i OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
Private antitrust actions have traditionally been rare in Spain, in proportion to the increase in cases that have been sanctioned by the National Commission on Markets and Competition (CNMC) and the European competition authorities, over the past few years.
Despite the low number of disputes, Spanish courts have already had the opportunity to analyse a number of standalone nullity and damages actions, and also a few follow-on actions, in particular the Sugar cartel case.2 As a result of the rulings in this case, the Supreme Court has decided several substantive issues on private antitrust actions, and has developed a body of case law applicable to such actions consistent with the existing legislation.
In addition, and prior to the entry into force of the Damages Directive,3 a series of legal reforms was implemented to modernise the rules on private antitrust litigation at the national level. As a consequence of the reforms, the commercial courts have became competent to hear cases involving antitrust litigation, and the new Competition Act4 has eliminated certain hurdles to bring follow-on actions before the courts, in line with EU Regulation 1/2003.
However, it was not until last year that the number of actions increased, attracting the attention of legal practitioners.
i 2018: increase in private antitrust enforcement
Several factors explain the rise in private antitrust litigation in Spain, starting with the implementation of the Damages Directive into the Spanish legal system and continuing with the discovery of a mainstream cartel by the European Commission (EC) involving manufacturers of medium and heavy-duty trucks that illegally and artificially increased the prices of trucks throughout Europe (Trucks).
In addition, the issuance of several rulings by the commercial courts of Barcelona and Madrid regarding actions for damages against several paper envelope producers for their participation in a price-fixing and market-sharing cartel in Spain from 1977 to 2010 (Envelopes) has also contributed to the rise in the popularity of actions for damages arising from antitrust infringements.
On 19 July 2016, the EC announced that it had fined manufacturers of medium and heavy-duty trucks over €2.93 billion for their participation in the price-fixing Trucks cartel, which covered the entire European Economic Area and lasted 14 years from 1997 to 2011,5 as a result of an investigation under Article 101 of the Treaty on the Functioning of the European Union (TFEU).
The Trucks cartel has had an enormous impact on litigation due to the large number of vehicles affected, and has led thousands of trucks owners affected by the cartel to file claims before the commercial courts in order to claim damages.
Although only the start of a long judicial process that will ultimately be decided by the Supreme Court, the first relevant rulings in this matter to clarify some of the key procedural issues of the action for damages have already been issued by the commercial courts.
In this regard, several judgments have affirmed the international competence of the Spanish courts to hear civil actions arising out of the Trucks cartel, considering the commercial courts in the place where claimants are domiciled to be competent, when resolving the plea as to jurisdiction filed by the defendants.6
In addition, Commercial Court Number 1 of Murcia issued the first ruling in Spain in the Trucks cartel with a decision in favour of the claimants. The judgment, issued on 15 October 2018, condemned the Spanish subsidiary of Volvo Trucks to compensate the claimants €128,756.78 as a result of their acquisition of five Renault trucks during the cartel period. The ruling, which is not final because it can be appealed before the provincial court, determined that an overcharge of 20.7 per cent occurred in the price of trucks charged by the manufacturers, which is in line with the average overcharge observed in the cartel by the EC.7
In March 2013, the Spanish National Competition Commission8 (CNC) fined several envelope producers for their participation in a price-fixing and market-sharing cartel in Spain that occurred from 1977 to 2010.
Before the judgments of the contentious-administrative courts that declared the CNC decision correct were final, several claimants filed actions for damages before the commercial courts of Madrid and Barcelona seeking compensation, and, after several procedural hurdles, in 2018 the commercial courts of Barcelona and Madrid issued their first judgments, with different results.
