In September of 2019, Burford Co-Chief Operating Officer Aviva Will and Deputy Chief Investment Officer Craig Arnott posed a series of questions about antitrust litigation to a respected group of antitrust litigation experts from the US and the UK. Their answers are excerpted below.
In just two years, Google was fined a total of €9 billion by the European Commission. How have eye-popping fines like these impacted the number of follow-on matters being brought—and how do you foresee the trend continuing in the years ahead?
Aaron Panner: The pace of follow-on actions in member states remains slow as the appeals of the Commission action continue to work their way through the EU courts. Future litigation will depend on whether the promise of significant collective action recoveries (or, in some cases, significant recoveries by rival businesses) is realized. Private litigation is an intensely rational business: Lawyers representing private plaintiffs are at least as cognizant of the Willie Sutton principle as anyone else. As the risk/reward ratio declines—which is fair to expect, given the 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. I think the pendulum is early in its swing towards greater private litigation; continued vigorous administrative enforcement will likely provide the impetus.
Scott Campbell: The European Commission’s fine imposed in the Google Android case was the largest-ever antitrust fine for an individual company—and such record-breaking penalties have attracted a great deal of attention. The fine mirrored Google’s large revenues but also the far-reaching consequences of the investigated conduct for the markets concerned and the widespread damage it caused the entire online ecosystem. The same applies to the Google Search (Shopping) decision, which the European Commission calls a “precedent” for future cases and which now forms the theoretical basis for further competition complaints against Google, Amazon, Apple and Facebook.
Google appealed all three decisions before the General Court of the European Union, interrupting the limitation period for damages lawsuits. Accordingly, the victims of Google’s abuses are in no rush. Nevertheless, several claims of aggrieved comparison-shopping services have already been brought in the UK and in Germany, some even prior to the Google Search (Shopping) decision.
Just like the fines, the quantum in such follow-on actions can reach high figures. Last year, Germany-based company Idealo brought a civil lawsuit against Google, demanding more than €500 million as compensation. Similar sums are at stake for UK-based company Kelkoo. Similar actions are likely to be brought in the near future, despite the fact that in such cases of long-lasting abuses of dominance on multi-sided Internet markets it is relatively burdensome to calculate quantum (as compared to, for example, cartel overcharges).
European Union antitrust enforcement will likely see further decisions involving the dominant platforms Google, Apple, Facebook and Amazon. Numerous investigations are pending, and the number of competition complaints are rising by the week. Closer scrutiny of the competition enforcers is accompanied by several proposals for legislative action, aiming particularly at ensuring a level-playing-field in the digital markets. Thus, competition enforcement in the digital era is not only in the spotlight of enforcers and legislators, but also a future market for damages claims.
Jane Wessel: 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.
More specifically, the fines against Google reflect the European Commission’s increased focus on the tech sector in recent years, which has seen Apple being ordered to pay €13 billion in back taxes to the Irish government and the announcement of an investigation into how Amazon uses data from other merchants selling goods on its websites. With Margrethe Vestager appointed for a second term as European Commissioner for Competition, this 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. As this gap narrows and regulation in the sector becomes more advanced, victims of infringements will have increased opportunities to seek redress in national courts.
Gregory Asciolla and Jay Himes: Despite the heavy fines levied on Google in Europe since 2017 involving Google Shopping, Google AdSense and the Android operating system, and the numerous complaints lodged by competitors with the Commission against Google during the EC’s investigations, there has been no stampede in Europe or the United States to file follow-on cases, even though the EC encouraged victims to rely on the 2017 decision to bring damages claims against Google. That said, 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.
Damages in follow-on actions may be hard to prove in Europe, requiring more access to data than typically is available. In the years ahead, as access to data increases, risks of litigation will decline and we can expect case volume will increase.
How do the US, UK and EU differ in their requirements for burden of proof for antitrust/competition matters—and what impact does that have on claimants?
Aaron Panner: On paper, the US regime appears to place greater demands on private plaintiffs both substantively and procedurally than EU and UK regimes. US law has higher thresholds for findings of market dominance; it generally does not recognize “abuse of dominance” claims that are not connected to monopoly maintenance; vertical agreements not involving a monopolist are more likely to be treated as benign; and government enforcement actions—even when successful—often end in consent decrees that entail no admission of liability, and hence no res judicata effect in parallel private litigation.
