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Winner of the SLS Annual Conference Best Paper Prize 2013: Bogeymen, lunatics and fanatics: collective actions and the private enforcement of European competition law

Bogeymen, lunatics and fanatics: collective actions and the private enforcement of European competition law

Published online by Cambridge University Press:  02 January 2018

Bruce Wardhaugh
Bruce Wardhaugh*
Affiliation:
Queen's University Belfast
*
Bruce Wardhaugh, Lecturer, School of Law, Queen's University Belfast, 27–30 University Square, Belfast BT7 1NN, UK. Email: [email protected]
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Abstract

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The European desire to ensure that bearers of EU rights are adequately compensated for any infringement of these rights, particularly in cases where the harm is widely diffused, and perhaps not even noticed by those affected by it, collides with another desire: to avoid the perceived excesses of an American-style system of class actions. The excesses of these American class actions are in European discourse presented as a sort of bogeyman, which is a source of irrational fear, often presented by parental or other authority figures. But when looked at critically, the bogeyman disappears. In this paper, I examine the European (and UK) proposals for collective action. I compare them to the American regime. The flaws and purported excesses of the American regime, I argue, are exaggerated. A close, objective examination of the American regime shows this. I conclude that it is not the mythical bogeyman of a US class action that is the barrier to effective collective redress; rather, the barriers to effective, wide-ranging group actions lie within European legal culture and traditions, particularly those mandating individual control over litigation.

Type
Research Article
Information
Legal Studies , Volume 34 , Issue 1 , March 2014 , pp. 1 - 23
Creative Commons
Creative Common License - CCCreative Common License - BYCreative Common License - NC
Legal Studies published by John Wiley & Sons Ltd on behalf of the Society of Legal Scholars This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes. (http://creativecommons.org/licenses/by-nc/4.0/).
Copyright
© 2014 The Authors

Footnotes

*

This paper was presented at the EU and Competition Law Section of the Annual Meeting of the Society of Legal Scholars at Edinburgh, in September 2013. I wish to thank those attending the session and the anonymous reviewers, whose comments and suggestions have improved this paper. All websites were verified on 13 October 2013. The usual disclaimers apply.

References

1. Carnegie v Household International Inc 376 F 3d 656 at 661 (CA7 2004).

2. Van Den Bergh, R ‘Private enforcement of European competition law and the persisting collective action problem’ (2013) 20 Maastricht J Eur & Comp L 12 at 13.Google Scholar

3. See eg the Green Paper on Consumer Collective Redress (presented by the Commission), Brussels, 27 November 2008, COM(2008) 794 final (available at http://ec.europa.eu/consumers/redress_cons/greenpaper_en.pdf) for a discussion of the need of collective action in consumer matters.

4. See below, text accompanying nn 85–89, for a discussion of the Dutch settlement regime designed to handle the effective resolution of mass torts.

5. There is an extensive literature regarding the place of bogeymen in folklore and our cultural tradition. See eg J Widdowson ‘The bogeyman: some preliminary observations on frightening figures’ (1971) Folklore 99 at 99: ‘When we speak of bogeys or bogeymen we may perhaps think primarily of childhood days when they may have had a specific meaning for each of us. On the other hand as adults we may simply use these words as general cover-terms for anything which inspires fear.’ And also Warner, M No Go the Bogeyman: Scaring, Lulling, and Making Mock (London: Chatto and Windus, 1998), in particular pp 30–31 for the role of such stories in facilitating the obedience of children.Google Scholar

6. An interesting illustration of this point may be found in the current US Federal Rules regarding class actions. The present rules were a result of 1966 amendments to the Federal Rules of Civil Procedure, and resulted in a strengthening of the ability to pursue collective actions. It was not really a coincidence that this sort of facilitation of group action occurred during the same era as other legislative efforts to encourage collective action, such as the Civil Rights Act of 1964 and the Voting Rights Act of 1965. See eg Miller, Ar ‘Of Frankenstein monsters and shining knights: myth, reality, and the “class action problem”’ (1978) 92 Harv L Rev 664 at 670–671.Google Scholar

7. See eg Becker, Gs ‘Crime and punishment: an economic approach’ (1968) 76 J Pol Econ 169;CrossRefGoogle Scholar Posner, Ra Economic Analysis of the Law (Boston: Little, Brown, 1st edn, 1972) p 56 – compare, however, his remarks in the eight edition (New York: Aspen, 8th edn, 2011) pp 149–158;Google Scholar and Judge Hand's negligence formula in United States etal v Carroll Towing Co Inc, etal 159 F 2d 169 at 173 (CA2 1947).

