key driver of growth and innovation. Competition ensures that businesses continually improve their goods and services whilst striving to reduce their costs. Anti-competitive conduct by businesses, such as price-fixing, causes harm to the economy, to other businesses and to consumers. It is small businesses and the consumer who ultimately pay the price for anti-competitive conduct. A coherent competition policy that is both effectively implemented and effectively enforced is essential in driving growth and innovation in a market economy. The importance of competition was recently emphasised when the EU/ECB/IMF 'Troika' included a number of competition specific conditions to the terms of Ireland's bailout. Both Irish and Community law recognise the right for parties injured by anti-competitive conduct to sue for damages. This right to damages, in theory, allows those that have suffered loss to recover that loss whilst helping to deter others from taking the illegal route to commercial success. However private actions for damages in Ireland are rare.
This book asks what the purpose of private competition litigation is and questions why there has been a dearth of this litigation in Ireland. The author makes a number of suggestions for reform of the law to enable and encourage private competition litigation. The author takes as his starting point the European Commission's initiative on damages actions for breach of the EC antitrust rules and compares the position in Ireland to that currently found in the UK and US.

1

Introduction

OVERVIEW

The central thrust of this book involves a critical examination of private enforcement of competition law in Ireland. A particular emphasis in this examination is placed on damages actions in private competition cases by claimants with small and scattered claims. Other aspects of private enforcement will also be touched on. As a first step in that examination, the purpose of private enforcement is considered and in particular, the function that private actions are intended to serve is reviewed. Next, an overview of some of the many difficulties that have accompanied private competition litigation in other jurisdictions is provided. That overview is necessary as these difficulties have yet to be encountered in Ireland where there has been, thus far, very little private competition litigation – a point that is explored later in this book.¹

Thereafter, the various obstacles to the development of private antitrust² litigation in the State will be examined. These obstacles principally include the problem of allowing large groups of claimants with small, scattered, low value claims to recover damages, and the difficulty of funding private antitrust litigation, which can be prohibitively expensive. Finally, the possibility of encouraging private actions for damages by creating incentives for plaintiffs will be studied.

The starting point of the book is the initiative of the European Commission (the Commission) on private actions for damages. On 19 December 2005, the Commission published a Green Paper³ on Damages actions for breach of the EC antitrust rules⁴ (Green Paper). The Commission then followed this with numerous further publications culminating in the publication of the White Paper⁵ on Damages actions for breach of the EC antitrust rules⁶ (White Paper) in April 2008. With the publication of the Green and White Papers and related documents including the Staff Working Papers, the Commission initiated an extensive debate on private enforcement in competition cases under Community law. It is hoped that this book will contribute to that debate from an Irish perspective.

In essence, the central question posed by this book is: ‘Private enforcement of competition law in Ireland: why and how?’ As a subtext, the book also questions whether the Irish legal system merely pays lip service to the right to sue in damages in competition cases – either in Irish or Community law. Linked to this is the further question of whether the legal system in Ireland is geared to allow effective redress for plaintiffs with small claims in competition cases.

The focus in chapters four to six will be on two central pillars in private damages actions in competition law: collective redress for plaintiffs with small claims and litigation funding. It is of course true that wealthy corporate undertakings can, and do, sue in competition cases in Ireland. Indeed, private competition cases have been litigated before the Irish courts on a number of occasions.⁷ However, there have been very few private actions in Ireland and only one case that resulted in damages being awarded arising from an infringement of Irish or Community competition law.⁸ This author is unaware of the initiation in Ireland of any private action involving a mass of consumers who have suffered small and dispersed losses arising from anti-competitive activity.

It is said that a by-product of competitive markets working well is consumer welfare.⁹ Former European Commissioner Neelie Kroes said in 2005:

Consumer welfare is now well established as the standard the Commission applies when assessing mergers and infringements of the Treaty rules on cartels and monopolies. Our aim is simple: to protect competition in the market as a means of enhancing consumer welfare¹⁰

Two years later, the Irish Supreme Court had a similar point to make when it said that ‘The entire aim and object of competition law is consumer welfare. Competitive markets must serve the consumer. That is their sole purpose’.¹¹

There is some debate in the literature about whether the sole purpose of competition policy is consumer welfare.¹² However, it is undoubtedly the case that consumer welfare is recognised, in the Irish courts at least, as being of some relevance to the outcome of competitive markets working well. This indicates that the interests of consumers in competition law are recognised not just in the literature, but by policy makers in the Commission and by the Irish judiciary.

Unlike wealthy corporate undertakings, consumers and small businesses with small and scattered claims rarely have the resources or the incentives to sue to recover what are essentially small individual claims, but which collectively could run to many millions of Euro. This inability of plaintiffs with small claims to sue in competition cases is a central theme in the book. Section 14 of the Competition Act 2002 (the 2002 Act) as amended by the Competition (Amendment) Act 2012¹³ (the 2012 Act) creates a right of action for any person aggrieved by a breach of the 2002 Act or of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). It is questionable if the Irish legal system provides plaintiffs, who have small claims, with mechanisms to vindicate their rights before the courts. Indeed it is questionable whether the right for plaintiffs with small claims to sue in damages under either domestic or Community competition law before the Irish courts is real, or can be vindicated.

