Ercüment Erdem Prof. Dr. H. Ercüment Erdem

The Implications Of The Directive On Certain Rules Governing Antitrust Damages Lawsuits On Turkish Law

November 2014

Introduction

The Directive on certain rules governing actions for damages under the national law concerning infringements of the competition law provisions of the Member States, and of the European Union (the “Directive”)[1], was adopted by the European Union Council of Ministers (the “Council”) on 10 November 2014. Pursuant to Article 23, the Directive shall enter into force on the twentieth day following its publication in the Official Journal of the European Union. Member states will have two years to implement the provisions of the Directive into their legal systems.

My earlier article of April, 2014, elaborated on The Draft Directive. In this article, I will deal with its possible implications on major points of Turkish competition law.

The Role of the National Court for the Establishment of Competition Law Infringement

The Directive does not provide any rule that an infringement of competition law has to be first established by any national competition authority or the Commission. To the contrary, the preamble (§ 13) of the Directive makes it clear that “the right of compensation is recognized … regardless of whether or not there has been a prior finding of an infringement by a competition authority.” Therefore, under the regime provided by the Directive, any person who has suffered harm because of an infringement of competition law can directly initiate a claim for damages before the national courts. It will be up to the claimant to prove that there is an infringement of competition law, and the national law will govern this infringement.

This issue was subjected to lengthy debate under Turkish law. Some legal scholars argued that the Competition Authority is the specialized body to establish competition infringement, and that the national courts do not have enough experience, knowledge, or sufficient staffing to assess competition infringements. Therefore, any claim of compensation has to be based on the prior finding of infringement by the Competition Authority. Other legal scholars advocated in favor of the power and the role of the national courts in assessing competition infringements. Further to those legal scholars, the courts are the ultimate body to make this assessment, either directly, or through acting as review court, of the Competition Authority’s decision. Therefore, there is no need to await a final decision of the Competition Authority, which may be long in coming.

The approach of the national courts has substantially diverged on this question. Some courts have accepted claims for damages without a prior assessment being provided by the Competition Authority. These courts have made their own analyses of infringements by using court-nominated experts, and thus, rendered their decisions. Some other courts, in the absence of the prior assessment of the Competition Authority, have suspended the case, and ordered the claimant to apply to the Competition Authority to establish competition infringement. Notwithstanding these differences of views, the courts’ practice now seems to be established in favor to await the assessment of the Competition Authority, if the claim of compensation is not based on a decision of the Competition Authority.

Although the practice of the courts differs from what was provided by the Directive, I am of the opinion that this practice is more reliable, since it respects the expertise and knowledge of the Competition Authority. In many instances, the establishment of the competition infringement is difficult, and requires particular knowledge and expertise that ordinary courts may not have. In particular, in consideration of cartels, the hidden nature of a cartel makes it difficult to identify. The Competition Authority uses particular powers that ordinary courts do not possess, such as inspections and investigations. The civil law courts are not permitted to conduct their own investigation, and are bound by evidence presented by the parties. In the case of abuse of dominant position, its assessment may require a complicated economic analysis and modeling: Again, ordinary courts do not have such ability.

Limitation Periods

Clear rules for limitation periods are regulated under the Directive to provide adequate time within which to bring an action. Pursuant to Article 10 of the Directive, Member States shall enact rules that are applicable to the limitation periods. These rules shall establish these commencement periods, the duration of the periods, and when these periods are interrupted or suspended. Limitation periods shall not begin to run before the infringed party has knowledge of the infringement. These periods shall be at least five years. The limitation periods shall be suspended or interrupted in cases where a competition authority investigates or commences proceedings with regard to an infringement for which the action for damages is related. The suspension period shall end, at the earliest, one year after finalization of the infringement decision, or upon termination of the proceedings. Through this provision, the injured party can choose to wait until the public proceeding is terminated before bringing the claim.

The regime provided by the Directive differs substantially from Turkish law. The Act on the Protection of the Competition Law (the “Act”) does not contain any rules with respect to limitation periods. Therefore, the provisions of the Turkish Code of Obligations (the “TCO”) apply. Pursuant to Article 72 of the TCO, the claim for damages becomes time-barred, two years from the date upon which the injured party became aware of the loss or damage and of the identity of the liable person, but, in any event, ten years after the date upon which the loss or damage was caused. However, if the action for damages is derived from an offence for which criminal law envisages a longer limitation period, that longer period also applies to the civil law claim.

The two years’ limitation period entered into force on 1st July 2012. Prior to that date, this limitation period was only one year. This short limitation period caused many problems in practice. In most cases, the injured party became aware of the damages, as well as the identity of the person who had caused the damages at the time when either he/she filed a complaint before the Competition Authority, or when the Competition Authority launched an investigation concerning the infringement. Decisions to launch an investigation are published on the web site of the Competition Authority, and create, therefore, public awareness. The claim concerning compensation has to be initiated within two years (this limitation period was one year, before) from the date the injured party was made aware of the infringement. In many instances, the claimants, who waited until the end of the investigation phase, passed the limitation period, and their claims were rejected. Moreover, complaints filed before the Competition Authority, or the request to set aside the Competition Court’s decision, does not suspend the limitation periods.

In light of the Directive, a more detailed provision on the limitation period may be provided in the draft law on the amendment of the Act (the “Draft Law”).

Passing on of Overcharges and Passing on Defence

Anyone who suffered damages, whether as direct or indirect purchasers, can claim compensation. Article 12 of the Directive provides that Member States are obliged to regulate procedural rules in order to prevent overcompensation. These procedural rules intend to avoid compensation for the actual loss that exceeds the overcharge harm suffered. Direct purchasers can pass on overcharges that they are exposed to due to a competition law infringement to indirect purchasers, such as in situations where price increases are “passed on” through the distribution chain. Direct customers of an infringer often increase their prices to offset the increased price they had to pay. Pursuant to Article 13, a defendant can invoke a defence claim for damages by claiming that the claimant passed on the overcharge that occurred as a result of the infringement. The burden of proof shall be on the defendant (infringed undertaking). National courts are empowered to determine the share of any overcharge that was passed on. The Directive intends that only the persons who suffered damages shall receive compensation.

The Act does not provide such a detailed provision. Although Articles 12 and 13 of the Directive could be seen as part of the proof of damages, or calculation of the compensation, it will certainly aid civil law judges on compensation awards. Therefore, a new provision to be included in the Draft Law would be helpful.

Consensual Dispute Resolution

Out-of-court resolutions to establish compensation can often be easier and less expensive. This is the main reason behind the regulation of consensual dispute resolutions in the Directive. Article 18 of the Directive provides for suspension of limitation periods to allow parties to settle through consensual dispute resolution, without losing their right to commence court proceedings. National courts can suspend their proceedings for up to two years. As a result of a consensual settlement, the claim of the injured party shall be reduced by the share of the co-infringer. The remaining claims of the injured party shall be brought against co-infringers who do not settle.

Although the Act does not prevent the parties from a consensual dispute resolution, neither does it encourage them. Incentives in favor of consensual dispute resolution are good examples for the Turkish legislator to implement, as well.

Conclusion

The detailed provisions of the Directive will certainly influence the Competition Authority and its practice. In spite of the fact that the Act contains provisions regarding the private law consequences of competition infringement, the Competition Authority does not closely monitor problems arising out of these provisions. The Directive now gives the opportunity to the Competition Authority to reconsider this position. It is time to include more detailed provisions in the Draft Law, and complete these provisions through a Communiqué and Guide.