The commercial courts of Madrid ruled in favour of the defendants, finding that the expert evidence was insufficient to justify the harm; therefore, the courts dismissed the claims.9
In contrast, Commercial Court Number 3 of Barcelona ruled in favour of the claimants, awarding damages to the companies affected by the Envelopes cartel in three different cases for a total amount of approximately €2 million.10
Even if they are not final, the judgments are very useful for future damages claims arising out of antitrust infringements (especially the judgments of the Commercial Court of Barcelona, since they approach the actions from a very constructive perspective), as they analyse in great detail all the procedural issues involved and confirm the application of the doctrine that emanated from the Supreme Court in the Sugar cartel case.
ii Legal expenses
Finally, the rise in private antitrust enforcement in Spain is linked to the attractive commercial conditions that can be offered by law firms based on the contingency fee, including conditional fee arrangements, that are currently available in Spain, because the Supreme Court established that bar associations' prohibitions in this regard were contrary to antitrust law, and therefore null and void.11
In addition to the attractiveness of the contingency fee, a second determining factor that explains the rise of antitrust claims is the emergence of international litigation funds in Spain, which have been very active in the Trucks cartel, both in terms of funding and acquiring claims.
ii GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
i Legal framework
The declaration of a competition infringement may be based on EU law (Articles 101 and 102 TFEU) or Spanish competition law (Articles 1 and 2 of the Competition Act). Both regulations are substantially identical, and their scope depends on the market affected, that is, whether it involves trade between EU Member States or within the domestic market, respectively.
Regarding civil claims arising from antitrust infringements, Spanish civil law offers the following possibilities:
- if a claim seeks the nullity of a contract, this purpose will be based on Article 6.3 of the Civil Code, and the economic consequence of such nullity will imply the reciprocal restoration of the economic contributions made by the parties (Article 1.303 of the Civil Code); and
- if a claim seeks damages on a non-contractual basis, Article 1.902 of the Civil Code has historically been the legal provision commonly used when claiming compensatory damages caused by an antitrust infringement, either as a follow-on or stand-alone action.
However, since the entry into force of Royal Decree-Law 9/2017, approved as a consequence of the Damages Directive, the new Title VI of the Competition Act provides claimants with a new and complete framework for antitrust claims that encourages the filing of claims as a way of deterring undertakings from competition law infringements.
The new regulation provides multiple provisions to strengthen the position of claimants, such as:
- an increase of the time-barring period;
- the presumption of harm where a cartel has resulted in fines;
- the joint and several liability of all the offenders; and
- the binding effect of the decisions of the Spanish Competition Authority.
Finally, non-compliance with the competition law can also be regarded as unfair competition under Article 15 of the Unfair Competition Act, which could lead to an action for damages specified in Article 32.1.5 of the Act.
Damages claims for antitrust infringements are filed before commercial courts, which are specialised civil courts that only deal with some commercial issues. Moreover, in big cities like Barcelona and Madrid, these types of claim are only judged by specialised commercial courts.12
There has been some controversy about the jurisdiction of the commercial courts when there is a follow-on claim that is based on a final decision by a competition authority, as some believe that these claims should not be different from other civil compensatory claims, which go to ordinary civil judges.
However, since a judgment issued by the Provincial Court of Madrid of 22 June 2017, the debate appears to have been closed in favour of the commercial courts' jurisdiction in both follow-on and stand-alone antitrust claims for damages.
iii Limitation periods
Claims seeking the nullity of a contract for antitrust infringements are limited to four years under Article 1.301 of the Civil Code.
Nevertheless, actions for damages that follow a non-contractual approach can benefit from the new prescription period of five years stated in the Competition Act, which is rather longer than the previous prescription period: if not for this new regulation, damages claims for antitrust infringements would still have the same limitation period as other damages civil claims in Spain, which is one year (except in Catalonia, whose Civil Code provides a three-year limitation period for non-contractual claims).13
In any case, following Article 74 of the Competition Act, the prescription period only begins to run when an infringement is over and the claimant knows or could have reasonably known about the unlawful conduct, the damages caused and the identity of the infringer.
Spain does not have specific rules regarding extraterritoriality when dealing with private competition enforcement.
Therefore, the Spanish legal system will apply to actions related to the prevention, restriction or distortion of competition in all or part of the domestic market, regardless of the nationality of the parties.
A case may be brought before the Spanish courts according to Regulation (EC) No. 1215/2012 of 12 December on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, mainly under Articles 4.1 (domicile of the defendant) and 7.2 (place where the harmful event occurred).
