The directive concerning damages to customers (and others) suffering a loss due to violation of the competition rules came into force in December 2014 (Directive 2014/104/EU). The directive is now being implemented into Danish law.
On 29 November 2016, the Danish parliament adopted the bill concerning claims for damages due to violation of the competition rules. The act will come into force on 27 December 2016.
The act implies that it will be easier to make claims for damages against cartel members, for instance for customers who have paid overcharges for products because the supplier has concluded a cartel agreement.
The directive is based on the conclusions of the Commission's investigations in 2008. The investigation proved that the member states' legislation in the area varied a lot, and that there is generally a lack of funds to ensure an effective processing of claims for damages due to violation of the competition rules. So far, the right to damages for violation of the competition rules has primarily been regulated by the general rules of Danish law.
Below, we will provide you with an overview of the most important measures, which will be implemented by the act or the subsequent executive order.
One overall set of rules
The original intention was to implement the directive by amending the Competition Act and giving the Minister of Business and Finance authority to implement other amendments by way of an executive order. It was further assessed that a number of the directive's rules were already stated in the general rules of Danish law on civil action. The proposal was subject to much criticism when put up for consultation in October 2015.
It was instead decided to gather all rules on damages due to violation of the competition act in one act. Several of the act's rules also appear from general rules of Danish law on damages and civil action, but the act will also introduce a number of new measures, which are to make it easier to make claims for damages due to violation of the competition rules.
The rules will apply to claims for damages concerning violation of the EU competition rules, the Danish Competition Act (irrespective of the effect on trade) and other member states' competition rules when applied parallel to the treaty's rules in cases that may affect the trade between member states.
The competition authorities' final decisions will be indisputable
When the Danish competition authorities or courts have made a final decision in an action concerning violation of the competition rules, this decision will be taken into account without review in a subsequent claim for damages. This does not explicitly appear from applicable law, as the court is, in general, free to assess the evidence.
The other member states' competition authorities' final decision on violation of the competition rules creates a presumption that the competition rules have been violated in a subsequent Danish claim for damages.
Easing of the injured party's burden of proof
The act introduces a presumption that a cartel's violation causes damage when calculating the claim for damages (the loss). It is for the cartel members to disprove the presumption.
This is a departure from the general rules of Danish law which state that it is for the injured party to prove that a loss has been suffered. Consequently, the injured party's burden of proof is eased. Upon request, the competition authorities may assist the courts in connection with the calculation of the loss.
Joint and several liability
When companies violate the competition rules by a joint conduct, for instance a cartel, the individual companies are generally obligated to cover the full claim for damages, and the injured party is entitled to claim full damages from any of the violating companies until it has received cover of the full claim. This provision corresponds to the general rules of Danish law and implies that the injured party may make its claim in full against each of the violating companies until it has received cover of the full claim.
However, the act will introduce certain restrictions as to the liability of SMEs and companies subject to relief of fines. These exemptions are not found in the general rules of Danish law.
Production of evidence
In competition cases, the competition authorities or the company having violated the competition rules is in possession of the evidence that the injured party needs in order to prove the claim for damages - which is often called information asymmetry. The purpose of the directive has been to increase the possibilities of obtaining evidence from the competition authorities and the violating company, for instance a cartel member.
But this has not given rise to any material amendments compared to the previous Danish rules, but it has been specified that applications for leniency and certain other documents from case pending before the competition authorities cannot be disclosed.
Passing on of overcharges - new rules on burden of proof
Violation of the competition rules often involves price agreements that result in the customer paying overcharge to the company violating the rules. This results in a loss in the form of the difference between the overcharge and what should have been the actual price. If the customer simply passes on the overcharge (fully or wholly) to its customers by increasing its prices, the customers has not suffered any loss in relation to the part of the overcharge, which has been passed, and is therefore not entitled to make a claim for damages in this respect.
But if the violation results in reduced sale and loss of earnings, because the customer had tried to pass on the overcharge by increasing its prices, the direct customer will then be entitled to make a claim for damages for loss of earnings.
The company having violated the competition rules may invoke that the customers has passed on the overcharge in a claim for damages, and the direct customer (the customer's customers) may make a claim for damages directly against the violating company. With the new act, special rules are also introduced facilitating the indirect injured party's burden of proving that the overcharge has been passed on.
Special rules on limitation of action
Claims for damages concerning violation of the competition rules will be time-barred after five years instead of the general time limit of three years of the Statute of Limitations Act.
Further, the period of limitation is relative and will not begin to run until the time when the injured party has or is reasonably expected to have knowledge of the following:
The violating party's conduct, and that this conduct constitutes a violation of the competition rules;
That the violation has inflicted at loss on the injured party; and
The identity of the violating party.
The period of limitation is also interrupted temporarily if a competition authority institutes an investigation of the violation, and will start running again no earlier than one year after the matter has been decided upon or otherwise concluded. In addition, the period of limitation may also be interrupted, while the parties try to reach an agreement on the claim for damages.
The act stipulates an absolute limitation period of ten years equivalent to the general absolute period of the Statute of Limitations Act.
The Act concerning claims for damages due to violation of the competition rules will come into force on 27 December 2016. Initially, the act will apply to claims for damages brought before the courts after that date. The special rules on period of limitation will, however, only apply to claims for damages due to violation after the coming into force of the act.