8. See eg Van den Bergh, above n 3, at 20; and Delatare, Jg ‘Beyond the White Paper: rethinking the Commission's proposal on private antitrust litigation’ (2011) 8 Comp L Rev 29 at 45.Google Scholar

9. 187 FRD 465 (SDNY 1998).

10. Ibid, at 470–471.

11. Ibid, at 470.

12. On the difficulty of the case, see ibid, at 474–476.

13. I am indebted to an anonymous reviewer who pointed this out.

14. Competition Appeal Tribunal Case No 1078/7/9/07 (12 March 2007); see Delatre, above n 9, at 47 for other examples.

15. See Which? ‘Jjb Sports: a case study in collective action’ (July 2011), available at http://www.which.co.uk/documents/pdf/collective-redress-case-study-which-briefing-258401.pdf

16. 2000 WL 33534572 (Fla Cir Ct, 6 November 2000) (NO. 94-08273 CA-22).

17. Cenini, M, Luppi, B and Parisi, F ‘Incentive effects of class actions and punitive damages under alternative procedural regimes’ (2011) 32 Eur J L & Econ 229 at 235.CrossRefGoogle Scholar

18. 945 So 2d 1246 at 1262–1265 (Fla SC 2006).

19. From a Beckarian perspective, above n 8, activity will be prevented if the expected costs of participating in it exceed the expected gain. Where the probability of detection is less than 1, punitive damages are needed to raise the costs of the activity to exceed their expected gain, unless public enforcement adds this increase.

20. Codified at 15 USC § 1681 et seq.

21. 15 USC § 1681c(g)(1).

22. 15 USC § 1681n(a)(1)(A).

23. Leysoto v Mama Mia I, Inc 255 FRD 693 (SD Fla 2009).

24. Ibid, at 698.

25. Macey, Jr and Miller, Gp ‘The plaintiffs' attorney's role in class action and derivative litigation: economic analysis and recommendations for reform’ (1991) 58 U Chi L Rev 1 at 7–8.CrossRefGoogle Scholar

26. 100 F 3d 1348 (CA7 1996).

27. Ibid, at 1349.

28. A pioneering study is Coffee, JC Jr ‘Class wars: the dilemma of the mass tort class action’ (1995) 95 Colum L Rev 1343 at 1367–1368.CrossRefGoogle Scholar

29. Leslie, Cr ‘The need to study coupon settlements in class action litigation’ (2004–2005) 18 Geo J Legal Ethics 1395 at 1396–1397.Google Scholar

30. In re Domestic Air Transportation Antitrust Litigation, 137 FRD 677 (ND Ga 1991) is perhaps the most infamous of the coupon settlement cases. See Hantler, Sb and Norton, Re ‘Coupon settlements: the emperor's clothes of class actions’ (2004–2005) 18 Geo J Legal Ethics 1343 at 1344, and their summary, available at http://www.ftc.gov/bcp/workshops/classaction/writ_materials/hantler.pdf Google Scholar

31. Codified 28 USC §§ 1332(d), 1453 and 1711–1715.

32. Ibid § 1712 (a).

33. Ibid § 1712(b)(1).

34. Ibid §§ 1553 and 1711.

35. American Tort Reform Association ‘Bringing justice to judicial hellholes’ (2002) quoted in Hantler and Norton, above n 31, summary at 2.

36. In re Auction Houses Antitrust Litigation 197 FRD 71 (SDNY 2000). That litigation arose out of the price-fixing of auction commissions by Sotheby's and Christie's. To determine the appointment of lead counsel, the court held an auction. After prequalification, the court conducted an auction based on one variable, X. The court described the auction (at 74): ‘One hundred percent of any gross recovery up to and including X was to go to the class. And twenty-five percent of any recovery in excess of X would be paid to counsel, with the remainder going to the class. Each bid was to state the value of X pursuant to which the bidder was prepared to serve as lead counsel.’ On this cartel and some criticisms of the auction process, see Ashenfelter, O and Graddy, K ‘Anatomy of the rise and fall of a pricefixing conspiracy: auctions at Sotheby's and Christie's’ (2005) 1 J Comp L & Econ 3.Google Scholar

37. Weisburst, Si ‘Judicial review of settlements and consent decrees: an economic analysis’ (1999) 28 J Legal Stud 55;CrossRefGoogle Scholar Sale, Ha ‘Judges who settle’ (2012) 89 Wash U L Rev 377.Google Scholar Further, the American system whereby state judges are elected aggravates agency issues: see Hantler and Norton's summary, above n 31, at 2–3.

