A picture of “astonishing diversity and total underdevelopment”. Thus spoke a 2004 Report that surveyed competition damages actions across the EU at the time. It took ten years from there to adopt the Damages Directive, which finally ensured that anyone who suffered harm caused by a competition infringement can effectively claim full compensation and gave “equivalent protection throughout the Union for anyone who has suffered such harm”.
Like EU competition law at its inception, the draft Digital Markets Act (DMA) and the UK’s proposals for a new competition regime for digital markets also do not contain specific rules on private actions. Will we find ourselves in the same place of astonishing diversity and underdevelopment with respect to private actions when those pieces of legislation are up and running? If that is the case, should it be avoided by introducing specific rules on private actions now? Some commentators certainly think so (see e.g. Rupprecht Podszun’s recent contribution to the Verfassungsblog). Others, like Assimakis Komninos, consider that the right to private actions should actually be limited.
In my inaugural post on the Platform Blog, and with thanks to my new colleagues for giving me the opportunity to do so, I’d like to share some thoughts on the desirability of specific rules on private actions in relation to the draft digital legislation in the EU and UK.
The status quo if the proposals come into force unchanged
What do the DMA and UK proposals say?
The draft DMA does not contain specific rules on private actions, whether they be actions to get a Court to grant some form of interim relief or damages actions.
The UK’s proposals state that specific rules for damages actions are not currently a priority, but “that once the regime is settled, policies that streamline follow-on cases may complement the effect of public enforcement”. Government intends to revisit this issue at post-legislative scrutiny of the legislation (usually 3-5 years after Royal Assent) or at the end of the first period of designation.
However, both recognise that the new rules may give cause for a claim for damages:
- The Commission states in its Q&A: “[the DMA] is a Regulation, containing precise obligations and prohibitions for the gatekeepers in scope, which can be enforced directly in national courts. This will facilitate direct actions for damages by those harmed by the conduct of non-complying gatekeepers.”
- The UK’s proposals recognise that “in some cases damage may arise before the Digital Markets Unit is able to take action” and they clarify that “we are not proposing to stop or curb an individual’s right to pursue a private law action”.
So how would private damages and other private actions fit in if no specific provision is made for them in the proposals? It is useful to look at the direct application of EU Regulations in national law, the experience in competition law from before the Damages Directive and the position in different areas of regulation.
Courage! Direct application of EU law and the ability to claim damages in competition law before the Damages Directive
The direct enforceability of EU law, including the competition rules and directly applicable EU regulations, was clarified in landmark judgments like Van Gend & Loos, Courage v Crehan, Manfredi and Politi. It is the principles in these judgments that the Commission’s Q&A statement in relation to the DMA is based on. In particular, the Court of Justice has been clear that individuals and businesses can invoke EU Regulations (as the DMA will be) directly in their dealings with other individuals and businesses. The applicability of a specific provision of a Regulation in those dealings depends on whether that provision is sufficiently clear and unconditional.
Specifically with respect to competition law, the Court of Justice also held in Courage and Manfredi that private enforcement of the competition rules strengthens the effectiveness of EU competition law and that any individual should therefore be able to claim compensation from harm suffered because of an infringement. Advocate General Jacobs has opined that this should also apply to applications for interim relief.
(Spare a thought for Mr Crehan and Mr Manfredi. The former spent 13 years litigating the case only to recover no damages at all because the courts held that the agreement did not infringe Article 101 in the first place. The latter recovered just under €900 in damages).
However, before the Damages Directive was adopted, Member States retained autonomy in terms of the procedural rules for claiming damages and the substantive rules of recovery in tort, delict, restitution, and other actions. These rules may well have formed an obstacle to efficient and effective damage claims in some jurisdictions. Indeed, in Manfredi the Court of Justice also gave a view on Italian rules that made a claim for damages more complex. It held that provided national rules do not offend the principles of equivalence and effectiveness, these are matters for national rather than EU law.
In the UK, it was established in the early eighties (well before Courage and Manfredi) that damages could be available after infringements of Articles 101 and 102. The cause of action for claimants in UK cases was considered to be breach of statutory duty. Subsequently, specific rules were included in the Competition Act 1998 for follow-on actions after Commission and UK decisions.
Ultimately the view was taken that the diffuse and inconsistent competition damages regime that had developed across the EU should make way for the 2014 Damages Directive.
Damages in a regulatory context
When it comes to ex ante regulation, there is no one-size-fits-all rule.
There are some examples where such regulation includes specific rules on damages. For example, in data protection Article 82 of the GDPR provides a specific right to claim damages. A number of financial, telecom and energy regulatory regimes also provide for the possibility for consumers to claim compensation in certain circumstances.
However, economic regulations that aim to provide market access or put in place behavioural rules as to how companies with significant market power in a certain sector must conduct their business vis-à-vis rivals tend not to have specific rules allowing those rivals to take cases directly to Court. Instead, those regimes tend to prefer to rely on the regulator’s expertise to arbitrate in the dispute.
The usual way for a complainant to address an issue is not to go to court, but to complain to the regulator. There then tends to be a possibility to appeal to a court if the regulator dismisses the complaint or takes no action at all. Such actions are issues of administrative law or (in the UK) judicial review. There may be scope for interim measures, but this depends on the national rules.
That is not to say that a business that suffers damage from a breach of such a regulation would not have an action to claim damages under national law. It is just that the regulations themselves do not tend to provide specific routes directly to court without involvement of the regulator first.