The Court of Justice of the European Union (the Court of Justice)¹⁴ had found as far back as the Van Gend en Loos¹⁵ case that citizens could sue to protect the rights that they derive from the Treaties. Even so, the question as to whether damages were available in competition cases remained somewhat in doubt.¹⁶ However as Professor Richard Whish points out:

In 2001 the Court of Justice’s judgment in Courage Ltd v Crehan clarified the position, emphatically establishing a right to damages. A subsequent judgment of the Court of Justice in 2006, Manfredi, was equally emphatic.¹⁷

Despite the Court’s recognition of the existence of this right in Community law, the Ashurst Report,¹⁸ a study commissioned by the European Commission in 2004, showed that private litigation in the enlarged EU was ‘one of astonishing diversity and total underdevelopment’.

In a press release accompanying the publication of the Green Paper on Damages actions, former Commissioner for Competition, Neelie Kroes was quoted as saying:

Businesses and individuals who suffer losses because of illegal activities such as cartels have a right to compensation. Currently, this right is all too often theoretical because of obstacles to exercising this right in practice. This Green Paper sets out options for making that right a reality, and so making companies that break the competition rules pay for the harm that they do.¹⁹

Kroes stated that the intention of the Commission in its damages initiative was to make the right to compensation ‘a reality’, in circumstances where it had been shown to be at best underdeveloped and at worst theoretical. This is a clear indication that the Commission intended to legislate, if that proved necessary, to ensure that citizens’ rights under the Treaty could be vindicated. The decision of the Court of Justice in Vincenzo Manfredi v Lloyd Adriatico Assicurazioni SpA, (Manfredi) which came after publication of the Green Paper strengthened the Commission initiative. In Manfredi, the Court of Justice stated:

In the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive directly from Community law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render practically impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness).²⁰

The question whether the right to damages in competition cases under Irish and Community law is real or theoretical in Ireland will form the backdrop to this book. It will be argued that there is a need for legislative reform in the area of collective redress and litigation funding if the rights citizens derive under Irish and Community law are to be enforced. It will also be seen that unless there is reform in Ireland, the right to damages for small claims that citizens enjoy under both Irish and Community law will remain at best theoretical.

STRUCTURE OF THE BOOK

This book is divided into nine chapters. Chapter one introduces the central thesis of the book and provides a layout. The substantive matter of the book begins in chapter two. In that chapter the question is posed whether private actions have an enforcement function that complements public enforcement, or whether private actions merely serve a compensatory function for claimants that have suffered loss due to an infringement of competition law. In other words, the question that is asked in that chapter is: ‘Private actions: why?’ The answer to this question is important as it will indicate why the Commission and Member States, including Ireland, should take steps to encourage private litigation in competition law. It will be seen that the Commission’s view on the role of private actions shifted between publication of the Green and White Papers. Initially the Commission initiated the review of private actions with the Green Paper as it wanted to enhance the ‘private pillar’²¹ of enforcement. However, by the time it had published its White Paper on Damages actions, the Commission had switched the emphasis of its damages initiative to one of compensating the victims of competition infringements.²² Chapter two will set this debate on the function of private actions for damages in the historical context of competition law in Ireland since the enactment of the first Competition Act in 1991. From this it will be seen that there has been some confusion in Ireland as to the exact function of private actions in competition cases: enforcement or compensation of victims? Chapter two questions whether it is appropriate to view private actions as a mechanism for enforcing the law. This is a complex issue and as will be seen, the answer is not simple.

Chapter three gives an overview of some of the problems that may arise in competition damages cases in Ireland. These complex problems include questions such as who exactly is injured by anti-competitive conduct and therefore, who can or should be allowed to sue for damages? Should the passing-on defence be allowed? Should indirect purchasers such as consumers, be allowed to sue for harm caused to them by anti-competitive conduct far up the distribution chain at some remove from them? Questions connected to the type of damages that should be recoverable and how those damages should be quantified in what will be very complex litigation will also be addressed in this chapter. Defining damages impacts on the level of damages a court can award in a competition case. There are suggestions that the definition of damages in competition cases should be broad enough to include restitution and/ or restitutionary damages. The long years of experience gained in private damages actions in the US will pro...

Table of contents

• Cover
• Title Page
• Dedication
• Preface
• Contents
• Table of Cases
• 1: INTRODUCTION
• 2: DAMAGES ACTIONS: ENFORCEMENT OR COMPENSATION
• 3: DAMAGES ACTIONS FOR COMPENSATION: WHO CAN SUE AND FOR WHAT?
• 4: COLLECTIVE REDRESS
• 5: COLLECTIVE REDRESS FOR BREACH OF COMPETITION LAW IN IRELAND
• 6: LITIGATION FUNDING, CONTINGENT FEES AND THE LAW OF CHAMPERTY
• 7: INCENTIVISING PRIVATE ACTIONS
• 8: RECENT DEVELOPMENTS
• 9: CONCLUSIONS
• Bibliography
• eCopyright