Private Enforcement of Antitrust Law in the EU, UK and USA

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Introduction A current judge of the European Court of Justice has said that this work 'focuses on one of the most fundamental and difficult problems of law enforcement in the European Union'.1 The Commission's then Director-General for Competition expressed:

85df07a2946c0bf5e633a71e91da97ad. 85df07 [T]he conviction that competition law enforcement based almost exclusively or even mainly on administrative gif action is not enough. Like other legal rules, competition law will only be efficiently applied if there is also gif private action. Private action complements the activities of administrative agencies. In periods of weak administrative enforcement, it is even a substitute for action by the State. We tend to consider private action to be a peculiarity of the USA. We should not.2 This work examines the legal basis for private EC antitrust enforcement in the courts of the United Kingdom by comparison to the litigation oriented system in the USA. It does not compare the substantive competition law in the EC or UK with that of the USA, but attempts to analyse and compare private enforcement in two systems which have at the same time great similarities and great differences. The last several years have seen increased interest on the part of the Commission and others in encouraging the development of private antitrust litigation in national courts. This work seeks to clarify and apply the foundational principles of Community law which enable private antitrust litigation to exist in the EC and UK, show how important issues have been dealt with in the US system, and test US approaches for possible application in the UK and Community legal orders. Chapter 1 contains an introduction to the benefits and pitfalls of comparing the EC and US antitrust systems and introduces the antitrust laws of the USA. Chapter 2 describes the multiple processes of antitrust enforcement in the USA and features of the US Federal court system pertinent to antitrust litigation and an understanding of US precedents. Chapter 3 describes the origins of the main EC Treaty rules on competition and a summary of their content and history relevant to private actions. Chapter 4 describes the UK competition systems and their features pertaining to private actions, including the new UK Competition Act 1998. Experienced practitioners already quite familiar with these systems may wish to skim one or more of these initial segments.

85df07a2946c0bf5e633a71e91da97ad. 85df07 1 Judge David A. O. Edward, European Court of Justice (extra-judicially), unpublished letter to the author, 23 gif Aug. 1995. gif 85df07a2946c0bf5e633a71e91da97ad. 2 C. D. Ehlermann, 'Deregulation and Enforcement of Competition Laws', Proceedings of the Second Seminar on gif European Union/Japan Competition Policy (Luxembourg, 1995), 26.

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Chapters 5 and 6 trace in detail the development of the foundations of private antitrust action in the Community through application of the principles of direct effect, supremacy, national remedies, and Community remedies to competition law. Chapters 7 and 8 consider the role of private enforcement in the USA and the EC and offer some partial solutions to the problems of enforcement pluralism and concurrent jurisdiction in private Community antitrust litigation. Chapters 9 to 12 study how EC and UK competition law damages actions fit into the UK legal system. Chapter 12 in particular describes what it is submitted constitutes the optimal approach to actions based on EC competition rules. Chapters 13 to 15 address some important prudential limitations on private antitrust litigation which have developed in the USA, including standing and antitrust injury, and Chapter 16 suggests how these issues might be resolved in the Community system. Chapters 17 and 18 discuss the principles of antitrust damages and methods of proof in the USA and their application in particular cases. Chapter 19 examines and describes how these principles apply in the Community system. The Treaty of Amsterdam (ToA) signed in 1997 entered into force on 1 May 1999. The renumbering of EC Treaty Articles in the ToA is taken into account by referring to ToA numbering as 'now' or 'new' and the pre-Amsterdam numbering as 'former' or 'old'. For example, Article 85 is now renumbered Article 81 in the ToA. Depending on the context, the reference will be to Article 81 (formerly or old Article 85) EC or Article 85 (now 81) EC.

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1 Introduction to Comparative Antitrust Systems

85df07a2946c0bf5e633a71e91da97ad. 1.1 The Rationale for Comparative Analysis gif

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85df07a2946c0bf5e633a71e91da97ad. 1.1.1 Foundations of Comparative Antitrust gif

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85df07a2946c0bf5e633a71e91da97ad. 1.1.2 Pitfalls of Similarity gif

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85df07a2946c0bf5e633a71e91da97ad. 1.2 The US System: The Federal Antitrust Laws gif

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85df07a2946c0bf5e633a71e91da97ad. 1.2.1 The Trust Problem gif

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85df07a2946c0bf5e633a71e91da97ad. 1.2.2 The Sherman Act gif

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85df07a2946c0bf5e633a71e91da97ad. 1.2.3 The Clayton Act gif

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85df07a2946c0bf5e633a71e91da97ad. 1.2.4 Other Antitrust Legislation gif

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1.1 The Rationale for Comparative Analysis 1.1.1 Foundations of Comparative Antitrust There are a number of reasons for conducting a comparative analysis of EC and US private antitrust litigation. First, despite the pronounced differences between legal systems in the USA and the EC, the US system for the enforcement of Federal antitrust law is the paradigm of private antitrust enforcement. The utility of private enforcement in the USA has been cited by one Advocate General as grounds for belief that such actions would assist in making EC competition rules more 'operational'.1 Secondly, as Whish and Sufrin have noted, '[m]uch can be learnt from a system of law that in 1990 celebrated its centenary'.2 This means, among other things, that there are few 'commercial phenomena' which have not been treated in the cases and literature concerning American antitrust.3 In the early years of EC competition law there were few precedents, and it was natural to look to US case law as the Advocates General did in a number of cases.4 Lord Slynn

85df07a2946c0bf5e633a71e91da97ad. 85df07 1 Opinion of Van Gerven AG, Case C128/92 H.J. Banks & Co. Ltd v. British Coal Corp. [1994] ECR I1212, I12502. gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 R. Whish and B. Sufrin, Competition Law (3rd edn., London, 1993), 16. gif 3Supra, at 1819. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 4 A.D. Neale and D.G. Goyder, The Antitrust Laws of the United States of America: A Study of Competition Enforced by gif Law (3rd edn., Cambridge, 1980), 491. See also René Joliet, The Rule (footnote continued on next page) file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_3.html (1 of 2)7/30/2009 1:19:28 PM

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of Hadley more recently noted that '[w]e have in Europe a lot to learn from comparisons with United States law in relevant areas (e.g., . . . competition law) . . .'.5 Thirdly, the genealogy of the Treaty of Rome includes an American professor of antitrust law at Harvard University, Robert Bowie, who was identified by Monnet as the draftsman of what became the competition provisions of the ECSC and EEC treaties.6 This surely legitimizes consideration of US precedent as persuasive authority where applicable. Fourthly, the role of national courts in the Member States in private enforcement of EC law makes a UK/US comparison particularly apt, not only because of the generally higher level of comparability of two common law systems, but especially because the US Sherman Antitrust Act was said at the time of its enactment to represent a Federal declaration of illegality of practices which the common law of England and the American states (which had adopted the English common law) 'had always prohibited'.7 Any meaningful comparative analysis obviously and necessarily considers textual differences between the antitrust laws of the USA and the competition rules of the EC Treaty, but this is only the beginning. There are also systemic structural differences which must be considered, such as the fact that the antitrust laws of the USA are statutory, whereas the competition rules of the EC are at the level of a treaty which 'constitutes the constitutional charter of a Community based on the rule of law'.8 There are underlying policy goals which are often similar but may diverge in ways that would prompt a different result when EC principles are applied in UK courts from that which would obtain in a US court.9 However, comparability in the area of private enforcement is enhanced by the fact that at times both the US Supreme Court and the European Court of Justice have (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. of Reason in Antitrust Law: American, German and Common Market Laws in Comparative Perspective gif (Liège, 1967), 1601.

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85df07a2946c0bf5e633a71e91da97ad. 5 The Rt. Hon. The Lord Slynn of Hadley, 'Foreword' in G.A. Bermann, R.J. Goebel, W.J. Davey, and E.M. Fox, gif Cases and Materials on European Community Law (St Paul, Minn., 1993), p. x. 85df07a2946c0bf5e633a71e91da97ad. 6 J. Monnet, Memoirs (trans. R. Mayne, New York, 1978), 3523. gif 7 W. Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (New York, 85df07a2946c0bf5e633a71e91da97ad. gif 1965), 18, 98; J. Sherman, speech to the US Senate, 21 Mar. 1890, 21 Cong. Rec. 3: 24567 (1890)('It does not

announce a new principle of law, but applies old and well recognized principles of the common law . . .'). It was considered, at least in 1890, that there was no Federal common law as such. Ironically, Senator Sherman's perception of the state of the English common law in the area of monopolies and restraints of trade seems to have been somewhat erroneous: Letwin, supra, at 512.

85df07a2946c0bf5e633a71e91da97ad. 8Opinion 1/91, Draft Agreement between EEC and EFTA, [1991] ECR 6079, at 21. gif 85df07a2946c0bf5e633a71e91da97ad. 9 See, generally, B. van der Esch, 'EC Rules on Undistorted Competition and U.S. Antitrust Laws: The Limits of gif Comparability' (1989) 15 Fordham Corp. L. Inst. 181 (B. Hawk, ed.) and B. Hawk, 'The American (Antitrust) Revolution: Lessons for the EEC?', (1988) 9 Eur. Competition L. Rev. 53, 5462.

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been known to bring a teleological approach to interpretation of general provisions of law. In particular, the European Court has since the early days of the EC favoured the protection of the rights of citizens of Member States in national courts when pure textual interpretation could have brought about a different result.10 The Supreme Court of the USA similarly has shown an interest at times in interpretations which protect the ability of private citizens injured by reason of violations of the antitrust laws to maintain damages actions in their own and the public interest.11 The convergence of EC and US antitrust thinking in the area of private enforcement may be substantially greater than some might have thought. 1.1.2 Pitfalls of Similarity Nonetheless, comparisons of EC and US law are to be approached with caution, as there is a very human tendency on the part of commentators trained primarily in one system to see issues in the second system in the terms of their native system. For example, a classic caution in comparing the US and EC systems is the influence of the goal of single market integration in the stricter treatment of export bans in the EC as opposed to the more lenient attitude currently taken in the USA where limits on intra-brand competition are often seen as beneficial to promoting vigourous inter-brand competition.12 In the EC, the 'first principle' of competition law is single market integration and the elimination of private practices which interfere with integration.13 Yet, a leading work on EC law by distinguished academics and practitioners seems at times to view US antitrust law through the single market lens in a manner which does considerable violence to history and precedent on the Western side of the Atlantic:

85df07a2946c0bf5e633a71e91da97ad. To take an example from the anti-trust (the US term for competition law) history of the United States: in its gif early days (at the end of the nineteenth century and the beginning of the twentieth), American anti-trust was

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renowned for its vigour. Enormous fines were imposed upon companies; treble-damage suits proliferated and recalcitrant managers and directors spent time in goal. The law started life as an instrument designed to ensure that businessmen did not, by private conduct, hinder the political forces seeking to integrate the vast continent of America. Railway companies that, through their trading policies, obstructed the passage of goods from coast to coast, felt the weight of the Sherman Act 1890 brought to bear upon them.14

85df07a2946c0bf5e633a71e91da97ad. 85df07a 10 See, e.g., Case 26/62, Van Gend en Loos v. Nederlandse Tariefcommissie [1963] ECR 1, 12. gif gif 85df07a2946c0bf5e633a71e91da97ad. 11 See, e.g., Blue Shield v. McCready, 457 US 465, 472 (1982). gif 85df07a2946c0bf5e633a71e91da97ad. 12 E.g., Hawk, supra note 9, at 54. gif 13 B. Hawk, United States, Common Market and International Antitrust (3 vols, 2nd edn., Englewood Cliffs, NJ, 85df07a2946c0bf5e633a71e91da97ad. gif Supp., 1990), ii, 6. 85df07a2946c0bf5e633a71e91da97ad. 14 N. Green, T.C. Hartley, and J.A. Usher, The Legal Foundations of the Single European Market (T.C. Hartley, gif ed.) (Oxford, 1991), 198 (emphasis supplied). Not surprisingly, no supporting references are given by the authors. Moreover, this passage also suffers from temporal compression, as is made clear later. E.g., until 1955 the maximum fine was just $5,000.00 and only 175 private actions were brought in the first 50 years of the Sherman Act (3.5 per year).

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There have been many treatments of the legislative history of the Sherman Act and its purposes,15 but there is no known support for the proposition that the Act was designed to prevent private conduct from hindering the political (or economic) integration of the United States. That such a uniquely European Community concept should surface as a description of the aims of a US law adopted more than half a century before even the ECSC came into existence is a sign that even the most meticulous writers can fall prey to the ailment of projection. This author is no more immune than others and can only hope to avoid similar misperceptions. Nearly 30 years ago, an important comparative study examined US, EC, and German treatment of the American Rule of Reason, an issue which continues to be debated. What then Professor, later Judge, Joliet had to say about comparative antitrust law retains its force today:

85df07a2946c0bf5e633a71e91da97ad. 85df07 In the field of antitrust law, the comparative method has a more useful function to perform than merely to gif describe what is the applicable law in different countries without questioning why it is so. Antitrust law is an gif American tradition, as should always be remembered when comparisons are made and guidance is sought for the European law. Comparative law in this area is more than a fascinating intellectual game; it is a valuable tool; and indeed to the European lawyer an essential one.16 1.2 The US System: The Federal Antitrust Laws The popular mind is agitated with problems that may disturb social order, and among them all none is more threatening than the inequality of condition, of wealth, and opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to break down competition. These combinations already defy or control powerful transportation corporations and reach State authorities. They reach out their Briarean arms to every part of our country. They are imported from abroad. Congress alone can deal with them, and if we are unwilling or unable there will soon be a trust for every production and a master to fix the price of every necessity of life. US Senator John Sherman, March 21, 189017

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85df07a2946c0bf5e633a71e91da97ad. 85df07 15 See, e.g., Neale and Goyder, supra note 4; Letwin, supra note 7; H.B. Thorelli, The Federal Antitrust gif Policy: Origination of an American Tradition (Baltimore, 1954); R.H. Bork, The Antitrust Paradox: A Policy gif at War with Itself(New York, 1978); R.J.R. Peritz, Competition Policy in America 18881992: History, Rhetoric, Law (Oxford, 1996), 926; R.H. Lande, 'Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged', (1982) 34 Hastings LJ67; E.M. Fox, 'The Modernization of Antitrust: A New Equilibrium', (1986) 66 Cornell L Rev. 1140.

85df07a2946c0bf5e633a71e91da97ad. 16 Joliet, supra note 4, at 191. gif 17 J. Sherman, (1890) 21 Cong. Rec. 3: 245662. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_6


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1.2.1 The Trust Problem Rapid industrialization took place in the USA following the close of the American Civil War (1865) to the point that by the 1880s problems of overcapacity affected a number of industries, resulting in frequent consolidations, pools, and cartels intended in one form or another to control competition, output, and prices. When some of these mechanisms turned out vulnerable18 to cheating, causing pools to collapse, an innovative lawyer conceived and implemented the Standard Oil Trust,19 the best known (and perhaps least popular20) of the great American business trusts of the late nineteenth century. The trust was a tighter form of combination than a pool or cartel. It was created by having participating corporations turn their stock over to a board of trustees and receive in turn trust certificates of equivalent value.21 Each corporation retained its state charter, but was subject to centralized control by the unincorporated trust entity holding the stock.22 The Standard Oil Trust was formed in 1882, but was soon copied by others, resulting in the Cotton Oil Trust (1884), Linseed Oil Trust (1885), Sugar and Whisky Trusts (1887), and numerous others.23 In the late 1880s the term 'trust' became a popular term denoting all types of monopoly24 or combinations or arrangements restraining trade, even though only a few of the most obnoxious technically made use of the trust device.25 Of course, it was the use of the trust device which gave the Sherman Anti-Trust Act its name and US antitrust law its label. By the US Presidential election of 1888, all four major political parties included in their platforms planks against trusts and combinations.26 It was commonly acknowledged that the public 'had found the trusts to be a growing and intolerable

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 18 See Thorelli, supra note 15, at 756. gif gif 85df07a2946c0bf5e633a71e91da97ad. 19 Letwin, supra note 7, at 55. gif 20 Some of the notoriously rapacious conduct of the Standard Oil Trust, under the guidance of John D. 85df07a2946c0bf5e633a71e91da97ad. gif Rockefeller, is detailed in M. Josephson, The Robber Barons: The Great American Capitalists, 18611901 (New York, 1962), 11219, 1613. See also Thorelli, supra note 15, at 916. The Standard Oil Trust was depicted in the popular press 'as a menacing octopus with tentacles stretching across the country': Peritz, supra note 15, at 9.

85df07a2946c0bf5e633a71e91da97ad. 21 A.D. Chandler, The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., gif 1977), 319. 85df07a2946c0bf5e633a71e91da97ad. 22 The actual trust agreement is reproduced in I.M. Tarbell, The History of the Standard Oil Company (2 vols., gif New York, 1904), ii, 36473. A summary of the salient features is found in Thorelli, supra note 15, at 778. 85df07a2946c0bf5e633a71e91da97ad. 23 Letwin, supra note 7, at 6970; Thorelli, supra note 15, at 769. The Standard Oil Trust was first created in 1879, gif but it was the second agreement which became the model for other trusts: supra, at 767. 85df07a2946c0bf5e633a71e91da97ad. 24 'Hatred of monopoly is one of the oldest American political habits. The trust was popularly regarded as nothing gif but a new form of monopoly': Letwin, supra note 7, at 59. 85df07a2946c0bf5e633a71e91da97ad. 25 Thorelli, supra note 15, at 161. gif 26Supra, at 1501. The then four major parties were the Democratic, Republican, Union Labor, and Prohibition 85df07a2946c0bf5e633a71e91da97ad. gif parties. Supra.

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evil'.27 Congress passed the Sherman Act in response to 'real public feeling against the trusts'.28 1.2.2 The Sherman Act The Sherman Act29 was initially introduced by US Senator John Sherman of Ohio in 1888, although by the time of its passage in 1890, it was an entirely different piece of legislation of which, paradoxically, almost none was written by Senator Sherman.30 It contained seven sections, the most important of which were no doubt the first and second. Section 1, as amended, provides in pertinent part that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Every contract, combination in the form of trust, or otherwise, or conspiracy, in restraint of trade or commerce gif among the several States, or with foreign nations, is hereby declared to be illegal . . . Every person who shall gif make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony. . . .31 Section 2 of the Sherman Act32 provides in pertinent part that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person gif or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, gif shall be deemed guilty of a felony. . . . Section 7 of the Sherman Act, now repealed, contained the original provision for private enforcement of the antitrust laws. As replaced by section 433 of the Clayton Antitrust Act, as amended, it provides in pertinent part '[t]hat any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States . . . and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee'. The US government may now recover treble damages in an action for pecuniary loss to the government from an antitrust violation.34 Section 1 of the Sherman Act originally provided that violations were misdemeanours punishable by a maximum fine of $5,000 and not more than one year in prison, or both. In 1955, the statute was amended to increase the maximum

85df07a2946c0bf5e633a71e91da97ad. 85df07 27 See W.H. Taft, The Anti- Trust Act and the Supreme Court (New York, 1914), 2. Taft was a former federal gif judge, President of the United States, and later Chief Justice of the United States. gif 85df07a2946c0bf5e633a71e91da97ad. 28 Letwin, supra note 7, at 54. gif 29 Act of 2 July 1890, c. 617, 25 Stat. 209, 15 USC §§ 17. 85df07a2946c0bf5e633a71e91da97ad. gif 30 See Letwin, supra note 7, at 8795; Thorelli, supra note 15, at 166214. 85df07a2946c0bf5e633a71e91da97ad. gif 31 15 USC § 1. 85df07a2946c0bf5e633a71e91da97ad. gif 32 15 USC § 2. 85df07a2946c0bf5e633a71e91da97ad. gif 33 15 USC § 15(a). 85df07a2946c0bf5e633a71e91da97ad. gif 34 15 USC § 15a. Formerly, the government was limited to single damages, and originally none at all, due to not 85df07a2946c0bf5e633a71e91da97ad. gif being considered a 'person'.

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fine to $50,000.35 The statute was again amended in 1974 to reclassify violations as felonies and to increase permissible fine amounts to $100,000 for individuals and $1,000,000 for corporations, and increase the maximum prison term from one to three years.36 In the centenary year 1990, maximum fines were again increased to $10,000,000 for corporations and $350,000 for individuals.37 The statutory $10,000,000 maximum fine was levied for the first time in 1995 against ICI Explosives USA, Inc., a manufacturer of commercial explosives which pleaded guilty to conspiracy to fix prices.38 In addition to the specific criminal penalties provided in the Sherman Act, other general Federal criminal law sanctions may apply to violations of the Sherman Act. One provision of the Comprehensive Crime Control Act of 1984 permits the assessment of a fine based on twice the gross pecuniary gain enjoyed by the perpetrators or twice the loss to the victims caused by the violation,39 as an alternative to the maximum fine contained in the Sherman Act itself. This permits the government to ask the trial court to levy an increased fine in cases involving large amounts of commerce. In 1995, Dyno Nobel, the world's largest manufacturer of commercial explosives, pleaded guilty to conspiring to fix prices and paid a $15,000,000 fine, the first fine to exceed the Sherman Act's maximum.40 In October 1996, Archer Daniels Midland Co. agreed to plead guilty to two counts of price-fixing, one involving synthetic lysine, a livestock feed additive, and one involving citric acid, a flavouring used in beverages. The agreed fine amounts to $100 million, the largest to date in a criminal antitrust case, and another $90 million has already been agreed to be paid in civil settlements.41 Other companies in the same industry are the subject of ongoing investigation and the plea agreement left the Justice Department free to indict company executives. The Antitrust Division of the Justice Department, which prosecutes all criminal cases for violation of the Sherman Act, has announced a policy of concentrating on cases involving larger amounts of commerce and seeking increased fines and longer terms of imprisonment.42

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 35 Act of 7 July 1955, c. 281, 69 Stat. 282. gif gif 85df07a2946c0bf5e633a71e91da97ad. 36 Act of 21 Dec. 1974, Pub.L. 93528, 88 Stat. 1708. gif 37 Pub.L. 101588, 4(a), 104 Stat. 2880 (1990). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 38 A.K. Bingaman, 'The Clinton Administration: Trends in Criminal Antitrust Enforcement', Address to the gif Corporate Counsel Institute, San Francisco, California, 30 Nov. 1995. 85df07a2946c0bf5e633a71e91da97ad. 39 18 USC § 3571 (d) (1993 Supp.). See also 18 USC §§ 36214; Criminal Fines Improvement Act of 1987 (regif enacted), 101 Stat. 1279, 1289. 85df07a2946c0bf5e633a71e91da97ad. 40 Bingaman, supra note 38. gif 41 S. Kilman and T.M. Burton, 'ADM's Guilty Plea Could Doom Andreas Reign', The Wall Street Journal, 15 Oct. 85df07a2946c0bf5e633a71e91da97ad. gif 1996, col. 1, p. A3. 85df07a2946c0bf5e633a71e91da97ad. 42 Bingaman, supra note 38. gif < previous page page_9 next page >


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1.2.3 The Clayton Act Dissatisfaction with the amount and success of antitrust enforcement after the initial passage of the Sherman Act was voiced over a period of many years, but reached new heights following the decision of the Supreme Court in the Standard Oil43 case. In that case, the Supreme Court abandoned its literal interpretation of the Sherman Act §1that every restraint was illegal, not merely unreasonable restraintsadopted in earlier cases such as United States v. TransMissouri Freight Association44 and announced the so-called 'Rule of Reason' under which only unreasonable restraints were forbidden by the statute. While the Supreme Court found the Standard Oil Trust to be illegal and ordered its breakup, it was thought by some that the Sherman Act had 'received a judicial construction depriving it of much of its efficiency'.45 It was feared that judges had been given too much discretion to approve 'reasonable' combinations. This led to legislative attempts to undo the Rule of Reason by statutory amendments which would forbid every restraint of trade, 'whether reasonable or unreasonable'.46 While these particular efforts were not successful, supplemental antitrust measures containing more explicit prohibitions, the Clayton Act and the Federal Trade Commission Act, were enacted.47 The Clayton Act48 was intended to single out specific practices believed to be of particular antitrust concern and to subject them to a less demanding standard of liability than that of the Sherman Act. The Clayton Act standard of legality is not 'restraint of trade' or 'monopolization', but whether 'the effect may be substantially to lessen competition or to tend to create a monopoly in any line of commerce' (in any section of the country). The Clayton Act specifically deals with price discrimination,49 tying or exclusive dealing contracts,50 mergers and acquisitions,51 and interlocking corporate directorates.52 In addition, it strengthened private remedies by the inclusion of a specific right to injunctive relief in favour of any person 'against threatened loss or damage by a violation of the antitrust laws',53 by providing that any final judgment

85df07a2946c0bf5e633a71e91da97ad. 43Standard Oil Co. of New Jersey v. United States, 221 US 1 (1911). This was the government's action to gif break up John D. Rockefeller's infamous Standard Oil Trust.

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85df07a2946c0bf5e633a71e91da97ad. 44 166 US 290 (1897). gif 85df07a2946c0bf5e633a71e91da97ad. 45 K.H. Porter and D.B. Johnson, National Party Platforms (3rd edn., Urbana, Ill., 1961), 169. The quoted gif language comes from the Democratic Party platform for the 1912 election. 85df07a2946c0bf5e633a71e91da97ad. 46 Letwin, supra note 7 at 267. gif 85df07a2946c0bf5e633a71e91da97ad. 47Supra, at 26778. gif 48 Act of 15 Oct. 1914, c. 323, 38 Stat. 730, 15 USC §§ 1227. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 49 Sect. 2, 15 USC § 13. gif 50 Sect. 3, 15 USC § 14. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 51 Sects. 7, 7A, 15 USC §§ 18, 18A. gif 52 Sect. 8, 15 USC § 19. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 53 Sect. 26, 15 USC § 16. gif < previous page page_10 next page >


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'in any civil or criminal antitrust proceeding brought by or on behalf of the United States' in which a violation is found is prima facie evidence of violation in private civil cases,54 by providing that the four-year statute of limitations applicable to private treble damages actions is suspended during the pendency of 'any civil or criminal proceeding . . . instituted by the United States' and for one year thereafter,55 and by providing special provisions for venue and service of process, especially against corporate defendants.56 Ironically, given these more specific offences, violations of the Clayton Act are not crimes.57 1.2.4 Other Antitrust Legislation The same Congress which passed the Clayton Act also enacted the Federal Trade Commission Act,58 which created the Federal Trade Commission (FTC), authorized it to carry out investigations, to issue 'cease and desist' orders and declared in section 5 that 'unfair methods of competition in commerce are . . . unlawful'.59 The Committee Report on the statute took the view that '[t]he most certain way to stop monopoly at the threshold is to prevent unfair competition'.60 The FTC is empowered to enforce certain provisions of the Clayton Act (the provisions dealing with price discrimination, tying arrangements and requirements contracts, mergers and interlocking directorates61 in civil cases, as well as having sole authority to enforce section 5 of the FTC Act. The breadth of the prohibition of section 5 is such that it enables the FTC to prohibit conduct which would violate neither the letter nor the spirit of the Sherman or Clayton Act.62 The 'standard of ''unfairness" under the FTC Act is, by necessity, an elusive one, encompassing not only practices that violate the Sherman Act and the other antitrust laws but also practices that the Commission determines are against public policy for other reasons . . .'.63 Conduct which violates the Sherman or Clayton Act would normally also violate the FTC Act. The FTC also has a number of responsibilities of a consumer protection nature in addition to its antitrust role.

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0 54 Sect. 5(a), 15 USC § 16(a). gif gif 85df07a2946c0bf5e633a71e91da97ad. 55 Sect. 5(b), 15 USC § 16(b). gif 56 Sects. 4, 12, 15 USC §§ 15, 22. 85df07a2946c0bf5e633a71e91da97ad. gif 57 The exception is § 10, concerning dealings between a common carrier and another firm with interlocking 85df07a2946c0bf5e633a71e91da97ad. gif officers or directors. 85df07a2946c0bf5e633a71e91da97ad. 58 Act of 26 Sept. 1914, c. 311, 38 Stat. 717; 15 USC §§ 4151. gif 59 FTC Act § 5(a)(1); 15 USC § 45(a)(1). This statutory language was twice amended (in 1938 and 1975) and now 85df07a2946c0bf5e633a71e91da97ad. gif reads '[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful'. 85df07a2946c0bf5e633a71e91da97ad. 60 63rd Cong. 2d Sess., H.R. Report 1142, 1819 (4 Sept. 1914). gif 61 15 USC § 21. 85df07a2946c0bf5e633a71e91da97ad.

gif 62Federal Trade Commission v. Sperry & Hutchinson Co., 405 US 233, 2445 (1972). 85df07a2946c0bf5e633a71e91da97ad. gif 63Federal Trade Commission v. Indiana Federation of Dentists, 476 US 447, 454 (1986). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_11


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There is no private right of action for violation of the FTC Act section 5, distinct from violations of the Sherman or Clayton Act.64 The treble damages provision of the Clayton Act provides a remedy for persons injured by reason of violations of the 'antitrust laws', which are defined in the Clayton Act for that purpose to include the Sherman Act, certain provisions of the Wilson Tariff Act of 1894 (overlapping the Sherman Act in foreign commerce), and the Clayton Act.65 The FTC Act is not one of the 'antitrust laws' so defined. In 1936, Congress enacted the RobinsonPatman Act66 as an amendment to the Clayton Act. Section 2 of the RobinsonPatman Act made it 'unlawful for any person . . . to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect . . . may be substantially to lessen competition or tend to create a monopoly . . .'. The RobinsonPatman Act was intended to protect the market shares of small businesses who were having difficulty competing with large 'chain stores' able to command quantity discounts from suppliers and thus undersell their smaller rivals.67 The Act has often been criticized, especially by those who tend to see antitrust as solely concerned with economic goals. Hovenkamp has characterized it as manifesting 'a distributive rather than an efficiency concern'68 and labelled its theory of injury as 'an intellectually hostile, impenetrable swamp'.69 Less favourable comments also have been recorded.70 The RobinsonPatman Act will not be a principal focus of this work, but it is mentioned because it resembles provisions of Article 81 (formerly 85)71 and Article 82 (formerly 86)72 EC. There are no analogues in US antitrust law to the state monopolies and state aid rules in the EC Treaty, new Articles 86 (formerly 90) and 8789 (formerly 9294)

85df07a2946c0bf5e633a71e91da97ad. 64Jeter v. Credit Bureau, 754 F 2d 907, 912 n.5 (11th Cir.), on reh'g, 760 F 2d 1168, 1174 n.5 (11th Cir. gif 1985); Holloway v. Bristol-Meyers Corp., 485 F 2d 986 (DC Cir. 1973).

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85df07a2946c0bf5e633a71e91da97ad. 65 Sect. 1 of the Clayton Act, 15 USC § 12. gif 66 15 USC § 13(a). 85df07a2946c0bf5e633a71e91da97ad. gif 67 See generally F.M. Rowe, Price Discrimination Under the RobinsonPatman Act (Boston, 1962) for a detailed 85df07a2946c0bf5e633a71e91da97ad. gif account of the statute and its legislative history. 85df07a2946c0bf5e633a71e91da97ad. 68 To a Chicago School-oriented observer, this is a pejorative remark. gif 69 H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (1994), 5234. 85df07a2946c0bf5e633a71e91da97ad. gif 70 'George Stigler said someplace that every type of literature has its own form of pornography. And I think, as I 85df07a2946c0bf5e633a71e91da97ad. gif said before, the RobinsonPatman Act is the Fanny Hill of antitrusta statute no man should let his daughter read': R. Bork, in Panel Discussions, in E. Fox and J.T. Halverson (eds.), Industrial Concentration and The Market System: Legal, Economic, Social & Political Perspectives (Chicago, 1979), 160. 85df07a2946c0bf5e633a71e91da97ad. 71 Art. 81 (1)(d) (formerly Art. 85) prohibits agreements, decisions, and practices which 'apply dissimilar gif conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage'. 85df07a2946c0bf5e633a71e91da97ad. 72 Art. 82(c) (formerly Art. 86) similarly prohibits abuse of a dominant position consisting in 'applying dissimilar gif conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage'.

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EC. They will not be addressed in this work for this reason and because direct effect has been found only to exist in the narrow category of state aids which have not been notified prior to implementation or which are prematurely implemented. As noted in the discussion of judicially created exemptions, state law can authorize behaviour which is exempt from Federal antitrust law.

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2 Antitrust Enforcement in the USA

85df07a2946c0bf5e633a71e91da97ad. 2.1 Decentralized Enforcement in the USA gif

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85df07a2946c0bf5e633a71e91da97ad. 2.1.1 Federal Enforcement: Department of Justice and FTC gif

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85df07a2946c0bf5e633a71e91da97ad. 2.1.3 State Enforcement gif

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85df07a2946c0bf5e633a71e91da97ad. 2.2 The Litigation Model and Exemptions in the USA gif

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85df07a2946c0bf5e633a71e91da97ad. 2.2.1 Statutory Exemptions in US Antitrust gif

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85df07a2946c0bf5e633a71e91da97ad. 2.2.3 Consequences of the US Litigation Model gif

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85df07a2946c0bf5e633a71e91da97ad. 2.3 A Primer on the US Federal Court System gif

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2.1 Decentralized Enforcement in the USA 2.1.1 Federal Enforcement: Department of Justice and FTC Responsibility for the enforcement of US antitrust law is apportioned among a number of parties, public and private. The oldest Federal enforcement agency is the United States Department of Justice ('DOJ'), an executive department of the United States government and the only federal agency which technically has jurisdiction to enforce the Sherman Act.1 The Justice Department and the Federal Trade Commission (FTC) share concurrent jurisdiction to enforce the Clayton Act, and the FTC alone enforces the FTC Act.2 The DOJ alone has the power to bring criminal charges, and it also can bring civil actions for injunctive relief, dissolution, divestiture, and consent decrees. As has been noted, after statutory changes, the DOJ now may bring treble damages actions in behalf of the US government, where the government has been injured as a purchaser or otherwise in a commercial manner. A separate division of the

85df07a2946c0bf5e633a71e91da97ad. 1 The FTC Act § 5 has been held to prohibit any actions prohibited by the Sherman Act, plus some practices not gif caught by the Sherman Act: FTC v. Cement Institute, 333 US 683, 694, 68 S Ct. 793, 800 (1948). file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_14.html (1 of 2)7/30/2009 1:19:13 PM

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DOJ, the Antitrust Division, carries out antitrust enforcement activity from 12 special regional offices throughout the country. The Antitrust Division also considers and sometimes issues 'Business Review Letters' in which it may evaluate proposed conduct by private parties who have requested it to do so.3 The Division is not required to take a position (and often does not), but if it does so it may state the Division's intent to challenge or not challenge the proposed activity, as at the date of the letter. The DOJ is not legally bound by any position it may take in a Business Review Letter, and such letters in no sense constitute an exemption or create an estoppel. As an executive department of the government, the Antitrust Division's enforcement policies may reflect the priorities of political administrations. This has most recently been evident during the eight years (19819) of the Reagan presidency, which saw the dismissal of the government's suit against IBM during the trial, the settlement of the government's case against AT&T, and the issuing of controversial Vertical Restraint Guidelines (1985) which argued the view of some as to what law should be (rather than what the courts said it was), including the view that 'Resale Price Maintenance' (RPM) should be legal. The Reagan administration engaged in no enforcement in vertical restraint cases, including RPM, and in fact intervened in one private case reaching the Supreme Court for the purpose of asking the Court to overturn the per se rule against RPM.4 The US Congress passed an appropriations bill for the DOJ containing a provision prohibiting the DOJ from expending any funds (e.g. staff attorney time) to advocate overturning the rule against RPM, which stopped the DOJ from appearing at oral argument of the case. Congress passed similar provisions in 1983, 1987, and 1988, as well as a resolution in 1985 declaring that the 'sense of Congress' was to reaffirm the validity of the per se rule against RPM. According to Senator Metzenbaum, during the Reagan administration, antitrust staff at the DOJ and FTC were reduced by 60 per cent.5 The Bush administration (198993) was somewhat more vigorous than the Reagan administration in antitrust enforcement, and the Clinton administrations have been more vigorous still. In 1993, the first year of the first Clinton administration, the Antitrust Division revoked the controversial Vertical Restraint Guidelines of the Reagan administration, announced an intent to resume the bringing of RPM and other vertical restraint cases, and stepped up its criminal enforcement activity. The Antitrust Division in 1996 was carrying out 27 joint investigations with State attorneys general and in Fiscal Year 1995 filed 60

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf 3 28 CFR § 50.6 (1991). gif gif 85df07a2946c0bf5e633a71e91da97ad. 4Spray-Rite Services Corp. v. Monsanto Corp., 465 US 752 (1984). gif 85df07a2946c0bf5e633a71e91da97ad. 5 Statement of the Hon. Howard Metzenbaum, US Senator for the State of Ohio, 101st Congress, 1st Sess, 135 gif Cong. Rec. S5381 (daily edn., 16 May 1989).

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criminal cases against 40 corporations and 32 individuals, collecting $41.5 million in criminal fines. The average corporation criminal fine was $1.2 million and average jail sentences were eight months for individuals convicted. The Division is currently carrying out 170 criminal investigations, concentrating on cases with large volumes of commerce. Secondly, the Federal Trade Commission enforces the Clayton Act 7 and 7A (mergers) and the FTC Act section 5 dealing with unfair trade practices, for which there is no private cause of action. The FTC has no criminal jurisdiction and its normal enforcement mechanism is the cease and desist order. 2.1.2 Private Enforcement The third major enforcement 'agency' is the private plaintiff who brings actions in US District Courts. While the vast majority of private cases are actions for treble damages, injunctions may also be sought. The number of private enforcement actions pending has fluctuated greatly, from about 1,400 in the late 1970s to about 750 in the mid to late 1980s, but private actions continue to represent at least 90 per cent of all Federal antitrust cases.6 Private enforcement of the antitrust laws is examined in more detail in Chapter 7. 2.1.3 State Enforcement The fourth principal enforcement means is actions by the Attorneys General of the various states of the United States, who in certain situations may enforce the federal antitrust laws in federal court. Of course, a state injured as a purchaser or in some other commercial manner is a 'person' who can bring a treble damages action or seek an injunction.7 Beyond that, Congress in 1976 authorized the states to bring parens patriae actions seeking relief on behalf of natural persons resident in the state for damages under the Sherman Act.8 The states became quite active in the 1980s in response to declining federal enforcement activity, especially in the area of vertical price fixing and other cases the Reagan administration chose not to bring. The states have increasingly co-ordinated massive antitrust litigation in cases involving price fixing,9 RPM,10 tying agreements,11 and insurance industry boycotts.12 In 1985, the National Association of Attorneys General published

85df07a2946c0bf5e633a71e91da97ad. 85df07 6 See S. Salop and L. White, 'Private Antitrust Litigation: An Introduction and Framework', in L. White (ed.), gif Private Antitrust Litigation: New Evidence, New Learning (Cambridge, Mass., 1988), 3. gif 85df07a2946c0bf5e633a71e91da97ad. 7 E.g. California v. American Stores, 495 US 271 (1990). gif 8 15 USC § 15ch. 85df07a2946c0bf5e633a71e91da97ad. gif 9 E.g., In re: Minolta Camera Products Antitrust Litigation, 668 F Supp. 456 (D Md. 1987). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 10 E.g., In re Panasonic Consumer Elecs. Products Antitrust Litigation, 19891 Trade Cas. 68613 (SDNY 1989). gif 85df07a2946c0bf5e633a71e91da97ad. 11In re Mid-Atlantic Toyota Antitrust Litigation, 605 F Supp. 440 (D Md. 1984). gif 12Hartford Fire Ins. Co. v. California, 509 US 764 (1993). This case involved actions by 19 states against liability 85df07a2946c0bf5e633a71e91da97ad. gif insurers.