However, one thing is important to note: the typical market access regulations in regulated industries do not benefit from a Courage or Manfredi-style statement recognising the importance of private litigation to enhance their effectiveness. While a provision in a regulation is directly applicable in horizontal relations between businesses if it is sufficiently clear and unconditional, that does not automatically mean that a national court would hold that any breach of that provision amounts to the kind of misconduct that can form the basis for a damages action, or that damage suffered at a different level of the supply chain or in a related market is automatically actionable. These issues will depend on the substantive and procedural rules of the relevant national law.
This is particularly important where regulations require detailed forms of market access (access to a complex telecom network, say, or interoperability with an operating system). If the incumbent is broadly cooperative but there is a dispute on the minutiae of technological issues, does this really amount to a breach that gives cause for a damages claim?
Complementary application of competition and regulatory rules
Expert regulators’ decisions often play a role in competition cases, demonstrating the complementary way in which those regimes work, and this may also be the case specifically in competition damages actions.
For example, in a class action filed at the Competition Appeal Tribunal against BT, the claimants recognise that Ofcom’s findings with respect to BT do not give rise to a follow-on claim, but it is nonetheless clear the claimants wish to rely heavily on those findings. If the class is approved, the question will be what weight the Tribunal will give to Ofcom’s regulatory decisions when deciding whether BT abused its dominant position under competition law. The answer to that question will be highly relevant to the prospects of success of any damages cases under the competition provisions that look to rely on reports by the UK’s Digital Markets Unit.
The upshot: claims under competition law or directly for breach of statutory duty?
Taking the above together, if there is no specific provision for private actions in the new proposals, it is likely that those who suffer damage from a breach of the DMA or the UK rules will base their claims on competition law or on some form of tort (including breach of a statutory duty), or a combination thereof.
In relation to competition law, the new rules look to regulate the behaviour of companies which have entrenched positions, some of which are already the subject of abuse of dominance decisions and investigations. In case of a sufficiently serious breach, it is likely these companies would have a credible abuse of dominance case to answer. Those cases will then already benefit from the Damages Directive or the UK regime for stand-alone claims. They can also be successful, at least in part, as Epic’s case against Apple in California demonstrates.
A case based solely on breach of a statutory duty would not benefit from the Damages Directive. It would need to be based on national rules of tort, which brings its own challenges as the UK National Health Service (NHS) recently found in an unrelated but interesting case where one of its claims against a pharma company called Servier was struck out because the NHS had not met the test for the ‘unlawful means tort’.
Experience in relation to FRAND-disputes demonstrates that these private claims (whether including competition law or not) may also be brought in parallel with efforts to resolve the issue, particularly where it concerns access to technology, even if just to keep the pressure on the gatekeeper.
Considerations for lawmakers thinking about specific rules on private actions
That then leaves the question whether the DMA and the UK rules should live with the above routes to court, or whether a specific rule allowing for (or restricting) private actions should be introduced. That question comes down to what existing model would be desirable:
- If, like in the competition regime, private enforcement is considered important in strengthening the effectiveness of the system, then we have learned that not harmonising the rules leads to an ineffective system where there is inequality as between Member States in terms of who can obtain redress (or injunctive relief) in case of a breach. In such a model, harmonised specific rules are preferable to avoid underenforcement and inequitable outcomes as between EU jurisdictions. This may be of lesser concern in the UK post-Brexit.
- If the model chosen is the GDPR, then digital rules would be enforced from the outset under a system with strong national regulators who can impose penalties, but also a specific right to apply directly to court. However, unlike competition law we do not yet know if adopting such a diffuse enforcement regime from the moment of inception of a set of complex rules (as the GDPR is) may lead to divergence and confusion. There is also, as remarked elsewhere, the risk that one single jurisdiction becomes a bottleneck.
- Finally, if the rules are based on existing systems of sectoral regulation, the system requires a strong regulator (or multiple strong regulators for each Member State with a leading role for the Commission) and complaints would be channeled through that regulator. The effectiveness and comprehensibility of such a regime may be undermined by opening up the possibility of many court cases interpreting the same rules, particularly if we want those rules to change from time to time to be sensitive to market developments. This could even be a reason to restrict access to courts in certain circumstances.
The most important thing is to not let the tail wag the dog: we should not introduce a private action regime just because there is one in competition law. Instead, we should ask ourselves what we want from these new rules. If we are looking to set the rules of the game for certain powerful players who are active in different markets which have different problems and needs, and if we recognise that our rules may well be successful in curtailing their power, thus necessitating perhaps less far-reaching or more tailored approaches in future, it could be preferable at least initially to focus on getting the rules right and focussing therefore on public enforcement.
However, this initial position can be revisited after a certain period, in particular if enforcement by the Commission (and hopefully the NCAs) is insufficient. Remember: not specifically legislating for private actions does not mean those actions are not available. If Big Tech firms do not play by the rules and there is a direct link between their non-compliance and damage suffered, effective routes to the courts do exist. Reports and other findings by the Commission, the NCAs or the UK’s Digital Markets Unit under the new rules will only help in bringing such cases.
In other words, the UK’s ‘wait and see’ approach to private enforcement may not be a bad one right now.
[I worked at the CMA until the beginning of this month. The views expressed in this blog post are strictly personal.]
Image Source: Forbes