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European Union On Verge Of Swinging Class Action Hammer

Posted  October 6, 2009

While the antitrust class action is historically an American enforcement tool, the European Union is on the verge of pressing this powerful hammer into the hands of its member states.

Under a draft EU Directive, state bodies and nonprofit organizations appointed by national governments would be able to bring class actions in national courts against companies that fix prices or abuse their dominant market share.  Victims would automatically be included in the class action unless they opt out.  The draft Directive allows victims at least two years to take legal action to recover actual losses and lost profit after a final court ruling on a company’s liability.

European Competition Commissioner Neelie Kroes is expected to present the proposed Directive to fellow commissioners in the next few weeks.  If adopted as a Directive by the European Commission, EU Member States would be required to implement it or face heavy fines.

Allowing private damage actions in national courts for alleged violations of EU competition law would represent a big change in the EU.  In addition to allowing victims of EU competition law violations to recover the estimated billions of Euros they forgo each year under the current enforcement regime, the impetus for the proposed change is likely the Commission’s ongoing effort to share its workload with private plaintiffs because it is overwhelmed.  The EU has grown from 15 to 27 Member States in the past five years and now has almost 500 million citizens (almost 200 million more than the U.S.).  While this has led to an inevitable rise in the number of cross-border antitrust cases, the growth in the staff and resources of the EU’s Directorate General for Competition has not kept pace.

Previous attempts by the European Commission to encourage private damages actions have been hamstrung by the Member States’ resistance to encouraging private damage actions.  This reluctance was likely due to lobbying by powerful corporations and concern about the burden on national court systems if a growing number of antitrust matters have to be adjudicated by domestic courts rather than the European Commission.  However, adoption of a Directive by the European Commission would essentially bypass these concerns and force Member States to implement the required changes.

Tagged in: Antitrust Enforcement, International Competition Issues, Price Fixing,