Any person who may have suffered damage due to a competition infringement is entitled to claim damages before the courts. This includes consumers or providers of offenders, and also those who may have suffered indirect (umbrella) damage and, therefore, have never had a direct relationship with the infringers. Additionally, those who acquire an action shall also be entitled to bring that action for damages before the court, according to the Competition Act.
Regarding the defendant, actions for damages must be brought against the undertakings who have participated in an unlawful act. Again, it must be taken into account that Royal Decree-Law 9/2017 introduces the joint and several liability ex lege of all the offenders.
This new regulation does not expressly mention the possibility of suing a Spanish subsidiary of a foreign company found guilty in an antitrust infringement, but this possibility has already been applied by a recent judgment from Commercial Court Number 1 of Murcia: the Court awarded damages against the Spanish subsidiary of Volvo Trucks, which was found guilty in the Trucks case. Since this judgment is not final, the subject is still open for discussion.
Finally, and as a consequence of joint and several liability, as a general rule all defendants that have fully compensated their victims are entitled to recover the part of the damages that has been paid on the other offenders' behalves. However, there are three exceptions to this:
- the beneficiaries of leniency programmes, who will only be responsible for compensating their own buyers or suppliers (directly and indirectly), unless full compensation cannot be obtained from the other offenders in the same conduct;
- small and medium-sized enterprises (SMEs), which are only responsible to their (direct and indirect) buyers or suppliers if they have not been sanctioned before, unless they have led an infringement or coerced other undertakings to participate; and
- offenders that have settled with a claimant.
v THE PROCESS OF DISCOVERY
Spain's legal culture has traditionally been very reluctant to require the disclosure of evidence. This explains not only the absence of a discovery proceedings in the Civil Procedure Act, but also the conservative approach, from a judiciary perspective, when dealing with preliminary measures to prepare subsequent proceedings, especially in areas such as unfair competition and intellectual property.
In terms of antitrust infringements, the approval of Royal Decree-Law 9/2017 has modified the Spanish Civil Procedure Act to include 11 new articles in order to provide access to sources of evidence when facing damages claims arising out of antitrust infringements in line with the Damages Directive. According to this new regulation, which is not available in other civil claims, both claimants and defendants may request categories of documents in each other's possession or in the possession of a third party, or relevant parts of the Competition Authority's case file, providing that such request is proportionate in general terms.
The Civil Procedure Act has incorporated the Damages Directive's rules on access to confidential information, which means that evidence obtained unlawfully will not be admissible, and cannot be voluntarily provided or requested from other parties. The duty of legal privilege and professional secrecy relating to the testimony of parties and witnesses is also protected by the law, which has been interpreted restrictively by the Spanish courts.
Finally, the use and dissemination of industrial or trade secrets is also protected, and can even be considered a criminal offence under the Criminal Code. Until the transposition of EU Directive 2016/943 into Spanish law, there is no specific definition of trade secrets under Spanish law, although Spanish courts have developed a consistent body of case law in this regard, and have interpreted very restrictively the access of the parties to relevant commercial information of other parties.
vi USE OF EXPERTS
As is common in private competition enforcement claims, experts have a leading role in proving damage, as a lack of evidence of damage caused by an antirust infringement or an incorrect approach by experts may lead a judge to dismiss a claim because damage was insufficiently proved.14
According to the Spanish Procedural Act, the claimant has the burden of proof in this regard; therefore, expert reports are absolutely necessary in any damages claim, and are particularly important when dealing with private competition enforcement where the damages claimed for is the result of a counter-factual scenario, which will always be abstract.
Regarding the content of an expert's report, the Supreme Court has stated in the Sugar cartel case that the claimant's expert report must provide a technically well-founded methodology based on a reasonable and testable hypothesis and accurate and verifiable data, comparing the actual situation (the price and loss of sales data) with the counter-factual analysis (a 'but-for' scenario). The defendant's expert report must not be limited to criticising the methodology of the claimant's expert report, but must also provide an accurate, alternative and better-founded quantification of damages. An unreasonable hypothesis is sufficient for the defendant's expert report to be found to be unreliable.
