Antitrust matters are among the most complex, costly and high-stakes commercial claims to litigate, making it an area of perennial need for risk-sharing and cost-sharing solutions. Increased activity in the past year suggests that 2020 will continue to see more (and more expensive) antitrust claims.
Below, we highlight global trends in antitrust litigation. Where appropriate, we have cited insights from industry experts who recently participated in a Burford roundtable.[1]
2019 trends
Unexpected opt-outs
In the wake of increasingly egregious supplier misconduct, companies in the pharmaceuticals and food industries have notably opted out of class actions involving suppliers in recent months:
- This represents a marked departure from past performance, where parties participated as class members in order to protect their relationships with suppliers. One of the driving forces behind this shift is quite simply that companies see their competitors opting out and winning, and they want in on the action as well.
- While the potential upside for pursuing opt-out litigation is enormous, so too is the potential risk. It’s understandable for companies to consider the expense and time required to pursue litigation a normal cost of doing business, but few CFOs welcome the uncertainty that comes along with it. In the year ahead, we expect that companies will continue to explore alternatives to self-financing litigation, including legal finance.
Inconclusive results following EU damages directive
Despite early hopes, the EU Damages Directive has not been as effective as expected at encouraging companies to implement global strategies for addressing anticompetitive conduct:
- Certain jurisdictions remain preferable. “Jurisdictions such as the UK and the Netherlands in particular have built up significant experience handling large-scale competition damages claims over many years. Claimants in these jurisdictions benefit from the experience of judges and a specialist competition bar, and no doubt such factors will continue to influence litigation strategy. [… And] there have been reports that the Spanish courts are struggling to cope with the large volume of follow-on claims related to the Trucks cartel.” - Jane Wessel, Partner, Arnold & Porter
- But claimants are taking advantage of a wider range of options. “We have witnessed a dramatic rise in the number of damages claims being brought before the Spanish Courts, particularly arising from the EU Trucks cartel. A similar trend is taking place in Italy, France and elsewhere. We expect this trend to continue in terms of damages claims being brought in places other than the traditional triumvirate of England, the Netherlands and Germany.” - Scott Campbell, Head of Competition Disputes, Hausfeld
- Impact in the US enforcement strategy has been minimal. “US plaintiffs continue to try to pursue damages based on the impact of domestic conduct outside the US and international conduct within the US, with the scope of US remedies remaining an area of uncertainty and active litigation. Overall, however, the trend seems to be against providing a US forum for claims with a tenuous US connection. That will encourage plaintiffs to explore international options.” - Aaron Panner, Partner, Kellogg Hansen
Client demand—and expectation—for legal capital
As in-house lawyers have become better acquainted with the advantages of working with an outside capital provider, demand for legal finance in antitrust matters has grown dramatically over the past decade:
- In-house lawyers are learning from their competitors’ successes. One of the main advantages of legal finance is that it enables large companies to “operate as self-standing profit-making units. […] Corporate claimants watching their competitors enter into bespoke arrangements are likely to have pointed questions for legal advisers who failed to highlight the full range of options.” - Jane Wessel
- Law firms should be prepared to meet client demand for capital. “Clients now “expect funding to be on the menu of engagement structural options.” - Scott Campbell
What to expect in 2020
Follow-on damages actions in Europe will increase
Experts anticipate that follow-on damages activity will increase for several reasons:
- Regulatory bodies show continued interest. “Given the [European] Commission’s desire to promote private enforcement and the willingness of national courts to leave the way clear, the pace of follow-on litigation will increase, perhaps dramatically.” And as private litigation becomes more common, “continued vigorous administrative enforcement will likely provide the impetus.” - Aaron Panner
- Success breeds success. “There has been a notable increase in the number of follow-on damages actions across Europe in recent years, particularly in the claimant-friendly jurisdictions of the UK, Germany and the Netherlands. Significant European Commission fines, such as the €2.93 billion fine against manufacturers of medium- and heavy-duty trucks in 2016, have encouraged this trend. Inevitably, large fines against well-known corporates will attract media attention, and in turn the attention of potential claimants. There is little doubt that this trend is set to continue.” - Jane Wessel
Tech giants in particular will be likely targets:
- The European Commission has encouraged victims to bring damages claims against Google. In just two years, the Commission has fined Google a total of €9 billion and has referred to the Google Search (Shopping) decision as “a ‘precedent’ for future cases, forming the theoretical basis for further competition complaints against Google, Amazon, Apple and Facebook.” - Scott Campbell
- Companies appear to be getting on board. “In April 2019, the first action for damages against Google was filed by a large company in Germany based on the EC’s 2017 decision finding Google abused its dominant position in the search engine market relating to price-comparison shopping services. This could lead to similar actions being filed throughout Europe.” - Gregory Asciolla and Jay Himes, Co-Chair Antitrust and Competition, Labaton Sucharow
- Margrethe Vestager reappointed as European Commissioner for Competition. Vestager continuing for a second term suggests that the recent “regulatory push against tech companies appears to be the tip of the iceberg as regulators play catch up with rapidly advancing technologies and the tech giants behind them.” - Jane Wessel
The UK’s Competition Appeal Tribunal (CAT) will continue to evolve
The UK’s and collective actions regime is still in its early days, but experts predict that CAT’s role will become more clearly defined in the months ahead:
- Activity will increase. “Looking ahead, there is little to doubt that the number and size of collective actions brought in the English courts and the CAT are set to increase.” - Jane Wessel
- Costs are likely to rise. “The Mastercard collective action lawsuit in the UK is on appeal to the UK Supreme Court. That should provide clarity on whether the UK adopts the current Canadian approach (relatively easy to certify)—which was essentially the US approach 20 years ago—or an approach that requires a more rigorous inquiry before permitting certification. […] Therefore, expect the upfront cost of collective litigation in the UK to keep increasing. Even if the UK Supreme Court affirms the Court of Appeals decision, defense attorneys will find argument-obstacles to test drive before the UK lower courts.” - Gregory Asciolla and Jay Himes
An evolution in how clients use capital
We anticipate that in-house and law firm lawyers will become more sophisticated users of legal capital, both in terms of how they use capital and what they expect from the finance providers they work with:
- Claim monetization will draw greater attention from companies engaged in antitrust litigation. Monetization converts a portion of a pending claim into cash, freeing up capital that companies can use for growth or for other business purposes. Gaining greater flexibility is understandably an attractive option for companies that may already have considerable resources tied up in costly, long-term antitrust matters.
- Lawyers will have higher expectations for capital providers. As the versatility of legal finance becomes better understood, we expect that law firms and legal departments will increasingly evaluate providers through a more critical lens and hold providers to a higher set of expectations—signaling a further maturing and segmentation in the marketplace for legal finance in the year ahead.
Conclusion
Given the high stakes of antitrust matters and the current regulatory climate, legal finance is an essential tool for companies that wish to pursue an effective competition strategy. With a 10-year track record of providing capital to companies and to law firms engaged in antitrust litigation, Burford is well equipped to help companies and firms manage high expert and expense costs, monetize awards, mitigate the risk of loss and bring meritorious cases forward.
[1] “Antitrust Roundtable,” Autumn 2019 Burford Quarterly. Available at: https://burfordcapital.com/insights/insights-container/autumn-2019-burford-quarterly/.