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their own more aggressive Vertical Restraints Guidelines to counteract the controversial DOJ guidelines promulgated by the Reagan administration.13 2.2 The Litigation Model and Exemptions in the USA The enforcement schemes contained in US antitrust law do not provide for any type of individual or group exemption which can be bestowed by any enforcement agency.14 In the US system, exemptions are generally statutory, sectoral in nature, and they normally require an Act of Congress. There are no individual exemptions as such in the USA, unless a verdict for the defendant at trial is so considered. However, even a verdict in favour of a defendant in one case does not bind a similarly situated plaintiff or the government in a subsequent case, unless the losing plaintiff (or one in privity) was a party in the first case. 2.2.1 Statutory Exemptions in US Antitrust Congress has enacted a number of statutory full or partial exemptions favouring agricultural producer co-operatives,15 ocean common carriers,16 amateur athletic associations,17 certain labour union conduct,18 and the business of insurance, except in cases of boycotts, coercion, or intimidation.19 In addition, a number of instances exist where Congress has eliminated treble damages liability for certain types of enterprises which register in advance, but liability for single damages remains. For example, the Export Trading Act of 1982 exempts from the treble damages provision (only) joint activity of organizations involved in export trading if their activities are disclosed to and approved by the government in advance.20 The National Co-operative Research Act limits the liability of

85df07a2946c0bf5e633a71e91da97ad. gif 13 National Association of Attorneys General, Vertical Restraints Guidelines, 4 Trade Reg. Rep. (CCH)

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13,400 (4 Dec. 1985). 85df07a2946c0bf5e633a71e91da97ad. 14 The FTC carries out administrative proceedings, but enforces its orders in Federal courts. It can choose not to gif open a case, or to find no violation, but has no power of exemption equivalent to that possessed by the European Commission under Art. 85(3) and Reg. 17. 85df07a2946c0bf5e633a71e91da97ad. 15 See § 6 of the Clayton Act, 15 USC § 17, and the CapperVolstead Act, 7 USC §§ 2912. The Act permits price gif and output agreements between producers, but not types of exclusionary conduct, such as predatory pricing. 85df07a2946c0bf5e633a71e91da97ad. 16 See the Shipping Act of 1984, 49 USC §§ 170120. Even if conduct falls outside the exemption, only gif administrative complaints, not court actions, are allowed.

85df07a2946c0bf5e633a71e91da97ad. 17 See Behagen v. Amateur Basketball Assn., 884 F 2d 524 (10th Cir. 1989), cert. denied, 495 US 918 (1990), gif referring to the Amateur Sports Act. 85df07a2946c0bf5e633a71e91da97ad. 18 See 15 USC § 17, the NorrisLaGuardia Act, 29 USC § 1 et seq., Local 189, Amalgamated Meat Cutters v. gif Jewel Tea Co., 381 US 676, 85 S Ct. 1596 (1965), and Connell Construction Co. v. Plumbers & Steamfitters Local Union No. 100, 421 US 616 (1975). 85df07a2946c0bf5e633a71e91da97ad. 19 See the McCarranFerguson Act of 1945, 15 USC §§ 101115. The exemption also exists only to the extent that gif the insurance business at issue is regulated by state law, the assumption being that the existence of regulation obviates any need for antitrust enforcement. 85df07a2946c0bf5e633a71e91da97ad. 20 See 15 USC §§ 400121.

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organizations engaging in joint research and development to single damages plus pre-judgment interest, if certain disclosures are made in advance.21 This is the closest analogue to the notification system in the EC, but without the possibility of full exemption. 2.2.2 Judicially-Created Exemptions The case law in the USA has also developed non-statutory exemptions to the antitrust laws. The principal such exemption is referred to as the 'state action' exemption, or Parker immunity.22 This doctrine provides an exemption for state and local regulation of business, provided that the challenged activity is authorized by a 'clearly articulated' state regulatory policy, and that the private conduct authorized by the state policy is 'actively supervised' by an appropriate governmental agency.23 Regulatory schemes which essentially permit private-sector anticompetitive activity and imbue it with apparent state approval do not satisfy the criteria. Under this exemption, immunity has been approved for a state requirement of approval of the location of new automobile dealerships24 and rules of a state bar association prohibiting lawyer advertising,25 but denied in cases involving state bar association minimum fee schedules for lawyers26 and state statutes establishing resale price maintenance for alcoholic beverages but leaving the determination of prices to the unsupervised discretion of producers and wholesalers.27 The other principal non-statutory exemption is Noerr-Pennington immunity,28 which shields private persons or interest groups from antitrust liability where they collectively petition the government for legislation or other action favourable to them, but which causes injury to competitors or consumers. The underlying premise of this doctrine is derived from the US constitutional right (First Amendment) to petition the government and is limited, in that it attaches only in so far as the activity is 'directed toward obtaining government action'.29 An excep-

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e6 21 15 USC § 4303. gif gif 85df07a2946c0bf5e633a71e91da97ad. 22 The term was first announced in Parker v. Brown, 317 US 341 (1943). See also California Retail Liquor gif Dealers Ass'n. v. Midcal Aluminum, 445 US 97, 105, (1980), and Southern Motor Carriers Rate Conference v. United States, 471 US 48 (1985) for elaboration of the criteria for this allowing this exemption.

85df07a2946c0bf5e633a71e91da97ad. 23Midcal, supra note 22. gif 24 See New Motor Vehicle Board v. Orrin W. Fox Co., 439 US 96 (1978). 85df07a2946c0bf5e633a71e91da97ad. gif 25Bates v. State Bar of Arizona, 433 US 350, rehearing den., 434 US 881 (1977). The Court in Bates struck down 85df07a2946c0bf5e633a71e91da97ad. gif the advertising regulation on other grounds. 85df07a2946c0bf5e633a71e91da97ad. 26Goldfarb v. Virginia State Bar, 421 US 773, 7912 (1975). gif 27Midcal, supra note 22, and 324 Liquor Corp. v. Duffy, 479 US 335 (1987). 85df07a2946c0bf5e633a71e91da97ad. gif 28 The name derives from the decisions in Eastern Railroad Presidents' Conference v. Noerr Motor Freight, Inc., 85df07a2946c0bf5e633a71e91da97ad. gif 365 US 127 (1961) (railroad lobbying for anticompetitive legislation immune) and United Mine Workers v. Pennington, 381 US 647 (1965) (efforts to influence coal purchasing decision immune).

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tion to this immunity is recognized in cases where the activity ostensibly directed at government action is a 'mere sham to cover what is nothing more than an attempt to interfere directly with the business relationships of a competitor'.30 This 'sham' exception has been applied where competitors banded together to protest all new applications for trucking permits as a means of discouraging applications, because the intent was not to obtain government action, but to injure competitors directly by the process of making objections.31 2.2.3 Consequences of the US Litigation Model The US antitrust enforcement scheme is almost exclusively litigation oriented and dependent on diverse public and private actors to bring court actions to secure compliance, compensation, punishment and deterrence. With rare and limited exceptions, there is no notification/exemption system under which governmental action or inaction can relieve undertakings of the burden of violations. The concept of a group exemption based on patterns of private contractual agreements or by industry is essentially unknown in US antitrust law. From the outset, US antitrust statutes were structured with a view toward pluralistic enforcement in diverse fora. In this, the US litigation model is perhaps unique32 among the antitrust systems of the world. It is uniqueso farin its reliance on private enforcement and nearly so in its active criminal prosecution of certain antitrust violations.33 The consequences of the decentralized litigation model are several. First, there is no necessary co-ordination or control of enforcement views or actions. While there is co-ordination at times between the various governmental enforcers, private enforcement actions exceed government ones by a factor of ten. Thus, while government policies are important to businesses contemplating possibly anticompetitive conduct, neither the Antitrust Division nor the FTC has the kind of influence on enforcement policy wielded by the Commission in the EC system. It is only limited comfort to know that the Department of Justice will not prosecute a vertical restraint if one knows that the practice is ten times more likely to be challenged by private litigants.34

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 30Supra, at 144. gif gif 85df07a2946c0bf5e633a71e91da97ad. 31 See California Motor Transport Co. v. Trucking Unlimited, 404 US 508, 515 (1972) and Professional Real gif Estate Investors v. Columbia Pictures Industries, 508 US 49 (1993). See generally C. A. Jones, 'Noerr Antitrust ImmunityDefining the Sham Exception', (1976) 29 Okla. L. Rev. 512. 85df07a2946c0bf5e633a71e91da97ad. 32 Cf. B.G. Peters, 'United States Competition Policy Institutions: Structural Constraints and Opportunities', in G. gif Bruce Doern and Stephen Wilks (eds.), Comparative Competition Policy: National Institutions in a Global Market (Oxford, 1996), 61. 85df07a2946c0bf5e633a71e91da97ad. 33 Japan and Canada, at least, also have criminal provisions. However, the level of criminal prosecution in the gif USA is apparently unique.

85df07a2946c0bf5e633a71e91da97ad. 34 C.A. Jones, 'Antitrust and Patent Licensing Problems: Are the Nine ''No-Nos" The Nine "Maybes"?', (1982) 53 gif Okla. Bar J 1568, 1570.

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A second consequence is that conduct is neither conclusively legal or illegal according to the outcome in a given trial. A well-known criminal prosecution by the Antitrust Division of a price-fixing cartel in corrugated cardboard products resulted in a verdict for the defence. The following civil action resulted in a large treble damages verdict.35 Each separate trial determines legality of a practice or conduct on a case-by-case basis, and the fact that one Federal jury approves the practice does not prevent another from condemning it where a new plaintiff is involved. A third consequence is that different purposes are at times served by the multiplicity of enforcers. Government actions cannot compensate victims of illegal practices any more than private actions can put business executives in prison. The treble damages action serves multiple goals: it compensates victims, it deters and punishes violators, and it draws private resources into the enforcement process as a supplement to government action. 2.3 A Primer on the US Federal Court System A brief description of the US court system may aid in following the development of US antitrust principles and presents a contrast to the Commission-centric EC system. The USA has an extremely developed system of Federal courts. The Federal court system is one of limited subject-matter jurisdiction, generally involving questions of Federal law,36 including conflicts between state law and Federal law, or actions between citizens of different states.37 The Supreme Court of the United States is the nation's highest court, exercising appellate jurisdiction over the 13 Federal courts of appeal and some cases decided by the highest courts of the states. The vast majority of the Supreme Court's case-load38 consists of a discretionary selection exercised by means of a writ of certiorari. Relatively few antitrust cases even reach the Supreme Court, and in many cases the governing precedent applied to an antitrust case will be decisions of the relevant Federal court of appeals.39

85df07a2946c0bf5e633a71e91da97ad. 85df07 35 S.D. Susman, in panel discussions, 'Mandatory Treble DamagesTime For a New Look?', Committee on gif Corporate and Antitrust Law of the Section of Corporation, Banking, and Business Law, 1981 American Bar gif Association Annual Meeting, New Orleans, reprinted in Antitrust Damage Allocation: Hearings before the Subcomm. On Monopolies and Commercial Law of the House Comm. On the Judiciary, 97th Cong., 1st and 2nd Sess. 170, 185, 193 (19812) (statement of J. Sims). 85df07a2946c0bf5e633a71e91da97ad. 36 See 28 USC § 1331 ('Federal question' jurisdiction). However, the Sherman Act contains a specific gif jurisdictional statute, 15 USC § 4, in addition to the general Federal question provision. 85df07a2946c0bf5e633a71e91da97ad. 37 See 28 USC § 1332 ('diversity' jurisdiction). There are numerous other special jurisdictional provisions gif primarily for specific Federal laws. 85df07a2946c0bf5e633a71e91da97ad. 38 In 19956, the Sup. Ct. issued judgments in a total of 75 cases of all types. Since 1990, the Court has not decided gif more than 112 cases in a term: D.J. Garrow, 'The Rehnquist Reins', The New York Times Magazine, 6 Oct. 1996, 61, 71. 85df07a2946c0bf5e633a71e91da97ad. 39 The Sup. Ct. can review the decisions of state courts of last resort by certiorari, but does not do so in antitrust gif cases since jurisdiction of such claims is exclusively Federal.

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Each state has from one to four Federal judicial districts and is assigned on a geographic basis to a particular circuit court of appeals. Each Federal judicial district has one or more district judges. Each circuit court of appeals reviews cases from the Federal district courts in its geographic area, except the Court of Appeals for the Federal Circuit, which reviews cases from all districts involving specialized subjects, e.g., intellectual property cases.40 Federal courts of appeal have no jurisdiction to review decisions of state courts of last resort. While decisions of the Supreme Court are of course binding upon all lower Federal courts, decisions of a Federal court of appeals are technically binding only upon those district courts located within the geographic area included within the appellate court's circuit. The decision of one court of appeals is persuasive authority in another, but no more. This can (but rarely does) lead to extreme conflicting results, as in Mozart Co. v. Mercedes Benz,41 where Mercedes Benz's practice of parts tying was upheld and Metrix Warehouse, Inc. v. Mercedes-Benz,42 where the Mercedes parts tying practice was found illegal. Such conflicts among the circuits are usually resolved by the Supreme Court, and the existence of such conflicts is one of the principal criteria used by the Supreme Court in deciding which cases to review by writ of certiorari. In one case a split in the circuits (the Ninth Circuit versus all others) on the issue of the proper legal standard for finding attempts to monopolize existed from the 1964 decision of the Ninth Circuit in Lessig v. Tidewater Oil Co.43 until 1993, when the Supreme Court finally granted certiorari and sided with the rest of the circuits in Spectrum Sports, Inc. v. McQuillan.44 However, such extreme and extended inconsistencies are quite rare. When considering US antitrust decisions rendered by district courts (the courts of first instance) and courts of appeal, it is necessary to keep in mind that such decisions are binding only in their respective district or appellate circuit, although they are persuasive authority elsewhere. In the Harvard uniform citation system employed in this work for US cases, the report nomenclature identifies the court deciding the case. Decisions of the Supreme Court are to the 'US' reports (or 'S Ct.' if a US report is not available), court of appeals decisions are to the 'Federal' series (F, F 2d, F 3d), and district court decisions are to the Federal Supplement series (F Supp.). In the latter two citation forms, the circuit or district court deciding the case is also indicated, i.e., Ninth Circuit (9th Cir.) or Southern District of New York (SDNY).

85df07a2946c0bf5e633a71e91da97ad. 85df07 40 Courts of Appeal are denominated as the First Circuit, etc. through to the Eleventh Circuit, plus the District gif of Columbia Circuit and the Federal Circuit. gif 85df07a2946c0bf5e633a71e91da97ad. 41 833 F 2d 1342 (9th. 1987). gif 42 828 F 2d 1033 (4th Cir. 1987), cert.den. 108 S Ct. 1753 (1988). 85df07a2946c0bf5e633a71e91da97ad. gif 43 327 F 2d 459 (9th Cir. 1964). 85df07a2946c0bf5e633a71e91da97ad. gif 44 506 US 447 (1993). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_21


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At the trial court (first instance) level, perhaps the single most distinctive feature of the US court system is the continued prevalence of trial by jury for both civil and criminal cases. In civil cases seeking damages, including antitrust cases, any plaintiff or defendant may require a trial by jury.45 Injunction actions are tried by a single judge, although a judge may impanel an advisory jury. Juries are sometimes waived by the parties. In Federal criminal cases, there is always46 a jury trial. In both civil and criminal cases, the judge determines the law to be applied and gives the jury oral and written instructions on the law and how they are to apply it to their determination of the facts. Federal judges do not ordinarily comment on the evidence. The jury's verdict in Federal cases is required to be unanimous. Neither jurors nor judges are ordinarily specialists in economics or antitrust. Litigants must teach jurors (and judges) what they need to know to decide the case. Expert witnesses are selected by the parties and are almost always used in antitrust cases.47 These are normally economists and sometimes others such as investment bankers, accountants, or professional appraisers who are experts in business or damages issues relevant to the case.

85df07a2946c0bf5e633a71e91da97ad. 85df07 45 The requirement of trial by jury is contained in the Seventh Amendment to the Constitution of the United gif States: '[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial gif by jury shall be preserved . . .'.

85df07a2946c0bf5e633a71e91da97ad. 46 It is theoretically possible for a defendant to waive the jury trial in a criminal case, but this does not occur in gif practice. 85df07a2946c0bf5e633a71e91da97ad. 47 See generally J. Greenfield (ed.), The Use of Economists in Antitrust Litigation (Chicago, 1984). gif < previous page page_22 next page >


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3 The EC System: The Treaty of Rome and Regulation 17

85df07a2946c0bf5e633a71e91da97ad. 3.1 The Birth of EC Competition Law gif

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85df07a2946c0bf5e633a71e91da97ad. 3.2 Article 81 (Formerly 85) and Regulation 17 gif

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85df07a2946c0bf5e633a71e91da97ad. 3.3 Article 82 (Formerly 86) and the Merger Regulations gif

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85df07a2946c0bf5e633a71e91da97ad. 3.4 Private Actions Not Expressly Provided for gif

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3.1 The Birth of EC Competition Law When Jean Monnet and Robert Schuman presented the Schuman Plan1 to US Secretary of State Dean Acheson on 7 May 1950, Acheson's first reaction was the fear that the plan was a clever cover for a 'gigantic European cartel'.2 Two days later, Acheson's fears assuaged, the Schuman Declaration heralded what is now considered the birthday of the European Community. Since the beginning, competition issues have pervaded the Communities, and US antitrust law has been a source of influence. The history of industrialization on the Continent since the nineteenth century could perhaps explain some initial scepticism regarding European dedication to the principles of competition. In France, a criminal prosecution of a cartel which controlled over half of steel production, fixed prices, shared markets, and imposed production quotas resulted in an acquittal because the cartel's objective was only to regulate 'the particular operations of its members according to an overall plan and in the general interest of production in an important industry'.3

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 1 The Schuman Plan proposed the creation of what became the ECSC. gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 D. Acheson, Present at the Creation: My Years in the State Department (New York, 1969) 383; D. Dinan, Ever Closer gif Union? (London, 1994), 23. Acheson feared objections by the Antitrust Division, which took a dim view of cartels controlling essential war material in light of then recent experience with the powerful cartelized German economy.

85df07a2946c0bf5e633a71e91da97ad. 3Comptoir Metallurgique de Longwy (Cour d'appel, Nancy, 1902), quoted in J. Ferry, 'How do We Get There from Here? gif Future Competition Policy in the EEC', (1984) 11 Fordham Corp. L Inst. 643, 645 (B. Hawk, ed.). Ferry notes that this was a prosecution under s. 419 of the Penal

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French industry was historically cartel-minded. The French government approved cartels throughout the 1930s, and one post-war writer stated 'the concept of free enterprise . . . with its postulate of a competitive struggle for markets . . . has never really been accepted in France'.4 The dominant role of cartels in German industrial development is well known.5 The German Cartel Decree of 1923, ostensibly designed to control cartels in the public interest, merely served as the foundation for completing the cartelization of the German economy. By 1936, there were 3,000 cartels in Germany, and individual firms had lost the right to stay out of a cartel.6 Even in Britain, the home of Adam Smith, the government organized the elimination of surplus capacity and set up a quota and market sharing agreement in the British Spindles Act of 1936, the Coal Mines Act of 1930, and the Coal Act of 1938. Combinations in the iron industry dated from the 1820s, and associations of producers were common in the 1840s.7 After the Second World War, with the exception of Germany, still under Allied occupation, European industry had continued with or gone back to its cartels.8 As Monnet put it, the competition provisions of the ECSC and EEC Treaties were for Europe 'a fundamental innovation'.9 Although most European governments at the time had little direct experience with free competitive markets, the US example of a powerful economy based on free competition undoubtedly seemed attractive,10 and this approach also found considerable support in the so-called 'Freiburg School' of German neoliberalism.11 Hallstein commented that '[b] esides the known economic and social advantages, an economic order based on competition has the decisive political advantage that it guarantees personal freedom to an extent not attainable in any other economic order'.12 The Freiburg School held that greater freedom exists (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. Code. More generally, he states that 'the judicial climate was never unfavourable to cartels nor to gif concentrations, despite what one might consider clear wording in Article 419 of the Penal Code and Article

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1382 of the Civil code': supra.

85df07a2946c0bf5e633a71e91da97ad. 4 Ferry, supra note 3, at 646, quoting from Landes. gif 5 See generally C. Trebilcock, The Industrialization of the Continental Powers 17801914 (Oxford, 1981). 85df07a2946c0bf5e633a71e91da97ad. gif 6 Ferry, supra note 3 at 647. 85df07a2946c0bf5e633a71e91da97ad. gif 7 Ferry, supra at 6467. Of course, Britain was not an original signatory to the EEC or ECSC Treaty. The point is 85df07a2946c0bf5e633a71e91da97ad. gif that Britain too had a relatively recent history of restricting free competition prior to its entry into the Common Market.

85df07a2946c0bf5e633a71e91da97ad. 8 Ferry, supra note 3. gif 9 J. Monnet, Memoirs (trans. R. Mayne, New York, 1978), 353. 85df07a2946c0bf5e633a71e91da97ad. gif 10 D. H. Chapman, Molting Time for Antitrust: Market Realities, Economic Fallacies, and European Innovations 85df07a2946c0bf5e633a71e91da97ad. gif (New York, 1991), 188. 85df07a2946c0bf5e633a71e91da97ad. 11 D.G. Goyder, EC Competition Law (2nd edn., Oxford, 1993), 19 and note 8. gif 12 D.L. McLachlan and D. Swann, Competition Policy in the European Community: The Rules in Theory and 85df07a2946c0bf5e633a71e91da97ad. gif Practice (Oxford, 1967), 79, quoting W. Hallstein, 'Der Weg zur gemeinsamen Politik', Europäische Gemeinschaft, Nov. 1962, 8. (Translation in McLachlan and Swann).

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when economic decision-making is decentralized by being left to market forces (rather than the state) and competition prevents entrepreneurs from accumulating unchecked power to exploit consumers or limit other businessmen. 'The parallel between this line of thinking and the philosophy which lies behind American anti-trust is quite close'.13 Although this writing takes the EC Treaty as its focus, there is more than a passing similarity between Article 81 (formerly 85) EC and Article 65 ECSC.14 Monnet recounts their origins:

85df07a2946c0bf5e633a71e91da97ad. 85df07 On March 14, 1951, the Allied decartelization plan finally secured Adenauer's agreement, and Hallstein at gif once accepted the two Treaty Articles that were still in dispute. They had been drafted by Robert Bowie, with gif meticulous care. For Europe, they were a fundamental innovation: the extensive anti-trust legislation now applied by the European Community essentially derives from those few lines in the Schuman Treaty.15 The ECSC Treaty was of course limited in scope but nonetheless laid the single market groundwork for the more expansive Treaty of Rome. Competition policy was seen by the High Authority as integral to this objective, as was noted in an early policy memorandum which confirms US influence:

85df07a2946c0bf5e633a71e91da97ad. A genuine single market cannot be brought about except through free competition. If the market were to gif remain subject to the arbitrary decisions of the cartels, or to the restrictive practices of monopolies, then the

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benefits of the single market would soon be offset by the effects of price-fixing and production quotas. This of course was understood by the framers of the Treaty, who provided in Articles 65 and 66 a set of standards and guiding procedural principles which together constitute the first effective anti-trust law in Europe. (There is a resemblance to American models here. Article 65, which relates to combinations in restraint of trade, and Article 66, which relates to illegal concentrations of economic power, respectively correspond some-what to Articles 1 and 2 of the Sherman Anti-Trust Act.)16 In the EC, the 'first principle' of competition law is single-market integration and the elimination of private practices which interfere with integration.17 As Deringer has commented, 'the basic sin in Europe is not so much restricting

85df07a2946c0bf5e633a71e91da97ad. 85df07 13 McLachlan and Swann, supra, at 79; Neale and Goyder, supra note 6, at 476, recognize parallels between gif American philosophy and British and German philosophy in this area, but suggest that elsewhere in the gif Community 'more dirigiste schools of thought' prevail. 85df07a2946c0bf5e633a71e91da97ad. 14 The Court of Justice (ECJ) has indicated that 'a common intention' inspired the drafting of Arts. 85 (now 81) gif EC and 65 ECSC: Case 13/60, Geitling v. High Authority, [1962] ECR 83, 102.

85df07a2946c0bf5e633a71e91da97ad. 15 Monnet, supra note 9, at 3523. Compare Art. 65 ECSC with Art. 85 (now 81) EC. Bowie was a 'young Harvard gif professor . . . who was said to be the leading expert on US anti-trust legislation, which the Americans applied as rigorously as morality itself'. Monnet, supra.

85df07a2946c0bf5e633a71e91da97ad. 16 High Authority, European Coal and Steel Community, Memorandum on the Anti-Trust Policy of the High gif Authority (1954), 1 (translation by the High Authority). 85df07a2946c0bf5e633a71e91da97ad. 17 B. Hawk, United States, Common Market and International Antitrust (2nd edn.) (Englewood Cliffs, NJ, Supp. gif 1990), ii, 6.

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competition but creating an obstacle to integration'.18 Competition law serves the purpose of integration by preventing private concerns from erecting or maintaining private barriers to free trade after or as governmental barriers are dismantled under the Treaty of Rome.19 As Faull has put it, 'the EC's overriding objective of prising open national markets . . . is not the invisible hand; it is competition policy as can opener'.20 The Court of Justice has said:

85df07a2946c0bf5e633a71e91da97ad. 85df07 An agreement . . . which might tend to restore the national divisions in trade between Member States might be gif such as to frustrate the most fundamental object of the Community. The Treaty, whose preamble and content gif aim at abolishing the barriers between States . . . could not allow undertakings to reconstruct such barriers. Article 85 (1) [now 81] is designed to pursue this aim. . . .21 The second major objective of EC competition law is the promotion of effective competition in the Community,22 or, as stated early on by the Commission, 'the second fundamental objective of the Community's competition policy must be to ensure that at all stages of the common market's development there exists the right amount of competition in order for the Treaty's requirement to be met and its aims attained'.23 Notwithstanding the remarks of some writers, '[t]here is no analogue in US anti-trust law' to the EC goal of singlemarket integration.24 Moreover, it has been said that the objectives of EC competition law are broader25 than those of the US antitrust laws and include notions of competition which embrace political and social considerations such as fairness26including protection of small and

85df07a2946c0bf5e633a71e91da97ad. 85df07 18 A. Deringer, in conference discussions, in F. Rowe, F. Jacobs, and M. Joelson (eds.), Enterprise Law of the gif 80's: European and American Perspectives on Competition and Industrial Organization (Chicago, 1980), 65. gif 85df07a2946c0bf5e633a71e91da97ad. 19 N. Green, T. Hartley, and J. Usher, The Legal Foundations of the Single European Market (ed. T. Hartley) gif (Oxford, 1991), 201; V. Korah, EC Competition Law and Practice (5th edn., London, 1994), 1. 85df07a2946c0bf5e633a71e91da97ad. 20 J. Faull, 'The Enforcement of Competition Policy in the European Community: A Mature System', (1992) 18 gif Fordham Corp. Law Inst. (B. Hawk, ed.), 139, 141. 85df07a2946c0bf5e633a71e91da97ad. 21 Cases 56 and 58/64, Consten and Grundig v. Commission [1966] ECR 299, 340. gif 85df07a2946c0bf5e633a71e91da97ad. 22 Hawk, supra note 17, at 5. gif 23 Commission, Ninth Report on Competition Policy, (Brussels, 1980) 10. EC Competition policy has other goals 85df07a2946c0bf5e633a71e91da97ad. gif as well, some of which are described in Green et al., supra note 19, at 2005. As Hawk, supra note 17, notes, EC competition policy 'comprises a delicate balance of multiple objectives'. See also Commission, Fourteenth Report on Competition Policy, Introduction (Luxembourg, 1984), and Commission, Sixteenth Report on Competition Policy, Introduction (Luxembourg, 1986).

85df07a2946c0bf5e633a71e91da97ad. 24 B. Hawk, 'The American (Antitrust) Revolution: Lessons for the EEC?', (1988) 9 Eur. Competition L Rev. 53, gif 54. The 'remarks' are those quoted in the text accompanying chap. 1, note 14. 85df07a2946c0bf5e633a71e91da97ad. 25 Chapman, supra note 10, 2001. gif 85df07a2946c0bf5e633a71e91da97ad. 26 Hawk note 24, supra. gif < previous page page_26 next page >


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medium-sized enterprises.27 Some consider that the broader scope and plurality of objectives of EC competition law make antitrust analysis 'a more complicated process' in Europe than in the USA and that conflicts between 'competition policy and other policies are primarily to be solved by the application of the exemption rules'.28 The original Treaty of Rome commands 'the institution of a system ensuring that competition in the common market is not distorted . . .'.29 As amended at Maastricht, the Treaty now explicitly requires the Member States to adopt an economic policy which is 'conducted in accordance with the principle of an open market economy with free competition'.30 It may be that, post-Maastricht, the maintenance of free competition will take on an increased importance in the goals of EC competition law.31 The Treaty now seemingly sets a new affirmative goal of 'free' competition, rather than one of merely ensuring that competition is not distorted. This ultimately may contribute to greater convergence of US and EC antitrust objectives. In the past, EC competition policy has always had to contend with differing attitudes of the Member States on the direction of their industrial and economic policiesthe French dirigiste tendencies, for example. Whether the Member States and their citizens have fully embraced free competition is yet to be seen, although somewhat doubtful. Ferry commented that after 21 years of active EC competition policy, 'industry does not yet accept that it should not attempt to partition markets' and that 'it sometimes appears that for many in European industry competition is still the unacceptable face of capitalism'.32 In the Pioneer33 case, famous for the then record 6.95 million ECUs in fines imposed by the Commission, the managing director of English Pioneer wrote in a letter, found by the investigating team, 'I am well aware of the EEC rules regarding parallel exports, but quite frankly at times I am more concerned with justice than the law itself'.34

85df07a2946c0bf5e633a71e91da97ad. 27 See Green, et al., supra note 19, 2015. See also Commission, Seventeenth Report on Competition Policy gif (Luxembourg, 1987) 29,

23.

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85df07a2946c0bf5e633a71e91da97ad. 28 H. R. B. Schröter, 'Antitrust Analysis under Articles 85(1) and (3)', (1988) 14 Fordham Corp. L Inst. 645, gif 65961 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 29 Art. 3(g) EC. Prior to the Maastricht Treaty, this language appeared as Art. 3(f) EC. gif 30 Art. 4(1) (formerly 3a(1) ) EC. Art. 3a (now 4), added by the Maastricht Treaty seems to be an expanded and 85df07a2946c0bf5e633a71e91da97ad. gif partially overlapping statement of goals and objectives. It arguably creates a new emphasis on the importance of

the goal of free competition, distinct from market integration. See also, Arts. 98 (formerly 102a) and 105 EC. 85df07a2946c0bf5e633a71e91da97ad. 31 The head of DG IV, the Directorate General for Competition, has suggested that following the entry into force gif of the Single European Act, the Community already has the 'most strongly freemarket oriented constitution in the world': C.-D. Ehlermann, 'The Contribution of EC Competition Policy to the Single Market' (1992) 29 CML Rev. 257, 273.

85df07a2946c0bf5e633a71e91da97ad. 32 J. Ferry, supra note 3, 643, 654, 667. gif 85df07a2946c0bf5e633a71e91da97ad. 33Musique Diffusion Française SA v. Commission, Cases 100103/80, [1983] ECR 1823. gif 34Supra, at 1852. The same letter also made the following plea: 'I wonder if I can call on you to ask your 85df07a2946c0bf5e633a71e91da97ad. gif assistance to help prevent a dog-eat-dog situation developing'.

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The late professor and Judge Joliet once argued against decentralized enforcement of EC competition law because the Belgian people and authorities 'are not at all in favour of competition. What they like is . . . ''concerted" economy. That is not similar at all to competition'.35 Another view, from the Netherlands, is more extravagantly stated:

85df07a2946c0bf5e633a71e91da97ad. And now I expect, but I sincerely do not hope, that this second time that Western civilization is seriously gif endangered since the eighth century when Rome crumbled under the victorious Islam, that the second time

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will bring to light that the Sherman Act and Article 85 are luxuries, the fundamental errors of which are not felt in a fast-growing economy but that they are an obstacle to a society which should be based on solidarity and regard for others.

85df07a2946c0bf5e633a71e91da97ad. 85df07 In my country, before the [former Article] 85 [now 81] men on horseback came galloping in, we did not speak gif about competitors; we spoke about 'colleagues'. I feel that we shall have to face the oncoming economic war gif not with competitor competitori lupus, but with the concepts I just evokedsolidarity and regard for others.36 The struggle to implement competition law in the EC has been long and arduous. Moreover, it is not yet complete. John Temple Lang has noted that there is a 'point of view widely held in Europe, which is totally opposed to competition. In particular, it is totally opposed to anyone trying to bring about more competition'.37 Part of the difficulty is the persistence of the European cartel tradition. As one Brussels practitioner noted, '[i]t must be recognized that even today, in most (but not all) EEC countries, competition policy runs against the traditions of European business, which has always been fond of cartels and ententes'.38 The historic situation in Europe is that the values of free and open business competition have never been fully accepted by consumers, businessmen, and even governments. Where even public authorities cannot always be relied upon to pursue and punish cartels aggressively, effective enforcement of competition law requires that injured victims have recourse in the courts. Even when public authorities are vigorous in enforcement activity, their resources are never sufficient to pursue all cases which should be litigated. Moreover, public enforcement proceedings can only punish and perhaps deter infringements, but never compensate the victims who are directly injured by illegal actions. Private enforcement actions are an essential element if effective enforcement of competition rules is seriously contemplated.

85df07a2946c0bf5e633a71e91da97ad. 85df07a 35 R. Joliet, in conference discussion, Rowe, et al. (eds.), supra note 18, at 66. gif gif 85df07a2946c0bf5e633a71e91da97ad. 36 F. Salomonson, in conference discussion, Rowe, et al. (eds.), supra note 18, at 70. gif 85df07a2946c0bf5e633a71e91da97ad. 37 J. Temple Lang, in conference discussions, in Rowe, et al. (eds.), supra note 18, at 70. gif 38 G. Pevtchin, commenting on M. Siragusa, 'Notification of Agreements in the EECto Notify or Not to Notify', 85df07a2946c0bf5e633a71e91da97ad. gif (1987) 13 Fordham Corp. Law Inst. 243, 310 (B. Hawk, ed.), in panel discussion. M. Siragusa at 283 commented that '[i]t is certainly true that in Europe the level of compliance with the EEC law is still generally low. In certain industries it is still very hard to break away from old traditions (or bad habits)'.

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The aim of this work is not to compare either the substance or the underlying philosophies of US and EC competition legislation in detail, except where they are relevant to a comparison of private enforcement actions. A brief overview of the principal EC competition rules and the enforcement regime will provide a basis for comparison to the US regime. 3.2 Article 81 (Formerly 85) and Regulation 17 Although the EC Treaty took effect in 1958, it was not until 1962 that the Council enacted Regulation 17,39 laying down specific measures for implementing the competition rules which had been provided for in the Treaty itself.40 Regulation 17 established a 'notification' system whereby parties could ask the Commission for a decision that their conduct or agreements either did not infringe the competition rules, or in the case of Article 81 (formerly 85),41 that their agreement/conduct was exempt. Article 81 (old 85) is considered a partial equivalent to the Sherman Act § 1 in that it addresses similar concerted acts of multiple parties. The text of Article 81 (old 85)42 couples a broad prohibition of practices 'which have as their object or effect the prevention, restriction or distortion of competition' with an express provision

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 39 Council Reg. 17 [195962] OJ Spec. Ed. 87. gif gif 85df07a2946c0bf5e633a71e91da97ad. 40 Treaty Establishing EEC ('Treaty of Rome'), 25 March 1957, 298 UNTS 3, Art. 87 (now 83). gif 85df07a2946c0bf5e633a71e91da97ad. 41Art. 81 (formerly 85) states: '1. The following shall be prohibited as incompatible with the common market; all gif agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which: 85df07a2946c0bf5e633a71e91da97ad. (a) directly or indirectly fix purchase or selling prices or any other trading conditions: gif 85df07a2946c0bf5e633a71e91da97ad. (b) limit or control production, markets, technical development, or investment; gif 85df07a2946c0bf5e633a71e91da97ad. (c) share markets or sources of supply; gif 85df07a2946c0bf5e633a71e91da97ad. (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; gif 85df07a2946c0bf5e633a71e91da97ad. (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such gif contracts. 85df07a2946c0bf5e633a71e91da97ad. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. gif 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. any agreement or category of agreements between undertakings; gif 85df07a2946c0bf5e633a71e91da97ad. any decision or category of decisions by associations of undertakings; gif 85df07a2946c0bf5e633a71e91da97ad. any concerted practice or category of concerted practices; gif which contributes to improving the production or distribution of goods or to promoting technical or economic 85df07a2946c0bf5e633a71e91da97ad. gif progress, while allowing consumers a fair share of the resulting benefit, and which does not: 85df07a2946c0bf5e633a71e91da97ad. (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; gif 85df07a2946c0bf5e633a71e91da97ad. (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.' gif

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in Article 81 (3) for the prohibition 'to be declared inapplicable' in certain cases. Such declarations of inapplicability are generally referred to as exemptions. Pursuant to Council Regulation 17, 'the Commission shall have sole power to declare Art. 85(1) [now 81(1)] inapplicable pursuant to Art. 85(3) [now 81(3)] of the Treaty'.43 Since the enactment of Regulation 17, the Commission has had a 'monopoly'44 on the granting of exemptions, and neither national courts nor enforcement authorities of the Member States may 'declare inapplicable' the provisions of Article 81(1) (formerly 85).45 An undertaking may ask the Commission for a 'negative clearance'a statement by the Commission that 'on the basis of facts in its possession, there are no grounds under Article 85(1) [now 81(1)] of the Treaty for action on its part'or an exemption.46 A negative clearance says that a given practice is not caught by Article 81 (formerly 85), but an exemption implies that an agreement or practice does violate Article 81 (formerly 85) but that the conditions for inapplicability are satisfied.47 No agreement can receive an exemption unless it is notified to the Commission (or is exempt from notification).48 An exemption if granted only can validate the practice or agreement from the time of notification.49 Exemptions may expire, be amended, or be revoked with retroactive effect in some cases.50 The breadth of Article 85(1)'s (now 81) prohibition, coupled with the exclusivity of the Commission's power to grant exemptions was apparently intended to allow the Commission maximum surveillance and control over what then to most

85df07a2946c0bf5e633a71e91da97ad. 43 Art. 9(1), Council Reg. 17, supra note 151. Art. 87(d) (now 83) EC authorizes the Council to define 'the gif respective functions of the Commission and of the Court of Justice in applying the provisions laid down in

85df07 gif

this paragraph'.

