Collective Redress

Individual businesses or consumers are often reluctant to claim compensation for the harm caused by anticompetitive conduct. There are many potential reasons in this respect: The damage individually sustained might be relatively low or difficult to prove, the risks of enforcing damage claims might be regarded too high in view of ongoing business relationships, or a damage action appears to be too costly and burdensome. Mechanisms of collective redress are said to overcome these obstacles to effective private enforcement. They allow for the bundling of a multitude of individual claims which result from the same competition law infringement and creates significant procedural efficiencies for the benefit of the claimants, defendants and the judicial system as a whole.

A number of different collective redress mechanisms are discussed:    

-    Representative actions  
-    Opt-in collective actions
-    Opt-out class actions
-    CDC approach

Representative actions 

In its White Paper, the Commission has suggested the introduction of a representative action for damages brought by qualified entities such as consumer associations, state bodies or trade associations which then act on behalf of identified or, in limited cases, identifiable victims. These entities are either officially designated in advance or certified on an ad hoc basis in a given case by the Member States.

It is unclear whether this approach could overcome the obstacles to private antitrust enforcement. For example, it is far from clear whether such ‘qualified entities’ can assume the administrative burden of bundling a multitude of claims and of collecting and analysing the purchase data required for the damage calculation. The running of representative actions with potentially millions or hundreds of thousands of claimants over several years also requires a high level of know-how, management, and manpower. Consumer or trade associations will usually not have the technical and IT infrastructure as well as the resources necessary to cope with the complexity of antitrust damage actions. The financial risks involved in multi-party damage actions might also exceed their capacities.

Doubts about the model of representative actions have been raised by different stakeholders in the public consultation of the Commission on its White Paper. According to the Association of European Competition Law Judges, for instance, the bringing of damages actions on behalf of victims who have not yet been identified ran counter to the principle of full compensation for those who have suffered harm, in that it could result in damages being awarded before the alleged victims have been identified. In some cases, it may not be possible to identify all relevant victims who are alleged to have suffered harm.

Indeed, it is not clear how full recovery of the damages suffered can be ensured by a representative action. For example, the UK’s leading consumer association Which?, the only organisation in the UK with government-granted power to represent consumers in antitrust damages actions, sought compensation from JJB Sports, alleging that, along with its rivals, the company had fixed prices on replica football shirts between 2000 and 2001. In a settlement reached in 2008, JJB agreed to pay £ 20 a shirt to each consumer affected. However, in spite of an extensive media campaign, Which? managed to collect only about 600 consumers who had purchased one or more of the shirts concerned, According to Which?, this was only a very small minority of the total number of consumers who were harmed by JJB’s price-fixing. In this case, the efforts made in the course of the proceedings were barely justified.

Opt-in collective actions

A further collective redress mechanism proposed by the Commission is the opt-in collective action. Under this approach victims expressly decide to combine their individual claims for harm they suffered into one single action.

The opt-in collective action seems to be, in principle, the most suitable form of collective redress. In particular, the approach is in line with the European legal culture and traditions. The opt-in collective action offers, however, no effective solution for the special requirements in antitrust damage actions. Each claimant would be a party to the legal proceedings and would thus have to substantiate and evidence the individual damage caused by the cartel. The claimants would also have to bear the costs and financial risks of the antitrust damage action. However, small and medium-sized corporate victims in particular, for whom the opt-in collective action is notably designed for, are often unwilling to bear the considerable costs and risks associated with antitrust litigation. 

Opt-out class actions

Class actions are a procedural tool which enables one or more plaintiff members of a certain class of victims to sue cartel members on behalf of all similarly situated members of the same class. Following the certification of such a class by the court every class member can, however, declare his ‘opt out’ from the class, and thus the proceedings. All class members who within a certain time period do not expressly opt out are bound by the court decision in the case.

Contrary to the United States, where this type of class action system was originally developed, most European countries do not recognise class actions as an appropriate mechanism for enforcing private antitrust claims. In particular the fact that all cartel victims, along with their damage claims, are automatically included in a class and thus party to court proceedings unless they do not explicitly opt-out seems contradictory to fundamental principles of civil procedure in Europe.  

CDC approach

CDC usually purchases a multitude of individual antitrust damage claims, evaluates the cartel-related damage on a market-wide basis, and enforces the claims in its own name and on its own account (see Approach).

CDC thus provides a model of private enforcement of competition law, which is in line with existing legal principles in Europe and allows for an effective enforcement of cartel-related damage claims. It shows how antitrust damage claims can collectively be enforced today, without the introduction of new procedural tools and in a different way from the muchcriticised US class action system. Rather, the CDC approach is based on the perception of antitrust damage claims as valuable and marketable assets. This approach is directly rooted in the market and thus corresponds to the demands of an effective private antitrust enforcement in practice. The bundling of claims by CDC on a material law level creates synergies and economies of scale as regards the economic analysis of the cartel-related damage and the enforcement of claims.

Printer friendly version of this page