Thomas Rouhette and Claire Massiera analyse recent trends and developments in France in the 2023 Chambers Global Practice Guide on Antitrust Litigation, with a focus on loss quantification and passing-on defence.
Partner Thomas Rouhette and Counsel Claire Massiera’s chapter was published in the 2023 Chambers Global Practice Guide on Antitrust Litigation, and can be found here.
Introduction
As pointed out by the French Competition Authority in its 2022 annual report published in July 2023, “anti-competitive practices are now even more risky for companies, which are faced with significant additional financial risks as a result of the rise in actions for damages”. The trending rise of such actions is an observation made year on year which is unlikely to be reversed.
Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions has set out several rules to ensure that undertakings “can effectively exercise the right to claim full compensation”. Several mechanisms are provided for in the directive, which are innovative for some jurisdictions, such as the rebuttable presumption of fault in follow-on cases or access to evidence aimed at ensuring the effectiveness of the right to compensation.
While we have been witnessing an increase in follow-on cases, courts are still in the process of clarifying the rules governing actions for damages in light of the core foundations of civil liability. This chapter will focus on recent decisions handed down by the French Cour de Cassation and their takeaways.
The Quantification of Losses
The quantification of losses is one of the thorniest issues which courts have to address considering the technicality of the matters at hand. The Commission has provided a general communication on quantifying harm in which it acknowledged that “A major difficulty encountered by courts, tribunals and parties in damages actions is how to quantify the harm suffered. Quantification is based on comparing the actual position of claimants with the position they would find themselves in had the infringement not occurred. In any hypothetical assessment of how market conditions and the interactions of market participants would have evolved without the infringement, complex and specific economic and competition law issues often arise. Courts and parties are increasingly confronted with these matters and with considering the methods and techniques available to address them” (Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union (2013/C 167/07)).
The Commission has drawn up a practical guide detailing the methods to use for quantifying harm. The Paris Court of Appeal has also issued several very useful guides on the quantification of losses which cover topics such as “How to compensate for damage caused by the passage of time”, “What consideration is to be given to the role of victims of economic loss?”, “How do you compensate for the damage caused by an anti-competitive practice?” or “What are the economic methods that can be used to assess loss?”.
This guide notably explores the use of the counterfactual method which has been retained in a recent landmark decision by the Cour de Cassation in order to assess the loss resulting from the barriers to the growth from which the victim would have benefited had anti-competitive practices not been carried out (Cour de Cassation, Commercial Chamber, 1st March 2023, nos. 20-18.356 and 20-20.416).
The proceedings were brought by Digicel, a mobile telephone operator, which had sustained damage due to exclusionary practices implemented by the incumbent operator in the French West Indies-Guyana region. Such practices included exclusive agreements entered into with independent local distributors and with the only authorised cell phone repair center in the Caribbean, a customer loyalty program acting as deterrent for consumers to change their mobile operator at the end of their subscription period and price discrimination.
The takeaways from this decision regarding loss assessment are the following.
- The Cour de Cassation acknowledged the possibility of an overall assessment of the damage, even though several practices had been identified. The Cour de Cassation considered that insofar as “the various practices implemented accumulated over time and reinforced one another” (Section 22), and that they led “to a single overall outcome hindering Digicel’s development on the mobile telephone market in the West Indies-Guyana region, thereby jeopardising its growth” (Section 22), the Court of Appeal therefore rightly “decided that the loss should have been assessed globally” (Section 23).
- The Cour de Cassation considered that the harm to Digicel’s growth was not a loss of opportunity, but a lost profit and that this loss was duly quantified using a dual counterfactual analysis based on a comparison over time (before/after the practices) and with similar geographic areas. The Cour de Cassation considered that “the loss sustained by an operator active on a market distorted by abusive loyalty, price discrimination and exclusivity practices that foreclose access to customers consists of restrictions on sales, the amount of which was recovered by implementing counterfactual methods, acknowledged by economic legal authors and necessarily based on theories whose relevance has been discussed by the parties and analysed by the judgment, on the grounds of a market functioning that would not have been distorted by the wrongful conduct identified” (Section 25).
- The Cour de Cassation acknowledged the existence of an additional loss that could be compensated alongside the loss resulting from the eviction practices implemented by the incumbent operator. According to the Cour de Cassation, Digicel “may, in addition, request compensation for additional loss resulting, the case arising, from the loss of the opportunity to re-use, with remuneration, the sums of which it was deprived. Where the loss of opportunity claimed arises from the impossibility of carrying out an investment, the requested compensation for which is assessed at the average profitability on the capital invested in the sector at stake, it is for the victim to establish the certain and direct nature of this loss of opportunity, by providing evidence for the reality of the investment project that could not have been carried out as well as the impossibility of financing it other than with the sums of which it was deprived” (Section 37).
- Regarding the starting point for the damages, the Cour de Cassation considered that the Court of Appeal wrongly took into account the beginning of the wrongful practices as the starting point of the interests attached to the compensation for the additional loss arising from the unavailability of the sum allocated by it for the loss of development. The Court in fact considered that such practices have lasted for several years and that at their beginning, the above-mentioned loss had not been fully established and was necessarily progressive (Section 49).