85df07a2946c0bf5e633a71e91da97ad. 44 J. Ferry, in 'EEC Competition Law and Policy Panel Discussion', (1992) 18 Fordham Corp. L Inst. (B. Hawk, gif ed.), 194. Art. 88 (now 84) EC allowed the 'authorities in Member States' to apply Art. 81 (3) (formerly 85) until

regulations were adopted, and the German Bundeskartellamt (Federal Cartel Office) made use of this power in declaring Art. 85 (now 81) inapplicable in several instances: A. Deringer, 'The Distribution of Powers in the Enforcement of the Rules of Competition Under the Rome Treaty', (1963) 1 CML Rev. 30, 33 note 2. 85df07a2946c0bf5e633a71e91da97ad. 45 'Authorities' in Member States now are administrative agencies or special courts charged with enforcement of gif competition laws, distinct from national courts: Case 127/73, Belgische Radio en Televisie (BRT) v. Société Belge des Auteurs, Compositeurs et Editeurs de Musique (SABAM), [1974] ECR 51 and 313 (hereinafter, BRT v. SABAM). Under Reg. 17, the jurisdiction of 'authorities' ceases upon commencement of proceedings by the Commission, but that of national courts does not. Supra.

85df07a2946c0bf5e633a71e91da97ad. 46 M. Siragusa, 'Notifications of Agreements in the EECto Notify or Not to Notify', (1987) 13 Fordham Corp. L gif Inst. 243, 244 (Barry Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 47 Siragusa, supra, at 248. gif 85df07a2946c0bf5e633a71e91da97ad. 48 Art. 4(1), Reg. 17. gif 49 Art. 6(1), Reg. 17. Agreements not required to be notified may be validated effective even prior to the date of 85df07a2946c0bf5e633a71e91da97ad. gif notification. Supra, Art. 6(2). The notification itself, provided it covers the activity engaged in, confers immunity from fines for the time from notification to the time of actual decision: Art. 15(5)(a), supra. 85df07a2946c0bf5e633a71e91da97ad. 50 Art. 8, Reg. 17.

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Europeans were novel legal principles.51 The Commission served as a sort of priesthood which alone could tend the development and application of these new and arcane legal principles.52 The result has been that hundreds, perhaps thousands, of agreements every year are caught by Article 81 (1) (formerly 85(1)), void under Article 81 (2) [formerly 85(2)), and theoretically finable in the absence of an exemption, but the Commission can rarely issue more than five to ten formal exemptions in a year.53 This has led to the Commission's practice of disposing of open files by the issue of informal 'comfort letters' indicating a lack of intent by the Commission to take further action, or in some cases 'discomfort letters'.54 3.3 Article 82 (Formerly 86) and the Merger Regulations Article 82 (formerly 86), a partial equivalent to the Sherman Act §2, prohibits the abusive exploitation of a dominant position within the common market in so far as it may restrain trade among the Member States.55 A firm which has a 'dominant' position within the meaning of Article 82 (formerly 86) is one which has 'a position of economic strength employed by an undertaking which enables it to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of competitors and ultimately of consumers'.56 The ECJ has taken the view that high market shares (above 40 to 50 per cent) are presumptive evidence of dominance, although such a presumption is rebuttable.57

85df07a2946c0bf5e633a71e91da97ad. 85df07 51 I. Forrester and C. Norall, 'The Laïcization of Community LawSelf-help and the Rule of Reason: How gif Competition Law Is and Could Be Applied', (1983) 10 Fordham Corp. L Inst. 305, 3067 (B. Hawk, ed.). See gif also R. Whish and B. Sufrin, 'Article 85 [now 81] and the Rule of Reason', (1988) 7 YBEL 1.

85df07a2946c0bf5e633a71e91da97ad. 52 Cf. Forrester and Norall, supra note 51, at 33940. gif 53 I. Forrester and C. Norall, 'Competition Law', (1993). 12 YBEL 547, 552. 85df07a2946c0bf5e633a71e91da97ad. gif 54 See V. Korah, EC Competition Law and Practice (5th edn., London, 1994), 115, 116. 85df07a2946c0bf5e633a71e91da97ad. gif 55 Art. 82 (formerly 86) states: '[a]ny abuse by one or more undertakings of a dominant position within the 85df07a2946c0bf5e633a71e91da97ad. gif common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: 85df07a2946c0bf5e633a71e91da97ad. (a) directly or indirectly imposing unfair purchase or selling prices or unfair trading conditions; gif (b) limiting production, markets or technical development to the prejudice of consumers; 85df07a2946c0bf5e633a71e91da97ad. gif (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a 85df07a2946c0bf5e633a71e91da97ad. gif competitive disadvantage; 85df07a2946c0bf5e633a71e91da97ad. (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations gif which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

85df07a2946c0bf5e633a71e91da97ad. 56 Case 322/81, Michelin v. Commission, [1983] ECR 3461. gif 57 Case 27/76, United Brands v. Commission, [1978] ECR 207. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_31


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Undertakings may apply for a negative clearance decision with respect to Article 86 (now 82) using the same procedure as in the case of Article 85 (now 81), but there is a major difference in that there is no provision for receiving an exemption. If negative clearance is denied, the undertaking will have succeeded only in flagging its conduct for the attention of the Commission and submitting what may amount to a confession. Because Article 82 (formerly 86) does not primarily address concerted conduct and does not contain a nullity provision similar to that found in Article 81 (formerly 85), the absence of an exemption leaves undertakings with little incentive to request a negative clearance except in the case of mergers and concentrations. In September, 1990 the first Merger Regulation58 came into effect, establishing for the first time59 based on Articles 86 (now 82) and 235 (now 308) a comprehensive60 system of merger control applicable to those mergers considered to have a 'Community dimension'. The Commission is required to block concentrations that would create or strengthen a dominant position. The Merger Regulation generally forbids Member States to apply their national legislation on competition to mergers having a Community dimension but makes an exception for appropriate measures to protect legitimate interests. When a merger is notified to the Commission, it is essentially frozen for 30 days, at which time the Commission may take a decision or extend the time to do so for another four months. In order for a proposed merger to have a 'Community dimension' and fall under the first Merger Regulation, the combined aggregate worldwide turnover (gross sales less rebates and VAT) of the undertakings concerned must have exceeded 5,000,000,000 ECUs and at least two of the undertakings must each have had aggregate Community turnover of more than 250,000,000 ECUs. In addition, the parties concerned must not derive two-thirds or more of their EC business from the same Member State.61 These turnover thresholds were obviously quite high. Mergers which did not exceed the thresholds were not governed by the Regulation and were dealt with under national merger laws where applicable. The Merger Regulation was reviewed in 1996, and the Commission's review noted that 357 decisions had been taken under the Regulation, four of which prohibited the merger, 24 cleared the merger subject to conditions and obligations,

85df07a2946c0bf5e633a71e91da97ad. 85df07a 58 Reg. 4064/89 [1989] OJ L395/1, corrected version published [1990] OJ L257/14. gif gif 85df07a2946c0bf5e633a71e91da97ad. 59 The regulation governing information required to be submitted is modelled on the US 'Hart/Scott/Rodino' Act gif which established a pre-merger notification procedure in that country in 1976. See Korah, supra note 54, at 240. 85df07a2946c0bf5e633a71e91da97ad. 60 The Merger Reg. attempts to exclude so far as possible the application of Art. 85 (now 81) to mergers by gif suspending in Art. 22(2) the application of Reg. 17 in respect of concentrations as defined in Art. 3(1) of the Merger Reg. 85df07a2946c0bf5e633a71e91da97ad. 61 Art. 1(2) of the 1989 Reg.

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and the balance were cleared.62 The Commission initially proposed a lowering of the turnover thresholds mentioned above to 3,000,000,000 ECUs and 150,000,000 ECUs respectively, or 2,000,000,000 ECUs and 100,000,000 ECUs if proposed concentrations qualify for examination by national authorities in three or more Member States, among other changes.63 The Merger Regulation ultimately was amended64 in a number of respects, including the setting of new financial thresholds to govern its application. With effect from 1 March 1998, a proposed merger which does not meet the original thresholds may nonetheless have a 'Community dimension' and fall under the revised Merger Regulation if the combined aggregate worldwide turnover (gross sales less rebates and VAT) of the undertakings concerned exceeds 2,500,000,000 ECUs and at least two of the undertakings involved in the merger each have aggregate Community turnover of more than 100,000,000 ECUs. In addition, in each of at least three Member States, the combined aggregate annual turnover of all undertakings involved must exceed 100,000,000 ECUs and in those three Member States, at least two of the undertakings involved must each have aggregate turnover of more than 25,000,000 ECUs.65 3.4 Private Actions Not Expressly Provided For Neither Regulation 17 nor the Treaty itself contains any express provisions for private damages remedies for infringement of the competition rules,66 and no legislation creating express private rights of action for infringement of the competition rules has been enacted.67 Nonetheless, the Commission from the beginning has considered that actions for damages were available to third parties in addition to the declarations of nullity mentioned in Article 85(2), now 81 (2). In its proposal to the Council with respect to what ultimately became Regulation 17, the Commission followed its mention of the sanctions (fines for non-compliance) with a statement concerning the civil consequences of violations:

85df07a2946c0bf5e633a71e91da97ad. 62 Commission, Community Merger Control Green Paper on The Review of the Merger Regulation gif (Luxembourg, 1996),

12.

85df07 gif

85df07a2946c0bf5e633a71e91da97ad. 63 Commission, Communication from the Commission to the Council and to the European Parliament Regarding gif the Revision of the Merger Regulation (Luxembourg, 1996), 19. 85df07a2946c0bf5e633a71e91da97ad. 64 Reg. 4064/89 has now been amended by Reg. 1310/97 [1997] OJ L180/1. gif 85df07a2946c0bf5e633a71e91da97ad. 65 Art. 1(3), as amended by Reg. 1310/97. gif 66 T. C. Hartley, The Foundations of European Community Law (3rd edn., Oxford, 1994), 230. This is also true of 85df07a2946c0bf5e633a71e91da97ad. gif most Community rights in the Treaty. 85df07a2946c0bf5e633a71e91da97ad. 67 Interview with Dr. John Temple Lang, Director of DG IV (Competition), Commission, in Brussels, Belgium gif (16 June 1995). Legislation was considered by the Commission but failed to gain the support of the Advisory Committee on Restrictive Practices and Monopolies, which is composed of Member State representatives.

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85df07a2946c0bf5e633a71e91da97ad. 85df07 A ces sanctions s'ajoutent la publicité éventuelle de la décision et les risques inhérents à la nullité de l'entente gif et aux demandes de dommages et intérêts qui pourraient être formées par des tiers.68 gif Following the adoption of Regulations 17 and 27, the Commission reaffirmed its position in a guidance manual for firms that private actions were available for nullifying contracts and seeking damages: '[m]any agreements or practices will probably have to be altered or terminated in order to avoid sanctions (fines or daily penalties) or possibly civil proceedings (notably actions for avoidance of contracts or for damages)'.69 More emphatically, it was noted that '[c] ompliance with the rules of Articles 85 and 86 [now 81 and 82] is ensured . . . by the domestic courts of Member States pronouncing within their jurisdiction on Article 85(1) and (2) and on Article 86'[now 81 (1) and (2) and 82].70 The Federation of British Industries in contrast counselled its members that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 No such action [for damages] would be maintainable in British courts unless the breach could be established gif as a breach of a statutory duty [if Britain joined the EEC] . . .. There appears to be nothing in the Treaty which gif suggests that, if it were embodied in a British statute, it would be intended to be a ground for civil liability.71 As Community law developed, it became apparent that the Federation of British Industries had misjudged the situation. That development is the subject of the following chapters.

85df07a2946c0bf5e633a71e91da97ad. 68 Commission, Premier Réglement d'Application des Articles 85 et 86 du Traité (Proposition de la gif Commission au Conseil) (1960), 3. The Commission's unofficial translation of this memorandum of 28 Oct.

85df07 gif

1960 is '[t]o these sanctions may be added the eventual publicity of the decision and the inherent risks of the nullity of the understanding, and of damages which could be raised by third parties'.

85df07a2946c0bf5e633a71e91da97ad. 69 European Community Information Service, Articles 85 and 86 of the EEC Treaty and the Relevant Regulations: gif A Manual for Firms (1963), 1. 85df07a2946c0bf5e633a71e91da97ad. 70Supra, at 5 (emphasis in original). gif 71 Federation of British Industries, European Economic Community Restrictive Trade Practices (1963), 34. It was 85df07a2946c0bf5e633a71e91da97ad. gif noted that the position in the rest of the Community 'is less clear' and that a civil damages action 'in respect of a breach of Article 85 or 86 may be maintainable'. Supra.

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4 The UK Systems: From Administration to Prohibition

85df07a2946c0bf5e633a71e91da97ad. 4.1 Historical Notes on Treble Damages under English Law gif

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85df07a2946c0bf5e633a71e91da97ad. 4.2 The Post-War Administrative System gif

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85df07a2946c0bf5e633a71e91da97ad. 4.3 The UK Competition Act 1998: A New Prohibition System? gif

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4.1 Historical Notes on Treble Damages under English Law A survey of British anti-monopoly law could begin at least as early as Dyer's Case1 in 1415, but this would render little assistance to the exploration of private antitrust litigation under present UK or EC law. This brief discussion will concentrate on current UK legislation enacted since 1945. However, it is worth briefly mentioning the now repealed English Statute of Monopolies2 of 1623. The Statute of Monopolies was perhaps the first statutory prohibition of monopolies, although it was narrow, in that it was directed at legal monopolies created by acts of the sovereign. Article IV of the statute provided that any person 'hindered, greived, disturbed, or disquieted, or his goods or chattels any way seized, attached, distrained, taken, carried away or detained by occasion or pretext of any monopoly . . . shall recover three times so much as the damages that he sustained . . .'.3 This treble damages formula was the model for the treble damages provision crafted by Senator Hoar and included in the Sherman Act.4 Multiple damages provisions appeared in many early English statutes. Some 65 different enactments between 1275 and 1753 provided for double, treble or quadruple damages.5 This is ironic

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c 1 Y.B. 2 Hen. V, vol. 5, pl. 26 (1415) gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 21 Jac. I, c. 3 (1623), repealed, S.L. (Repeals) (1969). gif 85df07a2946c0bf5e633a71e91da97ad. 3Supra. (emphasis supplied). gif 4 See 21 Cong. Rec. 3152 (1890); H.B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition 85df07a2946c0bf5e633a71e91da97ad. gif (Baltimore, 1954), 213. Senator Hoar had previously criticized the original Sherman bill for the insufficiency of its double damages provision.

85df07a2946c0bf5e633a71e91da97ad. 5BMW of North America, Inc. v. Gore, 517 US 559, 5801 (1996). See also D. G. Owen, 'A Punitive Damages Overview: gif Functions, Problems and Reform', (1994) 39 Vill. L. Rev. 363, 368 and note 23.

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in view of the distaste for US antitrust treble damages actions reflected in some British judgments and statutes.6 4.2 The Post-War Administrative System The end of the Second World War found British industry dominated by cartels and restrictive trade practices and the British government under pressure from the USA to adopt antitrust legislation, preferably along the lines of the US model.7 Although legislation was adopted, it bore no resemblance to the Sherman Act. The post-war law of competition in the UK has been described by Whish and Sufrin as having a 'bizarre and complex structure'8 which has developed in a 'haphazard way'9 involving a 'superfluity of institutions'.10 Moreover, it can 'appear to be so pragmatic as to lack any doctrinal cohesion' and 'the whole system can be seen as pusillanimous and insipid and incapable of combating the power of monopolies'.11 Sir Gordon Borrie (as he then was), former Director of the Office of Fair Trading, has noted that '[i]t has become notorious that UK law on cartels and restrictive trade agreements of all kinds is inadequate, a poor deterrent against malpractice, and only partially effective'.12 The UK government almost perennially seemed to contemplate amendments designed to bring the UK system more in line with the EC rules, but this only recently has borne fruit. In August, 1996 another draft Bill was circulated by the Major government.13 In 1997, the Blair government finally introduced a Competition Bill which passed the House of Lords, was amended in several respects in the House of Commons, and was returned to the House of Lords in October 1998. The following comments in this section concern the UK scheme as it existed prior to passage of the Competition Act 1998. The bill received Royal Assent on 9 November 1998.14 Nonetheless, a few brief comments on the post-war legislation are in order for historical reasons, and because the Competition Act 1998 incorporates portions of the older laws into the new scheme generally modelled after the EC competition rules.

85df07a2946c0bf5e633a71e91da97ad. 6 See generally Midland Bank plc, et al. v. Laker Airways Ltd, et al., [1986] 1 QB 689 (CA) and the gif Protection of Trading Interests Act 1980.

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85df07a2946c0bf5e633a71e91da97ad. 7 See generally T. Freyer, Regulating Big Business: Antitrust in Great Britain and America, 18801990, gif (Cambridge, 1992), 23468. 85df07a2946c0bf5e633a71e91da97ad. 8 R. Whish and B. Sufrin, Competition Law (3rd edn., London, 1993), 730. gif 9Supra, at 20. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 10Supra. gif 11Supra, at 283. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 12 G. Borrie, 'UK Antitrust Law and Policy: A Retrospective', (1993) 19 Fordham Corp. L Inst. 331, 338 (B. gif Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 13 Department of Trade and Industry, Tackling Cartels and the Abuse of Market Power: A Draft Bill (London, gif 1996). See Whish and Sufrin, supra note 8, at 7307. 85df07a2946c0bf5e633a71e91da97ad. 14 Competition Act 1998, 1998 c. 41. gif < previous page page_36 next page >


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While a general critique of the former UK system is unnecessary, it may be useful to mention a few points. In contrast to the prohibition and litigation model of US antitrust, the UK 'abuse' system was largely investigative and administrative15 in nature. The intitial post-war legislation, the Monopolies and Restrictive Practices (Inquiry and Control) Act 1948, established a system whereby in certain limited circumstances the Board of Trade could require a theoretically independent body, the Monopolies and Restrictive Practices Commission (later the Monopolies and Mergers Commission, MMC), to investigate. No remedy was required to be made available and action could be taken only upon approval of Parliament. As originally enacted, the most severe civil remedy provided was that of injunction. There were no criminal provisions, no enforceable rights for individuals, and it was thought that most abuses would be resolved by the threat of publicity alone.16 Following amendments to the 1948 Act and inclusion of its provisions in the Fair Trading Act 1973, the statute provided that monopoly references could be made by either a government minister or the Director-General of Fair Trading (DGFT). In such a case, the MMC would carry out an investigation and issue a report which must be submitted to the Secretary of State (or other minister) and presented to Parliament. If the MMC concluded that the public interest was in jeopardy, the Secretary of State could (a) do nothing, or (b) exercise remedies ranging from orders terminating agreements, prohibiting refusals to supply, fixing and controlling prices, to prohibiting takeovers. With the consent of Parliament, divestiture of business could be ordered. There were no criminal penalties specified for breach of an order or breach of an undertaking in lieu of an order. The supposed independence of the Mergers and Monopolies Commission (MMC) was diminished by the fact that the MMC was ultimately only an advisor to the Secretary of State, who could take decisions on grounds entirely distinct from those considered by the MMC.17 Under the post-war scheme, UK law offered no UK right to receive damages to private individuals who were injured by a monopolist's abuse of a dominant position. UK law merely allowed a person so injured to complain to the Office of Fair Trading, which could in its discretion take action. At most, this might have resulted in an order not to continue or repeat the abusive conduct.18

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 15 Or, as Whish and Sufrin state, 'political', supra note 8, at 282. gif gif 85df07a2946c0bf5e633a71e91da97ad. 16Supra, at 268. One MP called the measure a 'puny infant'. Supra. See also Whish and Sufrin, supra note 8, at gif 601. 85df07a2946c0bf5e633a71e91da97ad. 17 See B. Carlsberg and M. Howe, 'Dealing With Abuse of Market Power', (1994) 20 Fordham Corp. L Inst. 165, gif 16970 (Barry Hawk, ed.); Whish and Sufrin, supra note 8, at 2823. 85df07a2946c0bf5e633a71e91da97ad. 18 J. Lever, 'Developments in UK Law', (1993) 19 Fordham Corp. L Inst. 359, 368 (Barry Hawk, ed.). gif < previous page page_37 next page >


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Section 93(2), read together with section 93A (2) of what is now called the Fair Trading Act 1973, does indicate that unspecified 'civil proceedings' may be brought by 'any person'. It quite reasonably had been suggested that this means that an individual harmed by disobedience to an order or breach of an undertaking may bring a private damages action,19 but this was rejected in Mid Kent Holdings20 on the ground that the statute was not intended to confer a right of action for breach of statutory duty. The implications of Mid Kent Holdings for the viability of private damages actions under the Competition Act 1998 are considered in detail in Chapter 11, below. While MMC investigations under the Fair Trading Act 1973 are aimed at industries as a whole (it is products which are referred), the Competition Act 1980 was intended to permit more expeditious investigation of particular anticompetitive practices in which firms were thought to be engaging. Under the Competition Act 1980, the Director General of Fair Trade may investigate whether a firm is engaging in a harmful practice and make a referral to the MMC. The MMC then carries out its investigation and issues a report in which it considers whether action should be taken and makes recommendations. The Secretary of State then decides whether and how to act, as takes place under the Fair Trading Act. Two other provisions of the former UK statutes are of particular interest to private litigants. The Restrictive Trade Practices Act 1956 removed a range of restrictive practices and agreements from the scope of the 'benign'21 1948 legislation, required registration on a public register, and subjected registered agreements to possible examination in order to determine if they were against the public interest. Originally, there were no real sanctions provided. Following a 1968 amendment, the statute provided that unregistered agreements are void, unenforceable, and give rise to a private cause of action in favour of anyone harmed by an unregistered agreement in the form of claim for breach of statutory duty.22 Subsequent legislative repeals, enactments, and consolidations under the Restrictive Trade Practices Act 1976, Restrictive Trade Practices Act 1977, and the Competition Act 1980 resulted in a scheme in which a registered agreement could be referred to the Restrictive Practices Court for determination of its consistency with the public interest. If the agreement were found not to be in the public interest, the Restrictive Practices Court could take undertakings from the parties or make orders directed to the parties. Breach of such an order or accepted undertaking was a contempt and corporations, their officers, and employees were in

85df07a2946c0bf5e633a71e91da97ad. 19 Whish and Sufrin, supra note 8, at 83 and note 9. gif 85df07a2946c0bf5e633a71e91da97ad. 20Mid Kent Holdings plc v. General Utilities plc [1996] 3 All ER 132, 1545 (Ch.). gif 21 Whish and Sufrin, supra note 8, at 121. 85df07a2946c0bf5e633a71e91da97ad. gif 22 The Restrictive Trade Practices Act 1976 s. 35(2). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_38


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appropriate circumstances punishable by fine, with imprisonment a theoretical possibility.23 In August, 1995, the Restrictive Practices Court fined 17 ready mixed concrete companies a total £8.375 million for secret price-fixing and market-sharing arrangements carried out in breach of orders resulting from earlier decisions. Five directors of firms were personally fined £87,500 and warnings of future jail sentences were given.24 However, such penalties were the exceptional case, not the rule, as there were no fines provided for except under the contempt procedure. There was no provision for private actions in the statute. The second main provision of interest to private litigants was found in The Resale Prices Act 1976 (RPA), consolidating earlier law, which prohibited collective resale price maintenance25 and, with some exceptions, individual resale price maintenance.26 The RPA was enforced by the Director General of Fair Trading (DGFT) who was authorized under section 25 to bring actions for an injunction or other appropriate relief. Section 25(3) of the RPA 1976 provided for anyone harmed by collective or individual action enforcing resale price maintenance to bring a private law action for breach of statutory duty. 4.3 The UK Competition Act 1998: A New Prohibition System? The Competition Bill was introduced in Parliament on 15 October 1997 and received Royal Assent on 9 November 1998. It will be referred to here as the Competition Act 1998, CA 1998, or CA. The CA 1998 repeals much of the postwar legislation previously discussed, including the Restrictive Practices Court Act 1976, Restrictive Trade Practices Act 1976, the Resale Prices Act 1976, and much of the Competition Act 1980.27 The government intends that the prohibitions will not come into effect until 1 March 2000. The FTA 1973 is amended to strengthen the powers of the DGFT, expand the monopoly provisions, and increase penalties. The MMC is dissolved, and its functions are transferred to a new Competition Commission, with effect from 1 April 1999. In some industries, certain regulators are given concurrent power with the Competition Commission to administer the new law.28 Named

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 23 Whish and Sufrin, supra note 8, at 1689. gif gif 85df07a2946c0bf5e633a71e91da97ad. 24 Singletons Solicitors, press release, Int'l Bus. Law. 442 (Oct., 1995). gif 25 S. 1(1) of the RPA 1976. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 26 Ss. 9 (prohibition) and 14 (exemptions) of the RPA 1976. gif 27 See CA 1998, ss. 1, 17, 74, and Sched. 14 for lists of repeals. Ss. 210 of the Competition Act 1980 cease to 85df07a2946c0bf5e633a71e91da97ad. gif have effect. 85df07a2946c0bf5e633a71e91da97ad. 28 CA 1998, s. 54, Sched. 10. It is surely only a coincidence that the Competition Commission comes into effect gif on April Fool's Day.

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regulators include those whose functions concern telecommunications, gas, water, electricity, and railways. The general approach of the CA 1998 is said to be the replacement of the previous control of abuse scheme with a prohibition approach modelled on Articles 85 (now 81) and 86 (now 82) EC. The government's 'Guide' to the Bill states:

85df07a2946c0bf5e633a71e91da97ad. 85df07 '1. It is the Government's policy, and a manifesto commitment, to strengthen competition law by prohibiting gif anti-competitive behaviour. There will be two prohibitions: gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0b a prohibition of anti-competitive agreements, based closely on Article 85 of the EC Treaty; and gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a29 a prohibition of abuse of a dominant position in a market, based closely on Article 86 of the EC Treaty gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07 2. A prohibition based approach is intended to be a more effective deterrent to anti-competitive gif behaviour. . . .29 gif Whether the CA 1998 lives up to the promise of a prohibition approach remains to be seen. For the most part, the key prohibitory language is similar to the relevant EC Treaty provisions. The 'Chapter I prohibition', section 2(1), the analogue to Article 85 (now 81) states:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted gif practices which gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e91da97ad. (a) may affect trade within the United Kingdom, and gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07 (b) have as their object or effect the prevention, restriction or distortion of competition within the United gif Kingdom, gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e are prohibited unless they are exempt in accordance with the provisions of this Part'.30 gif gif Section 2(2) provides a list of examples of agreements, practices, and decisions which are prohibited, identical to that contained in Article 85(1) (now 81) EC. However, the CA analogue to Article 85(2)'s (now 81) declaration that prohibited agreements or decisions are 'automatically void' omits the modifier 'automatically' and provides that '[a]ny agreement or decision which is prohibited by sub-section (1) is void'.31 The omission of the word 'automatically' from the CA provision (when it does appear in new Article 81(2) ) probably has no major significance given its appar-

85df07a2946c0bf5e633a71e91da97ad. gif 29 Department of Trade and Industry (DTI) Press Release P/97/662 of 16 Oct., 1997, at

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12, Guide to the Competition Bill. 85df07a2946c0bf5e633a71e91da97ad. 30 CA 1998 s. 2(1). gif 31 CA 1998 s. 2(4). The original version of the Competition Bill contained the following language: '[a]ny 85df07a2946c0bf5e633a71e91da97ad. gif provision of an agreement or decision which causes the agreement or decision to infringe the prohibition imposed by subsection (1) is void'. This now deleted modification may have been intended to prevent an entire agreement from being declared void without any consideration of the importance of the infringing portion to the agreement as a whole. If so, the final CA is well rid of it.

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ent redundancy. Moreover, it is clearly expressed that the CA 1998 is to be interpreted so as to create 'no inconsistency between . . . the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in Community law'.32 This principle seems to require that voidness under the CA 1998's section 4 also be automatic. One other slight variance from the former Article 85 (now 81) model should be noted. The CA 1998 places the 'voidness' provision in subsection (4) of section 2, following the 'Chapter I prohibition' set out in subsection (1). Because the 'voidness' provision refers to agreements or decisions 'prohibited by subsection (1)', it differs slightly from former Article 85, in which the relevant analogous provision for voidness referred to 'this Article'. It will be recalled that the exemption provisions in the EC Treaty are paragraph 3 of Article 85, now 81. In contrast, the CA 1998 separates the exemption provision and places it in section 4. The effect of this slightly different structuring is that there is no textual basis for a 'provisional validity' doctrine under the CA 1998. The reference to 'this Article' as a whole was in part relied upon by the European Court as the basis for the original EEC provisional validity doctrine announced in Bosch.33 Companies in the UK should not expect a similar result under the new CA 1998. The 'Chapter II prohibition', section 18(1), the analogue to Article 86 (now 82) provides '[s]ubject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom'. Section 18(2) identifies particular behaviours which constitute abuse of a dominant position in language identical to that contained in Article 86 (now 82) EC. Unlike the EC Treaty, the CA 1998 makes provision for exemptions ('exclusions') from the prohibition of abuses of dominant position.34 The exclusions identified in the Schedules have to do with mergers and concentrations (Schedule 1), general exclusions, sectoral exclusions, services of general economic interest, and public policy exclusions (Schedule 3). Section 19(1)(c) refers to 'general exclusions' under Schedule 3, and section 19(3) explains that the Secretary of State is empowered under Schedule 3 to 'provide that the Chapter II prohibition is not to apply in certain circumstances'. Schedule 3 permits the Secretary of State to make such exclusions by order when he is

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e 32 CA 1998 s. 60(2). gif gif 85df07a2946c0bf5e633a71e91da97ad. 33 Case 13/61, Kledingverkoopbedrijt Den Uitdenbogerd Geus v. Robert Bosch GmbH[1962] ECR 45. See gif detailed discussion in Chap. 5, at § 5.2.2. 85df07a2946c0bf5e633a71e91da97ad. 34 CA 1998 s. 18. gif < previous page page_41 next page >


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'satisfied that there are exceptional and compelling reasons of public policy why the Chapter II provision ought not to apply in particular circumstances'. When the Competition Bill was introduced in the House of Lords, the President of the Board of Trade released a Guide to the Competition Bill which declared that under the prohibition approach followed in the legislation, '[c]ompanies breaching the prohibitions will be liable to fines and third parties affected by anticompetitive behaviour in breach of the prohibitions will be entitled to seek compensation'.35 However, the legislation itself contains no express provisions establishing a general right to sue for damages for breach of the prohibitions. One might have thought the need for express provisions would be apparent in light of the judgment in Mid Kent Holdings, but the government declined to include them on the grounds it was thought unnecessary to do so.36 Nonetheless, at the time the bill received Royal Assent, Peter Mandelson, Secretary of State for Trade and Industry, stated that, under the new Act, '[b]oth consumers and competitors who suffer will finally have effective rights to damages'.37 The most explicit reference to private actions in the text of the Competition Bill did not survive the legislative process to reach the CA 1998. The original Competition Bill as introduced in the House of Lords contained clause 31(1), providing that '[i]f a person fails, without reasonable excuse, to comply with a direction under section 29 or 30(a) his default is actionable by any person who suffers loss or damage which is attributable to it . . .'. Clauses 29 and 30 of the Bill (now sections 32 and 33 of the CA 1998) were the provisions which authorize the Director General of Fair Trading, if he decides there has been a breach of the Chapter I prohibition or Chapter II prohibition, respectively, to give 'such directions as he considers appropriate to bring the infringement to an end'.38 The language contained in clause 31 of the original Competition Bill was an apparent analogue to the provisions referring to private actions in sections 93(2) and 93A (2) of the Fair Trading Act 1973, although admittedly wider in scope and more explicit. Clause 31 of the Bill made specific references to non-compliance

85df07a2946c0bf5e633a71e91da97ad. gif 35 Department of Trade and Industry (DTI) Press Release P/97/662 of 16 Oct. 1997, at 2, Guide to the

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Competition Bill. 85df07a2946c0bf5e633a71e91da97ad. 36 Interview with Jeremy Lever QC, New York, 23 Oct. 1998. gif 85df07a2946c0bf5e633a71e91da97ad. 37 P. Mandelson, DTI Press Release P/98/867 (9 Nov. 1998). gif 38 Competition Bill 1998, cll. 29 (Chapter I prohibition) and 30 (Chapter II prohibition). The now deleted text did 85df07a2946c0bf5e633a71e91da97ad. gif not identify the type of cause of action apparently created. The stated language did not appear expressly to give a right of action for loss or damage directly upon an infringement of either the Chapter I or Chapter II prohibition, but did so for violation of an order made by the Director intended to put an end to an infringement. This necessarily implied that the Director first must have considered the matter and rendered a formal opinion and a direction which was then subsequently infringed. From the standpoint of general private litigation, this was not particularly encouraging, because it did not seem expressly to recognize a right of private litigants immediately to proceed by issue of a writ where they are injured by conduct which infringes the prohibitions of the CA 1998. This language was deleted by the House of Lords.

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with directions being actionable by persons suffering loss or damage. It will be recalled that in Mid-Kent Holdings,39 the FTA 1973 language was not considered sufficient by the court to find that the plaintiff there had a right to sue for a declaration (or damages) under the rubric of breach of statutory duty. The language in the Bill, now deleted in the CA 1998,40 clearly provided for private damages actions in the narrow case where the DGFT had given a direction to bring infringements to an end, and the respondent had failed to do so. This narrow approach to recognition of private rights of action had not been successful in the previous UK competition law regime and has evidently been abandoned in the new scheme. The CA 1998 does take steps to preserve the narrow rights to bring private actions created by the previous regime. In Schedule 13, dealing with transitional matters, persons having private rights of action under section 35 of the RTPA 1976 and section 25 of the RPA 1976 which accrued before the starting date of the legislation continue to be able to apply the provisions of those two Acts. The other major reference in the CA 1998 to private actions is more obscure. Section 55(1) CA provides that information obtained under any provision of 'Part I' of the CA, including the Chapter I and Chapter II prohibitions, and which relates to affairs of an individual or any particular business of an undertaking is not to be disclosed without consent. Section 55(3)(b) provides that the prohibition of subsection (1) does not apply to a disclosure of information 'made with a view to the institution of, or otherwise for the purposes of civil proceedings brought under or in connection with this Part' (PartI). This naturally implies that civil proceedings may occur under Part I and suggests that private actions are intended to be authorized. Proceedings 'under or in connection with' Part I could include civil proceedings by the DGFT as well as private actions in a court based on the Chapter I and Chapter II prohibitions. Actions by the Competition Commission to collect unpaid penalties also would be considered 'civil proceedings' within the meaning of section 55(3)(b).41 While there are civil proceedings which are not private actions at all, and some might argue that these references pertain only to proceedings brought by the Director, other provisions make it clear that both are embraced. For example, the CA 1998 section 58(1) refers to the binding nature of a 'Director's finding which is relevant to an issue arising in Part I proceedings'.

85df07a2946c0bf5e633a71e91da97ad. 85df07 39Mid Kent Holdings plc v. General Utilities plc [1996] 3 All ER 132, 1545, [1997] 1 WLR 14 (Ch.). gif gif 85df07a2946c0bf5e633a71e91da97ad. 40 CA 1998 s. 34(1) retains the provisions of cl. 31(1) of the Bill as to enforcement by the Director. It omits any gif reference to private party enforcement of directions given by the Director. 85df07a2946c0bf5e633a71e91da97ad. 41 See CA 1998 s. 37. gif < previous page page_43 next page >


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'Part I proceedings' are defined in that section to mean proceedings 'in respect of an alleged infringement of the Chapter I prohibition or of the Chapter II prohibition; but . . . which are brought otherwise than by the Director'.42 Part I proceedings clearly must embrace private claims for infringement of the Chapter I and Chapter II prohibitions, not just proceedings involving the Director. This is confirmed by section 58(3), which states that '[r]ules of court may make provision in respect of assistance to be given by the Director to the court in Part I proceedings'. This is reminiscent of the Co-operation Notice published by the Commission as an aid to national courts, discussed more fully in section 8.2. This book does not undertake to provide coverage of the substantive provisions of the CA 1998. It confines itself to the possibility of private enforcement actions for damages in the UK, the subject of Chapters 9 to 12, below.