Expert reports must be presented in writing (Article 299 of the Civil Procedure Act) and will be attached to the claim or counterclaim, and experts must appear in court during a trial to answer the questions of both parties. The claimant can also request the court to appoint an independent expert (Article 355 of the Civil Procedure Act) and, according to Article 5.2 (b) of Law 3/2013 of 4 June 2013 on the creation of the Spanish Markets and Competition Commission, the CNMC can also assist courts as amicus curiae in quantifying damages.
vii CLASS ACTIONS
The Spanish legal system restricts the scope of actions seeking collective redress to consumers and final users and, contrary to other legislation with a longer tradition, establishes a representative system that only grants consumer associations and the public prosecutor the procedural standing to initiate the action. Therefore, our legal system is still far from reaching EU recommendations on this issue.15
The same applies for private competition enforcement, although the Spanish Parliament is currently analysing an ambitious proposal that aims to create a real opt-out class action to enable any consumer in the representation of a class, and not only consumer associations, to claim damages and bring class actions before the court. Until and unless that happens, victims of antitrust infringements can still join their claims and have the same judge and the same process for all of them, given that there is a link between all the actions in view of the same object or the same petition. This will be presumed if all claims are based on the same grounds.
viii CALCULATING DAMAGES
Punitive or exemplary damages are not available under Spanish law, therefore antitrust civil claims will be focused on restoring the affected party to the exact position that he or she would have been in if the harm had never occurred, which has to be established in natura when possible and, if not, by the calculation of the monetary sum equivalent to the harm caused (including both material and moral damage).
In line with the Damages Directive, Article 72 of the Competition Act expressly recognises the right of any victim to full compensation, which includes emerging damage, loss of profit and the payment of interest. Therefore, establishing the precise amount of the overcharge is one of the most important issues in antitrust claims, which reinforces the importance of experts' reports to provide a very well-grounded counterfactual scenario to compare with the real scenario, thereby determining the damage caused to parties.
Due to the difficulties of this process, and despite the EU guidelines on the subject, Royal Decree-Law 9/2017 has introduced some provisions into the Competition Act to make it at least a little easier for claimants. For instance, it provides for the presumption of harm in cartel cases and the capacity of the judge to estimate the amount of damages when the calculation of the overcharge is too complicated.16
ix PASS-ON DEFENCES
Spanish tort law is very concerned with avoiding overcompensation of victims. As such, the passing-on defence has been accepted, and was expressly recognised by the Supreme Court in the Sugar cartel case.
The new regulation introduced into the Competition Act by Royal Decree 9/2017 also includes a specific regulation of the passing-on defence. It states that if the claimant is the direct buyer or supplier, the burden of proof of the passing-on remains with the defendant. In contrast, if the claimant is an indirect buyer or supplier, it will have to prove that damage has gone downstream or upstream.
However, due to the difficulty of proving the passing-on and as a way of encouraging consumers to claim for damage caused by manufacturers (hence indirect buyers), the new regulation also provides the claimant with a presumption that the harm has been passed-on to indirect buyers or suppliers whenever the defendant infringed competition rules, this infringement caused harm, and the claimant purchased the products or services affected by the unlawful conduct.
Even when the passing-on is proven, it will not necessarily imply the full dismissal of a claim of a direct buyer, because this claimant could prove that, even in the event that the overcharge was passed on his or her customers, there still has been a loss of sales as a consequence of the overcharge, which could have led to a loss of profit.
x FOLLOW-ON LITIGATION
Prior to the new Competition Act,17 the Spanish legislation required decisions of the Competition Authority to be final before a claim for damages could be filed before the courts. This is no longer the case, and parties can file claims whenever they want, although with different implications.
If a claim follows a final decision of the European Commission or the CNMC, this decision will be binding on the courts.18 However, the fact that most CNMC decisions are challenged before the contentious administrative courts must be taken into consideration, as this means that decisions will not be final before a five to seven-year period has elapsed.
