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In recent years, the European Commission has led the way in attacking cartels. Just last month it imposed fines equal to $1.3 billion against the elevators and escalators industry and $993 million against the gas-insulated switchgear industry. Last year, the EC imposed fines of $687 million against the synthetic rubber chemicals industry. And in 2001, it fined the vitamins industry $1 billion. But while government authorities have obtained penalties, the private victims of these cartels have had little recourse to obtain compensation. In Europe, unlike the United States, antitrust plaintiffs are not encouraged to act as private attorneys general. And the three major incentives for private plaintiffs to go to court in the United States — the ability to bring class actions, the opportunity to win treble damages, and the availability of contingent fees — do not exist there. But times are changing. The U.S. antitrust system remains unique — and notorious — among the world’s 100-plus antitrust regimes for the extraordinary reliance it places on private enforcement. A few numbers illustrate the sheer size of the efforts. In any given year, private plaintiffs file more than 750 antitrust actions in federal courts around the country. In contrast, the Justice Department may bring criminal charges in a mere 15 to 20 cases and, along with the Federal Trade Commission, may file another handful of civil cases. Over the past decade, antitrust plaintiffs attorneys have sought to expand their reach beyond U.S. borders. They filed suits in U.S. courts, such as In re Methyl Methacrylate Antitrust Litigation, against foreign companies embroiled in cartel investigations abroad, even when the defendants were not being investigated in the United States. They filed cases under U.S. law, such as In re Vitamin Antitrust Litigation, on behalf of both U.S. and foreign cartel victims. They filed cases in U.S. courts, such as In re Air Cargo Shipping Services Antitrust Litigation, asserting European claims on behalf of alleged foreign cartel victims. But the Supreme Court’s 2004 decision in F. Hoffman-LaRoche Ltd. v. Empagran S.A. largely shut the door on foreign claims. The Court held that U.S. courts have jurisdiction only over conduct that causes a “direct, substantial, and reasonably foreseeable effect” on the United States and only when that domestic effect directly “gives rise to” the plaintiff’s claim. Thus, victims directly injured abroad cannot obtain redress in the United States, as confirmed last month by the U.S. Court of Appeals for the 8th Circuit in In re Monosodium Glutamate Antitrust Litigation. In response to the Empagran decision, a rising chorus of voices has been calling for a new mechanism to allow European victims to recover their damages from cartels. The European Commission has indicated that it believes its enforcement agenda cannot be implemented by public enforcement alone. Neelie Kroes, the European commissioner for competition, underlined this in a March 8 speech to the International Bar Association at a conference on private enforcement: “The battle against illegal anti-competitive behavior is, of course, one the commission cannot fight alone,” she said. Kroes continued, “There is still one group of stakeholders — perhaps the most important of all — who I’d like to be more active in the pro-competition partnership. I mean customers and consumers, the small businesses and individual citizens who foot much of the bill of illegal behavior upstream.” And earlier this month a headline in the Financial Times urged development of a class-action system to protect consumers. In short, the debate in Europe has not been over the need for private actions, but rather the nature of them. The concern has been to avoid U.S.-style abuses and to preserve European culture. BARRIERS TO OVERCOME Right now, actual change is moving at a snail’s pace. One major barrier to private antitrust enforcement in Europe came down in 2001. For many years it was unclear whether individuals harmed by a breach of EC competition rules have any right to claim damages. The Treaty establishing the European Community is silent on this point. But the European Court of Justice’s 2001 decision in Courage v. Crehan finally erased any doubts. To date, however, damages actions at a national level remain few. Another remaining problem for private antitrust enforcement is the limits of the pan-European court system. The European Union’s courts, based in Luxembourg, are only entitled to hear cases arising out of decisions or actions of EU institutions or member states. Civil actions remain the preserve of the 27 national jurisdictions, each with its own laws and procedures. For plaintiffs that have suffered harm on a pan-European level, bringing individual claims in all these jurisdictions is a daunting prospect. The European Commission is in the middle of a public consultation on how to remove impediments to private litigation. A 2005 “green paper” stimulated an intense debate on how to reform national rules. By year’s end, the EC is expected to publish a “white paper” setting out its proposals. But it remains to be seen what reforms the EC can achieve: It is the national courts and legislatures, not the EC, that must write the laws and practices that will shape the future of private enforcement. As noted, many of the structures that facilitate private actions in the United States are uncommon or unknown in Europe. For instance, the class-action mechanism is certainly not part of European litigation culture. However, most member states permit some form of group action, which in certain circumstances provides a mechanism for claims to be heard together. Punitive, triple, or exemplary damages are anathema to European legal systems. Given the largely compensatory nature of EC competition claims, it seems likely that national courts will also be more sympathetic to claims for compensatory damages than to claims for restitution (disgorgement of unlawful profits) or punitive damages. On the other hand, Commissioner Kroes has raised the idea that maybe double damages should be considered. In addition, the legitimacy of the passing-on defense (where the cartel victim arguably suffered no real harm because it passed on the overcharge to its customers) is, for