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5 Foundations of Private Enforcement in the Community

85df07a2946c0bf5e633a71e91da97ad. 5.1 Introduction: Covenants without Swords gif

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85df07a2946c0bf5e633a71e91da97ad. 5.2 The Treaty of Rome and the Community Order gif

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85df07a2946c0bf5e633a71e91da97ad. 5.3 Direct Effect and the Competition Rules gif

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85df07a2946c0bf5e633a71e91da97ad. 5.3.1 The Primary Line of Direct Effect Decisions gif

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85df07a2946c0bf5e633a71e91da97ad. 5.3.2 The Secondary Line of Decisions: The Bosch Puzzle gif

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85df07a2946c0bf5e633a71e91da97ad. 5.3.3 A Modest Reconciliation? gif

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5.1 Introduction: Covenants without Swords The noted seventeenth-century competition lawyer Thomas Hobbes is reported1 to have commented that 'covenants without swords are but words', thus becoming perhaps the earliest critic of the Treaty of Rome. Article 81(2) (formerly 85) contains a 'shield' in the form of the automatic nullity provision, but the Treaty is noticeably lacking in express provision for the use of Articles 81 and 82 (formerly 85 and 86) as 'swords'. The enforcement scheme of the EC Treaty envisages that the Commission shall 'ensure that the provisions of this Treaty and the measures taken by the institutions pursuant thereto are applied',2 that the Commission may bring Member States considered to be in default of Treaty obligations before the Court of Justice,3 and that a Member State may bring another Member State considered to be in default before the Court of Justice.4 The Treaty provides for natural or legal persons to seek annulment of acts of Community institutions,5 in limited

85df07a2946c0bf5e633a71e91da97ad. 85df07 1 J. Weiler, 'The Community System: The Dual Character of Supranationalism' (1981) 1 YEL 267, 297 (F. Jacobs, ed., gif 1982). gif 85df07a2946c0bf5e633a71e91da97ad. 2 Art. 211 (formerly 155) EC. See also Art. 85 (formerly 89) EC. gif 85df07a2946c0bf5e633a71e91da97ad. 3 Art. 226 (formerly 169) EC. gif 4 Art. 227 (formerly 170) EC. 85df07a2946c0bf5e633a71e91da97ad. gif 5 Art. 230 (formerly 173) EC. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_45


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circumstances, and to compel a Community institution to act when it has failed to do so.6 However, the absence of any express provision for private antitrust actions has meant that the legal basis for such actions must be constructed from the foundations of the legal order of the Communities. The ability to use Articles 85 and 86, now 81 and 82, as swords does not derive from any one decision of the Court of Justice. It comes into demonstrable existence gradually, blow by blow, from the synthesis and specific application of familiar principles of Community law hammered out by the Court of Justice over the period of the Community's existence. First principles of the Community's legal order are reviewed in order to lay out the analytical steps leading to the establishment of a basis for private antitrust litigation. The deconstruction of these principles also serves to assist in determining the extent to which principles developed in US antitrust are suitable for application in the Community context. 5.2 The Treaty of Rome and the Community Order The Court of Justice has described the EC Treaty as 'the constitutional charter of a Community based on the rule of law'.7 Wyatt and Dashwood describe the Community as 'a developed form of international organisation which displays characteristics of an embryonic federation . . . quasi-federal, yet undeniably sui generis'8 No discussion would be complete without the classic pronouncement of the European Court of Justice in Van Gend en Loos:

85df07a2946c0bf5e633a71e91da97ad. [T]his Treaty is more than an agreement which merely creates mutual obligations between the contracting gif States. . . . Community law has an authority which can be invoked by their nationals before those courts and

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tribunals. The conclusion to be drawn from this is that the Community constitutes a new legal order of international law for the benefit of which the States have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals. Independently of the legislation of Member States, Community law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.9 Subsequently, in Costa,10 the Court made it clear that sovereignty was transferred to the Community:

85df07a2946c0bf5e633a71e91da97ad. 85df07 By contrast with ordinary international treaties, the EEC Treaty has created its own legal system which, on the gif entry into force of the Treaty, became an integral part of gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0 6 Art. 232 (formerly 175) EC. gif gif 85df07a2946c0bf5e633a71e91da97ad. 7Opinion 1/91, Draft EEA Agreement, [1991] ECR 6079, 21. gif 85df07a2946c0bf5e633a71e91da97ad. 8 D. Wyatt and A. Dashwood, European Community Law (3rd edn., London, 1993), 53, 56. gif 9 Case 26/62, Van Gend en Loos v. Nederlandse Tariefcommissie, [1963] ECR 1, 12. This case is the 'judicial fons 85df07a2946c0bf5e633a71e91da97ad. gif et origo of the principle that certain provisions of the Treaty may be invoked by individuals in national courts': Wyatt and Dashwood, supra note 8, at 58.

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85df07a2946c0bf5e633a71e91da97ad. the legal systems of the Member-States and which their courts are bound to apply. By creating a Community gif of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of

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representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the States to the Community, the Member States have limited their sovereign rights, albeit within limited fields, and have thus created a body of law which binds both their nationals and themselves. The basis of the Community order is thus a transfer of powers to common institutions coupled with a limitation of the powers remaining with the Member States. The corollaries of this divided sovereignty are the direct effect and supremacy of Community law, since a lawful delegation of powers necessarily implies that the acts of the new holder of transferred powers have effect in domestic law and prevail over inconsistent national law.11 This underlying theory is 'of intrinsic interest and may facilitate the solution of practical problems'.12 Indeed, direct applicability/direct effect and supremacy of Community law are the 'twin pillars of the Community legal system'.13 They are also the fundamental bases for the private use of Articles 81 and 82 (formerly 85 and 86) as a sword. Unless individuals are given rights by the Treaty which they may protect notwithstanding contrary or absent provisions of national law, the question of private enforcement of EC competition rules does not arise. 5.3 Direct Effect and the Competition Rules Discussions of the principle of direct effect traditionally commence with the decision in Van Gend en Loos, where the Court of Justice, over the objections of three Member States (out of then six) and the Advocate General,14 declared that individuals had the right to enforce Article 12 EC (now Article 25) rather than only the right to wait until the Commission or another Member State enforced it:

85df07a2946c0bf5e633a71e91da97ad. 85df07a 11 J.-V. Louis, The Community Legal Order (3rd edn., Luxembourg, 1995), 1718. gif gif 85df07a2946c0bf5e633a71e91da97ad. 12 Cf. Wyatt and Dashwood, supra note 8, at 53. gif 13 Wyatt and Dashwood, supra at 54; Louis, supra note 11, at 131. The concepts of direct effect and direct 85df07a2946c0bf5e633a71e91da97ad. gif applicability are not synonymous, although some have desired to 'ignore the whole controversy': T. C. Hartley, The Foundations of European Community Law (3rd edn., Oxford, 1994), 207. The distinction is made clear in J. A. Winter, 'Direct Applicability and Direct Effect: Two Distinct and Different Concepts in Community Law', (1972) 9 CML Rev. 425 and in A. Dashwood, 'The Principle of Direct Effect in European Community Law', (1978) 16 JCMS 229, 231. In essence, direct applicability has to do with the incorporation of a rule of Community law into the national legal order and direct effect has to do with whether a rule of Community law which is directly applicable creates rights in individuals which they may enforce directly. Direct applicability is clearly present and necessary, but not sufficient. 85df07a2946c0bf5e633a71e91da97ad. 14 Roemer AG agreed that (old) Arts. 85, 86, 88, 177, and 192 were 'clearly intended to be incorporated into gif national law and to modify or supplement it' but not Art. 12.

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85df07a2946c0bf5e633a71e91da97ad. A restriction of the guarantees against an infringement of Article 12 [now 25] by Member States to the gif procedures under Article 169 and 170 [now 226 and 227] would remove all direct legal protection of the

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individual rights of their nationals. There is the risk that recourse to the procedure under these articles would be ineffective if it were to occur after the implementation of a national decision taken contrary to the provisions of the Treaty. The vigilance of individuals concerned to protect their rights amounts to an effective supervision in addition to the supervision entrusted by Articles 169 and 170 [now 226 and 227] to the diligence of the Commission and of the Member States. It follows from the foregoing considerations that, according to the spirit, the general scheme and the wording of the Treaty, Article 12 [now 25] must be interpreted as producing direct effects and creating individual rights which national courts must protect.15 The two central conclusions to be drawn are (1) that EC law is capable of creating rights for individuals and (2) that national courts in Member States must protect them.16 The Van Gend en Loos judgment 'affirms the existence of the ''new legal order" in which individuals, as well as Member States, may have rights and obligations'.17 The criteria for determining which provisions of EC law will be considered to produce direct effects have been summarized as:

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e the provision in question must be sufficiently clear and precise for judicial application; gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e91da97ad. it must establish an unconditional obligation; gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07 the obligation must be complete and legally perfect, and its implementation must not depend on measures gif being subsequently taken by Community institutions or Member States with discretionary power in the gif matter.18 5.3.1 The Primary Line of Direct Effect Decisions The Court of Justice has never expressly applied these criteria to Articles 85 and 86 (now 81 and 82). As early as Van Gend en Loos, Advocate General Roemer took the position that Articles 85 and 86 (now 81 and 82) produced effects in national law, a position which the Court of Justice expressly accepted in BRT v. SABAM,19 stating:

85df07a2946c0bf5e633a71e91da97ad. As the prohibitions of Articles 85(1) and 86 [now 81(1) and 82] tend by their very nature to produce direct gif effects in relations between individuals, these articles create direct rights in respect of the individuals

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concerned which the national courts must safeguard.20

85df07a2946c0bf5e633a71e91da97ad. 15Van Gend en Loos, [1963] ECR at 13, 30 (emphasis supplied). Art. 25 (formerly 12) prohibits Member gif States from increasing or introducing new customs duties on imports. A Dutch importer challenged a tariff

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reclassification which resulted in a higher rate of duty being charged.

85df07a2946c0bf5e633a71e91da97ad. 16 E. Sharpston, Interim and Substantive Relief in Claims under Community Law (London, 1993), 4; Hartley, gif supra note 13, at 195. 85df07a2946c0bf5e633a71e91da97ad. 17 Wyatt and Dashwood, supra note 8, at 60. gif 18 Wyatt and Dashwood, supra; Hartley, supra note 13, at 200. 85df07a2946c0bf5e633a71e91da97ad. gif 19 Case 127/73, Belgische Radio en Televisie (BRT) v. Société Belge des Auteurs Compositeurs et Editeurs de 85df07a2946c0bf5e633a71e91da97ad. gif Musique (SABAM), [1974] ECR 51 and 313. 85df07a2946c0bf5e633a71e91da97ad. 20BRT v. SABAM, at 16. gif

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In its discussion, the Court drew a clear distinction between national courts which had authority to pass on questions involving Article 85 and 86 (now 81 and 82) by reason of direct effect and those 'authorities' which derived their jurisdiction from Article 88 (now 84) and Regulation 17:

85df07a2946c0bf5e633a71e91da97ad. 15. The competence of those courts to apply the provisions of Community law, particularly in the case of such gif disputes, derives from the direct effect of those provisions. 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e91da97ad. ... gif gif 85df07a2946c0bf5e633a71e91da97ad. 17. To deny, by virtue of the aforementioned Article 9 [of Regulation 17], the national courts' jurisdiction to gif afford this safeguard, would mean depriving individuals of rights which they hold under the Treaty itself. . . . 85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e91da97ad. ... gif gif 85df07a2946c0bf5e633a71e91da97ad. 20. The fact that the expression 'authorities of the member states' appearing in Article 9(3) of Regulation No gif 17 covers such courts cannot exempt a court before which the direct effect of Article 86 [now 82] is pleaded

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from giving judgment.21 The BRT v. SABAM, judgment thus stands for the principles that (1) Articles 85(1) and 86 (now 81 and 82) produce direct effects and (2) a regulation cannot deprive individuals of directly effective rights held under the Treaty. The European Court drew no distinction between Articles 85(1) and 86 (now 81 and 82), although the case actually involved questions only relating to Article 86 (now 82). In de Haecht No. 2,22 the Court had previously stated that 'the judiciary, by virtue of the direct effect of Article 85(2) [now 81(2)], is competent to rule against prohibited agreements and decisions by declaring them automatically void'. In addition, the Court discussed how the competence of the national courts derived from the Treaty, not from Regulation 17:

85df07a2946c0bf5e633a71e91da97ad. 6. Whilst, in defining the powers of the Commission, Regulation no 17, and in particular Article 7 thereof, gif enabled the Commission to take into account the general principle of legal certainty, it did not modifyas

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indeed it could notthe effects of Article 85 (2) [now 81], but, on the contrary, by Article 1 thereof, it confirmed that, without prejudice to Articles 6, 7 and 23 thereof, agreements, decisions and concerted practices of the kind described in Article 85 (1) [now 81(1)] shall be prohibited, no prior decision to that effect being required.

85df07a2946c0bf5e633a71e91da97ad. 7. Thus it was left entirely to the judgment of the courts to determine the lines on which the legal application gif of Article 85 (2) [now 81(2)] should be reconciled with respect for the said general principle of legal

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certainty.23 The judgment in de Haecht No. 2 therefore places the question of legal certainty in the hands of the national court judge, not the Commission or national authorities. The scope of alternatives available to the national court is addressed in more

85df07a2946c0bf5e633a71e91da97ad. gif 21BRT v. SABAM, [1974] ECR 51, at 1517, 20, (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. 22 Case 48/72, Brasserie de Haecht v. Wilkin (No. 2), [1973] ECR 77 (hereinafter, de Haecht No. 2). gif 85df07a2946c0bf5e633a71e91da97ad. gif 23de Haecht No. 2, supra, at 67 (emphasis supplied).

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detail in Chapter 8, but it is worth nothing at this point the Court's expressed view that national courts are capable of dealing with issues of legal certainty independent of implementing regulations. In Delimitis,24 the Court again discussed the direct effects produced by Articles 85 and 86 (now 81 and 82):

85df07a2946c0bf5e633a71e91da97ad. 85df07 [T]he Commission has exclusive competence to adopt decisions in implementation of Article 85(3) [now 81 gif (3)]. On the other hand, the Commission does not have exclusive competence to apply Articles 85(1) [now 81 gif (1)] and 86 [now 82]. It shares that competence with the national courts. As the Court stated in its judgment in Case 127/73 (BRT v. SABAM [1974] ECR 51), Articles 85(1) and 86 [now 81(1) and 82] produce direct effect in relations between individuals and create rights directly in respect of the individuals concerned which the national courts must safeguard. In none of these cases did the Court expressly apply its announced criteria for determining whether a given Treaty provision produced direct effects. Nonetheless, if Articles 85(1)(2) and 86 (now 81 and 82) are directly effective, one is left to consider precisely how the application of the Court's criteria yields this results. The first criterion, sufficiently clear and precise, is seemingly satisfied in the case of both Articles 81 and 82 (formerly 85 and 86).25 The second one, unconditionality, is less clear. One could (although one need not) read Article 83 (formerly 87), imposing on the Council the obligation to 'adopt any appropriate regulations or directives' to give effect to the principles set out in Articles 85 and 86 (now 81 and 82) within three years of the entry into force of the Treaty, as making the application of the competition rules conditional upon the adoption of a Council regulation. However, the Court in Bosch26 recognized that Articles 88 and 89 (now 84 and 85) rendered such an interpretation impossible because the Member States and the Commission were there authorized to enforce Articles 81 and 82 (formerly 85 and 86) immediately.27 This seems clearly correct. It therefore seems that direct effect should not be denied on the basis of conditionality. Under Article 88 (now 84), the 'authorities' in the Member States were clearly fully able to enforce Articles 85 and 86 (now 81 and 82) at least until regulations were adopted. Under Article 89 (now 85), the Commission was entitled to

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 24 Case 234/89, Delimitis v. Henninger Bräu, [1991] ECR I935. gif gif 85df07a2946c0bf5e633a71e91da97ad. 25 Some who consider the breadth of former Art. 85(1) or 86 (now 81 and 82) to be excessive might wish to argue gif the point, but broad is not the same as unclear. Generality is not fatal to finding a provision creates direct effects. See, e.g., Case 27/67 Fink-Frucht v. Hauptzollamt München, [1968] ECR 223, 232 (Art. 95, now Art. 90, case, 'similar products' language). Moreover, Reg. 17 adds nothing of a definitional or clarifying nature to the prohibitions in Art. 81 or 82 (formerly 85 or 86). Of course, Reg. 17 itself is directly applicable.

85df07a2946c0bf5e633a71e91da97ad. 26 Case 13/61, De Geus v. Bosch, [1962] ECR 45. gif 27 The expiry of a time limit without implementing action seems not to have been a factor. Cf. Case 33/74, Van 85df07a2946c0bf5e633a71e91da97ad. gif Binsbergen v. Bestuur van de Bedrijsvereniging voor de Metaalnijverheid, [1974] ECR 1299.

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find infringements and ask the Member States to take steps to enforce such a finding. The Commission's express power under Article 89 (now 85) to declare infringements clearly implied a power to determine inapplicability pursuant to Article 85(3), now 81(3).28 Therefore, the obligations imposed by Article 85 and 86 (now 81 and 82) could not be conditional on the adoption of regulations because the Commission had explicit Treaty authority to find infringements, and that authority was independent of Regulation 17. The third criterion for determining direct effect, lack of dependence on further discretionary action by a Community institution or Member State, might be argued not to be met as to Article 85 (now 81) because of the possibility of a declaration of inapplicability (exemption) under Article 85(3), now 81(3). Article 86 (now 82) lacks any provision for exemption, and it clearly satisfies the third criterion. Article 85 (now 81) bears some additional discussion. However, the text of Article 85 (now 81) does not easily lend itself to the interpretation that its prohibition depends on further Community action. Analytically, an agreement or decision must first fall under the prohibition of Article 85(1), now 81(1), before it may be considered whether it should nevertheless be exempted under Article 85(3), now 81(3). The text of Article 85 (3), now 81 (3), speaks of declaring 'the provisions of paragraph 1 . . . inapplicable', not of declaring the provisions of Article 85 (now 81) as a whole inapplicable. Article 85(1), now 81(1) does not condition its prohibition on the non-application of the criteria laid down in Article 85(3), now 81(3). Hence, there is no textual basis for the requirement of an exemption decision before the prohibition applies. It seems inconsistent with the Treaty text to preclude a national court from finding an infringement or applying a nullity sanctionwhich national courts exclusively may applyon the mere basis that a theoretical discretionary exemption has not yet been denied. Such an interpretation would create a negative conditionthat an exemption be sought and refused in order to determine whether an infringement had occurred without an adequate textual foundation. In terms of direct effects criteria, the prohibition of Article 85(1), now 81(1), and the nullity sanction of Article 85(2), now 81(2), are not dependent on a further or prior discretionary act, but at most are subject to being disapplied by a later discretionary act. This is consistent with the approach taken by the Court in BRT

85df07a2946c0bf5e633a71e91da97ad. 28 It seems that the Art. 89 (now 85) powers of the Commission to make a finding of infringement and gif request enforcement of such a finding from the national authorities of the Member States surely imply a

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power to make a finding that an infringement of Art. 85(1), now 81(1), does not exist because it is inapplicable pursuant to Art. 85(3), now 81(3). Cf. Case 7/82, Gesellschaft zur Verwaltung von Leistungsschutzrechten GmbH (GVL) v. Commission, [1983] ECR 483, 502 (power to order termination of an infringement and impose a fine 'necessarily implies a power to make a finding that the infringement exists').

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v. SABAM, de Haecht No. 2 and Delimitis. Article 85(1)(2), now 81(1)(2) therefore satisfies the Court's criteria and does produce direct effects. 5.3.2 The Secondary Line of Decisions: The Bosch Puzzle The principal basis for opposing the conclusion that Article 85 does produce direct effects derives from Bosch,29 in which the issue of the direct effect of Article 85 (now 81) indirectly arose prior to Van Gend en Loos.30 In Bosch, the manufacturer and his exclusive dealer sued under the Dutch law of unfair competition in order to restrain the activities of a parallel importer. The defendant sought to invalidate the exclusive agreement by asserting the nullity provision in Article 85(2), now 81.31 The matter came before the Court of Justice on an Article 177 (now 234) reference and was decided two months after Regulation 17 came into force. The Court was therefore confronted with the question whether the 'Eurodefence' of nullity under Article 85(2), now 81, could be asserted where no implementing regulations were in place in the relevant time period. In effect, the Court was asked whether Article 85, now 81, was applicable prior to the enactment of Regulation 17:

85df07a2946c0bf5e633a71e91da97ad. 85df07 The answer to this question must in principle be in the affirmative. Articles 88 and 89 [new 84 and 85] of the gif Treaty, which confer powers on the national authorities and on the Commission respectively for the gif application of Article 85 [now 81], presuppose its applicability from the time of entry into force of the Treaty . . .

85df07a2946c0bf5e633a71e91da97ad. Moreover, in accordance with the text of Article 85(2) [now 81(2)], which in referring to agreements or gif decisions 'prohibited pursuant to this article' seems to regard Articles 85 [now 81] (1) and (3) as forming an

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indivisible whole, this Court is bound to admit that up to the time of entry into force of the first regulation implementing Articles 85 and 86 [now 81 and 82], the nullifying provisions had operated only in respect of agreements and decisions which the authorities of the Member States, on the basis of Article 88 [now 84], have expressly held to fall under Article 85 (1) [now 81(1)], and not to qualify for exemption under 85 (3) [now 81(3)], or in respect of which the Commission has taken the decision envisaged by Article 89 (2)[new Article 85].32

85df07a2946c0bf5e633a71e91da97ad. 29 Case 13/61, De Geus v. Bosch, [1962] ECR 45, and the following: Cases 20913/84, Ministère Public v. gif Asjes (Nouvelles Frontières), [1986] ECR 1425, and Case 66/86, Ahmed Saeed Flugreisen v. Zentrale zur

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Bekämpfung Unlauteren Wettbewerbs eV, [1989] ECR 803.

85df07a2946c0bf5e633a71e91da97ad. 30 Case 13/61, Bosch, was decided on 6 April 1962. Reg. 17 was dated 6 Feb. 1962, and Van Gend en Loos was gif decided on 6 Feb. 1963. 85df07a2946c0bf5e633a71e91da97ad. 31 Art. 81(2), formerly 85(2), states that '[a]ny agreements or decisions prohibited pursuant to this Art. shall be gif automatically void'. 85df07a2946c0bf5e633a71e91da97ad. 32Bosch, [1962] ECR 45, at 512. The Court established the 'provisional validity' doctrine, whereby national gif courts were required to give effect to any agreement in force prior to passage of Reg. 17 (e.g., not declare it a nullity under Art. 85(2), now 81) which had not yet been the subject of an unfavorable Commission or Member State authority action. This effectively stifled private Art. 85 litigation prior to de Haecht No. 2.

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The Bosch judgment states that it would be contrary to the principle of legal certainty to apply Article 85(2), now 81(2) before decisions had been taken under both Article 85(1) and Article 85(3), now Article 81(2) and 81(3)the Court was concerned by the:

85df07a2946c0bf5e633a71e91da97ad. [I]nadmissible result that some agreements would already have been automatically void for several years gif without having been so declared by any authority, and even though they might ultimately be validated

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subsequently with retroactive effect. In general it would be contrary to the general principle of legal certaintya rule of law to be upheld in the application of the Treatyto render agreements automatically void before it is even possible to tell which are the agreements to which Article 85 [now 81] as a whole applies.33 From the perspective of whether Article 85 (now 81) is capable of creating direct effects, Bosch appears troublesome in that it seems to require a prior decision of infringement and non-exemption by the Commission or a national authority before Article 85(2), now 81(2), can be directly effective without infringing the principle of legal certainty. The Court's solution to a perceived lack of legal certainty was its doctrine of provisional validity, but this was unnecessary. The Court might have met the legal certainty objection by noting that national courts could have applied Article 85(3), now 81, in the same proceeding in which Article 85(2) nullity was in issue, at least until Regulation 17 divested them of that power by assigning exclusivity to the Commission.34 Article 85, now 81, itself does not specify the identity of the person entitled to issue a declaration of inapplicability, and one might have thought that national courts could apply the entirety of Article 85, now 81. While it is readily apparent that the Bosch court was genuinely concerned by what it saw as a problem of legal certainty, the reasoning contained in the judgment is less than satisfactory. One suspects that the Court's judgment was unduly influenced by its previous decision under the ECSC Treaty in Stork35 in which the Courtand the same Advocate Generalhad applied a transition convention attached to the ECSC Treaty to craft an ECSC provisional validity doctrine. However, the situation in Stork involved the total initial lack of a High Authority at all and no provision for Member State governments to grant cartel authorizations, so that 'there was no organization in existence with power to grant the authorizations'.36

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e9 33Supra. gif gif 85df07a2946c0bf5e633a71e91da97ad. 34 In Case 43/69 Brauerei A. Bilger Söhne GmbH v. Heinrich Jehle, [1970] ECR 127, the Court treated a national gif court as an 'authority' within the meaning of Art. 88 EC (now 84) and Art. 9 of Reg. 17. The Court later distinguished between courts and national authorities, but had not done so at the time of the Bosch judgment.

85df07a2946c0bf5e633a71e91da97ad. 35 Case 1/58, Friedrich Stork & Co. v. High Authority, [1959] ECR 17. gif 36Stork, supra, at 29. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_53


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In hindsight, it appears that Articles 88 and 89 EEC (now 84 and 85) must have been intended to avoid this problem when the EEC Treaty took effect, but the Court seemingly failed to give effect to these material distinctions. Instead, the Court focused on the transition provisions of Regulation 17 and seemed to regard the retroactive exemption provisions there as a basis for concluding that Article 85 (now 81) was not fully operative from the outset. The Bosch judgment is also flawed by internal inconsistency. The European Court made the (doubtful) statement that the Commission lacked the power under Article 85(3), now 81, to issue declarations of inapplicability, while simultaneously concluding that if the Commission had made a finding of infringement, this was sufficient to enable a national court to treat an agreement as void under Article 85(2), now 81(2). It has been previously suggested that the Commission's power to find infringements implies the right to take exemption decisions under Article 85(3), now 81(3). However, if the Bosch court thought so, why state the Commission lacked the power? If the Bosch court thought not, why say the Commission's infringement finding under its Article 89 (now 85) powers was sufficient to invoke Article 85 (2) (now 81) without an Article 85(3) (now 81) decision having been taken when the Court expressly said they were indivisible? It was precisely that point which seemed to cause the court to re-invent provisional validity for the EEC Treaty. The European Court seemed to have improved matters by its 1973 decision in de Haecht No. 2, which it is submitted represents a frontal assault on the underpinnings of Bosch. In de Haecht No. 2, the Court stated that 'by Article 85(2) [now 81(2)], the Treaty has, from its entry into force, rendered any agreements or decisions prohibited pursuant to this article automatically void',37 and noted that Regulation 17 'did not modifyas indeed it could notthe effects of Article 85 (2) [now 81(2)]'.38 The Court then proceeded to revise its provisional validity doctrine to apply only to 'old' agreementsthose entered into prior to the entry into force of Regulation 17stating that as regards new agreements 'it was left entirely to the judgments of the courts to determine the lines on which the legal application of Article 85(2) [now 81 (2)] should be reconciled with respect for the said general principle of legal certainty'.39 The judgment in de Haecht No. 2 did not re-examine provisional validity of 'old' agreements, but made it clear that since the entry into force of Regulation 17, the parties were required to know that they implemented the agreements prior to receiving the Commission's approval at their own risk. It appears that the fundamental distinction for the European Court in the application of the general prin-

85df07a2946c0bf5e633a71e91da97ad. 37de Haecht No. 2, at 2 (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 38Supra, at 6. gif 85df07a2946c0bf5e633a71e91da97ad. gif

39Supra, at

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ciple of legal certainty was the knowledge of the parties of the possible illegality of the agreement at the time the agreement was formed. The de Haecht No. 2 judgment seemed to strengthen the argument for direct effect by its statements regarding the inability of the Regulation to modify the Treaty, and that the legal certainty principle 'cannot, however, absolve the court from the obligation of deciding on the claims of interested parties who invoke the automatic nullity'.40 Given these strong statements, it is not clear why the Court did not take the view that 'new' agreements were those entered into after the EC Treaty came into force, rather than after Regulation 17 came into force. It may be that the Court was simply unwilling to retreat so far from its pronouncements in Bosch, although it must be said that a substantial retreat did take place. In the subsequent BRT v. SABAM judgment, the Court clearly stated that the competence of national courts to apply Articles 85 and 86, now 81 and 82, 'derives from the direct effect of those provisions', whereas the competence of national authorities 'derives from Article 88'.41 Accordingly, Article 9 of Regulation 17 could neither deprive 'individuals of rights which they hold under the Treaty itself', nor 'exempt a court before which the direct effect of Article 86 [now 82] is pleaded from giving judgment'.42 By 1974 it seemed as if Bosch had been almost totally undermined and limited to the unique circumstances of the gap between the entry into force of the Treaty and the entry into force of Regulation 17. However, any reports of the demise of Bosch were premature. In Nouvelles Frontières,43 executives of airlines and a travel agency were criminally charged with the heinous offence of engaging in competition on the basis of price by selling air tickets at prices lower than set out in applicable tariffs. The French criminal tribunal referred the matter to the Court under Article 177 (now 234). Regulation 17 had been disapplied to air transport, so no regulation on the application of Article 85(3), now 81, was in force for the air travel industry. The Commission argued that a lack of applicable rules enacted under Article 87, now 83, did not prevent the French court from applying Article 85(1) and (2), now 81(2) and (3), since the provisions had direct effect, and since old agreements were not involved. The Court rejected the Commission's position:

85df07a2946c0bf5e633a71e91da97ad. 85df07 It must therefore be concluded that in the absence of a decision taken under Article 88 [now 84] by the gif competent national authorities ruling that a given concerted action on tariffs taken by airlines is prohibited by gif Article 85(1) [now 81(1)] and cannot be exempted from that prohibition pursuant to Article 85(3) [now 81 (3)], or in the absence of a decision by the Commission under Article 89(2) [now 85] recording that such a concerted practice constitutes an infringement of [old] Article 85(1)

85df07a2946c0bf5e633a71e91da97ad. 40Supra, at 11. gif 85df07a2946c0bf5e633a71e91da97ad. gif 41BRT v. SABAM, [1974] ECR 51 at 15, 18. 85df07a2946c0bf5e633a71e91da97ad. gif 42Supra, at 17, 20. 85df07a2946c0bf5e633a71e91da97ad. 43 Cases 20913/84, Ministère Public v. Asjes (Nouvelles Frontières), [1986] ECR 1425. gif < previous page page_55


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85df07a2946c0bf5e633a71e91da97ad. [now 81(1)], a national court such as that which has referred these cases to the court does not itself have gif jurisdiction to hold that the concerted action in question is incompatible with Article 85 (1) [now 81(1)].44

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Nouvelles Frontières reads as if none of the judgments in the intervening 22 years since Bosch had taken place. The Court ignored the fact that the agreements in issue were 'new' agreements, repeated without elaboration its conclusions from Bosch that in the absence of an implementing regulation an agreement was not 'immediately considered to be prohibited' due to the principle of legal certainty, and reiterated the position that the Commission had no power to make declarations under Article 85(3), now 81(3).45 At the same time, the Court also repeated its somewhat contradictory statement that if the Commission declared the existence of an infringement an agreement must be treated as void by a national court.46 Moreover, the Court expressly stated that in the absence of a Member State authority finding under Article 88 (now 84) or a Commission finding under Article 89 (now 85), 'a national court . . . does not itself have jurisdiction to hold that the concerted action in question is incompatible with Article 85(1) [now 81(1)]'. A conclusion more inconsistent with the reasoning in de Haecht No. 2 and BRT v. SABAM can scarcely be imagined, yet the Court neither makes an attempt to reconcile its judgment with any of its pronouncements since Bosch nor expresses its disapproval of those cases. Three years later, the court announced its judgment in Saeed,47 another air transport case. In the interim, implementing regulations based on Article 87 (now 83) had come into force regarding intra-Community air travel, but not as regards flights between Community countries and non-member countries. With respect to the Article 85 (now 81) question, the judgment merely followed without meaningful new discussion the results in Nouvelles Frontières. However, the issue arose regarding whether the full effect of Article 86 (now 82) was also dependent on a finding pursuant to Article 88 (now 84) by a national authority or Article 89 (now 85) by the Commission. The Commission, which in Nouvelles Frontières had argued for the full direct effect of both Articles 85(1)(2) and 86 (now 81 and 82), this time argued Article 86 (new 82) could not be applied by a national court because neither the Commission nor a national authority had taken a decision that Article 86 (new 82) was infringed. The Court in Saeed somewhat surprisingly rejected the Commission's argument in a rather sharp departure from its reasoning in Bosch and Nouvelles Frontières:

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 44Supra, at 68. gif gif 85df07a2946c0bf5e633a71e91da97ad. gif 45Supra, at 614. 85df07a2946c0bf5e633a71e91da97ad. gif 46Supra, at 65, 69. 85df07a2946c0bf5e633a71e91da97ad. 47 Case 66/86, Ahmed Saeed Flugreisen v. Zentrale zur Bekämpfung Unlauteren Wettbewerbs eV, [1989] ECR gif 803.

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85df07a2946c0bf5e633a71e91da97ad. 85df07 The sole justification for the continued application of the transitional rules set out in Articles 88 and 89 [new gif 84 and 85] is that the agreements, decisions and concerted practices covered by Article 85(1) [new 81(1)] may gif qualify for exemption under Article 85(3) [new 85(3)] and that it is through the decisions taken by the institutions which have been given jurisdiction, under the implementing rules adopted pursuant to Article 87 [now 83], to grant or refuse such exemption that competition policy develops. In contrast, no exemption may be granted, in any manner whatsoever, in respect of abuse of a dominant position; such abuse is simply prohibited by the Treaty and it is for the competent national authorities or the Commission, as the case may be, to act on that prohibition within the limits of their powers.

85df07a2946c0bf5e633a71e91da97ad. 33. It must therefore be concluded that the prohibition laid down in Article 86 [new 82] of the Treaty is fully gif applicable to the whole of the air transport sector.48

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Notably absent from the Saeed judgment is any concern grounded in the general principle of legal certainty. Instead, the Court seems to consider 'the sole justification for the continued application of the transitional rules' to be the Commission's power to conduct competition policy through the granting and withholding of exemptions. The Court does not seem concerned that the transitional rules expressly allocate exemption decisions to national authorities or that its judgments in Bosch and Nouvelles Frontières deny that the Commission has any power conferred by the Treaty to grant exemptions. How these points might square with this hitherto undetected rationale for not recognizing the direct effect of Article 85 is left unexplained, as is the absence of discussion concerning legal certainty. After Saeed, the Court handed down its judgment in Delimitis, returning to the direct effect principles it had laid down in de Haecht No. 2 and BRT v. SABAM. Again, no attempt at reconciliation appears: it is as if the Bosch line of cases had never existed. 5.3.3 A Modest Reconciliation? From a theoretical perspective, it is difficult to avoid the conclusion that the principle of direct effect as applied to competition law (or at least to Article 85, now 81) is in a muddle. If taken at face value, Nouvelles Frontières would establish the principle that in the absence of Article 87 (now 83)-authorized implementing regulations, national courts have no jurisdiction to apply Article 85(1)(2), now 81, even though the Court had squarely held in de Haecht No. 2 and SABAM that national courts draw their authority from the direct effect of Article 85, now 81, not from Article 88 or 89 (now 84 or 85) or the implementing regulation. It is difficult to discern a supportable theoretical underpinning for a doctrine which holds that the direct effect of a Treaty provision can be 'switched on' or 'off' according to the status of an implementing regulation. Certainly the Commission has attempted to do so in the Merger Regulation by disapplying Regulation

85df07a2946c0bf5e633a71e91da97ad. gif 48Saeed, supra, at 323 (emphasis supplied).

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1749 to concentrations meeting the criteria of the Merger Regulation. This is an effort to exclude the directly effective application of Article 85 (now 81) to mergers under the conditions mentioned in Continental Can,50 although the legal effect of this attempt has apparently not been tested. While the Court initially suggested in Bosch that the general principle of legal certainty was the basis for withholding full direct effect of Article 85 (now 81) during the transitional stage, the shifting of the Court's articulated justification from legal certainty to the Commission's task of developing Community competition policy through exemptions (which ostensibly may be granted by national authorities only!) leaves one dissatisfied and wary of the strength of either justification. In order to reconcile the European Court's conflicting pronouncements, it is submitted that one must look at the overall perspective rather than continuing to struggle to reconcile the literal language of these several judgments. One suspects that the explanation for these largely unexplained doctrinal shifts and conflicts is the presence of one or more unarticulated bases for the judgments. Bosch could be dismissed quickly as a transitional aberration were it not for the Court's 1986 resurrection of that judgment in Nouvelles Frontières and, to a lesser extent, Saeed. However, the application of the legal certainty principle does not sit well nearly 30 years after the Treaty entered into force when it is considered that the agreements at issue in both of the later cases were in effect classic horizontal cartel price-fixing agreements the illegality of which could not have been in doubt under Article 85 (now 81). It is submitted that Nouvelles Frontières and Saeed are satisfactorily explained only as judicial policy decisions intended to avoid disruption in an economic sector (international air transport) largely constructed on the basis of a web of international multilateral and bilateral treaties.51 This is also consistent with the Court's shift in its justification for continuing the application of 'transitional' Articles 88 and 89 (now 84 and 85) nearly three decades after the EC Treaty entered into force. Notwithstanding the above theoretical problems raised by the vicissitudes of the Court's approach to the direct effect of competition law, it must be admitted that for nearly all practical purposes there can be no doubt that Articles 85(1)(2) and 86 (now 81 and 82) do produce direct effect. This is because Regulation 17 is in effect for most of the economy, and the effect of the Bosch line of cases is therefore limited to the minority of economic sectors not covered by any implementing reg-

85df07a2946c0bf5e633a71e91da97ad. 49 Art. 22(2) of Council Reg. 4064/89 of 21 Dec. 1989 on the Control of Concentrations Between gif Undertakings (as corrected and published in [1990] OJ L257/90) ([1989] OJ L395/1), as amended.

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85df07a2946c0bf5e633a71e91da97ad. 50 Case 6/72 Europemballage Corp. and Continental Can Co. Inc. v. Commission (Continental Can), [1973] ECR gif 215. 85df07a2946c0bf5e633a71e91da97ad. gif 51Nouvelles Frontières, at 1824; Saeed, at 14.

