February 10, 2014

Umbrella Liability For Price Fixing: Does The Forecast Call For More Damages In The EU And U.S.?

A View from Constantine Cannon’s London Office

By Irene Fraile and Ankur Kapoor

The European Union may be on the verge of embracing “umbrella liability”—a theory of liability that would significantly increase the exposure of members of anticompetitive cartels.

The European Court of Justice is being urged by one of its advocates general to hold that, under EU law, victims of cartels can seek damages from cartel members for higher prices paid to non-cartel members that were able to raise their prices under the pricing “umbrella” created by the cartel. If the Court of Justice endorses such umbrella liability, antitrust liability in the EU could diverge from the approach evolving in U.S. courts which have been reluctant to embrace umbrella liability. click here for more »

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Categories: Antitrust Enforcement, Antitrust Law and Monopolies, Antitrust Legislation, Antitrust Litigation, Antitrust Policy, International Competition Issues

    December 5, 2013

    Europeans Evolving Toward More Plaintiff-Friendly Private Damages Action Rules

     A View from Constantine Cannon’s London Office

    By James Ashe-Taylor and Julia Schaefer

    The governing institutions of the European Union are moving ahead with proposals that could enable consumers and businesses victimized by antitrust violations to have a better chance at recovering damages from cartel members.

    Earlier this week, ministers from all 28 member states of the EU agreed at a meeting of the Council of the European Union to push ahead with a legislative proposal which seeks to facilitate damages claims by victims of antitrust violations and to allow them to receive full compensation.  Competition Commissioner Joaquín Almunia has called this effort a “milestone in the evolution of competition law enforcement in the EU.”

    The European Commission (the EU’s executive arm) published the legislative proposal to revise rules governing antitrust damages actions under member states’ national law on June 11, 2013.  The Council (one of the EU’s two legislative bodies) has now authorized its Presidency to start negotiations with the European Parliament (the other legislative body) to agree to revisions in the legislative proposal.

    The legislative proposals are designed to remedy defects in private enforcement, an area which Mr. Almunia described as “ineffective” and “uneven.”  Currently, victims of antitrust violations face high procedural hurdles in seeking relief, particularly under national discovery rules.  These often require a detailed description of specific relevant documents before discovery is permitted, an evidentiary obstacle few victims are able to overcome.

    Similarly, the discoverability of leniency documents is often uncertain and determined only on a case-by-case basis.  The EU proposals aim to clarify this area of law, in order to give greater protection and certainty to whistleblowers, while at the same time upholding victims’ ability to access all relevant information.

    The divergent rules and procedures across the EU member states have encouraged forum shopping for the courts with the most plaintiff-friendly procedural rules.  This has meant that the vast majority of damages actions have been brought in the British, Dutch and German courts.  The Commission considers this to be contrary to the single market principle.  It has also pointed out that forum shopping is a luxury available only to large corporations.

    According to Mr. Almunia, the new proposals are about making recovery of compensation by ordinary European citizens and small businesses a reality.

    The proposals would also preserve the competition authorities’ power to punish and deter anticompetitive practices.

    The EU’s enforcement of its competition laws remains a priority.  As discussed on this blog yesterday, the EU has just imposed a new record level of fines against global banks in the Libor and Euribor benchmark manipulation investigations.

    While the legislative proposals would bring European private antitrust damages actions a few steps closer to the American model, they would not make the full leap.  Unlike in the U.S., where victims of antitrust violations are able to seek triple damages from cartelists as a deterrent, the EU’s proposals are aimed only at compensating for the harm suffered.  Punishment, according to the Commission, should remain the exclusive realm of the competition authorities.  Moreover, the EU currently does not have a class action regime, which would facilitate damages actions by consumers and small businesses.  But on June 11, 2013 the Commission adopted a set of common non-binding principles for collective redress mechanisms in member states, which recommend limited opt-in class action-style laws.

    The adoption of a “common approach” by the Council is a positive step toward finalizing the legislative proposal before May 2014, when new elections are held for the European Parliament.  Under the EU’s “ordinary legislative procedure,” the Council will have to reach agreement with the Parliament on the Commission’s proposed legislation.  However, disagreement remains on key aspects of the proposals, such as discovery rules and protection for whistleblowers.  In addition, political conflicts in the Parliament have led to a month-long postponement of the first reading of the proposal until January of next year.

    Despite these roadblocks, there is strong pressure within the Parliament and the Council to complete the legislative passage of this directive before April.  Once adopted, the member states would have two years in which to implement the directive into national law.

    Additional information about bringing private actions for antitrust damages in the EU can be obtained by contacting James Ashe-Taylor or Julia Schaefer in Constantine Cannon’s London office.  

