A victim of an anti-competitive practice should not wait until the final decision confirming the infringement before bringing an action for damages

The June 26, 2013 judgment of the Paris Court of Appeal (delivered after the case has been referred back by the French supreme court) defined new limits in the matter of compensation for harm suffered as a result of an anti-competitive practice.

Initially, the European Commission sanctioned the British company JCB Service in 2000 for concluding agreements and engaging in concerted practices with its official distributors to partition the markets at national level and preserve their territorial exclusivity. This sanction was the result of the complaint filed in 1996 by Central Parts, which claimed that it had been prevented from procuring JCB equipment in the UK, where the prices were substantially lower than in France. A few years later, after the dismissal of JCB’s appeal by the General Court of the European Union but before the final confirmation of the decision by the European Court of Justice, Central Parts brought a liability action before the French courts to obtain compensation for the damage suffered as a result of the anti-competitive practices. As is the case in any tort liability action, Central Parts had to establish that JCB had committed a wrongful act, that it had suffered harm and that there was a direct link between the wrongful act and the harm.

The Paris Court of Appeal held that infringements of EU legislation, recognized by the European bodies, constituted tort according to French domestic law and the resulting harm should be compensated.

When it came to determining the harm suffered, however, things got tougher for Central Parts: first the objection of the ten-year (now five-year) statute of limitations of tort liability actions was raised. Central Parts, which had brought its action by writs of March 4, 2004 and April 12, 2005, namely almost nine years after its complaint to the Commission, argued that the limitations period had been suspended by the proceedings before the EU courts up until their final confirmation of the infringements on which its action for damages was based. The Court of Appeal dismissed the argument, finding that the purpose of the proceedings before the EU courts was to determine and sanction the anti-competitive practices, and not to compensate the resulting harm. According to the Court, Central Parts should have applied to the domestic courts as soon as the harm became apparent and they would then have deferred their judgment until the end of the proceedings before the EU courts. It therefore considered that the limitations period had not been suspended and that just the harm suffered since April 1995 should be taken into account.

Finally, to estimate the amount of the damage, the Court of Appeal considered that the evidence produced by Central Parts to prove the damage suffered (evaluated at EUR 600,000 at first instance) was not sufficiently substantiated and therefore ordered an appraisal. 17 years after its initial complaint, Central Parts has still not been compensated for the reported anti-competitive practices.

While waiting for a European Directive (currently under discussion) to harmonize and clarify these rules, victims of anti-competitive practices will have learned their lesson from this case, that they should not wait for the decision acknowledging the infringement to become final before bringing an action for damages.

A legal entity can be held liable for a competition law infringement even if it does not itself engage in an economic activity

This matter goes back to 2008, when the European Commission had sanctioned various participants in a cartel on the international removal services market, one of which was Gosselin Group NV, which it had fined 3.28 million euros. The Portielje foundation had been held jointly and severally liable for the payment of part of the fine as (i) it held 100% of Gosselin’s capital for part of the period during which the infringement was committed and (ii) it had not succeeded in rebutting the presumption that it exercised a decisive influence over Gosselin.

The June 16, 2011 judgment of the General Court of the European Union had annulled the Commission’s decision with regard to Portielje, ruling that Portielje could not be sanctioned for its subsidiaries’ conduct as it was not itself an “undertaking” engaging in an economic activity, within the meaning of competition law, since it held “only in trust, shares which were previously held by the family shareholders themselves”. The General Court had in addition found that, even if Portielje could be deemed an undertaking, it had nevertheless managed to rebut the presumption of actually exercising a decisive influence over Gosselin, on the grounds that it had not adopted any formal management decision during the period in question.

The European Court of Justice (ECJ) considered that the General Court had committed an error in law on those two points. On the first point, the ECJ made clear that “liability may be imputed to a legal entity for the conduct of another legal entity where the latter does not decide independently upon its own conduct on the market”. According to the ECJ, the fact that the entity holding (virtually) all the capital of another entity is constituted in the legal form of a foundation rather than a company, or that it does not itself engage in any economic activity, is irrelevant. On the second point, the ECJ considered that the mere fact that a parent company has not adopted any management decision concerning the company against which the objections are being made is not sufficient to rebut the presumption of liability, insofar as a decisive influence can also be exercised informally, particularly as a result of the personal links existing between the legal entities comprising the economic unit.

The ECJ therefore annulled the General Court judgment and confirmed the fine imposed on the foundation. One more instance of the broad application of the presumption of parent companies’ liability…

A competition authority’s access to the information obtained about the clients of a forensic IT services provider

In the course of an undertaking’s competition compliance or audit procedures, it may turn to a forensic IT services provider to look for data files which might reveal anti-competitive practices. If the provider is not instructed by the undertaking’s external counsel, the communications between the undertaking and the provider do not benefit from any particular protection. The provider will then have to answer any requests for information from a competition authority, just like any “third party”, without being able to object that it is acting as an auditor or that its services are confidential.

On that basis, the Hague Court of Appeal validated the Dutch Competition Authority’s request for a forensic IT services provider to produce a list of clients in the sector under investigation for which the provider had carried out competition law compliance audits. The Court made sure that the principle of proportionality had been respected and pointed out that the investigators had not asked for access to the results of the audits. According to the Court of Appeal, the competition authority’s request was justified by the interest in knowing the identity of the audited undertakings, as the audits might prompt them to destroy any proofs that were discovered. Apparently the provider had “transferred” the incriminating information onto its own computer system.