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ulations. In the vast majority of cases, the practical effectiveness of the direct effect of Article 85(1), now 81(1), is unrestricted. The absence in the Treaty of an express private right of action for infringement of Articles 85 and 86, now 81 and 82, is thus in part compensated for by the application of the principle of direct effect. However, the means of protecting these Community rights before national courts require further elaboration. 5.4 The Supremacy of EC Law and the Competition Rules It is necessary but not sufficient for Articles 81 and 82, formerly 85 and 86, to have direct effect in order to create a basis for private antitrust actions. A potential plaintiff armed with a directly effective Article 81 or 82, formerly 85 or 86, is still confronted with the problem of national laws which make no provision for private enforcement or contain provisions which have the effect of limiting or preventing such actions. The solution derives from the second pillar of Community law, supremacy. The importer in Van Gend en Loos, having secured from the Court of Justice a declaration of his right to enforce directly Community law, was left to confront a provision of national law which was obviously inconsistent with Community law. There would have been little merit in conferring a directly enforceable Community law right on an individual if it did not displace contrary national law. The Court made this foregone conclusion explicit first in Costa v. ENEL.52 In Costa, an Italian lawyer contested his electricity bill on the ground that Italy had nationalized the electric utility industry in violation of the EEC Treaty. The government of Italy argued that the Italian judge was required to follow Italian law, not Community law. The Court of Justice begged to differ:

85df07a2946c0bf5e633a71e91da97ad. The precedence of Community law is confirmed by Article 189 [now 249], whereby a regulation 'shall be gif binding' and 'directly applicable in all Member States'. This provision, which is subject to no reservation,

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would be quite meaningless if a State could unilaterally nullify its effects by means of a legislative measure which could prevail over Community law. It follows from all these observations that the law stemming from the Treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question.53 The principle of supremacy (or primacy) of Community law is not a mere abstraction. Because national courts are bound to protect Community rights, individuals are entitled to enforce those rights in national courts: '[e]very time a rule of

85df07a2946c0bf5e633a71e91da97ad. 52 Case 6/64, [1964] ECR 585. gif 85df07a2946c0bf5e633a71e91da97ad. 53Supra, at 5934. gif < previous page

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Community law confers rights on individuals, those rights, without prejudice to the methods of recourse made available by the Treaty, may be safeguarded by proceedings brought before the competent national courts'.54 In Simmenthal (No. 2),55 the Court declared that conflicting measures of substantive national law are 'automatically inapplicable' and that every national court must 'apply Community law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the Community rule'.56 This leads inexorably to the conclusion that since Community rights under the competition rules are required to be protected in and by national courts, it is incumbent upon the Member States to provide remedies and procedures suitable for the protection of those rights. While the Treaty provides competence for Community-wide harmonization legislation in such matters,57 no measures of general application providing remedies or procedural rules for protection of Community competition law rightsor any other Community rights, for that matterhave yet been enacted. In the absence of applicable Community legislative measures, the national courts are obliged to protect Community competition rulebased rights according to the procedures and remedies available to protect domestic rights. The ECJ said in Salgoil:

85df07a2946c0bf5e633a71e91da97ad. 85df07 It is for the national legal system to determine which court or tribunal has jurisdiction to give this protection gif and, for this purpose, to decide how the individual position thus protected is to be classified. . . . [I]t is for the gif legal system of each Member State to decide which court has jurisdiction and, for this purpose to classify those rights with reference to the criteria of national law.58 The aspect of the supremacy principle necessary to the fashioning of a private cause of action for infringements of the competition rules is the effective requirement that national courts disapply national law which conflicts with the protection of the Community right being asserted. In the context of proceedings before national courts, the supremacy principle furnishes the operative means by which Member States are brought to comply with their duties to take appropriate measures to fulfil treaty obligations, facilitate the Community's tasks, and abstain from measures which might jeopardise attainment of the objectives of the Treaty, as set out in Article 5, now 10, of the Treaty.

85df07a2946c0bf5e633a71e91da97ad. 54 Case 28/67, Firma Molkerei-Zentrale Westfalen/Lippe GmbH v. Hauptzollamt Paderborn, [1968] ECR gif 143, 153.

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85df07a2946c0bf5e633a71e91da97ad. 55 Case 106/77, Amministrazione delle Finanze dello Stato v. Simmenthal SpA (No. 2), [1978] ECR 629 at 17 gif (hereinafter, Simmenthal No. 2). 85df07a2946c0bf5e633a71e91da97ad. gif 56Supra, at 212. 85df07a2946c0bf5e633a71e91da97ad. 57 See, e.g., Arts. 100102, 235 EC, now 94, 96, 97, and 308. gif 58 Case 13/68, Salgoil SpA v. Italian Ministry for Foreign Trade, [1968] ECR 453, 462. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_60 next page >


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The national courts are the courts of first instance of the Community system, before which directly effective Community rights are adjudicated, but there are no Community rules or procedures governing actions under Community law. Up to a point, the Community provides the substantive right and the national court provides the procedural means of safeguarding that right in the absence of Community legislation. At one time, some thought that Community law had little to say about national remedies and procedures, but if that were ever the case, there can be little doubt that the conception of an unfettered national procedural autonomy is (and, it is submitted always was) a largely mythical beast.

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6 Remedy Principles and the Competition Rules

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6.1 The National Remedy Principle and the Competition Rules Many of the early remedy cases involved claims before national courts concerning recovery of duties or taxes paid by the plaintiff which were determined to violate Community law. The ECJ normally took the position that the national courts were to choose from the national remedial palette the appropriate remedy or procedure to apply, as in Gebrüder Lück:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Although Article 95 of the Treaty [a tax provision] has the effect of excluding the application of any national measure gif incompatible with it, the article does not restrict the powers of the competent national courts to apply, from among the gif various procedures available under national law, those which are appropriate for the purpose of protecting the individual rights conferred by Community law.1 However, even the earlier cases did not unconditionally free the national courts to apply domestic remedies without consideration of the extent to which those remedies effectively safeguarded Community rights. In Rewe and Comet,2 the Court permitted a Member State to apply 'reasonable' national statute of limitation periods to claims arising under Community law, but the Court declared limits on the scope of the application of the national rule, stating that:

85df07a2946c0bf5e633a71e91da97ad. 1 Case 34/67, Firma Gebrüder Lück v. Hauptzollamt Köln-Rheinau, [1968] ECR 245, 251. See also Case 28/67, gif Firma Molkerei-Zentrale Westfalen-Lippe GmbH v. Hauptzollamt Paderborn, [1968] ECR 143 at 154.

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85df07a2946c0bf5e633a71e91da97ad. gif 2 Case 45/76, Comet BV v. Produktschap voor Siergewassen, [1976] ECR 2043,

1317 (emphasis supplied). In Case 33/76, Rewe-Zentralfinanz eG v. Landwirtschaftskammer für das Saarland, [1976] ECR 1989, 6, the Court applied the same rule in nearly identical language.

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85df07a2946c0bf5e633a71e91da97ad. Consequently, in the absence of any relevant Community rules, it is for the national legal order of each gif Member State to designate the competent courts and to lay down the procedural rules for proceedings

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designed to ensure the protection of the rights which individuals acquire through the direct effect of Community law, provided that such rules are not less favourable than those governing the same right of action on an internal matter. . . . [T]he rights conferred by Community law must be exercised before the national courts in accordance with the rules of procedure laid down by national law. The position would be different only if those rules and time-limits made it impossible in practice to exercise rights which the national courts have a duty to protect. This does not apply to the fixing of a reasonable period of limitation within which an action must be brought. In a later case, Barra,3 a national law restricted repayment of discriminatory educational fees to students who had commenced an action prior to a judgment holding the fees incompatible with Community law. Although the national law bore a passing resemblance to a statute of limitation, the ECJ held that the national law could not be applied because it made it impossible to exercise the Community right at issue. Presumably the Court thought this restriction unreasonable, and it appeared to impinge upon the Court's prerogative to determine when its rulings would not have retroactive effect. The ECJ revisited limitation periods in Emmott,4 where it determined that national limitation periods applicable to rights derived from directives transposed into national law could not begin to run before the transposition was complete, notwithstanding that it considered that reasonable limitation periods in principle satisfy the criteria of adequacy and nondiscrimination. However, in Steenhorst-Neerings,5 the Court considered a national rule limiting the time period for which retroactive benefits related to incapacity could be claimed. The national law limited retroactive benefits to one year prior to the date of application. The Court considered that the limit on retroactive benefits did not prevent reliance on the directive at issue in the case and served the purposes of preventing administrative decisions from being challenged indefinitely (principle of legal certainty) and maintaining the financial equilibrium of the benefits scheme. In Johnson (No. 2),6 the ECJ again upheld a one year limit on retroactive disability benefits in a case where the national rule did not have the effect of barring the claim in its entirety, but merely limited the extent of retroactive benefits which could be claimed.

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 gif gif 3 Case 309/85, Barra v. Belgium, [1988] ECR 355, 1921. 85df07a2946c0bf5e633a71e91da97ad. 4 Case C208/90, Emmott v. Minister for Social Welfare, [1991] ECR I4269, at 1723. Estoppel seemed to be a gif concern of the ECJ in this case, as it has been in a number of cases involving dirs. 85df07a2946c0bf5e633a71e91da97ad. 5 Case C338/91, Steenhorst-Neerings v. Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en gif Huisvrouwen, [1993] ECR I5475, 213. 85df07a2946c0bf5e633a71e91da97ad. 6 Case C410/92, Johnson v. Chief Adjudication Officer (No. 2), [1994] ECR I5483, 30. gif

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These judgments have been criticized7 as indistinguishable from Emmott and representing retrenchment, if not abandonment, of the principles of effectiveness and adequacy of safeguards for the protection of Community rights. However, there is a clear distinction between a rule limiting the period during which damages may be claimed retroactively and a rule which denies the right to bring the action at all. The cases thus establish from near the outset at least two qualifications to the rule that national procedural rules and remedies apply in enforcement of Community law rights. The first is a rule of non-discrimination in the sense that 'such rules are not less favourable than those governing the same right of action on an internal matter'.8 The second, a rule of adequacy, is that such rules must not make it 'impossible in practice' to exercise rights which the courts are obligated to protect. The application of national procedures and remedies for the protection of substantive Community rights is not always a happy combination. The Court applied its adequacy test for the first time in San Giorgio,9 a case dealing with an attempt to recover inspection charges which were improperly levied on imported dairy products. The Court considered that national procedural rules which imposed the burden of proof on the person unlawfully charged duties to prove the charges had not been passed on, coupled with a limitation of evidence to documents, were such as to make it virtually impossible to exercise the Community right and were therefore incompatible with Community law, even though not discriminatory:

85df07a2946c0bf5e633a71e91da97ad. Whilst it is true that repayment may be sought only within the framework of the conditions as to both gif substance and form, laid down by the various national laws applicable thereto, . . . any requirement of proof

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which has the effect of making it virtually impossible or excessively difficult to secure the repayment of charges levied contrary to Community law would be incompatible with Community law.

85df07a2946c0bf5e633a71e91da97ad. 85df07 . . .[A] Member State cannot make the repayment of national charges levied contrary to the requirements of gif Community law conditional upon the production of proof that those charges have not been passed on to other gif persons if the repayment is subject to rules of evidence which render the exercise of that right virtually impossible, even where the repayment of other taxes, charges or duties levied in breac( of national law is subject to the same restrictive conditions. The San Giorgio case added the alternative phrase 'or excessively difficult' to the 'virtually impossible' language employed in the earlier Comet and Rewe judgments. It has been said that there is a distinction between the two,10 but the ECJ

85df07a2946c0bf5e633a71e91da97ad. 7 P. Craig and G. deBúrca, EC Law: Text, Cases, and Materials (Oxford, 1995), 2223. With respect, it is gif submitted that the Court's distinction was appropriately drawn. 85df07a2946c0bf5e633a71e91da97ad. 8Comet, supra note 2. gif 85df07a2946c0bf5e633a71e91da97ad. 9 Case 199/82, Amministrazione delle Finanze dello Stato v. Società San Giorgio SpA, [1983] ECR 3595, gif 14, 18 (emphasis supplied).

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85df07a2946c0bf5e633a71e91da97ad. 10 S. Prechal, Directives in European Community Law: A Study of Directives and their Enforcement in National gif Courts (Oxford, 1995), 152.

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as yet has not seemed to articulate a precise explanation of how they may differ. Nonetheless, these principles have increasingly been used by the ECJ to expand the extent of the 'legal infiltration'11 of national remedies by Community law. It has been said that as a general principle there is no obligation on the part of national courts to create new remedies for the protection of Community rights, although 'the exceptions are almost as wide as the rule'.12 The reference is almost always to the ECJ's statement in Rewe v. Hauptzollamt Kiel (Butter Cruises)13 that:

85df07a2946c0bf5e633a71e91da97ad. 44. With regard to the right of a trader to request the courts to require the authorities of a Member State to gif compel a third party to comply with obligations arising from Community rules in a given situation in which

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that trader is not involved but is economically adversely affected by the failure to observe Community law, it must be remarked first of all that although the Treaty has made it possible in a number of instances for private persons to bring a direct action, where appropriate, before the Court of Justice, it was not intended to create new remedies in national courts to ensure the observance of Community law other than those already laid down by national law. On the other hand . . . it must be possible for every type of action provided for by national law to be available for the purpose of ensuring observance of Community provisions having direct effect, on the same conditions concerning the admissibility and procedure as would apply were it a question of ensuring observance of national law. In Butter Cruises, a German wholesaler and one of his retailer customers complained of the fact that consumers were allowed to embark on cruises from the Baltic coast for the express purpose of purchasing aboard ship items such as butter, meat, and tobacco at favourable prices. When the butter-laden consumers disembarked, they were not charged duties, in alleged violation of Community common customs tariffs. The plaintiffs claimed they lost custom to the cruise ships due to the price advantage gained by elimination of duties charged to the consumers. The Court's statement that new remedies were not intended or required to be created was made in the context of its ruling in that case that neither Community law nor national law recognized a private right on the part of one citizen of a Member State to insist that customs authorities collect duties from other citizens. The Court considered that the customs provisions at issue were not measures intended for the protection of individuals or undertakings as traders.14 The plaintiffs may well have had a right to contest the amounts of tax collected from themselves but

85df07a2946c0bf5e633a71e91da97ad. 85df07a 11 Cf. S. Weatherill, Law and Integration in the European Union (Oxford, 1995), 205. gif gif 85df07a2946c0bf5e633a71e91da97ad. 12 D. Wyatt and A. Dashwood, European Community Law (3rd edn., London, 1993), 80. gif 85df07a2946c0bf5e633a71e91da97ad. 13 The 'butter cruises' case, Case 158/80, Rewe-Handelsgesellschaft Nord GmbH v. Hauptzollamt Kiel, [1981] gif ECR 1805, 1838 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. 14 'Nevertheless private persons do not have a right corresponding to that obligation of the Member States that the gif taxes shall in fact be collected. In fact the national legal systems do not make provision for a right on the part of individuals to require that other individuals shall in fact pay their taxes, nor does Community law provide any right of this nature'. Supra.

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no right to complain about non-collection from their competitors. It is submitted that the Court's statement that Community law does not require the creation of 'new' remedies should be considered qualified by the context, in which the new remedy urged was not justified by the content or scope of the substantive right asserted.15 It appears that Butter Cruises is the sole example of a statement by the ECJ that 'it was not intended to create new remedies in national courts'. The Butter Cruises judgment did not address the situation where Community law provided for an enforceable right of action but no comparable right or remedy existed under national law. Of course, the competition rules do provide an instance where directly enforceable private rights exist under Articles 81 and 82, now 85 and 86, but national rights of a fully comparable nature may not exist or, at least, had not existed until recently in the UK. It is submitted that, given the ECJ's tendency to repeat principles in the same or similar language in subsequent cases, the absence of repetition by the ECJ of its Butter Cruises terminology buttresses the conclusion that the scope of the judgment is limited by its context, as well as the general derogations noted by the ECJ. In Butter Cruises, there was no clear delineation by the Court of what it thought constituted the creation of a 'new' remedy. Is a remedy new only if it does not already exist anywhere in the legal system of a Member State? Is it also 'new' if it exists, but has not previously been applied to redress infringement of Community rights or has not previously been available against particular categories of defendants? It may be argued that the difference between creating a new remedy and adapting existing remedies by disapplying selected national procedural rules or remedial rules is more one of degree than of principle.16 The doctrine of the supremacy of Community law is not one that admits of much limitation in principle. In San Giorgio, the Court employed the supremacy principle to disapply what it considered obstructive procedural rules of Italian law. In UNECTEF v. Heylens,17 the Court seemed affirmatively to require the provision

85df07a2946c0bf5e633a71e91da97ad. 85df07 15 Not all would consider it qualified, although the author finds comfort in the Opinion of Tesauro AG in gif Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany (Factortame III), gif [1996] ECR 11029, at 45 ('[i]n actual fact, that ruling is much less absolute in scope than would appear at first sightis subject to considerable derogations: in particular, whenever it is essential to derogate in order to ensure the proper implementation of Community law and correct, effective protection of the rights claimed by individuals under Community law'). 85df07a2946c0bf5e633a71e91da97ad. 16 Tesauro AG commented, consistently with the text, that '[i]n the final analysis, it can certainly be said that the gif Member States' autonomy with regard to judicial remedies for the infringement of rights conferred by Community provisions is firmly tied to the result sought by Community law'. Supra, at 47. 85df07a2946c0bf5e633a71e91da97ad. 17 Case 222/86, [1987] ECR 4097. The Court said: 'the Treaty requires that it must be possible for a decision gif refusing to recognize the equivalence of a diploma granted to a worker who is a national of another Member State by that Member State to be made the subject of judicial (footnote continued on next page)

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of a right of judicial review, rather than speaking in terms of 'disapplying' French law which did not make that remedy available. One might have thought this seems like creation of a new remedy. The blurring of the line between creating a new remedy and applying existing national remedies was further highlighted in Factortame I.18 The British government had sought to put an end to the practice known as 'quota-hopping', whereby numerous fishing vessels primarily owned or controlled by Spanish nationals were registered as UK vessels. This enabled ersatz British vessels to fish against quotas allocated to Britain under the Common Fisheries Policy. The solution chosen was to create a new shipping register which would not accept a listing for any vessel which did not meet specified standards of ownership, control, operations, and management related to the UK or its nationals. An action was brought by various affected parties, and an interim order was made by the Divisional Court restraining the application of the new statute and rules to the applicant fishing vessels and their owners. The Court of Appeal set aside the interim relief on the grounds that a national court lacked the power to suspend an Act of Parliament and thereby enjoin the Crown. The House of Lords agreed with the Court of Appeal, but then also referred the question to the Court of Justice. The Court of Justice rephrased the first question put to it by the House of Lords and held:

85df07a2946c0bf5e633a71e91da97ad. In accordance with the case-law of the Court, it is for the national courts, in application of the principle of gif cooperation laid down in Article 5 [now 10] of the EEC Treaty, to ensure the legal protection which persons

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derive from the direct effect of provisions of Community law. . . . It must be added that the full effectiveness of Community law would be just as much impaired if a rule of national law could prevent a court seised of a dispute governed by Community law from granting interim relief in order to ensure the full effectiveness of the judgment to be given on the existence of the rights claimed under Community law. It follows that a court which in those circumstances would grant interim relief, if it were not for a rule of national law, is obliged to set aside that rule. . . . Consequently, the reply to the question raised should be that Community law must be interpreted as meaning that a national court which, in a case before it concerning Community law, considers that the sole obstacle which precludes it from granting interim relief is a rule of national law must set aside that rule.19 The Court did not explicitly address whether it considered that a new remedy was being created. However, Advocate General Tesauro expressly took on the (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. proceedings in which its legality under Community law can be reviewed, and for the person concerned to gif ascertain the reasons for the decision'.

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85df07a2946c0bf5e633a71e91da97ad. 18 Case C213/89, R. v. Secretary of State for Transport, ex parte Factortame Ltd, (Factortame I) [1990] ECR gif 2433; Case C221/89, R. v. Secretary of State for Transport, ex parte Factortame Ltd, (Factortame II) [1991] ECR 13905 dealt with the substantive issue of whether the UK legislation violated the Treaty, which the Court found it did.

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argument advanced by the UK that requiring interim relief to be available under the circumstances ran foul of the language in Butter Cruises concerning creation of new remedies. The Advocate General dismissed this argument, pointing out, first, that a new remedy was not created since a developed system of interim relief already existed in the UK, and secondly, the principle of domestic law remedies had no application where domestic law made it 'impossible in practice to exercise rights which the national courts have a duty to protect'.20 The Advocate General met the objection of the impossibility of an injunction against the Crown in part by characterizing the relief sought as a mere 'provisional suspension of the application of a statute to the parties concerned', in part by comparing such a rule to the situation in Simmenthal (No. 2), and by calling into question the compatibility with Community law of the English legal system in its aspect of denying recovery for losses suffered in the course of the very proceedings to definitively establish the right claimed. Viewed from one perspective, the Factortame judgment breaks new ground by requiring the creation of a new national remedyinjunction against the Crownin order to secure Community law rights. Under this view, the remedy of interim injunctive relief to suspend an Act of Parliament is a 'new' remedy because it was not available in protection of national law rights against the Crown, even though the remedy of injunction was available in other circumstances, against other types of defendants.21 From another perspective, the Court has merely said that since the arsenal of national law already contained the weapon of interim injunctive relief for some rights created under national law, this remedy must also be available for protection of rights granted under Community law. Under this view, the Court has routinely applied its doctrine that it is for the national court to select from those remedies contained in the national legal system the most appropriate for protection of Community rights. In principle, the remedy is not 'new' to the national legal system but is merely 'adapted' to protect Community rights. It has been said that this view 'seems to collapse the distinction between the creation of a new remedy and the provision of an existing national remedy in a new situation' and the ECJ's 'reassurance to national courts that the creation of new remedies is not demanded by Community law would seem empty of substance'.22 With respect, this seems too broad a statement, and the characterization of the Butter Cruises judgment as a 'reassurance' to national courts is unwarranted.

85df07a2946c0bf5e633a71e91da97ad. 85df07a gif 20 Opinion of Tesauro AG, Case 213/89, Factortame I, supra note 18, at 301. gif 85df07a2946c0bf5e633a71e91da97ad. 21 See M. Ross, 'Refining Effective Enjoyment', (1990) 15 Eur. L Rev. 476, 478 ('[t]he greatest radicalism of the gif Factortame decision may yet prove . . . [to be] the more stealthy creation of a Community obligation on national courts to create remedies').

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On balance, it seems that in Factortame I the Court merely adapted an existing remedy23 to the protection of Community rights. It is submitted that this view is correct because the Court was careful not to lay down new Community law criteria24 for the national court to apply in determining whether interim injunctive relief was appropriatethe national court was left to employ the same criteria used in a case involving national law. The fact that the Factortame judgment applied an existing national remedy to an additional category of defendant in order to protect a Community law right does not mean the Court created a new remedy.25 It means the Court applied the supremacy of Community law in straightforward fashion to set aside a rule of national law which would have prevented adequate protection of Community rights merely because the defendant was the Crown. In no other context has the Court accepted the argument of a Member State that it is immune from the requirements of Community law because it is a (mostly) sovereign Member State. It should not have come as any surprise that such a claim was not accepted in the context of a remedy of general application already present in the national legal system. The Crown's argument that domestic law did not provide such a remedy against the Crown for national rights and therefore implicitly need not provide it for Community rights is reminiscent of the non-discrimination argument previously rejected by the Court in San Giorgionon-discrimination will not save a rule of national law which makes it impossible or excessively difficult to protect Community rights. Community law requires the national courts fully and adequately to protect directly effective Community rights.26 All of the Member States possess advanced legal systems. While the variations are wide, they all in some form, in some circumstances, and to some degree provide relief in the form of damages, injunctive relief, and judicial review. If national procedural rules or remedies are not fully

85df07a2946c0bf5e633a71e91da97ad. 23 Cf. Opinion of Ruiz-Jarabo Colomer AG. Joined Cases C65/95 and C111/95 The Queen v. The Secretary gif of State for the Home Department, ex parte Mann Singh Shingara et Abbas Radiom, [1997] 3 CMLR 703,

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715, noting that the phrase 'the same legal remedies . . . as are available to nationals of the State concerned' in a directive is a reference to the general system of remedies available in each Member State with respect to such acts. See also the judgment of the Court at 736. 85df07a2946c0bf5e633a71e91da97ad. 24 In contrast, the Court did lay down criteria for interim relief to suspend the application of Community measures gif shortly thereafter in Joined Cases C143/88 and C92/89, Zuckerfabrik Süderdithmarschen v. Hauptzollamt Itzhoe, [1991] ECR I415. 85df07a2946c0bf5e633a71e91da97ad. 25 If a new remedy was created, it was when the UK voluntarily subscribed to the EC Treaty, passed the European gif Communities Act 1972an Act of Parliamentand thereby subjected itself to a superior legal order. Lord Bridge's speech in Factortame Ltd v. Secretary of State for Transport (No. 2), [1991] AC 603, 658, seems appropriate: '[t] hus, whatever limitation of its sovereignty Parliament accepted when it enacted the European Communities Act 1972 was entirely voluntary. Under the terms of the 1972 Act it has always been clear that it was the duty of a United Kingdom court, when delivering final judgment, to override any rule of national law found to be in conflict with any directly enforceable rule of Community law.'

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adequate to protect Community rights, due to restrictions or limitations included within national law, the Court is likely to amputate particular national rules which obstruct the granting of full and adequate relief without considering that a 'new' remedy has been created. The Court does not have to create remedies new to the national legal systems but need only reshape27 the generic remedies of damages, injunction, and judicial review already present in order to protect Community law rights.28 After Factortame, Allott commented on the failure of the ECJ to:

85df07a2946c0bf5e633a71e91da97ad. clear up an unsatisfactory area of its own jurisprudence, as to whether the member States are or are not gif obliged to introduce new remedies to give full effect to Community law (a problem which was convincingly

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exploited by the Crown in the Factortame proceedings). . . . Sooner or later, the Court will have to grasp the theoretical nettle and insist that EC law is a source of law throughout the Community in the fullest sense of that expression, having the full force of law everywhere, with all necessary national and Community remedies.29 Factortame was litigated on the assumption that no right to damages against the Crown existed under the national law of the UK. While the application of the principles applied to interim relief in Factortame would obviously require a UK court to recognize a damage remedy, the ECJ next took a more Allott-like view of the Community system in addressing the damages issue. 6.2 Francovich: The Community Remedy Principle The Court of Justice has frequently made reference to the obligation of the national courts to protect rights conferred under Community law, an obligation which derives in part from Article 5 (now 10) EC. The full impact of Article 5, now 10, and the duty to protect Community law rights were felt by the Italian State in Francovich,30 a case involving its failure to implement a Community directive which sought to guarantee a minimum level of protection to employees of companies which became insolvent. The plaintiffs in the cases were owed unpaid wages by their insolvent employer. Italy's failure to implement the directive had

85df07a2946c0bf5e633a71e91da97ad. 27 It has been argued that this is 'being required to create what amounts to a new remedy': P.P. Craig, gif 'Francovich, Remedies and the Scope of Damages Liability', (1993) 109 LQR 595, 600.

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85df07a2946c0bf5e633a71e91da97ad. 28 To a certain type of mind, regrettably including the author's, Factortame evokes the apocryphal lesson on gif carving an elephant. Once upon a time, a man wanted to learn how to carve an elephant, so he went to a famous

sculptor and pleaded for instruction. The sculptor led him to a block of stone and presented him with a hammer, a chisel, and the following guidance: '[i]t's easy. Just chip away anything that doesn't look like an elephant'. In Factortame, did the Court create a new elephant or just adapt an existing national elephant?

85df07a2946c0bf5e633a71e91da97ad. 29 P. Allott, 'Parliamentary SovereigntyFrom Austin to Hart', (1990) 49 Cambridge LJ 377, 378 (emphasis gif supplied). 85df07a2946c0bf5e633a71e91da97ad. 30 Joined Cases C6/90 and C9/90, Francovich v. Italian Republic [1991] ECR I5357. gif < previous page page_70 next page >


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been established in a prior judgment of the Court of Justice, although the Court did not make a prior judgment of default a condition of a right to damages. The Court found that the directive in question was almost, but not quite, directly effective because no guarantor was identifiable, in the absence of implementing legislation. The Court found another way:

85df07a2946c0bf5e633a71e91da97ad. 33. The full effectiveness of Community rules would be impaired and the protection of the rights which they gif grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a

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breach of Community law for which a Member State can be held responsible.

85df07a2946c0bf5e633a71e91da97ad. 34. The possibility of obtaining redress from the Member State is particularly indispensable where, as in this gif case, the full effectiveness of Community rules is subject to prior action on the part of the State and where,

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consequently, in the absence of such action, individuals cannot enforce before the national courts the rights conferred upon them by Community law.

85df07a2946c0bf5e633a71e91da97ad. 85df07 35. It follows that the principle whereby a State must be liable for loss and damage caused to individuals as a gif result of breaches of Community law for which the State can be held responsible is inherent in the system of gif the Treaty.

85df07a2946c0bf5e633a71e91da97ad. 36. A further basis for the obligation of Member States to make good such loss and damage is to be found in gif Article 5 [now 10] of the Treaty, under which the Member States are required to take all appropriate

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measures, whether general or particular, to ensure fulfillment of their obligations under Community law. Among these is the obligation to nullify the unlawful consequences of a breach of Community law (see, in relation to the analogous provision of Article 86 of the ECSC Treaty, the judgment in Case 6/60 Humblet v. Belgium [1960] ECR 559).31 The Court specifically referred in its discussion of the conditions under which liability would lie against the state to:

85df07a2946c0bf5e633a71e91da97ad. a right on the part of individuals to obtain compensation, a right founded directly on Community law . . . gif Subject to that reservation, it is on the basis of the rules of national law on liability that the State must make

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reparation for the consequences of the loss and damage caused.32 Francovich thus clearly states that individuals have a right to obtain compensation which is directly based on Community law, not national law. This principle applies to Community competition law, as was said almost ten years before Factortame: '[s]ince claims for injunctions and damages can be made against the state for breach of Community law, a fortiori they can also be made against private corporations'.33 The Community law right to compensation principle espoused in Francovich applies as well to private individuals or undertakings as to governments.34 Because the purpose of the Community right to damages is to assure

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 gif gif 31Supra, at 337 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. gif 32Supra, at 412 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. 33 J. Temple Lang, 'EEC Competition Actions in Member States' CourtsClaims for Damages, Declarations and gif Injunctions for Breach of Community Antitrust Law', (1983) 10 Fordham Corp. L Inst. 219, 237 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 34 R. Caranta, 'Governmental Liability After Francovich', (1993) 52 Cambridge LJ 272, 286. gif < previous page page_71 next page >


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effective protection of Community rights, it must logically apply to any category of entity or undertaking which can be held responsible for a breach of Community law. Even prior to Francovich, the Court had suggested that directly effective provisions of Community law carried with them a right to damages. In Humblet,35 the Court had spoken of the obligation of a Member State under Article 86 ECSC, the equivalent ECSC provision to Article 5 (now 10) EC, 'to make reparation for any unlawful consequences which may have ensued . . .'. In Russo,36 the Court spoke of the obligation of the Member State 'as regards the injured party, to take the consequences upon itself in the context of the provisions of national law relating to the liability of the State'. Francovich made the Community right to damages and conditions for State liability explicit and apparently broad in application. The scope of the language used seems implicitly to embrace not only liability for failure to implement directives, but for any other breach of Community law for which the State bears responsibility.37 The Court seemingly avoided restricting liability in the case either of situations in which there had been a previous determination of failure to implement a directive38 or in which there had been a 'sufficiently serious breach of a superior rule' of law.39 This was clarified in the later cases. The significance of Francovich in the development of private antitrust litigation is twofold. First, it seems to confirm a principle of a Community right to damages for breach of Community law. This 'Community remedies' principle departs significantly from the notion that Community law provides the substantive rule and national law the procedures and remedies. After Francovich, it may no longer be vitally important whether national law recognizes a damages remedy for breaches of competition rules, because Francovich has explicitly forged a Community law damages remedy of apparently wide scope which the national courts will be required to recognize and enforce. The procedural autonomy of Member States is now subject to the 'Francovich reservation' that there is a right to compensation founded directly on Community law. Francovich arguably renders moot much of the debate over whether a 'new' national remedy is being created or an existing one

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 35 Case 6/60, Humblet v. Belgium, [1960] ECR 559, 569 (emphasis supplied). gif gif 85df07a2946c0bf5e633a71e91da97ad. 36 Case 60/75, Russo v. AIMA, [1976] ECR 45, 57 (emphasis supplied). gif 37 E. Sharpston, Interim and Substantive Relief in Claims under Community Law (London, 1993), 68; J. Steiner, 85df07a2946c0bf5e633a71e91da97ad. gif 'From Direct Effects to Francovich: Shifting Means of Enforcement of Community Law', (1993) 18 Eur. L Rev. 3, 11. In Factortame III, Tesauro AG concluded that the Francovich principle 'holds good for any situation in which Community law is infringed'; Tesauro AG, supra note 15, at 25.

85df07a2946c0bf5e633a71e91da97ad. 38 Sharpston, supra note 37, at 67. gif 85df07a2946c0bf5e633a71e91da97ad. 39 Caranta, supra note 34, at 2845. The requirement of a 'sufficiently serious breach of a superior rule of law' has gif been applied by the ECJ in cases involving the non-contractual liability (Art. 215 EC) of Community institutions.

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adapted, by declaring the existence of a Community remedy which must be available in the national courts. Secondly, Francovich creates a very large hammer: if a Member State does not provide a fully effective judicial remedyincluding damagesfor the private enforcement of directly effective Article 85 and 86 (now Articles 81 and 82) rights, the Member State itself may have breached its obligations under Article 5 and the scheme of the Treaty to provide full protection of Community rights. In an appropriate case, a Member State which does not legislatively or judicially provide an antitrust damages remedy which individuals and undertakings may enforce against defendants, may itself be required to pay damages,40 just as Italy was required to pay damages for its failure to provide a wage guaranty system in Francovich. Member States are 'required to legislate to create sanctions, and to provide administrative and enforcement procedures and personnel'.41 The specific application of this principle to competition law was suggested in INNO,42 where the Court said with reference to Article 5 (now 10) and Article 90 (now 86), 'Member States may not enact measures enabling private undertakings to escape from the constraints imposed by Articles 85 to 94 [now Articles 81 to 89] of the Treaty'. Even under the national remedy principle, it seems clear that national law which did not permit damages actions43 for infringements of Articles 81 and 82 (formerly 85 and 86) would allow potential defendants to escape in part from the constraints of Articles 81 and 82 within the meaning of INNO. In Buys,44 Advocate General Warner stated that a Member State would breach Article 5 (now 10) if it enacted legislation encouraging agreements, decisions or concerted practices which infringed Article 85 (now 81). In one of the Leclerc45 cases, Advocate General Darmon stated:

85df07a2946c0bf5e633a71e91da97ad. 85df07 I consider it to be the sense of the court's judgment in INNO v. ATAB: a national measure which encourages gif behaviour in restraint of competition or, more generally, deprives of practical effect the prohibition laid down gif in Articles 85 and 86 [now 81 and 82] of the Treaty is incompatible with Article 3(f) and the second paragraph of Article 5 [now 10], read together with Articles 85 and 86 [now 81 and 82].

85df07a2946c0bf5e633a71e91da97ad. 40 Not all would agree. Steiner, supra note 37, at 11 note 48, finds the prospect of state liability for judicial gif failure 'surely unthinkable'. However, the state surely is responsible for inaction by courts as well as

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legislatures.

85df07a2946c0bf5e633a71e91da97ad. 41 Cf.J. Temple Lang, 'Community Constitutional Law: Article 5 EEC Treaty', (1990) 27 CML Rev. 645, 6501. gif 42 Case 13/77, INNO v. ATAB, [1977] ECR 2115, 21445. 85df07a2946c0bf5e633a71e91da97ad. gif 43 Prior to Francovich, the position in the UK was that no damage remedy was available against the Crown, and 85df07a2946c0bf5e633a71e91da97ad. gif redress was limited to judicial review. Bourgoin SA v. Ministry of Agriculture Fisheries and Food, [1986] QB 716 (CA) (an Article 30 case). Francovich casts considerable doubt on the continuing vitality of the judgment in Bourgoin: see Kirklees MBC v. Wickes Building Supplies Ltd, [1993] AC 227, 281 (HL).

85df07a2946c0bf5e633a71e91da97ad. 44 Case 5/79, Procureur Général v. Buys, [1979] ECR 3203, 3226, 32301. gif 45 Case 229/83, Leclerc v. Au Blé Vert, [1985] ECR 1. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_73


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Under the supremacy principle previously mentioned, a Member State may neither enact nor maintain in force measures which are incompatible with Community law. Therefore, any national rules which prevent individuals from enforcing directly effective Article 81 and 82 (formerly 85 and 86) rights, whether a national or a Community right to damages, may enable undertakings injured by infringements of Article 8182 (formerly 8586) to claim compensation from the Member State.46 One can hardly imagine a greater incentive for Member States, including the national courts, to create or 'adapt' national procedures and remedies so that private actions to enforce Articles 81 and 82 (formerly 85 and 86) may be maintained. It has been said that the 'breakthrough' in Francovich was that the right to claim damages was 'independent of the principle of direct effects'.47 Francovich could be used to support a general principle of Community law that under appropriate conditions damages are available to compensate an individual who is placed in an economically disadvantageous position by a Member State's failure to implement Community law.48 From the standpoint of private antitrust litigation, the breakthrough is that because individuals have a right to compensation founded in Community law, 'inherent in the scheme of the Treaty' and confirmed by Article 5, now 10, the national courts are required to give effect to that right in private enforcement actions regardless of the position in national law. To paraphrase the Court's judgments in Factortame I and Francovich, a national court which considers that the sole obstacle to the implementation of a Community or national right of damages for an infringement of directly effective Article 81 and 82 (formerly 85 and 86) rights is a national rule of law that no right to damages is recognized must set aside that rule. While Francovich itself literally dealt only with the right of damages against the State for non-implementation of directives which lacked direct effect, its progeny have confirmed the application of the Community remedy principle to directly effective rights under Community law, which include competition law.

85df07a2946c0bf5e633a71e91da97ad. 46 Much of the post-Francovich commentary focused on the level of culpability to be required before gif imposing liability on a Member State. See, e.g., Wyatt and Dashwood, supra note 12, at 87; Steiner, supra

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note 37, at 11 ff.; Caranta, supra note 34, at 285; T. C. Hartley, The Foundations of European Community Law (3rd edn., Oxford, 1994), 226; C. Barnard, EC Employment Law (Chichester, 1995), 40.