- Lastly, the Cour de Cassation considered that the Court of Appeal had properly assessed the parties’ competing private expert opinions on loss assessment, and that it had correctly arbitrated between the diverging expert reports filed by the parties. The Court hence considered that the Court of Appeal could not be criticised for deciding to follow the analysis resulting from the expert report of one of the parties.
This landmark decision is in line with the principle of full compensation, with the Cour de Cassation affirming the Court of Appeal’s decision to acknowledge both the eviction loss and additional loss.
While there has been a strong tendency to rely on court-appointed experts for damage assessment rather than on private experts, such finding is a strong reminder that parties should absolutely appoint private experts. The parties should also ensure that they provide the court with a solid and comprehensive expert opinion, that addresses the opposing party’s potential criticisms.
Temporal Applicability of Article 13 of the Damages Directive on the Passing-On Defence
While the Damages Directive was to be transposed into national laws in December 2016 at the latest (it was transposed into French Law by Order of 9 March 2017), issues relating to the application ratione temporis remain frequent issues in antitrust litigation.
The CJEU handed down an important decision on this matter (CJEU, 22 June 2022, C-267/20, Volvo AB/DAF Trucjs NV), in which it set out the analysis to be carried out by national judges in order to determine the temporal applicability of the provisions of Directive 2014/104. The CJEU’s decision provided that “it is necessary to establish, in the first place, whether or not the provision concerned constitutes a substantive provision”. As a second step in the analysis, the CJEU ruled that “Once it has been determined whether the provision concerned is substantive or not, it is necessary to ascertain, in the second place, whether, in circumstances such as those at issue in the main proceedings, in which that directive was transposed late, the situation at issue, in so far as it cannot be described as new, arose before the expiry of the time limit for the transposition of that directive or whether it continued to produce effects after the expiry of that time limit.” The Court added that “The fact remains that, where a national court has to determine a dispute between individuals, it is for that court, where appropriate, to interpret the national provisions at issue in the main proceedings, so far as possible, in the light of EU law and […] without, however, interpreting those national provisions contra legem”.
The Cour de Cassation applied this ruling in a case between Carrefour and Johnson & Johnson relating to the temporal applicability of Article 13 of the Damages Directive per which the burden of proving, in a passing-on defence, that an overcharge was passed on lies with the defendant (Cour de Cassation, 19 October 2022, no. 21-19.197). In this case, Carrefour had brought an action for damages against Johnson & Johnson, its supplier of hygiene products, on 23 January 2017, ie, after the expiry of the deadline for transposing the Damages Directive, but before the transposition into French Law.
The Court of Appeal dismissed Carrefour’s action as it failed to prove it did not benefit from the anti-competitive practices, prompting it to lodge an appeal on the ground that direct effect of EU law should have led the Court to apply Article 13 of the Damages Directive and therefore reverse the burden of proof, the transposition period having expired.
The Cour de Cassation reminded that based on CJEU case law, a directive cannot, by itself, create obligations for an individual and cannot therefore be invoked as such against them. The Cour de Cassation then applied the Volvo case, ie, it considered whether it could interpret national law, upon expiry of the time limit for transposing the Damages Directive not yet transposed, “so as to render the situation at stake immediately compatible with the provisions of that directive” without interpreting French law contra legem. The Cour de Cassation considered
“for acts committed prior to the entry into force of these provisions, pursuant to Articles 1382 and 1315 of the Civil Code, which have become Articles 1240 and 1353 of the Civil Code […] that the burden of proving the existence of the damage caused by an anti-competitive practice lies with the claimant for compensation and that the claimant must, in light of the usual business practices, establish that it did not pass on the additional costs arising from a cartel to its own customers […]” (Section 11).
The Cour de Cassation therefore considered that “After having established that the facts giving rise to the liability action brought by the Carrefour companies predated the entry into force of Article L. 481-4 of the Commercial Code and after having ruled that the provisions of Article 13 of the Directive were incompatible with the national law in force on the date of its transposition, the Court of Appeal rightly inferred that it could not interpret the rules of evidence applicable to the action referred to it in light of the latter text […]” (Section 12).
While this decision clarifies the issue on the temporal applicability for the passing-on defence, it is not exempt of criticism. One might argue that Article 13 should not have been considered as a substantive provision but rather a procedural one. In fact, in the Volvo case, the CJEU underlined that “it is apparent from the case-law of the Court that the rules on the burden of proof and the standard of proof are, in principle, classified as procedural rules”.
Liability of Parent Companies for their Subsidiaries’ Practices
A recent decision handed down by the Cour de Cassation (Cour de Cassation, 7 June 2023, no. 22-10.545) in the scope of the so-called dairy products cartel (French Competition Authority, no. 15-D-03, 11 March 2015) has enshrined vicarious liability in a private enforcement case: the Court relied on the European case law relating to the requirement lying with the parent company to bear the burden of its subsidiary’s condemnation over which it exercises decisive influence which had been applied in the public enforcement field and ruled that it ought to be extended to actions for damages.
The Court specified that such presumption could be rebutted if the parent company provides “any evidence relating to the organisational, economic and legal links between itself and its subsidiary such as to show that the latter acted autonomously on the market and that they do not form a single economic entity” (Section 7).
Law stated – 30 October 2023
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