If a claim follows a final decision of the competition authority of another EU Member State, then there is a rebuttable presumption that the unlawful antitrust conduct actually occurred. Again, the problem with this option lies in time issues, and not in its effectiveness.
Finally, if a claimant decides to file a follow-on claim based on a decision made by a competition authority that is not final (i.e., it has been challenged before the courts), the antitrust infringement will not be considered irrebuttable, although it may be considered qualified proof before the courts and the claimant will clearly be in a better position than without having the non-final resolution.
A question may arise in relation to this third option: what if a judge estimates the claim and, afterwards, the resolution is declared null and void? This has already happened. Mussat, one of the companies affected by the Construction Insurance cartel, claimed for damages against the insurance companies that took part in the cartel that was declared by the CNMC. Damages were awarded by Commercial Court Number 12 of Madrid, and were confirmed afterwards by the Provincial Court even though the decision of the CNMC had been previously set aside by the National High Court.19
Evidence subject to legal privilege or professional secrecy is protected, which means that attorney–client communications are privileged. Lawyers have an obligation not to reveal any information provided by a client for the purpose of obtaining advice. The flip side is the right of clients to not disclose any information provided to a lawyer either in processes before a competition authority or in private competition enforcement.
Whistle-blowers are also protected. When an undertaking that took part in an antitrust infringement has participated in a leniency programme of any competition authority, all documents sent and produced for this purpose cannot be disclosed in a subsequent damages claim. The same holds for settlement requests made by offenders.20
As such, if a judge requests a copy of the administrative file from a competition authority following Article 15 bis of the Civil Procedure Act (ex officio or at the request of any of the parties), these pieces of information shall be omitted.
xii SETTLEMENT PROCEDURES
Parties can reach an agreement to avoid or terminate litigation under Article 1809 of the Civil Code at any time during the proceedings. The judge must expressly ask the parties if they can reach an agreement at the beginning of the preliminary hearing (Article 415 of the Civil Procedure Act) and once the contested facts have been defined (Article 428 of the Civil Procedure Act). The parties may choose whether to submit their agreement to the judge to get his or her approval, in which case it has the same effect as a judgment; otherwise, it would have the effect of a private agreement.
Since its modification because of the Damages Directive, the Competition Act tries to encourage parties to reach agreements in damages claims. This is why Article 81 enables the judge to suspend proceedings when both parties are trying to settle their discussion about the damage caused by a competition infringement.
In the same vein, Article 77 of the Competition Act states that if a defendant settles with the claimants, it will be released from joint and several liability. This could encourage settlements with the smaller offenders, which would benefit the claimants, who would obtain part of the damages; and the offenders that settle, which would only pay a small part of the damages.
Private arbitration is permitted in Spain when dealing with disputes on issues that are under the parties' free disposal, according to Article 2 of Law 60/2003 of 23 December. As such, public policy issues cannot be arbitrated.
Although EU antitrust legislation is considered to be a public policy matter, the European Court of Justice's decision in Eco Swiss allows arbitrators to apply competition rules to determine the validity of a certain contract or commercial conduct.21 However, the possibility of arbitrating a dispute regarding damage caused by antitrust infringements that have not been previously and finally declared by a competition authority remains controversial.
xiv INDEMNIFICATION AND CONTRIBUTION
Spanish tort law regards joint and several liability as an exception to the general rule, so whenever it is possible to individualise the harm caused by every single offender, there will be joint liability.
An exception to joint and several liability, however, has been widely applied when there is a plurality of parties whose participation in the offence cannot be individualised. This could be the case in a claim for damages arising out of an antitrust infringement such as a cartel.
Regarding private competition enforcement, however, Royal Decree-Law 9/2017 approves the current Article 73 of the Competition Act, which establishes the joint and several liability of all infringers of any provision related to competition law, and hence the capacity of claimants to bring actions against only one infringer. The exceptions to this joint and several liability are, as previously stated, those who benefit from a leniency programme, SMEs in some cases and defendants who settle with the claimant.
xv FUTURE DEVELOPMENTS AND OUTLOOK
Actions for damages against the manufacturers in the Trucks cartel will be a particular focus of the judiciary in 2019.
