EU College Of Commissioners May Promote Antitrust Class Action Plan Despite Last Year’s Failing Grade

Although the American version of class actions may still be viewed as an unwelcome immigrant by businesses in Europe, the European Commission appears to be reviving efforts to fashion its own kinder, gentler, European version of class actions for antitrust violations.

Recent reports indicate that the European Commission has gone back to work on an initiative to allow collective actions for damages by parties injured by violations of EU antitrust law – just a year after killing a previous proposal for such actions.

The EU College of Commissioners reportedly met on October 12, 2010, to discuss the issue of antitrust damages actions. Three Commissioners – Competition Commissioner Joaquín Almunia, Consumer Policy Commissioner John Dalli and Commissioner for Justice Viviane Reding – prepared a briefing paper for their colleagues on the topic.

The European Commission’s previous efforts to allow collective antitrust actions for damages collapsed in dramatic fashion last year.

Under the helm of then Competition Commissioner Neelie Kroes, the Commission had been crafting a Directive which was to include provisions to that effect. But in October 2009, just days before a meeting of the College of Commissioners at which it was to be discussed, the Directive was shelved sine die.

Commission President José Manuel Barroso made the decision to kill the initiative under pressure from the European Parliament. Members of the Parliament complained that the Commission had failed to involve them in the process of drawing up the Directive, and claimed that the Commission’s proposed measures would expose businesses to abusive litigation.

The European Commission has been studying the possibility of collective redress for antitrust violations for a number of years. In December 2005, the Commission issued its Green Paper on Damages Actions for Breach of the EC Antitrust Rules, in which it noted that it was impractical, if not impossible, for individual purchasers with small claims to bring damages actions. Consideration should therefore be given to collective actions as a means to better protect consumer interests, and achieve time and cost efficient redress by consolidating small claims into a single action.

On the heels of the Green Paper, the Commission launched a public consultation on the subject of facilitating damages claims for breaches of EU competition law. It received some 150 submissions from Member States, industry groups, consumer groups, academics and law firms. Many of the comments, particularly those submitted by industry groups, were hostile to collective damages actions and warned that they would lead to frivolous litigation and unduly burden businesses.

In 2008, the Commission followed up with a White paper on Damages Actions for Breach of the EC Antitrust Rules, which proposed the adoption of two mechanisms of collective redress:

• representative actions brought by qualified entities such as consumer associations, state bodies or trade associations, on behalf of victims of antitrust injury; and

• opt-in collective actions, in which victims expressly decide to combine their claims into a single action.

However, the Commission’s draft Directive, which was leaked to the press in 2009, provided for opt-out collective actions, which likely raised even more alarm in the business community.

If the Commission does adopt some forms of collective redress for victims of antitrust violations, it will likely seek to appease businesses’ fears that these measures will lead to costly frivolous lawsuits. According to press reports, the briefing paper authored by Commissioners Almunia, Dalli and Reding recognizes these concerns and stresses that any legislation adopted by the Commission should include safeguards against abusive litigation.

In that respect, the U.S. class action model has become somewhat of a scarecrow in the EU debate on collective redress.

During his confirmation hearing before the European Parliament, Commissioner Almunia stated that he would “examine closely the different possibilities of addressing collective redress, while ensuring that it does not open the door to the sort of excesses seen in other parts of the world.” If there was any doubt as to what part of the world the Commissioner was referring to, it was lifted in an interview he gave to the Financial times earlier this month, in which he declared that he “fully agree[s]” with those who say “you should avoid the failure of the U.S. system.”

According to the Almunia-Dalli-Reding briefing paper, the Commission plans to launch another public consultation on private enforcement of competition law between November 2010 and February 2011. Commissioner Almunia has said that he aims to propose legislation in the second semester of 2011.