But for all that, the private enforcement regime in the US has been and remains both active and much more central to the implementation of competition laws than the still-developing private enforcement regime in the EU, with the UK in between. In part, that is simply a function of the long tradition of private enforcement in the US, but it also reflects institutional factors in the US that create a number of advantages for private plaintiffs. To be sure, US courts, especially the Supreme Court, have generally been defendant-friendly over the past two decades, both in tightening substantive standards and in making it more difficult for cases to proceed as class actions. Nevertheless, defendants face serious downside risks and high defense costs when faced with antitrust litigation, and plaintiffs retain incentives to pursue claims.
Gregory Asciolla and Jay Himes: Differences in burden of proof probably isn’t so important on its own. Access to proof is. In the US, the discovery mechanism provides plaintiffs access to documents, electronically-stored information and testimony in order to gather evidence to prove their case. The UK provides for limited discovery. Most of continental Europe has none, or very little—at best it’s being developed under the EC Damages Directive.
The availability of collective litigation is also a factor. It’s developing in the UK and northern European countries—but it’s still rudimentary. In addition, procedure in UK collective actions front-loads costs more than in the US.
Cost shifting (also known as “loser pays”) in the UK is also a big difference. Third-party funding and after-the-fact insurance are needed to mitigate claimant risk. Lack of contingent fee arrangements, except for UK, is a factor as well.
Jane Wessel: In the EU and UK, infringement decisions of the European Commission are binding on national courts, and victims can rely on these decisions as the basis for follow-on litigation. This differs from the position in the US, where a government judgment or decree is only prima facie evidence in a private antitrust suit. In addition, DOJ and FTC consent decrees in the context of settlement do not constitute an admission by the defendant that competition law has been infringed. This contrasts with the position in the UK and EU where settlement decisions can be relied upon as the basis for follow-on action. In terms of the UK specifically, this analysis is likely to change as and when the terms of the UK’s withdrawal from the EU are finalized.
As things currently stand, claimants in the UK and the EU benefit from the fact that the European Commission’s decisions on liability are binding on national courts. This certainty reduces the risks of conflicting decisions which in turn has encouraged a flourishing third-party funding market in the context of follow-on damages claims. It is therefore unsurprising that the number of follow-on damages claims across the EU has soared over the past decade.
Scott Campbell: In the English civil law context it is well established that the burden of proving loss occasioned by a breach of competition rules rests with the claimant (subject to the exemption—which was dealt with by the Court of Appeal in the case of Sainsbury’s v Mastercard—that the burden of proving loss does not extend to proving that the agreement in breach of the competition rules cannot be exempted).
Where the claimant has established that it has suffered a loss in the form of an “overcharge” arising from the cartel conduct, it is open to the defendant to claim that the claimant passed on the overcharge downstream to its own customers. In those circumstances it is the defendant’s burden to prove that the claimant passed on all or part of the overcharge and the defendant may seek disclosure from the claimant or third parties in this regard.
The EU Damages Directive builds on these principles, but it goes further by establishing two rebuttable presumptions that make it easier to prove a damages claim: The first is that cartel infringements cause harm; and second that cartel overcharges are at least partially passed on to indirect purchasers. It is then up to national courts to determine the extent of the overcharge harm and the amounts passed on.
Within this context the burden of proof shifts to the defendant to show that indirect purchaser claimants did not have any overcharge passed on to them. In practice, expert economic evidence is invariably relied on by both parties to establish whether there was in fact upstream pass-on (irrespective of where the burden of proof lies), but the implementation of this presumption can nevertheless only be a positive thing for prospective indirect purchaser claimants. Indirect purchasers will therefore subsequently be able to rely upon the presumption that the overcharges have been passed on to them, with the potentially more challenging onus of disproving the passing-on of overcharges falling to the defendant and its experts.
Read more of "Expert insights: Antitrust roundtable":
Part I • Part II
To read the article in full, download the Autumn 2019 Burford Quarterly.