85df07a2946c0bf5e633a71e91da97ad. 47 Steiner, supra note 37, at 9. gif 48 Cf. E. Sharpston, Interim and Substantive Relief in Claims under Community Law (London, 1993), 67. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_74 next page >


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6.3 The 'Sons' of Francovich: Private Damages Actions for Breach of the Competition Rules The first case raising the application of the Francovich Community damages remedy to directly effective provisions was Banks,49 a competition law case in which a private company claimed that British Coal had abused its dominant position as a supplier of coal for producing electricity in violation of Articles 4(d), 60 and/or 65 ECSC and, in the alternative, Articles 85, 86 and 232(1) (now 81, 82, and 305) EC. On a preliminary reference from the High Court, the ECJ decided that the applicable treaty provisions were those of the ECSC, the ECSC provisions were not directly effective, and the national courts could not entertain actions for damages absent a Commission decision on compatibility with Article 65 ECSC.50 Advocate General van Gerven addressed the issue, not reached by the Court in light of its disposition of the direct effects question, of the application of the Francovich case to an action for damages against third parties for infringement of directly effective competition rules. The Advocate General agreed with the Commission's view that the existence of direct effect (in Francovich there was not a directly effective provision) 'constitutes an a fortiori argument'51 for the application of the Community right to damages. On the question whether the Francovich principle extended to 'horizontal' actions by one individual or undertaking against another in respect of the breach of a directly effective provision, the Advocate General took the view that it did, stating:

85df07a2946c0bf5e633a71e91da97ad. 85df07 The general basis established by the Court in the Francovich judgment for State liability also applies where an gif individual infringes a provision of Community law to which he is subject, thereby causing loss and damage to gif another individual. The situation then falls within the terms stated by the Court in paragraph 31 of the Francovich judgment (and even earlier in Van Gend en Loos) namely breach of a right which an individual derives from an obligation imposed by Community law on another individual. Once again, the full effect of Community law would be impaired if the former individual or undertaking did not have the possibility of obtaining reparation from the party who can be held responsible for the breach of Community lawall the more so, evidently, if a directly effective provision of Community law is infringed: in that regard the Court has already pointed out in Simmenthal that such provisions are: 'a direct source of . . . duties for all those affected thereby, whether Member States or individuals, who are parties to legal relationships under Community law'.52

85df07a2946c0bf5e633a71e91da97ad. 85df07 49 Case C128/92, H.J. Banks & Co. Ltd v. British Coal Corporation, [1994] ECR I1209. The Opinion of Van gif Gerven AG delivered on 27 Oct. 1993 is reported at [1994] ECR I1212. gif 85df07a2946c0bf5e633a71e91da97ad. 50 [1994] ECR at I12756. gif 85df07a2946c0bf5e633a71e91da97ad. 51 [1994] ECR at I1247. gif 52Supra, at I124950 (emphasis by the AG). The AG thought this result was particularly appropriate in the 85df07a2946c0bf5e633a71e91da97ad. gif competition field because it was the logical conclusion to the horizontal direct effect of the competition rules and because individual damages actions had been useful in the USA and would make Community competition rule 'more operational'. Supra.

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The ECJ addressed some of these issues in a non-competition law context when the new Spanish (fishing) Armada returned to Luxembourg on another preliminary reference. In Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany and The Queen v. Secretary of State for Transport, ex parte Factortame Ltd and Others (Factortame III),53 the ECJ was given an opportunity to further elaborate on the principles announced in Francovich. In the Brasserie du Pêcheur case, an Alsatian exporter of beer to Germany sought damages resulting from the discontinuance of exports occasioned by the German Reinheitsgebot (purity requirement), previously found incompatible with Article 30 EC.54 In Factortame III, individuals, companies, and their directors and shareholders were claiming damages resulting from being deprived of the right to fish by the Merchant Shipping Act 1988, previously found incompatible with Community law.55 The joined cases collectively will be referred to as Factortame III. The Court in Factortame III quickly rejected the contention that Francovich applied only to situations where the provisions of Community law breached were not directly effective, noting that the right to rely on directly effective provisions 'is only a minimum guarantee and is not sufficient in itself to ensure the full and complete implementation of the Treaty'.56 The Court thought that the full effectiveness of Community law would be impaired if individuals could not obtain redress when their rights were infringed, and the 'right to reparation is the necessary corollary of the direct effect of the Community provision whose breach caused the damage sustained'.57 The Court repeated its statement in Francovich that the State must make reparation for the consequences of the loss and damage caused 'in accordance with the domestic rules on liability', but the Court also noted those rules were 'subject to the right to reparation which flows directly from Community law'.58 In these cases, the ECJ also considered national rules concerning state liability which appeared to impair the effectiveness of the Community damages remedy. In the beer case, German law made reparation dependent upon the act or omission of the legislature in question being referable to an individual situation and, in the British case, conditions for liability may have included proof of misfeasance in office. The ECJ considered that both conditions made it 'impossible or extremely

85df07a2946c0bf5e633a71e91da97ad. 53 Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany (Factortame gif III), [1996] ECR I1029.

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85df07a2946c0bf5e633a71e91da97ad. 54 The declaration of incompatibility came in Case 178/84, Commission v. Germany (beer purity) [1987] ECR gif 1227. 85df07a2946c0bf5e633a71e91da97ad. 55 The declarations of incompatibility came in Cases C221/89, Factortame II, [1991] ECR I3905 and C246/89, gif Commission v. United Kingdom, [1991] ECR I4585. 85df07a2946c0bf5e633a71e91da97ad. 56Factortame III, supra note 53, at 20. gif 85df07a2946c0bf5e633a71e91da97ad. 57Supra, at

22.

gif 85df07a2946c0bf5e633a71e91da97ad. 58Supra, at 67. gif

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difficult to obtain effective reparation for loss or damage resulting from a breach of Community law' and must therefore be 'set aside'.59 The Court also discussed in some detail the extent of reparation required, concluding that 'it is for the domestic legal system of each Member State to set the criteria', but the Court also found certain items either permissible or required, including mitigation of damages obligations, loss of profits in economic or commercial litigation, and exemplary damages, where they could be awarded pursuant to a similar claim founded upon domestic law.60 The Court subsequently applied the Francovich principle in several other cases,61 and the Community remedy principle (the 'Francovich reservation') is thus well established. Following Francovich, there had been doubt whether the principle of state liability announced in that case required that a Member State have committed a breach of Community law which was 'sufficiently serious', that is, one in which 'in the exercise of its legislative powers, an institution or a Member State has manifestly and gravely disregarded the limits on the exercise of its powers',62 a requirement the Court originally had adopted in the context of liability of Community institutions. In Factortame III, the ECJ mentioned several criteria to be employed in determining in state liability cases whether the breach was 'sufficiently serious'.63 The Court applied these criteria in the later state liability cases. In British Telecommunications, the Court determined that the directive involved in that case was sufficiently imprecisely worded that the UK's erroneous interpretation under the circumstances was not sufficiently serious to create liability.64 In Hedley Lomas, the Court stated that where the Member State concerned, the UK, was not exercising legislative choices and had little or no discretion, 'the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach'.65 In Dillenkofer, the ECJ confirmed its Francovich ruling by holding that the failure of the Federal Republic of Germany to take any action to implement a directive within the required time period 'constitutes per se a serious breach of Community law'.66

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e gif gif 59Supra, at 713. 85df07a2946c0bf5e633a71e91da97ad. gif 60Supra, at 8490. 85df07a2946c0bf5e633a71e91da97ad. 61 These include Case C392/93, The Queen v. HM Treasury, ex parte British Telecommunications plc, [1996] gif ECR I1631; Case C5/94, The Queen v. Ministry of Agriculture, Fisheries and Food, ex parte Hedley Lomas (Ireland) Ltd, [1996] ECR I2553; and Joined Cases C178/94, C179/94, C188/94, and C190/94, Dillenkofer and Others v. Federal Republic of Germany, [1996] ECR I4845.

85df07a2946c0bf5e633a71e91da97ad. 62British Telecom, supra note 61, at 42. gif 85df07a2946c0bf5e633a71e91da97ad.

gif 63Factortame III, supra note 53, at 5564. 85df07a2946c0bf5e633a71e91da97ad. gif 64British Telecommunications, supra note 61, at 85df07a2946c0bf5e633a71e91da97ad. 65Hedley Lomas, supra note 61, at 28. gif 85df07a2946c0bf5e633a71e91da97ad. 66Dillenkofer, supra note 61, at

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29. In Francovich, the Court had declared the right of reparation to arise from

gif failure to timely implement a directive without expressly referring to the 'serious breach' criterion.

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None of these decisions definitively addressed the horizontal application of Community competition rules, but the language used by the Court makes this application abundantly clear: Articles 85(1)(2) and 86 (now 81 and 82) create directly effective Community rights, and the right to damages is a necessary corollary of the principle of direct effect. The right of reparation arises equally with respect to loss and damage caused by private parties breaching Community law as it does from Member States breaching Community law. As private parties have no legislative discretion, it must be the case that a mere breach of Community competition law suffices to give rise to a right of reparation on the part of one suffering loss or damage from the breach. The Court of Justice seems to have confirmed this conclusion in its recent judgment in Guérin,67 a case concerning a French car dealer's complaint that Volvo France had breached Article 81 (formerly 85) and wrongfully terminated Guérin's dealership agreement. In the context of an action complaining of the Commission's failure to act, or in the alternative for annulment, the Court said:

85df07a2946c0bf5e633a71e91da97ad. 85df07 It must also be noted that any undertaking which considers that it has suffered damage as a result of restrictive gif practices may rely before the national courts, particularly where the Commission decides not to act on a gif complaint, on the rights conferred on it by Article 85(1) and Article 86 [now 81 and 82] of the Treaty, which produce direct effects in relations between individuals.68

85df07a2946c0bf5e633a71e91da97ad. 67 Case C282/95, Guérin Automobiles v. Commission, [1997] ECR I1503. gif 85df07a2946c0bf5e633a71e91da97ad. 68Supra, at 39. gif

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7 Aspects of Private Antitrust Enforcement

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85df07a2946c0bf5e633a71e91da97ad. 7.2 Private Enforcement in the Community System gif

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7.1 The Private Enforcement System in the USA The system of private antitrust enforcement in the USA is sometimes perceived1 as having immediately sprung full-blown into existence upon the passage of the Sherman Act in 1890. However, during the first 50 years of the Sherman Act only 175 private actions were brought and only 13 of those were recorded as successful for the plaintiff.2 From 1941 to 1985, there were 29,588 private actions commenced, with the most in any one year consisting of 2,005 filed in 1962.3 Since 1985, the number of new private actions has remained in the range of 600 to 1,000 annually. Even the government's early enforcement efforts were scant. In the first 13 years of the Sherman Act (to 1903), a grand total of 23 government actions of all types were brought. The Justice Department received no funds at all for antitrust enforcement for that first 13 years.4 It seems the Commission received more resources and more quickly than did the Justice Department.

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 1 See discussion in Chap. 1 accompanying note 16. gif gif 85df07a2946c0bf5e633a71e91da97ad. 2Report of the Att'y Gen 'ls Nat'l Comm'n to Study the Antitrust Laws (Washington, DC, 1955), 378. The records do not gif account for cases in which settlements were reached, and therefore the success rate of plaintiffs may have been higher than these records reflect. Another estimate concluded that from 1890 to 1940 there were 423 private cases brought: R. Posner, 'A Statistical Study of Antitrust Enforcement', (1970) 13 JL & Econ. 365, 371.

85df07a2946c0bf5e633a71e91da97ad. 3 Administrative Office of the United States Courts, Annual Report of the Director for the years 19411985 (Washington, gif DC). 85df07a2946c0bf5e633a71e91da97ad. 4 H.B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (Baltimore, 1954), 588, 590. gif < previous page page_79 next page >


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During the original legislative debates on the Sherman Act, critics of the bill complained that the bill's remedies (originally double damages) were ineffective because it would be excessively difficult for private parties to prove violations, and any one trader's damages would be small, even though overall damages might be large.5 The revised Sherman Act containing treble damages provisions and an award of the attorney's fee as part of the costs of suit was intended, according to Senator Hoar, to provide for enforcement through the 'self-policing capacity of business' by allowing damages that '[m]ake it worth his while' to sue for injuries.6 The goals of the private remedy provided in the Sherman Act have thus always included the notion that persons injured by the antitrust laws are to be encouraged to bring suit in order to obtain compensation for their own injuries and to aid in policing the market-place. The Supreme Court of the USA has frequently stressed the importance of the goals of both compensation and deterrence to the effective enforcement of the antitrust laws.7 Moreover, the treble damages plaintiff in the USA is favourably regarded (except by defendants, no doubt) as a 'Private Attorney General' whose activity is encouraged to supplement scarce governmental resources brought to bear on enforcement. One writer further described its systemic importance as follows:

85df07a2946c0bf5e633a71e91da97ad. 85df07 [P]rivate enforcement also performs an important failsafe function by ensuring that legal norms are not wholly gif dependent on the current attitude of public enforcers or the vagaries of the budgetary process and that the gif legal system emits clear and consistent signals to those who might be tempted to offend. Absent private enforcement, potential defendants would have a considerably stronger incentive to lobby against public enforcement efforts or to seek to curtail funds to public enforcement agencies. Ultimately, private enforcement helps ensure the stability of legal norms by preventing abrupt transitions in enforcement policy that have not been sanctioned by the legislature.8 Because the ratio of private to public cases in the USA remains in the order of 90 per cent private actions, and because private actions are seen by some as motivated more by private interest than any abstract conception of sound antitrust policy, the private treble damages action has often been the target of criticism. During the 1970s and 1980s, the influence of that conception of economic theory known as the 'Chicago school' had a substantial impact on a number of substantive antitrust doctrines. Some practitioners of 'Chicago' theory sought to attack the treble damages remedy on economic efficiency grounds, contending in part that it

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 5 Senator George, (1890) 21 Cong. Rec. 76572. gif gif 85df07a2946c0bf5e633a71e91da97ad. 6 G. Hoar, Autobiography of Seventy Years (1903), ii, 363. gif 7 E.g., Perma-Life Mufflers, Inc. v. International Parts Co., 392 US 134, 139 (1968); Brunswick Corp. v. Pueblo 85df07a2946c0bf5e633a71e91da97ad. gif Bowl-O-Mat, Inc., 429 US 477, 486 (1977); Illinois Brick v. State of Illinois, 431 US 720, 748 (1977) (Brennan J. dissenting). 85df07a2946c0bf5e633a71e91da97ad. 8 J. C. Coffee, Jr., 'Rescuing the Private Attorney General: Why the Model of the Lawyer as Bounty Hunter is not gif Working', (1983) 42 Md. L Rev. 215, 217.

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Page 81 encouraged too much private litigation at too high a cost, resulting in 'over-deterrence' and allegedly consequent economic inefficiency.9 While a debate on the merits of the Chicago School is beyond the scope of this work, it should be noted that in general economic-oriented critiques attempt to assess the treble damages policy primarily from a deterrence perspective without giving substantial weight to the compensation goal of the policy.10 Even on purely economic grounds, others have shown that these attacks on the treble damages remedy are exaggerated, lack substance, and that private enforcement may be more efficient than public enforcement.11 The most comprehensive empirical study of private antitrust enforcement in the USA to date, the 'Georgetown Study',12 revealed an interesting picture of the operation of private enforcement, without offering much support to the harsher critics of the treble damages system. The Georgetown Study examined approximately 1,900 cases filed during the years 197383 in five US District Courts, including the three most active districts in the country: the Southern District of New York (including New York City), the Northern District of Illinois (including Chicago), and the Northern District of California (San Francisco).13 The Georgetown Study found that the most common primary illegal practices alleged14 were: Illegal Practices Alleged Horizontal Price Fixing Vertical Price Fixing Dealer Termination Refusal to Deal Predatory Pricing Asset/Patent Accum. Price Discrimination

Primary Allegations

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15.7% 85df07a2946c0bf5e633a71e91da97ad. 21.3% 85df07a2946c0b

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gif gif 85df07a2946c0bf5e633a71e91da97ad. 9 The principal studies include K. Elzinga and W. Breit, The Antitrust Penalties: A Study in Law and Economics gif (New Haven, Conn., 1976) and W. Schwartz, Private Enforcement of the Antitrust Laws: An Economic Critique

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(Washington, DC, 1981). 85df07a2946c0bf5e633a71e91da97ad. 10 Compensation is not literally ignored, but is dismissed as a 'distributive concern' entitled to no weight under the gif Chicago school theory: e.g., Schwartz, supra note 9, at 312, seems to view the fact that persons are injured by antitrust violations as unfortunate but unworthy of attention.

85df07a2946c0bf5e633a71e91da97ad. 11 V. Sarris, The Efficiency of Private Antitrust Enforcement: The 'Illinois Brick' Decision (New York, 1984), 534, 63. gif Sarris concludes that the best enforcement system is a dual public and private approach. 85df07a2946c0bf5e633a71e91da97ad. 12Georgetown Study of Private Antitrust Litigation: Papers from the Georgetown Conference on Private Antitrust gif Litigation (Airlie House, Virginia, 89 Nov. 1985) (hereinafter, 'Georgetown Study') (on file in the law library of Georgetown University). Later versions of some of these papers appear in L. White (ed.), Private Antitrust Litigation: New Evidence, New Learning (Cambridge, Mass., 1988).

85df07a2946c0bf5e633a71e91da97ad. 13 P. B. Teplitz, 'Private Antitrust Litigation: An Overview' 18, in The Georgetown Study, supra note 12. gif 14Supra note 13, at 9B. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_81 next page >


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Page 82 Illegal Practices Alleged Vertical Price Discrimination Tying/Exclusive Dealing Merger or Joint Venture Inducing government actions 'Conspiracy' 'Restraint of Trade' 'Monopoly' or 'monopolization' Other

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The business relationships between the plaintiffs and the defendants were summarized15 as follows: Competitor Dealer (of which terminated dealer) Customer Company Franchisee Licensee Final customer or end user Supplier Employee or former employee State or local government Other No Information

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Cases terminated on average slightly over two years after commencement, with the vast bulk (approximately 80 per cent) being settled without a trial. Of those cases which went to trial, the plaintiffs won less than 30 per cent of the time.16 The study concluded that 'treble damage suits are not, by and large inordinately lengthy' and legal costs did not appear excessive 'given the stakes in antitrust litigation'.17 Even a noted critic of the private treble damages action concluded that while the 'average' private antitrust suit was more costly than other types, it was not 'enormously so' and 'for all its warts, the private treble damage action serves a useful and important function'.18 Millstein concluded that while there were bad private cases in the system, there were also meritorious cases 'that would never

85df07a2946c0bf5e633a71e91da97ad. 85df07 15 S. C. Salop and L. J. White, 'Economic Analysis of Private Antitrust Litigation', (1986) 74 Geo. LJ 1001, 1007. gif gif 85df07a2946c0bf5e633a71e91da97ad. 16 Teplitz, supra note 13, at 66. gif 17 G. E. Garvey, 'The Georgetown Study of Private Antitrust Litigation: Some Preliminary Comments' 11, in The 85df07a2946c0bf5e633a71e91da97ad. gif Georgetown Study, supra note 12. 85df07a2946c0bf5e633a71e91da97ad. 18 I. M. Millstein, 'The Georgetown Study of Private Antitrust LitigationSome Policy Implications' 89, in The Georgetown gif Study, supra note 12.

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have been brought by the government and don't cost as much as many critics have feared'.19 This is not to say that some antitrust lawsuits are not extremely complex and costly,20 but the ordinary suit does not appear to be unacceptably burdensome, given the amounts that tend to be at stake. One prominent plaintiff's antitrust lawyer noted that the 'travesties of antitrust litigation in the last decade have been government cases, not private cases' and 'private lawyers who handle a case are extremely cost conscious'.21 In fact, the most burdensome and costly antitrust litigation in history was United States v. IBM, a government action which commenced in January 1969, began actual trial in May 1975, and continued until January 1982, when the US government dismissed the case with a stipulation that it was 'without merit'.22 There were several private suits brought against IBM concerning many of the same issues (alleged monopolization of computer hardware and software) and each of them was tried in about six monthsa very long trial by any standard. However:

85df07a2946c0bf5e633a71e91da97ad. 85df07 For U.S. v. IBM, which took six years from complaint to trial, also took six years to try, about twelve times as gif long as any one of the private suits . . . As either its absolute length or comparison with the private suits gif suggests, U.S. v. IBM was a juggernaut out of control.23 Although the IBM litigation represents the nadir of US governmental antitrust litigation (and most likely litigation in general), there are many examples of successful private litigation. Even in the IBM litigation, while the government dismissed its case in 1982, 'in 1973 Control Data settled its private monopolization action against IBM for upwards of $ 100 million', and 'senior officers of Control Data boasted that the lawsuit had been the best investment the company had ever made'.24 In one very well known saga, in the latter part of the 1950s, the US government indicted and convicted dozens of major electrical companies and their officers and

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e9 19Supra. gif gif 85df07a2946c0bf5e633a71e91da97ad. 20 See, e.g., P.M. Gerhart, Report on the Empirical Case Studies Project to the National Commission for the gif Review of Antitrust Laws and Procedures (Washington, DC, 1979), 1924, which profiles some particularly complex cases, including multiple cases against IBM and AT&T. 85df07a2946c0bf5e633a71e91da97ad. 21 S.D. Susman, in panel discussions, 'Mandatory Treble DamagesTime For a New Look?', Committee on gif Corporate and Antitrust Law of the Section of Corporation, Banking, and Business Law, 1981 American Bar Association Annual Meeting, New Orleans, reprinted in Antitrust Damage Allocation: Hearings before the Subcomm. On Monopolies and Commercial Law of the House Comm. On the Judiciary, (statement of J. Sims), 97th Cong., 1st and 2d Sess. (19812), 170, 174.

85df07a2946c0bf5e633a71e91da97ad. 22 The stipulation appears in United States of America v. International Business Machines Corporation, Case No. gif 69 Civ. 200, USDC SDNY, and in F. M. Fisher, J.J. McGowan, and J. E. Greenwood, Folded, Spindled, and Mutilated: Economic Analysis and US vs. IBM (Cambridge, Mass., 1983), 368.

85df07a2946c0bf5e633a71e91da97ad. 23 Fisher et al., supra, at 15 (emphasis supplied). gif 24 M. Handler, R. Pitofsky, H. Goldschmid and D. Wood, Trade Regulation: Cases and Materials (Foundation 85df07a2946c0bf5e633a71e91da97ad. gif Press, 4th edn., Westbury, NY, 1997), 124.

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employees for criminal price-fixing in electrical equipment purchases made by state, federal, and local governments.25 In the aftermath of the government prosecutions, some 2,233 private treble damages actions were filed,26 primarily on behalf of governmental purchasers who had been overcharged. Although some General Electric and Westinghouse executives served 30-day jail sentences after pleading guilty to criminal price-fixing charges, 'the real bite' came from the 'private lawsuits which cost GE and other companies upwards of $350 million to litigate and settle'.27 An example of the value of private enforcement in a dual system was demonstrated in litigation concerning price fixing in the corrugated cardboard industry during the 1970s and 1980s. The government filed criminal charges against certain companies but lost the jury trial. However, in one subsequent private treble damages action against 20 corrugated cardboard manufacturers, the jury found a price-fixing conspiracy, found the overcharge was 5 per cent over two and three-quarter years, and awarded actual damages (before trebling) of $374 million.28 'In the early 1980s, private antitrust actions shook the paper industry to its economic foundations; as the result of this series of private actions (through settlements and judgments), over $1 billion changed hands',29 including a $218 million settlement with folding carton manufacturers. Other examples30 in the 1990s include large cases and settlements involving actions by retail pharmacists against pharmaceutical manufacturers.31 In earlier pharmaceutical litigation, a $195 million settlement was reached in a class action against manufacturers of antibiotic drugs.32 7.2 Private Enforcement in the Community System 7.2.1 The Limited Use of Private Enforcement in the Community Despite the general substantive similarities between the US and EC provisions concerning antitrust, there are a number of potentially important ways in which

85df07a2946c0bf5e633a71e91da97ad. 25 See generally J. Herling, The Great Price Conspiracy: The Story of the Antitrust Violations in the gif Electrical Industry (Washington, DC, 1962).

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85df07a2946c0bf5e633a71e91da97ad. 26 Administrative Office of the United States Courts, supra note 3. gif 27 Handler, et al., supra note 24, at 118. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 28 Susman, supra note 21, at 185, 193. Treble damages were $1.12 billion, although most defendants settled postgif verdict for what amounted to single damages and attorney fees. 85df07a2946c0bf5e633a71e91da97ad. 29 Handler et al., supra note 24, at 124. gif 85df07a2946c0bf5e633a71e91da97ad. 30 For information on other earlier awards, see P. Max, Hearings, The Antitrust Improvements Act of 1975, i gif (statement of P. Max), Sen. Subcomm. Antitrust & Monopolies, 94th Cong., 1st Sess. (1975), 385. 85df07a2946c0bf5e633a71e91da97ad. 31 Handler et al., supra note 24. gif 85df07a2946c0bf5e633a71e91da97ad. 32 L. Schwartz, J. Flynn, and H. First, Free Enterprise and Economic Organization: Antitrust (6th edn., gif Foundation Press, Mineola, NY, 1983), 22.

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the two systems differ. As has been described, the US enforcement system was explicitly created with publicprivate pluralism in mind. The litigation-oriented US system has for decades relied on a ratio of private to public suits ranging from 10 to 1 to 20 to 1, and there has never been any expectation that the Antitrust Division of the US Department of Justice would shape antitrust law in the manner of the Commission. In contrast, the Community system has resulted in the Commission having virtually exclusive control of competition regulation. The Community's centralized administrative system of antitrust and the lack of explicit provision for private enforcement have made it extremely difficult for such actions to gain a significant foothold in Community jurisprudence. Some have argued that in the Community system there can be no place (read 'should be' no place) for private actions. It may be helpful to review some of the differences in approach in the Community to antitrust generally as a foundation for considering the place of private enforcement in the Community's administrative system. The bifurcation of Article 81 (formerly 85) EC and the exclusive allocation in Regulation 17 of the power of exemption to the Commission have been said to have the effect of excluding the national courts of the Member States from 'what the legal system of the United States understands by antitrust analysis'.33 Whether this must necessarily remain true (if it is) is addressed below, but it cannot be questioned that decentralization of antitrust enforcement by means of a substantial number of private actions in national courts would be a very great departure from past practice. Various commentators have referred to the paucity of cases enforcing EC competition law in national courts in terms of 'disappointing',34 'still only embryonically developed',35 'failed',36 'remarkably unexplored',37 '[a]lthough . . . theoretically possible, few have been brought',38 and 'not a single judgment has yet been given by a national court awarding damages under the EC competition rules'.39 While

85df07a2946c0bf5e633a71e91da97ad. 85df07 33 H. R. B. Schröter, 'Antitrust Analysis under Articles 85(1) and (3)', (1988) 14 Fordham Corp. L Inst. 645, gif 6634 (B. Hawk, ed.). gif 85df07a2946c0bf5e633a71e91da97ad. 34 D. Hall, 'Enforcement of EC Competition Law by National Courts', in P. J. Slot and A. McDonnell (eds.), gif Procedure and Enforcement in EC and US Competition Law (London, 1993), 41. 85df07a2946c0bf5e633a71e91da97ad. 35 P. J. Slot, 'Introduction', in supra, at p. xvi. gif 36 J. Ferry, in 'EEC Competition Law and Policy Panel Discussion', (1992) 18 Fordham Corp. L Inst. (B. Hawk, 85df07a2946c0bf5e633a71e91da97ad. gif ed.), 193. 85df07a2946c0bf5e633a71e91da97ad. 37 F. G. Jacobs, 'Jurisdiction and Enforcement in EEC Competition Cases', in F. Rowe et al. (eds.), Enterprise gif Law of the 80's: European and American Perspectives on Competition and Industrial Organization (American Bar Association Press, Chicago, Ill., 1980), 213.

85df07a2946c0bf5e633a71e91da97ad. 38 B. Hawk, 'The American (Antitrust) Revolution: Lessons for the EEC?', (1988) 9 Eur. Competition L Rev. 53, gif 63. 85df07a2946c0bf5e633a71e91da97ad. 39 I. Forrester and C. Norall, 'Competition Law', (1993) 12 YBEL 547, 559. See also R. Whish, 'The Enforcement gif of EC Competition Law in the Domestic Courts of Member States', (1994) 15 Eur. Competition L Rev. 60, 63 (Sixth Baron De Lancey Lecture). ('there has yet to be a case . . . in


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damages awards have yet to make their presence visibly felt, there are some signs of activity. Comprehensive and reliable information on the use of Articles 81 (formerly 85) and 82 (formerly 86) EC in the national courts is difficult to obtain. An early study by Steindorff has shown perhaps more use of EC competition law in national courts than is generally realized, although he notes that the number is 'insignificant if compared with the US situation, but it is increasing'.40 Steindorff reported that in 19718, there were slightly over 100 decisions which treated EC competition law in the national courts of France, Belgium, Britain, Germany, and The Netherlands, but that 'national courts are having difficulties with the application of Articles 85 and 86 [now 81 and 82] of the EEC Treaty'.41 He found that, as a general rule, only defendants were basing their claims on EC law and that '[v]ery rare, to the contrary, are cases where plaintiff relies on Community antitrust law'.42 Steindorff concluded that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 One can say that the number since then is increasing slightly, but not considerably. I know that in ninety gif percent of these cases, European antitrust law was invoked only for purposes of the defense. There are almost gif no damage cases and not even one case for refusal to sell. If you want to have an average, I shall say that in two-thirds of the civil cases in France, in Germany and wherever in the Community, the Courts did not find a violation of Article 85 [now 81]. This leaves me with the impression that enforcement of Community antitrust, which does not happen in arbitration, also doesn't take place in civil litigation before state courts.43 More recently, Bourgeois has compiled some figures from unpublished work of the Research and Documentation Division of the Court of Justice, showing that national courts 'enforced' Article 81 (formerly 85) or Article 82 (formerly 86) 60 times in 1989, 56 times in 1990, 22 times in 1991, 15 times in 1992, and four times in some unstated portion of 1993.44 The meaning of these figures is unclear, (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. which a court has actually made an award'); I. S. Forrester, 'Competition Structures for the 21st Century', gif (1995) 21 Fordham Corp. L Inst. 445, 492 (B. Hawk, ed.) ('[i]t is a fact that no court has yet awarded

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damages for breach of Articles 85 or 86 [now 81 or 82], though there is a consensus that such a judgment must one day occur'). Some national court cases recognize the possibility of damages, or have awarded injunctive relief: J. Temple Lang, 'EEC Competition Actions in Member States' CourtsClaims for Damages, Declarations and Injunctions for Breach of Community Antitrust Law', (1983) 10 Fordham Corp. L Inst. 219, 22532 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 40 E. Steindorff, 'Common Market Antitrust Law in Civil Proceedings Before National Courts and Arbitrators', gif (1986) 12 Fordham Corp. L Inst. 409 (B. Hawk, ed.).

85df07a2946c0bf5e633a71e91da97ad. 41Supra, at 40910. gif 42Supra, at 413. 85df07a2946c0bf5e633a71e91da97ad. gif 43Supra, at 442. 85df07a2946c0bf5e633a71e91da97ad. gif 44 J. H. J. Bourgeois, 'EC Competition Law and Member State Courts', (1994) 20 Fordham Corp. L Inst. 475, 476 85df07a2946c0bf5e633a71e91da97ad. gif (B. Hawk, ed.). The author cautions that the figures listed are incomplete, do not explain the role of Arts. 81 (formerly 85) or 82 (formerly 86) in the case, and that 'little is known about the degree of enforcement of EC competition law by national courts'. Supra.

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not least because there is no explanation of what 'enforced' means in this context. The author characterizes these results as 'remarkably low when compared to the activities of the Commission', which he also summarizes, e.g.,: 1989: 206 notifications, 93 complaints, 67 initiated own proceedings, 428 files closed; for 1992: 246 notifications, 110 complaints, 43 own proceedings initiated, and 729 files closed.45 Former Commissioner Sutherland has stated that many of the cases pending before the Commission could be dealt with by national jurisdictions.46 A study of 40 complaints suggested that 20 of the 40, or 50 per cent, could be dealt with by national courts.47 However, the most recent information treating application of the competition rules by national courts and national authorities suggests that there continues to be difficulty in bringing and succeeding in claims in national courts under EC competition law.48 Since at least 1973,49 the Commission has been publicly interested in encouraging private enforcement of Articles 81 (formerly 85) and 82 (formerly 86) in the national courts as a means of improving enforcement.50 Private practitioners have asserted that 'the problem of noncompliance is linked to the difficulty of bringing actions in national courts'.51 Commission staff have acknowledged that 'decentralization of the enforcement to national courts has proven to be necessary if EEC competition policy is to be effectively complied with by the various market operators'.52 Then Advocate-General Warner has commented that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 I think one can now be certain that if there are any excesses in this field in the United States, it is due to gif factors that we need not reproduce in Europe, such as the fact that damages are treble, such as the fact that you gif have trial by jury, such as the class

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 45Supra, at 477. gif gif 85df07a2946c0bf5e633a71e91da97ad. 46 P. Sutherland, 'EEC Enforcement Policy: Recent Developments and Future Prospects', (1987) 13 Fordham gif Corp. L Inst. 325, 338 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 47Supra, Criteria included, inter alia, whether the cases required the evidence-gathering powers of the gif Commission. Whether these numbers may reliably be extrapolated is doubtful. They are certainly too small a sample to meet standard requirements of statistical validity.

85df07a2946c0bf5e633a71e91da97ad. 48 J. Temple Lang, General Report on the Application of Community Competition Law on Enterprises by National gif Courts and National Authorities (1998), 20 (report to the FIDE Congress, Stockholm, June 1998); A. J. Braakman (ed.), The Application of Articles 85 and 86 of the EC Treaty by National Courts in the Member States (Luxembourg, 1997).

85df07a2946c0bf5e633a71e91da97ad. 49 Commission, reply to Mr. Vredeling, Parl. Question 519/72 [1973] OJ C67/54. gif 85df07a2946c0bf5e633a71e91da97ad. 50 See also Commission, Thirteenth Report on Competition Policy (Luxembourg, 1983) gif Commission, Reply to Mr. Moreland, Parl. Question 1935/83 [1984] OJ C144/14.

21718 and

85df07a2946c0bf5e633a71e91da97ad. 51 I. Forrester and C. Norall, 'The Laïcization of Community LawSelf-help and the Rule of Reason: How gif Competition Law is and Could Be Applied', (1983) 10 Fordham Corp. L Inst. 305, 348 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 52 J.-F. Verstrynge, 'Current Antitrust Policy Issues in the EEC: Some Reflections on the Second Generation of gif Competition Policy', (1985) 11 Fordham Corp. L Inst. 673, 687 (B. Hawk, ed.). See, Temple Lang, supra note 39,

at 3023.; and J. Temple Lang, 'Community Antitrust LawCompliance and Enforcement', (1981) 18 CML Rev. 335, 3412.

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85df07a2946c0bf5e633a71e91da97ad. actions, the contingency fees and so on. If one removes all those elements, it seems to me that probably the gif adoption of an action for damages by the person who is the victim of anticompetitive behavior would be

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salutary in Europe . . . the . . . obedience by Member States of and to the provisions of Community law that we have has been secured, to a far greater extent than by action by the Commission under Article 169, as a result of the decisions of the Court in its early days to the effect that certain provisions . . . had direct effect. . . . As a result of that, you get a flood of litigation in the national courts which compels the authorities in the Member States to comply in detail with Community law.

85df07a2946c0bf5e633a71e91da97ad. 85df07 I can see that in this field of competition law, if one had a similar right for the victim to bring an action in his gif national court, then we would get a much greater degree of compliance with Community competition law.53 gif 7.2.2 Objections to Private Enforcement in the Community Despite official support and advocacy from the Commission and writers for private enforcement, some have taken the view in the past that an increase in private competition law enforcement would be undesirable from the standpoint of the Community system.54 In an article representative of this school of thought, then Professor, now Advocate General, Jacobs listed several objections to the practice of national courts taking final decisions in damages actions based on the antitrust rules. The principal 'practical' objections put forth seem to be that (1) lack of resources at Community level is not a relevant reason for deciding an issue of principle; (2) compensation of victims for violations of Community antitrust is not a sufficient justification where breaches of national competition law do not ordinarily give rise to actions for damages; (3) courts are not appropriate agencies to decide complex issues of fact and policy present in the competition field; (4) the coexistence of two systems of antitrust law, national and Community, means that a right to damages would turn on the 'relatively insignificant criterion' of whether there exists an actual or potential effect on interstate tradewhich is regarded as 'making a nonsense of the assertion of a claim to damages in national courts in cases where there would be no such claim for breach of the domestic antitrust law';55 (5) it may be difficult for plaintiffs to meet their burden of proof, especially with regard to obstacles to discovery of documents; (6) it is uncertain who would have standing to sue and there would be the risk of multiple actions by different parties in different Member States with the possibility of conflicting results; (7) there would be a risk of forum-shopping if plaintiffs sought to sue in the jurisdiction offering the best prospects for success and the highest available damages

85df07a2946c0bf5e633a71e91da97ad. 85df07 53 J.-P. Warner, in conference discussion, in F. Rowe, F. Jacobs, and M. Joelson (eds.), Enterprise Law of the gif 80's: European and American Perspectives on Competition and Industrial Organization (Chicago, Ill., 1980), gif 233.