38. FRCP r 8(a)(2).

39. Bell Atlantic v Twombly 550 US 544 at 555, 127 S Ct 1955 at 1965 (2007).

40. See Sanjuan and Maviglia v American Board of Psychiatry and Neurology Inc 40 F 3d 247 at 251 (CA7 1994).

41. Bell Atlantic, above n 40, at 1965.

42. See Andreangeli, A ‘Collective redress in Eu competition law: an open question with many possible solutions’ (2012) 35 World Comp 529 at 536–548.Google Scholar

43. 564 US —, 131 S Ct 2551 (2011), internal references omitted.

44. Ibid at 2565–2566.

45. 569 US —, — S Ct — (2013) (decided 27 March 2013).

46. Behrend v Comcast 264 FRD 150 at 165 (ED Pa 2010).

47. Majority Slip opinion, above n 46, at 4.

48. Behrend v Comcast 655 F 3d 182 (CA3 2011).

49. Ibid, at 207.

50. Comcast, above n 46, at majority's slip opinion at 6–7, see also Blades v Monsanto 400 F 3d 562 at 575 (CA8 2005): ‘…if [plaintiffs] propose to use such a method to prove injury, they must show that it could work to prove classwide injury with common evidence’.

51. For instance, as the majority in Comcast, ibid at slip opinion 7, held, predominance will not be found where ‘Questions of individual damage calculations will inevitably overwhelm questions common to the class.’

52. The decision in Illinois Brick v Illinois 431 US 720, 97 S Ct 2061 (1977) holds that under federal law indirect purchasers cannot make claims for damages. However, under the state law of jurisdictions that have passed ‘Illinois Brick-repealer’ statutes, such damages are available and can be pursued in federal courts.

53. In re the Drexel Burnham Lambert Group, Inc 960 F 2d 285 at 291 (CA2 1992).

54. In re Nasdaq Market-Makers Antitrust Litigation 169 FRD 493 at 511 (SDNY 1996), citing In re Drexel Burnham ibid, at 291.

55. In re Brand Name Prescription Drugs Antitrust Litigation 1994 WL 663590 (ND Ill) *7.

56. See inter alia Allied Orthopedic Appliances, Inc v Tyco Healthcare Group LP, 247 FRD 156 (CD Cal, 21 December 2007); Heerwagen v Clear Channel Communications, 435 F 3d 219 (CA2 2006); Blades v Monsanto Co, 400 F 3d 562 (CA8 2005); Valley Drug Co v Geneva Pharmaceuticals Inc, 350 F 3d 1181 (CA11 2003); In re Microsoft Corporation Antitrust Litigation, 218 FRD 449 (D Md 2003).

57. A similar concern has been raised in Canada: Pro-Sys Consultants Ltd etal v Microsoft Corporation etal, Sun-Rype Products Ltd etal v Archer Daniels Midland Company etal and Samsung Electronics Co Ltd et autres v Option Consommateurs et autres (Supreme Court of Canada Docket Numbers 34282, 342823 and 34617; jointly heard 17 October 2012).

58. See Rodriguez v Disner 688 F 3d 645 (CA9 2012); and Image Technical Service, Inc v Eastman Kodak Co 136 F 3d 1354 (CA9 1997).

59. Section 4(a) of the Clayton Antitrust Act of 1914 (codified as 15 USC § 15(a)) provides for, inter alia, threefold recovery of antitrust damages. The justification for this was to provide an incentive for private enforcement of the antitrust laws.

60. See eg Rookes v Barnard [1964] AC 1129 (HL); Broome v Cassell & Co Ltd [1972] AC 127 (HL); Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29.

61. See Lande, Rh ‘Are antitrust “treble” damages really single damages?’ (1993) 54 Ohio St L J 115.Google Scholar

62. 2 Travel Group plc (In Liquidation) v Cardiff City Transport Services Limited [2012] CAT 19.

63. Quebec Code of Civil Procedure, RSQ Ch C-25, ss 999–1051.

64. See the cases cited, above n 58.

65. Wong v Sony of Canada Ltd [2001] OJ No 1707, 9 CPC (5th) 122 (Ont SC); 321665 Alberta Ltd v Mobil Oil Canada Ltd [2013] ABCA 221 (Alta CA).