The consolidation of Spain's jurisdiction to hear actions for damages arising out of the cartel has considerably reduced the legal uncertainties of the case argued by the defendant's lawyers in order to halt or slow down the claims. In addition, the issuance of the first judgments in favour of the claimants has contributed to optimism about the future success of the thousands of claims filed before the Spanish commercial courts against the truck manufacturers.
In addition to the Trucks cartel, in 2019 Spanish courts will also hear more actions for damages arising out of the Envelopes, Raw Milk and Basketball Clubs Association cartels, among others. The result of those judgments will also be important for evaluating the success of actions for damages arising out of antitrust infringements declared by the CNMC, which have their own peculiarities due to the length of the judiciary proceedings before the contentious administrative courts.
On a regulatory level, the possible amendment of the Spanish system for collective actions under the Civil Procedure Act will inevitably be in the spotlight, as the current regulation of collective actions will be improved in line with the Recommendation of the European Commission of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law.
In this regard, Parliament is currently analysing an ambitious proposal that may amend Article 11 of the Civil Procedure Law to create opt-out class actions to enable any consumer in representation of a class, and not only consumer associations, to claim damages and bring class actions before the court in line with the US regulations on class actions under Federal Rule No. 23.
Until and unless that happens, alternative methods for individuals to appear before the courts, including by assigning their claims to a special purpose vehicle that acquires the claims and may bring an action on its own behalf, will increasingly be used to claim damages arising out of antitrust infringements, as is already common in other jurisdictions such as the Netherlands.
1 Albert Poch Tort and Andoni de la Llosa Galarza are founding partners at Redi Litigation.
2 Supreme Court rulings Nos. 344/2012 and 651/2013.
3 Directive 2014/104/EU.
4 Competition Act 15/2007.
5 Case COMP/39824, Trucks.
6 Judgment of Commercial Court Number 3 of Valencia, 4 October 2018.
7 External study prepared for the European Commission, 'Quantifying antitrust damages' (2009), pages 88 ff, available at http://ec.europa.eu/competition/antitrust/actionsdamages/index.html.
8 The CNC was integrated into the CNMC in 2013 with the following five entities: the National Energy Commission, the Commission on the Telecommunications Market, the National Commission on the Postal Sector, the State Council on Audio-visual Media, and the Committee on Railway and Airport Regulation.
9 Judgments of the Commercial Court Number 3 of Madrid, 7 May 2018, Chamber of Commerce of Madrid, and Commercial Court Number 11 of Madrid, 8 June 2018, Pontifical Missions.
10 Judgments of 6 June 2018, Cortefiel, 5 September 2018, CIFDSA and 10 September 2010, Mutua Madrileña.
11 Judgment of 4 November 2008.
12 For instance, in Barcelona, only Commercial Court Number 11 now deals with the private application of competition law.
13 See Article 121-21 of the Catalan Civil Code.
14 See judgment of Commercial Court Number 3 of Madrid, 7 May 2018.
15 See the Recommendation of the European Commission of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under the Union Law.
16 See Article 76 of the Competition Act. However, see also the judgment of the Commercial Court of Madrid, Section 3, 7 May 2018, where the claim was dismissed simply because the amount of damages was not adequately proved. The judge stated obiter dicta that, even if the Damages Directive were applicable to the case, this does not prevent the claimant from proving the concrete harm suffered (page 8).
17 Competition Act 15/2017.
18 See Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and Article 75.1 of the Competition Act.
19 This judgment was afterwards partially revoked by the Supreme Court in sentence No. 481/2013 of 22 May 2015.
20 See Article 283 bis i), 6 of the Civil Procedure Act in relation to the definition of 'statements in the framework of a leniency programme' provided by the fourth additional provision of the Competition Act.
21 See judgment of the Court of 1 June 1999, Eco Swiss China Time Ltd v. Benetton International NV, case C-126/97 (Rec 1999, pl-03055).