85df07a2946c0bf5e633a71e91da97ad. 54 F. G. Jacobs, 'Civil Enforcement of EEC Antitrust Law', (1984) 82 Mich. L Rev. 1364. It is not meant to imply gif that these same views would be held today by now-AG Jacobs. 85df07a2946c0bf5e633a71e91da97ad. 55Supra, at 1369. gif < previous page page_88 next page >


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award; and (8) prospective plaintiffs might consider that in the absence of treble damages and class actions, the damages recovered might not justify the total risks of litigation. With respect, these objections are unpersuasive whether viewed individually or in the aggregate. It seems that in considering private enforcement from a systemic perspective there ought to be some attention paid to the views of the Commission, which has of course historically dominated competition law enforcement in every respect. While perhaps not dispositive, the view from the standpoint of the Commission that private enforcement is necessary, to be encouraged, and would increase the effectiveness of Community law, surely ought not be lightly ignored. In this context, where the principle is the effectiveness of Community law, the contention that the quantity of the resources available to the Commission is not relevant cannot be accepted. Indeed, one of the important reasons previously mentioned for having a dual enforcement system in the USA was to prevent political and budgetary considerations from affecting enforcement resources and legal principles. The 'relevance' objection mistakenly trivializes the policy issue by categorizing it as mere budgetary sufficiency, as if that were the sole justification for private enforcement in the absence of any underlying legal principle. There is no foreseeable likelihood of additional resources being granted to the Commission in amounts sufficient to eliminate the value of private enforcement. Moreover, this objection does not fully address the reasons in favour of private enforcement as either policy or legal doctrine. From a policy standpoint, a preference for increasing the resources of the Commission56 does not meet the problem of compensating victims of infringement of the competition rules. From a legal doctrine standpoint, this argument fails to justify a refusal to give full respect to directly effective rights.57 From the standpoint of deterrence, even increasing the resources to the Commission to any politically acceptable level would not achieve the same level of deterrence as would enlisting the full efforts in private litigation of victims of infringing practices along with the activities of the Commission. Other objections to private damages actions include suggestions that citizens need not be allowed such compensation under Community law when they lack such rights under national law, and that it would be anomalous 'nonsense' to make the availability of a private right to damages turn on the effect of conduct on interstate trade. The concept implicit in this argument is that the absence of comparable rights in national law ought to limit the scope of rights granted under Community law, a doctrine which, if accepted, would have profound

85df07a2946c0bf5e633a71e91da97ad. 56 Jacobs, supra, at 1376. gif 85df07a2946c0bf5e633a71e91da97ad. 57 See Chap. 5. gif < previous page

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consequences for the Community system. However, this doctrine cannot be accepted. The fact that damage remedies might be available for infringements of Community competition rules but not national ones is not at all an 'intolerable anomaly' but is in fact 'a consequence of the very nature of the Community'.58 The argument that courts are inappropriate for the determination of competition law decisions is made to rest on the fact that antitrust systems in Europe are either predominately or exclusively administrative in nature. This only demonstrates that in Europe courts do not generally decide antitrust questions, not that they cannot or should not. One might as well point out that in the USA, the antitrust system embraces not only private litigation but also administrative proceedings (FTC) and governmental litigation, which would by the same reasoning indicate that courts can decide antitrust questions. However, the fundamental issue must include consideration of precisely what national courts are really being asked to decide in a private action. A national court deciding an antitrust case is in only limited respects comparable to proceedings before the Commission or a national authority. In a private antitrust action, national courts are deciding the particular dispute between private parties. They are not deciding subtle questions of economic policy on a Community-wide basis. Their decisions will result or not result in an injunction or a damages award based on the evidence presented to the court. It will not create a legislative or administrative act having uniform binding effect on every similar agreement or conduct, as might a block exemption. To say that courts cannot or should not decide complex policy questions is not the issue, because they do not. In fact a senior official in the Commission's DG IV (speaking unofficially) has argued for doing away with the administrative notification system and leaving the exemption decisions now made by the Commission to the courts:

85df07a2946c0bf5e633a71e91da97ad. [T]here is a great deal to be said . . . [for] getting rid of the notification system altogether and have no gif individual approvals for agreements, simply leaving everything to the courts, including perhaps specialized

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courts if necessary, something like the US system. That has enormous advantages. The more I think about it, the more I think they are very strong ones.59 In a similar vein, the former Director General of DG IV has suggested that in so far as Commission use of resources is concerned, 'the examination of requests for individual exemption from the prohibition of restrictions of competition might be less productive than the discovery of hard-core cartels'.60 Senior Commission

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c 58 Jacobs, supra note 54, at 1375. gif gif 85df07a2946c0bf5e633a71e91da97ad. 59 J. Temple Lang, comments in panel discussion, 'EC Competition and Trade Law', (1995) 21 Fordham Corp. L gif Inst. 579, 595 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 60 C.-D. Ehlermann, 'Deregulation and Enforcement of Competition Laws', Proceedings of the Second Seminar on gif European Union/Japan Competition Policy (Luxembourg,1995), 25.

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officials, speaking unofficially, have said that if the Commission were not able to grant individual exemptions at all, there would be no practical adverse effect on the Commission's ability to make Community competition policy.61 When Commission personnel of such rank make declarations (even unofficial ones) which seem to go against their administrative interest, it is submitted that some weight ought to be given to such pronouncements. To say that courts cannot decide complex factual matters, if true, is to say too much. Courts are in the business of deciding factual disputes and applying governing law to the facts determined. They have no other reason to exist. If current judges and court systems in Europe or the UK are unable to decide complex factual disputes, then reforms are greatly needed for far more reasons than merely antitrust cases. However, if courts are in fact ill-equipped, this 'should not mean that the unsatisfactory status quo is maintained. On the contrary: the judicial system should be improved, the courts should be better equipped, the judges should be helped in their difficult work of fact finding and fact appreciation'.62 The suggestion that national courts need to be advised by the Commission, however important it may have seemed to some a decade or more ago, has been rejected by the Commission's Temple Lang (speaking unofficially), who has said that 'if there is anything on which national courts do not need guidance, it's Community competition law. The place is full of competition lawyers in Europe'.63 Other objections such as the potential difficulty in discharging burdens of proof, uncertainty as to the scope of standing, jurisdiction, and risks of forum-shopping are not objections in principle. They are difficulties which, in the absence of harmonizing legislation, can only be resolved by having cases raising these issues work their way through the courtsto suggest that these are reasons not to allow such cases until they are resolved is to require the impossible. The legal order requires grist for its mill in the form of cases to develop the applicable rules. Moreover, as then Professor Jacobs indicated in 1980, a Community solution to the problem of remedies would help keep such problems from assuming a disproportionate role.64 A Community solution would also tend to limit the possibility of variations among Member States in availability of damages. One central theme of objections to private enforcement is the notion that, because of an attitudinal disinclination of companies to litigation, or uncertainty whether damages awarded will be worth the expense and risks of litigation, private

85df07a2946c0bf5e633a71e91da97ad. 85df07a 61 Interview with Dr. John Temple Lang, Director of DG IV, in New York City, 16 Oct. 1997. gif gif 85df07a2946c0bf5e633a71e91da97ad. 62 Ehlermann, supra note 60, at 26. gif 85df07a2946c0bf5e633a71e91da97ad. 63 Temple Lang, supra note 59. gif 64 Jacobs, supra note 54, at 214. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_91 next page >


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enforcement may not be effective in Europe. However, as an argument against private enforcement, this does not suffice. It has never been suggested that private enforcement should take the place of Commission enforcement, only that private enforcement should supplement it. If there are cases not worth the expense of bringing in view of the rewards to be expected, those cases will not be brought. This is no more an objection in principle to private enforcement than it is an objection in principle to Commission enforcement to say that the Commission does not commence enforcement proceedings in response to every complaint. Where some victims of antitrust violations are seriously injured and have substantial claims for damages, it is not acceptable to say those cases may not be brought because other cases may have less merit or fewer damages. Private enforcement cannot fairly be judged on cases which are not brought, but must be evaluated on those which are brought or might be brought if some of the legal and doctrinal uncertainties now prevalent could be resolved. There is more than a little irony in Jacobs' suggestion that Community antitrust law can and should be enforced in national courts with respect to interim or interlocutory injunctive relief but that it will 'rarely be appropriate . . . for national courts to take a final decision leading to an award of damages'.65 While this statement was made prior to Factortame (all of them), there is no apparent principled justification for saying that private parties should be entitled to interim injunctive relief but not final damages. If private enforcement has a place at all in the Community system, and it is submitted that it clearly does, then effective interim and final relief must also have a place. A true 'intolerable anomaly' would be a system which protects Community rights on an interim but not a final basis.

85df07a2946c0bf5e633a71e91da97ad. 65 Jacobs, supra note 54, at 13756. gif

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8 Enforcement Pluralism in the Community System

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85df07a2946c0bf5e633a71e91da97ad. 8.2 The Co-Operation Notice gif

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85df07a2946c0bf5e633a71e91da97ad. 8.3 Limits on the Duty to Stay Actions gif

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85df07a2946c0bf5e633a71e91da97ad. 8.4 Narrow Constructionism: The Illusion of Exclusivity gif

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85df07a2946c0bf5e633a71e91da97ad. 8.5 The Effect of Commission Decisions on Parties before the National Courts gif

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8.1 Concurrent Jurisdiction The result of the direct effect of Article 81(1)(2) (formerly 85) and the Commission's duty to enforce the competition rules of the Treaty1 is that the national courts and the Commission have concurrent jurisdiction over the enforcement of Article 81(1) (2). 'The Commission does not have exclusive competence to apply Articles 85(1) and 86 [now 81 and 82]. It shares that competence with the national courts'.2 This shared competence means that, as in BRT v. SABAM,3 there can be proceedings before the Commission while the same agreement or conduct is being challenged in a private action before a national court. The possibility of inconsistent decisions cannot be excluded, in that inevitably one judgment will occur first. This possibility has been recognized since the earliest days of Regulation 17:

85df07a2946c0bf5e633a71e91da97ad. There is therefore the danger that there can be two conflicting decisions by the Commission and by the National gif Courts as to whether an agreement is inadmissible under Article 85(1) [now 81(1)] and therefore null and void. This

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danger can, however, be overcome because in both cases the Court of Justice in Luxembourg has

85df07a2946c0bf5e633a71e91da97ad. 1 Arts. 89, 155 EC, now 85 and 211. gif 85df07a2946c0bf5e633a71e91da97ad. 2 Case 234/89, Delimitis v. Henninger Bräu [1991] ECR I935, at 47. gif 85df07a2946c0bf5e633a71e91da97ad. 3 Case 127/73, [1974] ECR 51 and 313. gif < previous page

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85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a7 the last word, whether under Article 173 or Article 177 [now 230 or 234] of the Treaty.4 gif gif A national court could conceivably find no infringement of Article 85(1) (now 81) even though the Commission had found an infringement.5 On the other hand, it appears that the national court is free to find an infringement and is not bound by a Commission finding of non-infringement (negative clearance).6 Marenco explains why this seeming inconsistency is not a conflict of decision:

85df07a2946c0bf5e633a71e91da97ad. [T]he operative part of a negative clearance (there are no grounds for the Commission to act in respect of a gif given agreement) conveys to the undertaking the message that the Commission does not intend to act. If a

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national court takes a different view as to the existence of an infringement, therefore, technically there is not even a conflict between the Commission's decision and the court's judgment. . . . The result is that in the interpretation of Article 85(1) [now 81 (1)] national courts are never legally bound by Commission decisions. . . .7 Even if the Commission has already given a negative clearance decision, distinct from an exemption, a national court is free under Community law to render its own judgment on the issue. If negative clearance is not granted by formal decision but instead an informal 'comfort letter' is issued in order to close the file, the result is the same. Because even a formal decision would not bind the national court, certainly a comfort letter could not8 pretend to have binding effect. The result is the same whether the decision/comfort letter grants or denies negative clearance. If the national court rules that an agreement, decision, or concerted practice is caught by Article 85(1) and the Commission has ruled to the contrary, there is no actual conflict, but the most likely result is that the party defending the agreement will urge the national court to make an Article 177 (now 234) reference to the Court of Justice. If the Commission has ruled that an agreement is caught by Article 81 (1), formerly 85(1), without exemption, the party attacking the agree-

85df07a2946c0bf5e633a71e91da97ad. 4 A. Deringer, 'The Distribution of Powers in the Enforcement of the Rules of Competition Under the Rome gif Treaty', (1963) 1 CML Rev. 30, 38.

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85df07a2946c0bf5e633a71e91da97ad. 5 See I. Van Bael, 'The Role of the National Courts', (1994) 15 Eur. Competition L Rev. 3, 4. gif 85df07a2946c0bf5e633a71e91da97ad. 6 Case T51/89, Tetra Pak Rausing v. Commission, [1990] ECR II309, 324, 343 Opinion of AG; J. Temple Lang, gif 'European Community Constitutional Law and the Enforcement of Community Antitrust Law', (1994) 20 Fordham Corp. L Inst. 525, 562 (B. Hawk, ed.); Commission, Notice on Co-operation Between National Courts and the Commission in Applying Articles 85 and 86 of the EEC Treaty [1993] OJ C 39/6, 20 (hereinafter, Co-operation Notice); G. Marenco, 'The Uneasy Enforcement of Article 85 EEC as Between Community and National Levels', (1994) 20 Fordham Corp. L Inst. 605, 61516 (B. Hawk, ed.); Opinion of Van Gerven AG, Case C128/92, H.J. Banks & Co. Ltd v. British Coal Corp. [1994] ECR I1209, at 60.

85df07a2946c0bf5e633a71e91da97ad. 7 Marenco, supra note 6, at 61617. gif 8 Case 99/79, Lancôme v. Etos BV, [1980] ECR 2511; Cases 253/78 and 13/79, Procureur de la République v. 85df07a2946c0bf5e633a71e91da97ad. gif Giry and Guérlain, [1980] ECR 2327. However, the ECJ has said '[w]hilst it does not bind the national courts, the opinion transmitted in such letters nevertheless constitutes a factor which the national court may take into account in examining whether the agreements or conduct in question are in accordance with the provisions of Article 85 [now 81]'. Lancôme, at 11.

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ment in the national court will certainly be urging the national court to follow suit. However, applications for negative clearance under Article 81 (formerly 85) will as a rule be joined with alternative requests for an individual exemption (Form A/B).9 Therefore, the normal situation where a negative clearance has been requested is that a national court very likely will also be considering the Commission's action or possible action on an exemption request. The conventional approach to the problems of concurrent jurisdiction has been to focus on the allegedly erroneously wide scope of the Commission's interpretation of Article 81 (1), formerly 85(1), and propose that a less literal and more American-style 'Rule of Reason' be adopted in the interpretation of Article 81 (1), formerly 85(1).10 The premise of this approach is that many, if not most, agreements now considered caught by Article 81 (1), formerly 85(1), would escape the Commission's dragnet, avoiding the need for the Commission to grant so many exemptions under Article 81 (3), formerly 85(3). While this might well be true in many circumstances, the European Court of Justice case law does not really support such a result.11 On the other hand, a principled consideration of Delimitis and its predecessors leads to the (only) slightly heretical conclusion that real conflicts between national court enforcement and the Commission ought in practice to be rather rare. Where there is no Commission decision at the time a plaintiff prepares to commence an Article 81 (formerly 85) proceeding (or assert a defence) in a national court, two distinct problems can occur. One potential difficulty is the breadth of Article 81 (1), formerly 85(1), coupled with the Commission's sole power of exemption. This means that hundreds or thousands of agreements have the potential to be caught by Article 85(1), be declared void by national courts under Article 81 (2), formerly 85(2), and possibly result in the award of damages, without the national court having the competence to consider an exemption under the terms of Article 81 (3), formerly 85(3).12 If the Commission has not rendered an exemption decision prior to the national court's giving judgment, the agreement or conduct may be declared void by the national court pending possible subsequent action by the Commission. This is what I have called the doctrine of provisional nullity.13

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 9 V. Korah, EC Competition Law & Practice (5th edn., London, 1994), 114. gif gif 85df07a2946c0bf5e633a71e91da97ad. 10 See, generally, I. Forrester and C. Norall, 'The Laïcization of Community LawSelf- help and the Rule of gif Reason: How Competition Law Is and Could Be Applied', (1983) 10 Fordham Corp. L Inst. 305, 3067 (B. Hawk, ed.). See also R. Whish and B. Sufrin, 'Article 85 and the Rule of Reason', (1988) 7 YBEL 1; and G. Wils, The Rule of Reason in EEC Competition Law: The Dumping of a Legal Concept (1988) (LL.M. Thesis, on file at Harvard Law School) (critical of this approach).

85df07a2946c0bf5e633a71e91da97ad. 11 Wils, supra note 10. gif 12 See I. Forrester and C. Norall, 'Competition Law', (1993). 12 YBEL 547, 552. 85df07a2946c0bf5e633a71e91da97ad. gif 13 As compared to the doctrine of provisional validity, previously discussed in Chap. 5. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_95


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Provisional nullity is unsettling to undertakings in the position of defending agreements in the national courts, but it ought not be thought a genuine concern from the standpoint of legal certainty.14 The source of the problem is the 'original sin of EC competition law',15 the bifurcation of responsibility under Article 81, formerly 85, for determining infringements and exemptions. More specifically, while there is concurrent jurisdiction to find infringements of Article 81 (1), formerly 85(1), there is no concurrent jurisdiction to allow exemptions under Article 81 (3), formerly 85(3). Another concern is that a plaintiff may be reluctant to begin lengthy and expensive national court proceedings with knowledge that at any point in time, the Sword of Damoclesin the form of the Commission's power to grant a discretionary exemptionmay fall,16 cutting off his 'heads' of claim and leaving behind a possible liability for costs. This has already occurred in the context of proceedings by some national authorities, who are now unwilling to expend resources which could be wasted if the Commission takes actioncommencing a proceeding or granting an exemptionthat has the effect of terminating the national authority's competence.17 In the case of the national courts, the Commission's power of exemption has a 'chilling' effect applicable to the substantive law being applied, even though Commission action does not directly affect the national court's jurisdiction as in the case of national authorities.18 Some have suggested that national courts and national authorities are deprived of 'motivation' and willingness to co-operate to apply Article 81 (1), formerly 85(1), by their inability to apply Article 81 (3), formerly 85(3).19 The Commission has suggested communicative and co-operative strategies for addressing these concerns in its National Authorities

85df07a2946c0bf5e633a71e91da97ad. 85df07 14 Too much sympathy may not be in order because the problem is most likely to arise in situations where an gif undertaking has chosen to implement an agreement at its own risk in advance of a Commission decision, cf. gif de Haecht No. 2, has chosen not to notify an agreement to the Commission, or has delayed notification until a dispute arose or litigation commenced. It is to a great extent a self-inflicted problem. 85df07a2946c0bf5e633a71e91da97ad. 15 B. Hawk, 'Enforcement of EC and National Competition Law by Member State Competition Authorities: gif Roundtable Four', (1994) 20 Fordham Corp. L Inst. 639, 661 (B. Hawk, ed.).

85df07a2946c0bf5e633a71e91da97ad. 16 Marenco, supra note 6, at 623. gif 17 H.-P. von Stoephasius, 'Enforcement of EC Competition Law By National Authorities', in P. J. Slot and A. 85df07a2946c0bf5e633a71e91da97ad. gif McDonnell (eds.), Procedure and Enforcement in EC and U.S. Competition Law (London, 1993), 334. In the Ford/ Volkswagen joint venture, the Commission issued an exemption in order to prevent the German Federal Cartel Office from prohibiting the arrangement. Von Stoephasius expressed the view that the Commission's exclusive power of exemption thus gives national authorities no motivation to act. Other national authorities have reported similar discouragement: J. Temple Lang, General Report on the Application of Community Competition Law on Enterprises by National Courts and National Authorities (1998), 18 (report to the FIDE Congress, Stockholm, June 1998).

85df07a2946c0bf5e633a71e91da97ad. 18 Marenco, supra note 6, at 6234. Art. 9(3) of Reg. 17 provides that the competence of national authorities ceases gif upon commencement of a procedure by the Commission. 85df07a2946c0bf5e633a71e91da97ad. 19 K. Stockman, in 'Enforcement of EC and National Competition Law by Member State Competition Authorities: gif Roundtable Four', (1994) 20 Fordham Corp. L Inst. 639, 6468 (B. Hawk, ed.).

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Notice.20 The Commission now considers that this has been dealt with,21 although it is yet to be determined if the national authorities fully concur. Both problems are the product of the combination of concurrent competence to enforce Article 81 (1), formerly 85(1), and exclusive competence of the Commission with regard to Article 81 (3), formerly 85(3). The problem of concurrent competence was addressed at some length by the European Court of Justice in Delimitis:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Such conflicting decisions would be contrary to the general principle of legal certainty and must, therefore, be gif avoided when national courts give decisions on agreements or practices which may subsequently be the gif subject of a decision by the Commission. . . .

85df07a2946c0bf5e633a71e91da97ad. 85df07 Nevertheless, in order to reconcile the need to avoid conflicting decisions with the national court's duty to rule gif on the claims of a party to the proceedings that the agreement is automatically void, the national court may gif have regard to the following considerations in applying Article 85 [now 81].

85df07a2946c0bf5e633a71e91da97ad. 50. If the conditions for the application of Article 85(1) [now 81 (1)] are clearly not satisfied and there is, gif consequently, scarcely any risk of the Commission taking a different decision, the national court may

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continue the proceedings and rule on the agreement in issue. It may do the same if the agreement's incompatibility with Article 85(1) [now 81 (1)] is beyond doubt and, regard being had to the exemption regulations and the Commission's previous decisions, the agreement may on no account be the subject of an exemption decision under Article 85(3) [now 81 (3)].

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e91da97ad. ... gif gif 85df07a2946c0bf5e633a71e91da97ad. 85df07 52. If the national court finds . . . that the agreement may be the subject of an exemption decision, the national gif court may decide to stay the proceedings or to adopt interim measures pursuant to its national rules of gif procedure. . . .

85df07a2946c0bf5e633a71e91da97ad. 54. Finally, the national court may in any event, stay the proceedings and make a reference to the court for a gif preliminary ruling under Article 177 [now 234] of the Treaty.22

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National courts do not lose their competence to adjudicate competition law disputes whenever an issue arises as to the possible application of Article 81 (3), formerly 85(3). A broader interpretation of Article 9(1)'s23 reservation of competence to the Commission could have resulted in a rule that national courts could not apply Article 81, formerly 85, in any way if a plea of exemption

85df07a2946c0bf5e633a71e91da97ad. 20 Commission, Notice on Co-operation between National Competition Authorities and the Commission in gif Handling Cases Falling within the Scope of Articles 85 or 86 of the EC Treaty [1997] OJ C313/3 (the

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National Authorities Notice).

85df07a2946c0bf5e633a71e91da97ad. 21 Temple Lang, supra note 17, at 18. ('the [National Authorities] Co-operation Notice now deals with this. The gif Commission in practice would not take away a case from a national authority which was applying Community law (as distinct from national law), and there is no reason why the authority could not agree, in advance, with the Commission that the Commission would not intervene in a particular case if the authority was applying Community law').

85df07a2946c0bf5e633a71e91da97ad. gif 22 Case 234/89, Delimitis, note 2 above, at 85df07a2946c0bf5e633a71e91da97ad. 23 Of Council Reg. 17. gif < previous page

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pursuant to Article 81 (3), formerly 85(3), were entered.24 A national court considering whether an agreement or practice violates Article 81 (formerly 85) necessarily considers the application of Article 81 (3), formerly 85(3),25 if only in order to reject it. The position with respect to new agreements since de Haecht (No.2) has been a narrower view that the Commission has sole authority to grant exemptions under Article 81 (3), formerly 85(3), but national courts retain jurisdiction to deny exemptions.26 Under the rules laid down in Delimitis, a national court may in a clear case decide that Article 81 (1), formerly 85(1), is not infringed. A national court may determine that an agreement is covered under a block exemption. The national court may also decide that the challenged practice is incompatible with Article 81, formerly 85, that Article 81 (1), formerly 85(1), is infringed, and that there is no likelihood of exemption under Article 81 (3), formerly 85(3). The difficulty arises of course in the unclear cases, where the national court determines that Article 81 (1), formerly 85 (1), is infringed, but there is a plausible claim that the Commission may yet grant an exemption. Whether there is an actual conflict may turn on the order in which decisions come down. If the Commission has already taken a decision granting an exemption by the time allegedly infringing conduct is considered by a national court, then the national court must determine whether the Commission's competence is actually exclusive and whether the apparent certainty of the exemption is actually binding in the particular case, or merely illusory. If the Commission has not already taken a decision but is considering a request for an exemption, the national court must determine the probability that an exemption will be granted which covers the particular case and consider a stay of proceedings to await the outcome of the Commission's ruminations.

85df07a2946c0bf5e633a71e91da97ad. 24 J.M.H. Faull and J.H.H. Weiler, 'Conflicts of Resolution in European Competition Law', (1978) 3 Eur. L gif Rev. 116, 1245.

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85df07a2946c0bf5e633a71e91da97ad. 25 Cf. J. Faull, 'The Enforcement of Competition Policy in the European Community: A Mature System', (1992) gif 18 Fordham Corp. L Inst. 139, 154 (B. Hawk, ed.) ('[t]his does not alarm me: indeed, enforcement of Article 85

[now 81] by national judges would be severely handicapped if they could not take a realistic view of the possible application of Article 85(3) [now 81 (3)] to an agreement. . . . Courts can consider the likely application of Article 85(3) [now 81 (3)] without actually going so far as to declare Article 85(1) [now 81 (1)] inapplicable'). 85df07a2946c0bf5e633a71e91da97ad. 26 '[T]he position of the law as it stands today is that national courts may apply Article 85(3) [now 81 (3)] gif negatively, by drawing legal conclusions from its non-applicability to an agreement, but may not apply it positively': Faull and Weiler, supra note 24, at 133. Technically, a national court does not deny something it has no jurisdiction to grant, but it takes the position that the restriction at issue is not entitled to or likely to receive an exemption.

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8.2 The Co-Operation Notice Following the judgment in Delimitis, the Commission's Co-operation Notice27 was issued to encourage private enforcement of Articles 81 and 82 (formerly 85 and 86) in the national courts. The apparent objective was to increase awareness on the part of national courts, lawyers, and prospective private litigants of their options for private enforcement actions and provide guidance on avoidance of inconsistent decisions by national courts and the Commission. The Co-operation Notice itself does not break any new ground, but it points out certain advantages of private enforcement over complaints to the Commission and cautions that the Commission's limited resources 'cannot be used to deal with all the cases brought to its attention'.28 The Commission takes the view that its responsibility to the Community interest as a whole means that it must set priorities, and it considers 'that there is not normally a sufficient Community interest in examining a case when the plaintiff is able to secure adequate protection of his rights before the national courts'.29 This is more than a hint that the Commission wishes to discourage complaints, which are less costly for an undertaking to pursue than private actions, by indicating that some are not likely to be given investigatory attention. Presumably, the Commission envisages that parties in doubt of their welcome in Brussels are more likely to resort to national courts. 'The Commission considers that it is not obliged to decide issues of Community competition law arising from complaints or to adopt formal decisions merely to facilitate claims for compensation in national courts.'30 From a practical perspective of private enforcement, the Co-operation Notice sends mixed signals. A perusal of that document reveals that the Commission's intended encouragement of resort to national courts is so encumbered with comments concerning the need for national courts to stay actions and wait on information or

85df07a2946c0bf5e633a71e91da97ad. 85df07 27Notice on Co-operation between National Courts and the Commission in Applying Articles 85 and 86 of the gif EEC Treaty [1993] OJ C39/6, (here the Co-operation Notice). The Commission has also issued two other gif notices dealing with co-operation in application of Community competition law, one dealing with national competition authorities: Commission, Notice on Co-operation between National Competition Authorities and the Commission in Handling Cases Falling within the Scope of Articles 85 or 86 of the EC Treaty [1997] OJ C313/3 (the National Authorities Notice), and one dealing with state aids: Commission, Notice on Cooperation between National Courts and the Commission in the State Aid Field [1995] OJ C312/8.

85df07a2946c0bf5e633a71e91da97ad. 28Supra note 27, at 13. gif 85df07a2946c0bf5e633a71e91da97ad. 29Supra, at

15. See Case T24/90, Automec v. Commission (No. 2), [1992] ECR II-2223. In Automec No. 2, the

gif CFI in fact indicated in 86 of its judgment that the Commission was required to make a determination that the

rights of the plaintiff could in fact be protected in the national court by a specific analysis of the legal and factual circumstances of the particular case. An automatic Commission policy of deprioritizing or rejecting complaints where a private action has been commenced in national court seems unwarranted by the judgment in Automec No. 2.

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action from the Commission that it may well persuade prospective litigants that the most likely outcome of private litigation is inaction. From a workload standpoint, the most probable result will be an increase in the Commission's work, rather than a decrease. If parties do resort to national courts, undertakings which were formerly satisfied with a comfort letter but are facing litigation in a national court may now insist on a formal exemption decision. The Cooperation Notice may therefore be counterproductive. Its effects so far have been limited.31 8.3 Limits on the Duty to Stay Actions The Co-operation Notice could have profitably devoted less space to encouraging stays and more space to explaining that national courts have the power to decide the cases before them. A national court has a duty when possible to avoid taking a decision which conflicts32 with a decision of the Commission, existing or prospective, but there are limits. Despite some seemingly mandatory language in the Co-operation Notice, de Haecht (No. 2), and Delimitis, it seems clear that there is not an absolute or unconditional obligation to stay national court proceedings while waiting for the Commission to act.33 The national court, in the performance of its duty to decide the case, is entitled to formulate a considered, discretionary judgment about what the Commission is likely to do:

85df07a2946c0bf5e633a71e91da97ad. [T]his cannot, however, absolve the [national] court from the obligation of deciding on the claims of gif interested parties who invoke the automatic nullity. 85df07a2946c0bf5e633a71e91da97ad. 12. In such a case it devolves on the court to judge, subject to the possible application of Article 177, whether gif there is cause to suspend proceedings in order to allow the parties to obtain the Commission's

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standpoint. . . .34 Similarly, in BRT v. SABAM, the Court spoke of the national court's discretion:

85df07a2946c0bf5e633a71e91da97ad. Nevertheless, if the Commission initiates a procedure in application of Article 3 of Regulation no 17 such a gif court may, if it considers it necessary for reasons of legal certainty, stay the proceedings before it while

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awaiting the outcome of the Commission's action.35 The Delimitis judgment characterized the standard for the national court to employ in deciding not to stay its proceedings in terms such as whether the

85df07a2946c0bf5e633a71e91da97ad. 85df07 31 Temple Lang, supra note 17, at 38 ('[s]everal reasons are given. Some national courts are not accustomed gif to the idea of asking any authority for information. . . . When a national court wants guidance on a question of gif law, rather than factual information, it naturally prefers to use Article 177 [now 234], so as to get an authoritative ruling').

85df07a2946c0bf5e633a71e91da97ad. 32 Case 234/89, Delimitis v. Henninger Bräu [1991] ECR I935 ('[s]uch conflicting decisions . . . must . . . be gif avoided'). 85df07a2946c0bf5e633a71e91da97ad. 33 D. A. O. Edward and R. C. Lane, European Community Law: An Introduction (Edinburgh, 1991) 72, at 161, gif note 4. See also Temple Lang, supra note 17, at 32: 'a national court is not always obliged to adjourn and wait'. 85df07a2946c0bf5e633a71e91da97ad. gif 34de Haecht (No. 2), [1973] ECR 77, at 1112 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. 35BRT v. SABAM, [1974] ECR 51, at 21 (emphasis supplied). gif

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incompatibility of the practice with Article 85 is 'beyond doubt', if the practice 'may on no account' be the subject of an exemption, or if there is 'scarcely any risk' the Commission would decide to condemn an agreement under Article 85. At the same time, the Court spoke of the national court's 'duty to rule on the claims of a party' and the conditions under which it 'may decide to stay' proceedings. The Commission's view is that if an agreement has been notified to the Commission, the national court must 'assess the likelihood of an exemption being granted in the case', and if the national court ascertains that the agreement or practice at issue 'cannot be the subject of an individual exemption', it will 'take the measures necessary to comply with the requirements of Article 85(1) and (2)'.36 However, if the national court 'takes the view that an individual exemption is possible, the national court should suspend the proceedings while awaiting the Commission's decision'.37 The national court should 'envisage' suspending its proceedings38 when there is a risk that the Commission may 'envisage' an exemption being granted.39 However, suspending proceedings whilst waiting for the Commission to act can be a very great hardship on the parties, particularly since there will be no reliable way of predicting the length of such a stay. Even if a national court correctly predicts what the Commission's decision will be, the Commission has at times been reversed on appeal. Must the national court also stay its hand pending review by the Court of First Instance, followed by the Court of Justice? Given the average length of time to obtain a Commission decision (one to two years or more40), even assuming the Commission issues a formal one, adding the length of time for the Court of First Instance to act (23.3 months41) and the time for Court of Justice review (19.2 months42), the stay of national court proceedings could span two

85df07a2946c0bf5e633a71e91da97ad. gif 36Co-operation Notice, supra note 27, at 85df07a2946c0bf5e633a71e91da97ad. 37Supra, at 30 (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 38Delimitis, supra note 2, at

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2930 (emphasis supplied).

52.

gif 85df07a2946c0bf5e633a71e91da97ad. 39 In the Co-operation Notice, supra note 27, the Commission states at 18, that national courts 'must take gif account of the Commission's powers in order to avoid decisions which could conflict with those taken or envisaged by the Commission in applying Article 85(1) and Article 86, and also Article 85(3) [now 81(1), 82, and 81(3)]' (emphasis supplied). This language comes from Delimitis, supra note 2, at 47. 85df07a2946c0bf5e633a71e91da97ad. 40 Adrian Brown, 'Notification of Agreements to the EC Commission: Whether to Submit to a Flawed System', gif (1992) 17 Eur. L Rev. 323, 336. The author notes that even 'comfort letters' take several months. The Commission asserts in the Co-operation Notice, supra note 27, at 37, that it will 'endeavour to give priority to cases which are the subject of national proceedings suspended in this way, in particular when the outcome of a civil suit depends on them'. 85df07a2946c0bf5e633a71e91da97ad. 41 In 1993, the average length of decision for direct actions was 23.3 months in the CFI. 'Statistical information gif from the Court of Justice and the Court of First Instance', (1994) 19 Eur. L Rev. 241, 242.

85df07a2946c0bf5e633a71e91da97ad. 42Supra, at 241. For the ECJ, appeals had an average length of 19.2 months and direct actions had an average gif length of 22.9 months. Art. 177 (now 234) references averaged 20.4 months. All figures are for 1993.

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Intergovernmental Conferences, not to mention the lives of witnesses and the fortunes of the litigants! It is submitted that a national court should be reluctant to suspend proceedings for very long unless it takes the view that an exemption is probable, rather than merely possible.43 This is particularly the case because private actions will not always claim only Article 81 (formerly 85) violations or assert the Article 81(2), formerly 85(2), nullity defence but often may be combined with Article 82 (formerly 86) claims and national law claims. National law claims are not subject to the Commission's 'exclusive' power of exemption,44 and no exemption is possible for infringements of Article 82 (formerly 86). Where an Article 81 (formerly 85) claim is only part of a private action, a national court will surely want powerful reasons to believe that an exemption is likely to be forthcoming from the Commission before it suspends the entire proceeding. If there are non-Article 81 (formerly 85) claims, the national court may also have to consider separately whether they should also be suspended or may proceed independently of the Article 81 (formerly 85) claim. Certainly, the national court may permit discovery and other pre-trial matters to proceed up to the point of setting down for trial while the Commission considers the matter without risking a conflicting decison.45 The European Court of Justice has expressly noted that the national court might consider interim measures as an alternative to a stay.46 Presumably, interim measures also could be used to assure that parties are not unnecessarily adversely affected by a stay. Under the circumstances, the certainty required of the national court regarding the Commission's course of action inevitably will be relative. It is submitted that a national court has the competence and discretion to form the judgment, presumably informed by prior decisions of the ECJ, Court of First Instance, and the Commission,47 that an exemption is not to be expected and to act on its conclu-

85df07a2946c0bf5e633a71e91da97ad. 43 Greaves has noted a tendency of national courts (all pre-Delimitis and most pre-BRT) to stay cases, gif although she indicates this is 'merely illustrative of an earlier uncertainty and in no way are to be taken as

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views held by these courts now': R. Greaves, 'Concurrent Jurisdiction in EEC Competition Law: When Should a National Court Stay Proceedings?', (1987) 8 Eur. Comp. L Rev. 256, 264. See, e.g., Iberian UK v. BPB Industries plc, [1996] 2 CMLR 601, 6257 (Ch.) and MTV Europe v. BMG Record (UK) Limited, [1997] CMLR 867 (CA), (allowing action to proceed to the point of setting down during Commission proceedings). 85df07a2946c0bf5e633a71e91da97ad. 44 However, it may be that national courts may not under national law condemn cartel arrangements which the gif Commission has exempted under EC law; cf. Case 14/68, Walt Wilhelm v. Bundeskartellamt, [1969] ECR 1 (addressing national competition law), but the point is unsettled. See, generally, R. Galinsky, 'The Resolution of Conflicts between UK and Community Competition Law', (1994) 15 Eur. Comp. L Rev. 16 and B. Doherty, 'Community Exemptions in National Law', (1994) 15 Eur. Comp. L Rev. 315. Of course, if the exemption does not cover the facts before the national court, there should be no conflict.

85df07a2946c0bf5e633a71e91da97ad. 45Iberian UK and MTV Europe, supra note 43. gif 85df07a2946c0bf5e633a71e91da97ad. 46Delimitis, supra note 2, at 52. gif 85df07a2946c0bf5e633a71e91da97ad. 47 Van Bael, supra note 5, at 4. gif < previous page

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sion. It is not yet practicable to demand full prescience on the part of national court judges. If the Commission later takes an unexpected decision that the agreement is exempt, the Commission's position may be entitled to precedence under the supremacy principle of Community law because an exemption decision is thought to have constitutive effect.48 The national court could then stay its decision and assess the scope of the exemption. If the precise conduct condemned in the national court coincided with the scope of a subsequent49 Commission exemption decision, the conflict could be resolved by an Article 177 (now 234) reference or perhaps an appeal in the national system. In addition, the Commission's decision would be subject to review by the Court of First Instance and then the European Court of Justice. Appeals could take place in both systems, with the possibility of reconciliation in the Court of Justice by virtue of an Article 177 (now 234) reference. However, it is highly unlikely that there would be a direct conflict if the national court has properly analysed the case before it in the light of any pending exemption request prior to giving judgment. A party wishing to rely upon a pending exemption request to the Commission can surely be required or persuaded to either disclose the exact contents or scope of the request or be estopped from seeking a stay on the basis of the pending request. 8.4 Narrow Constructionism: The Illusion of Exclusivity The conventional wisdom that the exclusiveness of the Commission's power of exemption prevents private actions from becoming an effective force in enforcement of Article 81 (formerly 85) is subject to doubt on a number of points. First, the national courts have competence to consider whether block exemptions apply. Secondly, the national courts must disregard Article 81(3), formerly 85(3), entirely if no block exemption applies and no required notification has been made to the Commission of the conduct or agreement at issue in the case. Thirdly, many types of conduct on which private actions might be based are unlikely to be notified or exempted. Fourthly, the practice or agreement at issue in the national court may not be covered, in whole or in part, by a notification. Fifthly, an exemption

85df07a2946c0bf5e633a71e91da97ad. 85df07 48 Unlike the result on a pure Art. 81(1), formerly 85(1), determination of infringement discussed previously, gif a Commission exemption decision is considered constitutive in nature and entitled to binding effect: Marenco, gif supra note 6, at 617. 85df07a2946c0bf5e633a71e91da97ad. 49 Should a defendant be so imprudent as to notify its conduct to the Commission after the national court has gif already given judgment, there could be no conflict. Under present Community law, no exemption could be retroactive to a time prior to the date of notification, so no relevant exemption would be possible. The only exceptions would be contracts having provisional validity or which are exempt from notification under, e.g., Art. 4 (2) of Reg. 17.