66. In Consumers' Association of Canada v Coca-Cola Bottling Company etal [2006] BCSC 1233, the costs were estimated to be about $400,000.

67. Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others [2001] ECR I-6297, paras 25–27.

68. Cases C-295/04 to C-298/04, Vincenzo Manfredi and Others v Lloyd Adriatico Assicurazioni SpA and Others [2006] ECR I-6641, para 62.

69. C-360/09, Pfliederer v Bundeskartellamt, NYR (Opinion of A-G Mazák, 16 December 2010; Judgment, 14 June 2011); see also T-437/08, CDC Hydrogene Peroxide v Commission, NYR (15 December 2011); T-344/08, T-344/08, En BW Energie Baden-Württemberg AG v Commission, NYR (22 May 2012); C-536/11, Bundeswettbewerbsbehörde v Donau Chemie and Others, NYR (Opinion of Advocate General Jääskinen, 7 February 2013; Judgment, 6 June 2013); Pfliederer v Bundeskartellamt 51 Gs 53/09 AG Bonn (18 January 2012); National Grid Electricity Transmission PLC v ABB Ltd etal [2012] EWHC 869 (Ch) (4 April 2012).

70. Green Paper Damages Actions for Breach of the Ec Antitrust Rules (presented by the Commission) {SEC(2005) 1732} Brussels, 19 December 2005 COM(2005) 672 final; White Paper on Damages Actions for Breach of the Ec Antitrust Rules (2 April 2008) {COM(2008) 165 final} {SEC (2008) 405} {SEC (2008) 406}.

71. Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (11 June 2013) COM(2013) 404 final.

72. See the Green Paper, above n 71, passim.

73. Proposal for Directive, above n 72, p 4.

74. Commission Recommendation of XXX on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law, Strasbourg XXX, C(2013) 3539/3 (11 June 2013) (available at http://ec.europa.eu/justice/civil/files/c_2013_3539_en.pdf); and Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘Towards a European horizontal framework for collective redress’, Brussels, XXX, COM(2013) 401/2 (available at http://ec.europa.eu/justice/civil/files/com_2013_401_en.pdf).

75. European Commission Press Release ‘Commission recommends Member States to have collective redress mechanisms in place to ensure effective access to justice’ IP/13/524 (11 June 2013) (available at http://europa.eu/rapid/press-release_IP-13-524_en.htm).

76. Ibid.

77. This point is also made by Delatre, above n 9, at 51–53.

78. Califano v Yamasaki 442 US 682 at 701, 99 S Ct 2545 at 2557 (1979).

79. Murray, Pl and Stürner, R German Civil Justice (Durham, NC: Carolina Academic Press, 2004) p 188.Google Scholar

80. In France, the case-law of the European Court of Justice directly binds judges, and Art 6-1 of the ECHR is taken to preclude opt-out collective action: see Dec. Cons. Const. No 89-257 DC, 25 July 1989.

81. On this point, see the country surveys in Foer, AA and Cuneo, JW (eds) The International Handbook on Private Enforcement of Competition Law (Cheltenham: Edward Elgar, 2010).CrossRefGoogle Scholar

82. See Mulheron, R ‘The case for an opt-out class action for European Member States: a legal and empirical analysis’ (2009) 15 Colum J Eur L 409 at 421–425.Google Scholar

83. See eg Van Den Bergh, above n 3, at 29–32.

84. And not to mention a decreased element of deterrence, to the extent that private actions supplement the deterrent effect of public enforcement.

85. Wet Collectieve Afhandeling Massachade; Netherlands Civil Code 7:907–910 and Code of Civil Procedure Art 1013.

86. See eg Department for Business, Innovation and Skills Private Actions in Competition Law: A Consultation on Option for Reform – Government Response (Document BIS/13/501) (London: BIS, January 2013) paras 5.23 and 6.20–6.26.

87. Netherlands Civil Code Art 7:907(1).

88. Ibid, Art 7:907(3).

89. However, in spite of the non-profit nature driving such litigation, other agency issues will arise: see Van Den Bergh, above n 3, at 22–24' 31–32.

90. In addition to the White Paper and Green Paper (n 71), see also Ashurst (A Firm) Study on the Conditions of Claims for Damages in Case of Infringement of EC Competition Rules: Comparative Report (Brussels: Ashurst, 2004); Commission Staff Working Paper Accompanying the White Paper on Damages Actions for Breach of the Ec Antitrust Rules {COM(2008) 165 final} {SEC (2008) 405} {SEC (2008) 406} Brussels, 2 April 2008, SEC(2008) 404; and Commission Staff Working Paper Annex to the Green Paper Damages Actions for Breach of the Ec Antitrust Rules {COM(2005) 672 final} Brussels, 19 December 2005 SEC(2005) 1732.

