Implementation of European Union Directive on Antitrust Damages Actions into French Law
On 10 March 2017, France finally implemented into French law the European Union Directive 2014/104 of 26 November 2014 on antitrust damages actions through Order n° 2017-303 and its implementing Decree n° 2017-305 of 9 March 2017. France was more than two months late, but there are still some EU Member states that still have yet to comply with the obligation, including Austria, Belgium, Portugal and Spain, among others.
A new title in the French Commercial Code (FCC) was specifically created to gather most of the rules governing antitrust damages actions. Notwithstanding the implementation of the specific rules, the French general rules on liability still apply to damages actions (when consistent with these specific rules), with the new provisions creating only rather marginal changes.
While key areas, such as the validity of litigation vehicles and the financing of actions by third parties are still not addressed by the French implementation provisions, their scope of application and some of the substantive and procedural rules they contain, highlight some immediate areas for discussion.
Scope of Application
Although the French Order’s procedural provisions apply immediately, its substantive rules will not apply to ongoing litigation because the EU Directive prohibited Member States from implementing its substantive provisions with a retroactive effect. French courts may, however, decide to start immediately interpreting the former applicable law, which will continue to govern ongoing actions, in light of the Directive.
As regards its material scope, the EU Directive applies to infringements of Articles 101 and 102 of the Treaty on the Functioning of the European Union, which cover cartels and abuses of dominant position. The implementation provisions also apply to infringements that are specific to French law, such as the abuse of a situation of economic dependency and the setting of abusively low prices. The material scope of the French Order is therefore broader than that of the EU Directive.
The implementation provisions also refer to damages actions brought against an “undertaking” or an “association of undertakings”. Due to the absence of specific definitions of these in both the EU Directive and the implementation provisions, it is likely that the concept of “undertaking” will be construed in light of the current definition laid down by EU case law in the field of parent company liability. It could in turn lead to parent companies being sued by victims in damages actions for infringement carried out by their subsidiaries.
Binding Effect of Competition Authorities’ Decisions
Similar to the EU Directive, the implementation provisions are intended to make it easier for victims of anticompetitive infringements to prove the actual fault committed by the infringer. This is one of the three elements, alongside harm and causality, that a victim must prove under French law to obtain compensation.
In the event of follow-on actions, sanction decisions rendered by the European Commission or the French Competition Authority (FCA) – but not by competition authorities in other Member States – that are no longer subject to ordinary appeals will constitute an irrebuttable presumption of fault, see Article L. 481-2 of the FCC. This means that decisions subject to an appeal before the French Cour de cassation (French Supreme Court for judicial matters) – an extraordinary appeal – will be considered as having a binding effect on French courts dealing with damages actions.
Decisions rendered by competition authorities in other EU Member States will have evidential value in relation to proving an infringement, but will not be binding on French courts.
The implementation provisions also provide that cartel infringements, but not other types of anticompetitive practices (such as abuses of a dominant position), are presumed to cause harm to victims, see Article L. 481-7 of the FCC. This presumption is, however, theoretically rebuttable.
These changes should facilitate the burden of proof in favour of the claimant.
Passing-on of Overcharges
The victims’ burden of proof is also lightened in relation to the passing-on of overcharges to a subsequent purchaser: the overcharge is presumed to have not been passed-on and the burden of proof of the passing-on therefore shifts onto the defendant. This is a significant shift away from the existing case law of theCour de cassation, which required the claimant to bring the (difficult) evidence that it had not passed on the overcharge resulting from the anticompetitive practice.
In contrast, however, indirect purchasers are presumed to have established the passing-on of overcharges when they bring specific types of evidence listed in the new Article L. 481-5 of the FCC. This presumption is also rebuttable. It should be noted that Article L. 481-14 of the FCC states that “direct or indirect purchasers shall be deemed not to have passed on the additional costs”, without any definition of “purchaser”. Future case law should hopefully bring some guidance regarding the exact scope of this provision.