    Edited by Gary J. Malone

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    Categories: Antitrust Legislation, International Competition Issues

      April 5, 2012

      Prognosis Negative For Congressional Repeal Of Antitrust Exemption For Health Insurers

      Although the fate of Obamacare in the Supreme Court is still an open question, the prognosis is decidedly negative for the congressional effort to repeal the McCarran-Ferguson antitrust exemption for health insurers.

      Although the Republican-controlled U.S. House of Representatives has passed a bill that would repeal the antitrust exemption for health insurers, the bill is not likely to pass the Democratic-controlled Senate.

      The repeal of the antitrust exemption enjoyed by health insurers was included in the Protecting Access to Healthcare Act (the “PATH Act”), which was drafted by opponents of President Obama’s healthcare overhaul to repeal parts of that law.  The PATH Act recently passed the House (H.R. 5), largely along party lines.

      As originally drafted, the amendment repealing the antitrust exemption would have applied broadly across the insurance industry.  However, the amendment was revised to keep the antitrust exemption for life insurance, annuities, property and casualty insurance, and other types of insurance other than health insurance.

      Representative Paul Gosar (R-Arizona) sponsored the repeal amendment, stating that the measure was necessary “so that we can empower health insurance companies to compete more aggressively.”  On the other hand, Gosar also emphasized that the amendment would preclude class action lawsuits against health insurers, leaving antitrust enforcement to government authorities.

      Representative John Conyers (D-Michigan) expressed the view of many Democrats by noting that the class action bar “effectively destroyed” the repeal.  Implicit in his statement was the acknowledgment that private actions play a major role in enforcement of the antitrust laws.

      In the end, though, none of this is likely to amount to much more than political posturing in an election year.  The PATH Act is not likely to be passed by the Senate.  Not only are Senate Democrats unlikely to support the PATH Act, but President Obama has threatened to veto the bill if it makes it to his desk.

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      Categories: Antitrust Legislation

        January 11, 2012

        U.S. Agriculture Competition Rules Get Meat Axed By Industry And Congressional Pressure

        Pressure from the U.S. meat industry and Congress has succeeded in trimming new competition rules designed to help farmers contained in the U.S. Department of Agriculture’s (“USDA”) final regulations for the Grain Inspection, Packers and Stockyards Administration (“GIPSA”).

        The Food, Conservation, and Energy Act of 2008 (the “2008 Farm Bill”) required the USDA to promulgate new, and clarify existing, GIPSA regulations on a wide variety of topics.  The final regulations represent a significant retreat from the proposed rules and demonstrate the political power of large industrial meat companies.

        As directed by Congress in the 2008 Farm Bill, the USDA proposed several changes to the relationship between farmers and meat packagers and processors.

        Many industry observers have long criticized the power imbalance that exists between individual farmers, who have little bargaining leverage in the context of a multi-billion dollar industry, and large corporate meat dealers.  The proposed regulatory changes included rules that were intended to help level the playing field, such as creating definitions of competitive injury, unfair and unjust practices, and undue or unreasonable preferences or advantages. 

        None of those provisions survived a year of heated debate and lobbying by the meat industry.

        In addition to the notice and comment process, Congress intervened before the USDA published its final rule to prohibit the agency from passing most of the competition-related reforms.  The provisions that did make it into the final rule, such as allowing farmers to decline mandatory arbitration provisions in growing contracts, have come under heavy criticism, and the meat industry will likely continue to push for their repeal or modification.

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        Categories: Antitrust Legislation, Antitrust Policy

          October 18, 2010

          Antitrust Regulators Will Be Navigating Health Care Reform In Evaluating New Accountable Care Organizations

          While doctors and medical organizations have long had to navigate antitrust concerns in their practices, antitrust regulators will now have to consider health care reform in evaluating collective action by health care providers in groups known as care accountable care organizations (“ACOs”).

          ACOs are health care provider groups responsible for the cost and quality of care delivered to a group of patients cared for by the groups’ doctors.  The Affordable Care Act of 2010 seeks to foster the growth of ACOs as a way to control costs and boost quality in healthcare with a direction to the Centers for Medicare and Medicaid Services (CMS) to create a national voluntary program for accountable care organizations (ACOs) by January 2012.

          As ACOs grow in number and influence during the next few years, antitrust policy will have to take into account the goals of health care reform as antitrust regulators deal with the competing concerns of competition and cost containment.

          These antitrust issues are explored by Constantine Cannon partners Axel Bernabe and Ankur Kapoor in a recent article that considers the antitrust implications of ACOs under the Affordable Care Act.

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          Categories: Antitrust Enforcement, Antitrust Legislation, Antitrust Policy

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