the most part, undetermined. Co-defendants in the United Kingdom have a right of contribution, which may affect the dynamic of damages cases. Rules providing that litigation losers pay costs and restricting contingent fees are significant disincentives for plaintiffs to bring claims. European countries are currently debating all these issues. With regard to larger, pan-European claims — for example, when cartel victims seek damages in many locations — no harmonized framework dictates how and where such claims should be brought. The question of jurisdiction is only in part answered by the Brussels and Lugano Conventions and by EC Regulation 44/2001: The basic premise is that a defendant is sued in its place of domicile, although in claims in tort or “delict,” such as antitrust actions, a party may be sued in the country where the harm occurred (or where it may occur) or the place where the loss was sustained. Where there is more than one defendant, all parties may be sued together in any member state where one of them is domiciled. But there is no Judicial Panel on Multidistrict Litigation, as in the United States, to consolidate all cases before a single court. LOOK TO LONDON? So far there have been only a scattering of private antitrust cases in different jurisdictions. Many disputes go unreported, leaving the true extent of plaintiff activity hard to quantify. Settlement is an attractive option, especially where a dispute involves untested legal questions: With the risk of incurring a winning defendant’s costs in addition to their own, many plaintiffs are understandably nervous about bringing a test case. Yet there has been movement in some of the major jurisdictions. The landmark judgment in Provimi v Aventis may place the United Kingdom at the center of future multijurisdictional litigation. In that 2003 case, the plaintiff’s non-U.K. subsidiary was able to proceed against the defendants’ non-U.K. subsidiaries before the English High Court. The judge applied Regulation 44/2001 and the EC competition-law notion of the single “undertaking” to allow the plaintiff’s German subsidiary to sue in an English court the U.K. and German subsidiaries, as well as the parent companies, of Aventis and Roche over harm suffered in Germany arising from German purchases from the German defendant-subsidiaries. One caveat: There was no appeal on the preliminary jurisdictional ruling so Provimi still may be challenged in future cases. The application of the Provimi ruling before the U.K. Competition Appeal Tribunal is also untested, although that specialized court is on the verge of addressing pan-European jurisdiction in new proceedings brought by a group of French, German, and U.S. companies in February. The companies have sued a group of multinational defendants on the back of the 2003 EC decision against a carbon and graphite electrodes cartel. The English courts are plaintiff-friendly in other ways as well: Compared with civil-law jurisdictions — where discovery is more limited — the English courts permit a relatively wide scope of discovery, called “disclosure.” The English High Court has jurisdiction to hear all claims arising from alleged breaches of EC and U.K. competition rules; plaintiffs may also sue in the Competition Appeal Tribunal for purely follow-on damages (relying on a prior EC or U.K. decision). Although there is no class-action mechanism, the law permits actions by “super complainants” that have been “specified” for these claims. For example, in a much-watched case, a national consumers group known as Which? has been specified to seek damages for a price-fixing arrangement that involved replica football shirts. And it is expected that later this spring, the U.K. Office of Fair Trading will weigh in with its own proposals on private enforcement. EUROPE CALLING In Germany, the 2005 reform of the Act Against Restraints of Competition was designed (in line with the EC-level discussions) to facilitate private antitrust litigation — in particular, follow-on actions. The reform abolished certain barriers for standing, partly excluded the passing-on defense, and made findings of competition-law violations by courts and competition authorities of other EC member states binding on German civil courts for the purposes of follow-on damage claims. Recently, the D�sseldorf district court allowed a follow-on action in which a third party bought damage claims from cartel victims and is now pursuing them in court. The $150 million action is being brought by Cartel Damage Claims against the members of a cement cartel. In France, private antitrust litigation may be picking up and courts seem less reluctant to grant antitrust damages to private plaintiffs. The Paris Court of Appeal granted damages equal to about $2 million in a 2004 case. And it is expected that a multimillion-euro action for damages will be lodged against several mobile phone operators now that the French competition authority has found an illegal cartel. There have also been useful developments in French statutory law. To facilitate private litigation, jurisdiction for competition cases was concentrated within specialized civil and commercial courts in 2005. The introduction of a class-action system is under discussion, although in all likelihood this system will be very different from the U.S. model and will not provide the same incentives for private plaintiffs. The latest draft bill, for example, provided standing for consumer organizations only and limited damages to about $2,600 per consumer. Overall, increasing private enforcement is now high on the European antitrust agenda. The European Commission will do what it can to advance an effective system of private enforcement. Authorities seem to recognize that plaintiffs will need proper incentives. Today the atmosphere in Europe is much like that of the United States in the late 1960s, when lawyers here began bringing class actions for cartel victims.
Alan Wiseman is co-chairman of the antitrust practice group at Howrey, based in Washington, D.C. Sarah Jordan is a senior associate and Julian Joshua is a partner in the Brussels office. The authors appreciate the contributions of Joseph Ostoyich, a partner in the D.C. office, and Martina Maier, a partner in the Paris and Brussels offices.

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