Assessment of Damages and Compensation
The implementation provisions provide that if an infringing company enters into a settlement agreement with victims of an antitrust infringement during the related FCA investigation, the FCA may take this into account and reduce its fine (see new Article L. 464-2 of the FCC). It has not yet been established however, whether or not this fine reduction will be proportional to the compensation voluntarily paid by the infringing company to the claimant.
Unfortunately, the implementation provisions do not provide much more guidance than the EU Directive concerning the assessment of the injury suffered by victims once the FCA has rendered its decision and the victims bring damages actions against the infringers. Quite surprisingly in view of the role and expertise of the FCA, which lies in public enforcement, not private enforcement, the implementation provisions state that French courts are now empowered to ask the FCA for guidance, but the FCA has no formal obligation to answer.
In the event of follow-on actions, the FCA’s decisions can themselves provide some guidance as they take into account the harm caused to the global economy when setting the amount of the fine, which is specific to French antitrust law. It should, however, be borne in mind that the harm caused to the global economy is not necessarily equivalent to the harm suffered by a private party.
After assessing the amount of damages an individual should receive, the issue becomes one of who should provide compensation. When multiple companies carried out the infringement, the implementation provisions specify, in accordance with the EU Directive, that they are jointly and severally liable towards the victim. Ultimately, however, each of them will only contribute to the compensation in proportion to their causal role in the infringement. This proportionality principle in the EU Directive is aligned with French case law, although French courts usually refer to the seriousness of each company’s behaviour rather than their causal role.
Despite the freedom left to Member States to increase the limitation period beyond five years, the implementation provisions have adopted the five year limitation period suggested in the EU Directive. Nonetheless, the rules regarding the starting point of the limitation period tend to play in favour of the victim. In brief the limitation period only starts running once the victim has knowledge, or should have had knowledge, of the identity of the infringer(s); see new Article L. 482-1 of the FCC.
In practice, in follow-on actions, this means that the limitation period should not start running until before the European Commission or the FCA has rendered a decision and published either a press release or the decision itself. In the absence of any infringement decision, the discovery by victims or the court of the existence of co-perpetrators during the proceedings, might delay the start of the limitation period, but only for those co-perpetrators.
In addition, since the implementation provisions provide for the interruption of the limitation period when proceedings are initiated before a competition authority, this extends the time limit for follow-on actions, which should therefore be postponed.
Disclosure of Evidence
The procedural rules governing access to evidence will apply retroactively to proceedings initiated as from 26 December 2014. They are largely consistent with the former rules on access to evidence contained in the French Code of Civil Procedure. They enable French courts to order the parties, or a third party, to disclose relevant evidence upon request of the defendant or the claimant. A question mark still hangs over whether French judges will not continue to carry out a proportionality assessment for each disclosure request as was their custom before the implementation provisions.
On a general basis, and beyond specific items of evidence, courts may order the disclosure of “categories of evidence”, but the definition of “categories” has not yet been determined and neither has the extent to which French judges will adopt a broad interpretation of this concept. Finally, the disclosure of evidence has to be balanced against the protection of business secrets.
In addition, similar to the EU Directive, the implementation provisions set specific rules pertaining to the disclosure of evidence in the FCA’s file. In the course of a private damages action, French courts are prohibited from ordering the FCA to produce self-incriminating declarations made by leniency applicants and evidence that can be reasonably provided by the parties or a third party. In addition, certain types of evidence can only be disclosed once the FCA has rendered its decision.
In conclusion, even if some concepts still need to be clarified by courts at the EU and French levels, the implementation provisions faithfully transpose the EU Directive and bring clarity to victims and perpetrators of antitrust infringements. As a result, the attractiveness of France within the European Union for damages actions and, in particular, follow-on actions could be improved, in particular in comparison with Germany, the Netherlands and the United Kingdom, where the liability regimes are clearly more attractive.