91. European Parliament Directorate-General for Internal Affairs Collective Redress in Antitrust (Brussels: EU Publications, June 2012), available at http://www.europarl.europa.eu/committees/en/studiesdownload.html?languageDocument=EN&file=74351; European Parliament Committee on Legal Affairs Report on ‘towards a Coherent European Approach to Collective Redress’ (2011/2089(INI)) A7-0012/2012 (12 January 2012), available at http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7-2012-0012&language=EN.

92. Collective Redress, ibid, pp 65–67.

93. White Paper, above n 71, p. 21.

94. Delatre, above n 9, at 57.

95. Report, above n 92, para 2, reference to Wal-Mart v Dukes omitte

96. Above n 72.

97. Above n 75.

98. Ibid, para 21: ‘The claimant party should be formed on the basis of express consent of the natural or legal persons claiming to have been harmed (“opt-in” principle). Any exception to this principle, by law or by court order, should be duly justified by reasons of sound administration of justice.’

99. Communication from the Commission, above n 75, at p 11, point 3.4.

100. Garden Cottage Foods v Milk Marketing Board [1984] AC 130;An Bord Bainne Co-operative Ltd v Milk Marketing Board [1984] 2 CMLR 584;Bourgeoin SA v Minister of Agriculture Fisheries and Food [1985] 1 CMLR 528.

101. Competition Act 1998, s 47B(3).

102. Sub nom Emerald Supplies Limited and Southern Glass House Produce Limited v British Airways plc [2010] EWCA Civ 1284, [2011] 2 WLR 203.

103. Emerald Supplies [2009] EWHC 741 (Ch), para 2.

104. Ibid, paras 33–35.

105. Ibid, paras 36–37.

106. Emerald Supplies (CA), above n 103, paras 62–65.

107. Office of Fair Trading Private Actions in Competition Law: Effective Redress for Consumers and Business: Discussion Paper (OFT916) (London: OFT, April 2007).

108. Ibid, para 1.1.

109. Ibid, para 4.23.

110. Ibid, para 4.24.

111. While further analysis of the compatibility of opt-out collective actions and the HRA is well beyond the scope of this paper, it is worth noting the following: if the suggestion is true and such actions are incompatible with the HRA, then this provides further evidence of legal/traditional barriers to the adoption of such actions. On the other hand, if this suggestion is false and these actions are compatible with the HRA, then the suggestion is perhaps yet another bogeyman story.

112. Ibid, para 4.8.

113. Ibid, paras 4.14–4.15.

114. [2009] EWCA Civ 647.

115. Department for Business, Innovation and Skills Private Actions in Competition Law: A Consultation on Options for Reform (Document BIS/12/742) (London: BIS, April 2012) para 3.14.

116. Ibid, paras 3.21, 5.1–5.53 and Annex A.

117. Ibid, para 3.21.

118. Ibid, paras A.5–A.12.

119. Office of Fair Trading Private Actions in Competition Law: A Consultation on Options for Reform: The OFT's Response to the Government's Consultation (OFT1434resp) (London: OFT, July 2012) para 1.12.

120. Ibid.

121. Department for Business, Innovation and Skills Private Actions in Competition Law: A Consultation on Options for Reform – Government Response (Document BIS/13/501) (London: BIS, January 2013) paras 6.20–6.21.

122. Ibid, paras 5.72 and 6.22–6.25.

123. Ibid, para 5.33: ‘The great majority of respondents strongly agreed with Government that, if an opt-out system were to be introduced, there would be a need for strong safeguards to protect against vexatious claims or frivolous litigation. In the words of the law firm Herbert Smith, the system “must provide adequate safeguards to prevent unmeritorious claims being brought, avoiding the excesses of the US class action system”’ (footnote omitted).

124. See 2 Travel and text accompanying note 63, above.

125. For example, in France the legal maxim ‘tout le dommage, mais rien que le dommage’ (‘all the damage, but nothing more than the damage’) applies to compensation.

126. On this point and its relevance to collective actions in competition matters, see Veljanovski, C ‘Third-party litigation funding in Europe’ (2012) 8 J L, Econ & Pol'y 405.Google Scholar