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may contain conditions with which the beneficiary has not complied, and the exemption itself therefore may be inapplicable or invalid. The sum of these considerations is that national courts have much more scope to examine critically and apply notifications and exemptions than seems to be generally acknowledged. It is submitted that Delimitis supports and indeed requires the application of a general principle of narrow construction of exemptions by national courts. The notion that if the Commission has granted or is contemplating an exemption, the national courts are powerless to enforce Article 81, formerly 85, is an illusion which shatters upon close inspection. Block exemptions: although the Commission's power to exempt agreements from the application of Article 85(1), now 81(1), is exclusive on an individual basis by reason of Article 9(1) of Regulation 17, national courts may be asked to decide if a challenged agreement is entitled to the benefit of a block exemption. In such cases, the national court does not declare Article 85(1), now 81(1) inapplicable but decides whether or not the block exemption is applicable. The block exemptions are regulations and are binding in their entirety and directly applicable in all Member States.50 In Delimitis, the Court of Justice described the scope of a national court's power to interpret and apply block exemption regulations:

85df07a2946c0bf5e633a71e91da97ad. Articles 85(1) and 86 [now 81(1) and 82] produce direct effect in relations between individuals and create gif rights directly in respect of the individuals concerned which the national courts must safeguard. The same is

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true of the provisions of the exemption regulation. . . . The direct applicability of those provisions may not, however, lead the national courts to modify the scope of the exemption regulations by extending their sphere of application to agreements not covered by them. Any such extension, whatever its scope, would affect the manner in which the Commission exercises its legislative competence. . . .

85df07a2946c0bf5e633a71e91da97ad. 85df07 A national court may not extend the scope of Regulation no 1984/83 to beer supply agreements which do not gif explicitly meet the conditions for exemption laid down in that regulation.51 gif If the national court finds that the agreement is covered by a block exemption, the Commission's generic declaration of inapplicability has been confirmed in the specific case. If the national court finds that the block exemption does not cover the agreement or practice at issue in the case, the agreement or practice is not automatically illegal. The decision is only that the block exemption does not apply, and the national court must still determine if Article 85(1), now 81(1), is infringed and, if so, whether an individual exemption may yet be envisaged.52

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf 50 Art. 189 EC, now 249. gif gif 85df07a2946c0bf5e633a71e91da97ad. gif 51Delimitis, supra note 2, at 46, 55 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. 52 J.H.J. Bourgeois, 'EC Competition Law and Member State Courts', (1994) 20 Fordham Corp. L Inst. 475, 483 gif (B. Hawk, ed.) ('[t]he fact that an agreement does not fulfil the conditions of a block (footnote continued on next page)

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Moreover, it is submitted that this principle of narrow construction of exemptions found in Delimitis cannot be limited to block exemptions but necessarily includes individual exemptions as well. No notification: however, if a party is relying on the block exemption, it is highly unlikely to have notified the agreement to the Commission. If an agreement not exempt from notification has not been notified to the Commission, the agreement cannot receive an individual exemption.53 If it cannot receive an individual exemption but does infringe Article 81(1), now 85(1), the national court must award appropriate damages or declare offending portions of an agreement void, as the case may be. No belated notification would have any effect on nullity or damages accrued prior to the date of notification, since the retroactive effect of an exemption normally cannot extend past the date of notification.54 Moreover, the Commission may not feel moved promptly to exercise its discretion in regard to an agreement notified only as or after a national court prepared to render a judgment of infringement. That would risk encouraging tactical notifications in order to delay proceedings in a national court.55 Core misconduct: private enforcement actions may challenge conduct which no one could possibly envisage as qualifying for an exemption. Classic cartel-type activities such as price-fixing and market division will not be notified to the Commission, and plaintiffs will not be deterred by the prospect of exemption. There is a rather limited category of cartels 'which might possibly be entitled to an exemption. This is not a rich area for notifications'.56 The highest fines levied by the Commission, such as the 248 million ECUs in fines levied on the cement cartel, 132 million ECUs on the cartonboard cartel, 104.4 million ECUs on the steel beams cartel, and 75 million ECUs fine imposed on Tetra-Pak, 'have been imposed for conduct which nobody would notify'.57 The fact that the Commission in the past has faced backlogs of notifications for 'ordinary' business agreements such as exclusive dealing or selective distribution (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. exemption regulation, however, does not mean that it is therefore prohibited by Article 85(1) [now 81(1)]'). gif 85df07a2946c0bf5e633a71e91da97ad. 53Delimitis, [1991] ECR I935, at 51. gif 85df07a2946c0bf5e633a71e91da97ad. 54 Reg. 17, Art. 6(1); see Art. 6(2) for exceptions; Marenco, supra note 6, at 626.

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gif 85df07a2946c0bf5e633a71e91da97ad. 55 Cf. Commission, supra note 27, the National Authorities Notice, 7 at 2.2, which notes that it would be gif justified in 'not examining . . . as a matter of priority' those 'dilatory notifications' which it considers 'chiefly aimed at suspending the national procedure'.

85df07a2946c0bf5e633a71e91da97ad. 56 D. L. Holley, 'EEC Competition Practice: A Thirty Year Retrospective', (1993) 19 Fordham Corp. L Inst. 669, gif 677 (B. Hawk, ed.). 85df07a2946c0bf5e633a71e91da97ad. 57 O. Lieberknecht, in 'EEC Competition Practice: A Thirty Year Retrospective panel discussion', (1993) 19 gif Fordham Corp. L Inst. 745, 748 (B. Hawk, ed.). The steel beams, cartonboard, and cement producer cartel fines

were all assessed in 1994: Commission, 1994 European Community Competition Policy (Luxembourg, 1995), 910.

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arrangements may have tended to obscure the fact that private enforcement may frequently involve classic cartel 'hardcore' violations of Article 81, formerly 85. Private enforcement is not just about distribution agreements but is also about price-fixing and market-sharing cartels. Such cases will not be discouraged by the risk of exemption. 'There have been no studies to determine how many cases occur in which Article 85(1) [now 81(1)] applies and no serious question of Article 85(3) [now 81(3)] arises. There are undoubtedly some such cases. There may well be many'.58 Cases are likely to be brought when the balance of argument is seen to favour no exemption, perhaps even accompanied by applications for Article 177, now 234, references directly to the European Court of Justice, bypassing the Commission.59 The Court in Delimitis indicated that national courts have the option to seek a determination from the Court on the exemption question. Non-notified facts or conduct: even if the Commission has acted or may act to grant some exemption, the factual basis for a private action and a Commission exemption decision will rarely be identical.60 It is submitted that just as a national court has the competence to determine whether a given agreement, decision, or practice meets the requirements for a block exemption, it can determine whether the conduct before it fits within the scope of an individual exemption decision taken or envisaged by the Commission. A national court does not trespass upon the Commission's sole competence by merely examining the Commission's exemption decision to determine if it covers the matter pending before the national court. The narrow construction principle found in Delimitis applies to individual exemptions because a national court which gives effect to an individual exemption which does not fully reflect the conduct at issue in the case is in effect expanding the scope of the individual exemption. Because Delimitis unequivocally denies a national court the power to expand the scope of a block exemption crafted under the authority of Article 81(3), formerly 85(3), it necessarily denies the national court the power to expand an individual exemption. Individual and block exemptions are both issued pursuant to the Commission's Article 81(3), formerly 85(3), competence, and the national court may not expansively apply either kind of exemption. There is no hint in Delimitis that the Court intended a rule that the Commission's legislative competence has different levels of exclusivity according to which type of exemption is under consideration.

85df07a2946c0bf5e633a71e91da97ad. 58 J. Temple Lang, comments in panel discussion, 'EC Competition and Trade Law', (1995) 21 Fordham gif Corp. L Inst. 579, 600 (B. Hawk, ed.).

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85df07a2946c0bf5e633a71e91da97ad. 59 See, S. Kon, 'Article 85, Para. 3: A Case for Application by National Courts', (1982) 19 CML Rev. 541, 553. gif 60 R. Whish, 'The Enforcement of EC Competition Law in the Domestic Courts of Member States', (1994) 15 Eur. 85df07a2946c0bf5e633a71e91da97ad. gif Comp. L Rev. 60, 66 (Sixth Baron De Lancey Lecture).

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Much of the information on which the Commission bases an exemption decision will be submitted with Form A/B. It would be astonishing if a firm's exemption submission were so comprehensive as to embrace the full range of evidence and charges which might be offered in a private action. Facts may also have changed since the notification, which could be several years old. An exemption granted to a new entrant which then rapidly acquired a strong market share might present a persuasive case for revisiting the question prior to the expiry of the exemption. Skilful lawyers may be able to prove any number of legally significant factual and evidentiary variations on the conduct submitted for exemption sufficient to prompt a national court to conclude that an existing or envisaged exemption decision does not cover the conduct actually before the national court. If the conduct challenged is not precisely the same as that contained in the notification, there will be a strong argument that neither the notification nor any exemption envisaged as resulting from it is any barrier to a finding of infringement in the national court. Given the tendency in practice to a 'minimalist' approach61 to notification submissions, this factual parsimony could come back to haunt notifying firms in subsequent private litigation. If a private action were based entirely on a written agreement, a notification could be coextensive with litigation claims. It is more likely that events or types of conduct not included in a standard written contractual agreement will play a role in substantial private litigation. Alternatively, variations from the Form A/B submission might cause a national court to conclude that an individual exemption decision did not cover the claim in litigation. For example, a plaintiff might prove a different relevant product market or a different relevant geographic market than the one on which the exemption is based. A standard agreement which the Commission considered not harmful to competition in the Community as a whole may appreciably restrain competition in a geographic sub-market in which the plaintiff operates. There certainly may be different market shares as well as markets. One reason some companies are hesitant to notify their agreements is that Form A/B requires them to take positions on relevant markets they might later regret and which may not coincide with the views of the Commission.62 A fortiori with respect to private litigants. Unfulfilled conditions: finally, a national court should be able to apply Article 81, formerly 85, where it finds that any conditions or obligations imposed in the granting of an exemption have not been satisfied. Article 8(1) of Regulation 17 permits 'conditions and obligations' to be attached to a decision under Article 85(3). If conditions or obligations attached to an individual exemption (or even an informal comfort letter) are breached, a national court should in principle be

85df07a2946c0bf5e633a71e91da97ad. 61 See Holley, supra note 56, at 680. gif 85df07a2946c0bf5e633a71e91da97ad. 62 Holley, supra note 31, at 680. gif < previous page

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competent to adjudicate non-compliance and declare an individual exemption inapplicable. The principle of narrow construction applies because a national court which gives effect to an exemption in which the conditions are shown to be unfulfilled has clearly expanded the scope of the Commission's decision. The ECJ has made it clear there is no scope for expansion by national courts. The national court in Delimitis was required to find a block exemption inapplicable where the contract in the case failed to satisfy all of the requirements stated in the exemption. The judgment in Delimitis stated that the national court could not extend the block exemption to a situation which did not meet the precise terms of the exemption even though the divergence in that case was described as minor. This strongly implies that a national court is similarly obliged narrowly to construe and limit an individual exemption to the precise conduct, agreements, and conditions considered by the Commission and may not apply an exemption to conduct or factual circumstances not explicitly covered by the Commission's decision or in which conditions are unfulfilled.63 The principle of narrow construction means that in many cases an apparent exemption or notification is no real barrier to a successful private damages action or Eurodefence. Private litigation will probably motivate undertakings to seek formal exemptions from the Commission and create a complementary opportunity for a litigant to seek to take away an exemption which may already exist64or more likely, to prevent a comfort letter from becoming a formal exemption decision. Litigation has a tendency to bring out the sort of facts which an undertaking may not have voluntarily disclosed to the Commission in its application for an exemption. Litigants who discover their opponents have misled the Commission cannot be expected to keep quiet about it. Private litigants who can make a case that an exemption has been abused, circumstances have changed, or the Commission has been misled in some important way may be able to persuade a national judge that a putative exemption is invalid. At the very least, they may persuade a national judge to allow them the opportunity to persuade the Commission to revoke or amend an individual exemption.

85df07a2946c0bf5e633a71e91da97ad. 85df07 gif 63 In Case 99/79, Lancôme v. Etos BV, [1980] ECR 2511, at 5, the national court's third question put to the gif ECJ was whether an exemption granted by the Commission was valid where the undertaking had not complied with the conditions of the comfort letter 'exemption' in that case. The ECJ found that a comfort letter did not constitute an exemption and did not answer the third question. According to a press report, British Telecom won a ruling in Düsseldorf on 17 Apr. 1997 that a 'strategic alliance' of Deutsche Telekom, France Télécom, and Sprint breached EC competition rules and were liable for damages and costs because they had breached conditions imposed by the Commission on their arrangement. A. Crane, Financial Times, 18 Apr. 1997 (electronic edn.), at www.ft.com/hippocampus/5522e.htm. 85df07a2946c0bf5e633a71e91da97ad. 64 Under Reg. 17, exemptions have a limited duration: Art. 8(1), may be renewed: Art. 8(2), and may be revoked gif retroactively where conditions are breached, where based on incorrect information or induced by deceit, or where abused: Art. 8(3)(a)(d). Block exemptions may be withdrawn by the Commission.

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Active private enforcement is likely to put pressure, directly and indirectly, on the certainty of the exemption system as private litigants learn to defeat or avoid claims of exemption by the narrow construction approach followed in Delimitis. This is a consequence of increased enforcement and is not necessarily undesirable. In the long run, it will result in more complete disclosure to the Commission, better exemption decisions, better block exemptions, and better compliance. As far as litigants seeking damages in national courts are concerned, the bifurcated nature of the Community system offers both curses and blessings. The curses come when a national court struggles to reconcile its obligation to decide the case before it with the need to avoid conflicting decisions by granting or withholding a stay. The blessings come when a national court, having ruled that an exemption is not to be expected, is invalid, or does not cover the matter before it, proceeds to give judgment under Article 81, formerly 85. Because of the wide net cast by Article 81, formerly 85, under current interpretations, it is quite easy by comparison to US standards for an agreement to be caught. Once defendants are caught without exemption coverage, proof of injury and causation entitles a plaintiff or pursuer to a nearly automatic damages award. Many of the defences which would be litigated in a US private action are unavailable under present EC law, as the benefits of a challenged restriction are essentially evaluated only under the rubric of Article 81(3), formerly 85(3). The effect is that at the stage a US damage action is just getting under way, the Article 81, formerly 85, liability issue is over in the ECin favour of the plaintiff.65 8.5 The Effect of Commission Decisions on Parties before the National Courts Much of the foregoing discussion assumes the case of private litigation where there has not been a full prior proceeding before the Commission and disposition of appeals to the CFI or the ECJ. In the vast majority of cases, this will be the situation, as the Commission delivers very few formal decisions compared to the number of complaints and notifications received or the number of informal decisions rendered. For example, in 1977 the Commission gave only 27 formal decisions under both Article 81 and 82 (formerly 85 and 86) while disposing of 490

85df07a2946c0bf5e633a71e91da97ad. 85df07 65 In the long run, this may result in amendment of either the EC Treaty, Reg. 17, or both. My suspicion is gif that either the interpretation of Article 85(1) will be narrowed legislatively or judicially, or the bifurcation will gif be ended. Since this was written, the Commission's Director General for DG IV has indicated he is considering various approaches to the problem, including the narrowing interpretation approach or amendments to Regulation 17: A. Schaub, address to the Fordham Corporate Law Institute, 22 Oct. 1998.

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cases informally.66 In the same year, 499 new cases were opened in the form of 101 own-initiative matters, 177 complaints, and 221 notifications.67 However, there will be some cases in which a private party who has complained to the Commission and participated in the Commission's procedure, including CFI or ECJ appeals will also engage in private damages litigation. Where the Commission has found an infringement, the issue arises whether the plaintiff in the private action may claim the benefit of the Commission's finding. Alternatively, may the respondent dispute the Commission's findings before the national court? In the Iberian case,68 the plaintiff imported Spanish plasterboard into the UK and succeeded in underpricing the defendants. The defendants took certain steps to protect their markets, including loyalty rebates, exclusive purchasing requirements, and delivery priority to users of the defendants' products. The plaintiff complained to the Commission, which instituted infringement proceedings resulting in fines totalling approximately £2.1 million assessed against the two defendants. The plaintiff issued a writ alleging the same wrongdoing found by the Commission as the basis for a breach of statutory duty claim contrary to Article 86, now 82. The plaintiff alleged that the defendants' actions caused loss and damage and asserted an additional claim for aggravated and exemplary damages. The defendants admitted holding a dominant position, but denied abusing it and contested the plaintiff's right to rely on the Commission decision. The Commission's decision was upheld by the CFI and ECJ. The Court in Iberian considered and rejected the plaintiff's assertion that issue estoppel bound the defendants, concluding that Commission proceedings were administrative in nature and did not therefore create an issue estoppel under English law.69 Instead, the Court said that 'whether expressed in terms of res judicata or abuse of process, it would be contrary to public policy to allow persons who have been involved in competition proceedings in Europe to deny here the correctness of the conclusions reached there. The parties are bound'.70 The Court considered that for the defendants to deny the correctness of the plaintiff's allegations of abuse of dominant position 'amounts to an abuse of process since it would involve a collateral attack on binding decisions of the Commission, CFI and ECJ. There is no doubt that the defendants are bound by the

85df07a2946c0bf5e633a71e91da97ad. 66 Commission, European Community Competition Policy1997 (Luxembourg, 1998), 37. The average of gif formal decisions from 1993 to 1997 was 22. 85df07a2946c0bf5e633a71e91da97ad. 67Supra, at 36. gif 85df07a2946c0bf5e633a71e91da97ad. 68Iberian UK v. BPB Industries plc, [1996] 2 CMLR 601 (Ch.). gif 69Iberian, supra, at 61617. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 70Iberian, supra, at 627. gif < previous page page_110


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Commission decision in so far as upheld by the CFI and ECJ'.71 In so holding, Laddie J distinguished the earlier judgment of Judge Curtis in Merson v. Rover Group Ltd72 in part on the grounds that 'the issues in the case were different to those before the Commission'.73 The result in Iberian seems quite correct as far as it goes. It is consistent with the views of the Commission as set out by Temple Lang:

85df07a2946c0bf5e633a71e91da97ad. 85df07 However, serious problems would arise if national courts considered that they should reconsider findings gif made by the Commission in formal decisions, even in cases involving parties who could have challenged the gif Commission's decision under Article 173 [now 230]. This view would inevitably create a risk of conflict, contrary to Article 5 [now 10] EC Treaty. It would also be contrary to the principle of Community law that national laws and procedures must not make it unduly difficult in practice to obtain effective legal protection for rights given by Community law. Having to litigate all over again issues already decided by the Commission and not challenged, or challenged unsuccessfully, by the same parties would be a serious obstacle to the right to obtain compensation.74 It is clear that Iberian involved precisely, word for word, a claim for liability premised on the same conduct by the defendants which was determined by the Commission to infringe Article 86, now 82. Had the claims by the plaintiff involved other conduct, there could not have been any binding effect as to other or additional grounds not considered by the Commission and the CFI and ECJ. The defendants were clearly bound as the addresses of the Commission's decision. Whether the plaintiff, Iberian, would be bound depends on whether the decision was one which Iberian could have attacked under Article 173 (now 230) EC. If so, Iberian would not have been able to question the decision (not that it wanted to in the case) in the national court. If the Commission's decision in Iberian had been that the defendants had not infringed Article 82 (formerly 86), and Iberian had been a stranger to the case, there can be little doubt that Iberian would not have been bound by the outcome of the case.75 If the Commission had not been of the view that Article 82 (formerly 86) were infringed, it would most likely not have proceeded to a formal decision, so there would have been no Commission decision to be binding. Even as a

85df07a2946c0bf5e633a71e91da97ad. 85df07 71Iberian, supra at 628: '[i]t follows that in my view it would be an abuse of process to allow the defendants gif to mount a collateral attack on the Commission decision in proceedings against any party before any national gif court': at 632 (emphasis in original). See also Laddie J, 'Community Competition Law in English Courts', in M. Andenas and F. Jacobs (eds.), European Community Law in the English Courts (Oxford, 1998), 165. 85df07a2946c0bf5e633a71e91da97ad. 72 Unreported, 22 May 1992.

gif 85df07a2946c0bf5e633a71e91da97ad. 73Iberian, supra note 68, at 628. Other distinguishing grounds were that the res judicata argument was not made, gif and Judge Curtis lacked the benefit of the Delimitis, Banks and MTV Europe cases. 85df07a2946c0bf5e633a71e91da97ad. 74 Temple Lang, supra note 17, at 30. gif 85df07a2946c0bf5e633a71e91da97ad. 75Iberian, supra note 68, at 623, 628. gif < previous page page_111 next page >


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complainant, Iberian would have lacked any power to compel the Commission to render a formal decision.76 The remaining question is whether a complainant like Iberian who participates in Commission proceedings and subsequent CFI or ECJ appeals is bound by an adverse result there if a later action is brought before a national court. It is submitted that this will be determined by the strict constructionist principles previously discussed. If the same conduct is at issue and the Commission formally finds no infringement on the merits, or a positive finding of infringement is reversed by a court, a complainant who is regarded as participating as a party may be bound by the adverse result. Otherwise, or if he is not regarded as a party with a full and fair opportunity to litigate the matter, then it is submitted that neither the plaintiff in a national court, nor the national court is bound by the Commission's decision. Postscript on Reform of Regulation 17 As this book went to press, the Commission released the White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme No 99/027, (Commission, Brussels, 28.04.1999). Major amendments to Reg. 17 are proposed, including the abolition of the notification and exemption system. It would be replaced with a Council Regulation designed to make Article 85(3) (now 81) directly effective without a prior decision by the Commission. The Commission's 37 year old monopoly on granting of exemptions would be ended, and Article 81 (formerly 85) as a whole would be applied by national courts and national competition authorities in addition to the Commission. Should these proposed reforms take effect, the approach to enforcement pluralism discussed in the foregoing chapter can be expected to have even wider applicability. The freedom of private litigants to try their cases and that of national courts to decide them may be expected to be enhanced greatly by such developments. The Commission is to be applauded for getting serious about decentralisation of Community competition law.

85df07a2946c0bf5e633a71e91da97ad. 76 Case T114/92, Bureau Européen des Médias de l'Industrie Musicale v. Commission (BEMIM), [1995] gif ECR II147.

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9 The Legal Basis of Private Actions in the UK under Community Law

85df07a2946c0bf5e633a71e91da97ad. 9.1 The Search for a National Cause of Action gif

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85df07a2946c0bf5e633a71e91da97ad. 9.3 The Economic Torts Approach gif

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85df07a2946c0bf5e633a71e91da97ad. 9.3.1 Inducement of Breach of Contract gif

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85df07a2946c0bf5e633a71e91da97ad. 9.3.2 Intimidation gif

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85df07a2946c0bf5e633a71e91da97ad. 9.3.3 Unlawful Interference with Trade or Business gif

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85df07a2946c0bf5e633a71e91da97ad. 9.3.4 Conspiracy gif

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9.1 The Search for a National Cause of Action Parliament sought to recognize the direct effect of the EC Treaty in British law by providing in the European Communities Act 1972, section 2(1), that 'all such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly'.1 Not surprisingly from the British constitutional law perspective, there has been 'consistent emphasis on the statutory nature of the gateway for Community law which was opened by the European Communities Act 1972'.2 As Shaw has noted, 'for the purist, there are difficulties in reconciling the doctrine of parliamentary sovereignty with the transfer of apparently sovereign powers to the European Community'.3 While the English courts in general seem to have accepted their responsibility to safeguard the rights of individuals under Community law through the application of national remedies and procedures, there has been a decided reluctance to view

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0 1 European Communities Act 1972. gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 J. Shaw, 'United Kingdom', in P. Behrens (ed.), EEC Competition Rules in National Courts, Pt. 1 United Kingdom and gif Italy (Baden-Baden, 1992), 88. 85df07a2946c0bf5e633a71e91da97ad. 3Supra, at 78. gif < previous page page_113 next page >


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substantive Community competition law rights other than through the lens of national causes of action. In particular, there has been much debate on the question whether there is a right to damages under English law available to plaintiffs injured by infringements of Articles 85 and 86. Under English law, the characterization of the cause of action has much to do with the remedies which are available. It has been said that in order for a plaintiff to have a right to damages in an English court, there normally must be a cause of action founded in tort.4 It has likewise been said that in order to claim damages in tort for a breach of Community law, it is necessary to fit the Community claim within an existing category of English tort.5 This traditional dualist view has led to what is apparently a never-ending dispute over which is the correct theory of the action and, if a tort, which particular tort embraces violations of EC competition rules. It is this ongoing debate which justifies comments like '[i]t is remarkable that after 30 years of European competition law, it is still not possible to say definitively whether a breach of Article 85 or 86 [now 81 or 82] of the EEC Treaty will give rise to a private action in damages'.6 As Brealey and Hoskins succinctly observed, 'uncertainty remains as to how to categorise the nature of the breach and how to determine the relevant cause of action'.7 The major alternative approaches are the new torts approach, the breach of statutory duty approach, the economic torts approach, the 'direct applicability' approach, and the Community law approach. 9.2 The New Torts Approach One might have thought that following the accession of the UK to the EEC Treaty, there would have been prompt judicial recognition of the Community nature of the new (to the UK) competition rules. Indeed, it first appeared this might be the case in Application des Gaz SA v. Falks Veritas Ltd.,8 where the Court of Appeal considered the correctness of allowing a defendant to amend its defences and counterclaims to plead Articles 85 and 86, now 81 and 82, which had become germane due to Britain's accession to the Community during the lit-

85df07a2946c0bf5e633a71e91da97ad. 85df07 4 J. Steiner, 'How to Make the Action Suit the Case: Domestic Remedies for Breach of EEC Law', (1987) 12 gif Eur. L Rev. 102, 107. See also J. Steiner, Enforcing EC Law (London, 1995), 98. gif 85df07a2946c0bf5e633a71e91da97ad. 5 Steiner (1987) supra. This view derives from the ECJ's statements concerning national autonomy regarding the gif application of national procedures and remedies to redress violations of Community law. See Chap. 6. 85df07a2946c0bf5e633a71e91da97ad. 6 J. Maitland-Walker, 'A Step Closer to a Definitive Ruling on a Right in Damages for Breach of the EC gif Competition Rules', (1992) 13 Eur. Competition L Rev. 3. 85df07a2946c0bf5e633a71e91da97ad. 7 M. Brealey and M. Hoskins, Remedies in EC Law: Law and Practice in the English and EC Courts (London, gif 1994), 63. 85df07a2946c0bf5e633a71e91da97ad. 8 [1974] Ch. 381. gif < previous page page_114 next page >


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igation. In that case, involving defence of a copyright action, Lord Denning MR heralded the creation of new torts:

85df07a2946c0bf5e633a71e91da97ad. So we reach this important conclusion: Articles 85 and 86 [now 81 and 82] are part of our law. They create gif new torts or wrongs. Their names are 'undue restriction of competition in the common market'; and 'abuse of

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dominant position within the common market'. Any infringement of those articles can be dealt with by our English courts. It is for our courts to find the facts, to apply the law, and to use the remedies which we have available.9 A consideration of Lord Denning's speech reveals the new torts to be premised on the direct effect of Articles 85 and 86, now 81 and 82, in general and the judgment of the European Court of Justice in BRT v. SABAM in particular.10 However, this 'new torts' view has received little adherence among either the judiciary or the commentators. Roskill LJ considered Lord Denning's comments both obiter and premature, stating that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Obviously there are many questions which will have to be argued in this court or elsewhere in this country or gif at Luxembourg, before it can be stated categorically, as is stated there by the Master of the Rolls, that Articles gif 85 and 86 [now 81 and 82] create new torts or wrongs of which the names are undue restriction on competition within the common market'.11 Lord Denning reaffirmed his new torts view in the later Garden Cottage12 case, although on appeal his position was expressly rejected by Lord Diplock, speaking for the majority in the House of Lords:

85df07a2946c0bf5e633a71e91da97ad. 85df07 No reasons are to be found in any of the judgments of the Court of Appeal and none has been advanced at the gif hearing before your Lordships, why in law, in logic or in justice, if contravention of Article 86 [now 82] of the gif Treaty of Rome is capable of giving rise to a cause of action in English private law at all, there is any need to invent a cause of action with characteristics which are wholly novel as respects the remedies that it attracts, in order to deal with breaches of articles of the Treaty of Rome which have in the United Kingdom the same effect as statutes.13 Lord Diplock apparently found the new torts view both superfluous and its expression in Falks Veritas to have been obiter dictum.14 In the High Court in Garden Cottage, Parker J had assumed the correctness15 of Lord Denning's dicta on new torts, but, as noted, this acceptance was short-lived. In the High Court in

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5 9Supra, (396AB)(CA). gif gif 85df07a2946c0bf5e633a71e91da97ad. 10Supra, at 395FG. gif 11Valor International Ltd. v. Application des Gaz SA and EPI Leisure Ltd., [1978] 3 CMLR 87, 100 (CA). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 12Garden Cottage Foods, Inc. v. Milk Marketing Board, [1982] 1 QB 1114 (CA). gif 13Garden Cottage Foods, Ltd v. Milk Marketing Board, [1984] AC 130 (HL). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 14 See supra. gif 15 N. Green, 'The Treaty of Rome, National Courts, and English Common Law: The Enforcement of European 85df07a2946c0bf5e633a71e91da97ad. gif Competition Law After Milk Marketing Board', (1984) 48 Rabels Zeitschrift 509, 510 note 3 and 529 note 67, referring to an unreported solicitors' note of the judgment.

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Page 116 Bourgoin,16 Mann J discussed the theory under the heading of 'innominate tort' (even though Lord Denning had quite obviously given names to the torts) and characterized the theory as 'obsolete'. Green has criticized Lord Denning's approach for its classification of Article 85, now 81, claims and Article 86, now 82, claims into separate torts, apparently on the basis that such classification for each distinct directly effective provision of Community law would create:

85df07a2946c0bf5e633a71e91da97ad. not one generic tort but a proliferation of different torts. . . . Ultimately there could exist many hundreds of gif new torts all derived from the locus classicus of the Treaty of Rome and its subordinate legislation. Such an

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unwarranted proliferation is to be discouraged as superfluous to existing needs and productive of nothing but uncertainty. . . . [I]f the new tort theory has been laid to rest this will be no bad thing.17 Similar sentiments were echoed later by Green and Barav to the effect that '[i]f every single myriad instance of directly effective Community rule creates its own self-contained, individualised cause of action, then a veritable flood of such creatures would swarm in to overwhelm the English courts'.18 Textbook writers have also managed to restrain their enthusiasm for Lord Denning's approach.19 Steiner notes that Lord Denning's suggestion 'that Article 85 and 86 (now 81 and 82) create new torts or wrongs has not found widespread acceptance', and the claim under this head was withdrawn in both Garden Cottage and Bourgoin.20 The new torts approach has received surprisingly little attention on its merits, no doubt due to the lack of judicial acceptance of the idea. Given the unavailability (in most cases) of comparable rights in English competition law, it might have been thought that the ability to shape a new cause of action for the implementation of a new right was a sensible approach. The most extravagantly-phrased objections (by Green and Barav) have been directed less to suitability for competition law than to the juridical clutter which might result if each directly enforceable Community right were to engender its own custom-tailored tort. However much surface appeal there might be to the notion that English judges and practitioners cannot be expected21 to learn and apply potentially hundreds of new torts, there is no real substance to the 'clutter' objection. Whether there is

85df07a2946c0bf5e633a71e91da97ad. 16Bourgoin SA v. Ministry of Agriculture, Fisheries and Food, [1985] 1 CMLR 528, 542, [1985] 3 All ER gif 585 (QB), and [1985] 3 All ER 603 (CA).

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85df07a2946c0bf5e633a71e91da97ad. 17 Green, supra note 15, at 516. gif 18 N. Green and A. Barav, 'Damages in the National Courts for Breach of Community Law', (1987) 6 YBEL 55, 85df07a2946c0bf5e633a71e91da97ad. gif 912. 85df07a2946c0bf5e633a71e91da97ad. 19 See, e.g., P. Winfield and J. Jolowicz, Winfield & Jolowicz on Tort (13th edn., London, 1989), 495. gif 20 Steiner (1987), supra note 4, at 107. 85df07a2946c0bf5e633a71e91da97ad. gif 21 However, reluctance to learn does not seem to be a consideration in limiting quantity where it is English 85df07a2946c0bf5e633a71e91da97ad. gif legislation which creates new statutory remedies. Cf. Steiner (1995), supra note 4 at 109; cf. R.M. D'Sa, European Community Law and Civil Remedies in England and Wales (London, 1994), 244 at

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one 'tort' perhaps called 'breach of directly effective EC law' which then is subclassified into potentially hundreds of categories according to the particular Treaty or legislative provision at issue (and all will require, obviously, different elements of proof) or whether there are hundreds of distinct 'Euro-torts' each based on a separate Treaty or legislative provision hardly seems a compelling rationale for rejection. The quantity of causes of action is, after all, a function of the number of EC law provisions found capable of producing direct effects, not of whether each provision is considered a separate principal tort, distinct from a subsidiary tort. The central point is whether a new cause of action should in principle be recognized at all, distinct from how many new causes of action should be recognized. Green and Barav's 'clutter' objection does not directly address this central question. Notwithstanding this objection, Green and Barav cautiously offered a kind word22 to Lord Denning and his 'new judicial creatures' as:

85df07a2946c0bf5e633a71e91da97ad. 85df07 [A]t least recognising the novelty of the concept of direct effect of Community law in domestic law. He was gif prepared to see national law adapt to fit the mould of European law whereas the converse approach supported gif by the other judges, has direct effect squeezing itself into idiosyncratic and often anachronistic domestic pigeon holes. Most of the torts discussed have inherent limitations which entail affording only partial protection to directly effective rights. Lord Denning's creations would, one may presume, have been free from these difficulties. The torts in question would have been responsive to the directly applicable right and not vice versa. It may be argued that this approach is more consonant with the elemental Community rule of supremacy which requires domestic law to give way to European law.23 Green also has criticized Lord Denning's creatures for making use of the traditional tort concept at all: '[t]he ''new torts" theory of Lord Denning M.R. is another example of national courts attempting to distort and disfigure a directly applicable right that needs no assistance to enable it to serve as a self-contained cause of action'.24 Green's solution is to propose 'direct applicability' as a cause of action, an approach which is discussed below. The other principal objection to the new torts theory appears to be that voiced by Lord Diplock in Garden Cottage, that it is unnecessary to create new causes of action with characteristics which are 'wholly novel as respects the remedies that it attracts' in order to deal with breaches of EC law. This objection may turn on the suitability of the breach of statutory duty theory and the extent to which it may be transformed by EC law. These issues are considered in the next chapter.

85df07a2946c0bf5e633a71e91da97ad. 85df07 22 '[I]t may tentatively be questioned whether these creations are as unsupportable as current judicial opinion gif seems to indicate': Green and Barav, supra note 18, at 92. gif 85df07a2946c0bf5e633a71e91da97ad. 23Supra. gif 85df07a2946c0bf5e633a71e91da97ad. 24 Green, supra note 15, at 547. gif < previous page

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9.3 The Economic Torts Approach A number of other existing 'economic' torts have from time to time been suggested as appropriate and suitable for the enforcement of Articles 85 and 86, now 81 and 82. These include the torts of inducement of breach of contract, conspiracy, intimidation, and deliberate interference with business by unlawful means. None of these torts really gets to the heart of the economic concepts underlying the competition rules, but they may be useful at times. In the USA, business torts with names like unfair competition, disparagement, intentional interference with contractual relations, intentional or negligent interference with prospective business relations, fraud, securities fraud, and misappropriation of trade secrets have long been available under state and sometimes Federal law. There has been a growing trend toward use of business tort claims in addition to, or in lieu of, 'traditional' antitrust claims.25 Some of these uses have been quite successful. In one case, the plaintiff alleged attempted monopolization under the Sherman Act § 2 and contractual interference, winning a verdict for $724 million on all counts. On appeal, the antitrust claim was overturned for lack of proof of injury to competition, but the contractual interference verdict was affirmed.26 In another case, the plaintiff recovered a verdict of $51,000 in damages on both antitrust and tortious interference claims. The antitrust damages were trebled according to statute, but the jury awarded $6 million in exemplary damages on the tortious interference claim.27 However, business torts in the USA are independent claims which do not depend on an underlying breach of antitrust law. Business torts are used because they may be easier to prove if a showing of competitive injury is not required. There would be little reason to use them if it were necessary to prove the requisite elements of both in order to recover. Moreover, if the only way a plaintiff could enforce an antitrust claim were to clothe it in the garb of a business tort, then there really is no way to enforce an antitrust claim. This is the fundamental fallacy of the 'economic torts' approach to the competition rules of the EC Treaty. Theories of action which are under-inclusive as regards Community rights and which in large part are not suitable for domestic law purposes cannot really be considered suitable for Community law purposes.

85df07a2946c0bf5e633a71e91da97ad. 85df07 25 See H. I. Saferstein, 'The Ascendancy of Business Tort Claims in Antitrust Practice', (1991) 59 Antitrust LJ gif 379, and A. M. Ferrill (ed.), Business Torts & Unfair Competition: A Practitioner's Handbook (Chicago, Ill., gif 1996).

85df07a2946c0bf5e633a71e91da97ad. 26Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. of America, 885 F 2d 683 (10th Cir. 1989), cert. gif denied, 498 US 972 (1990). 85df07a2946c0bf5e633a71e91da97ad. 27Browning-Ferris Indus. of Vermont v. Kelco Disposal, Inc., 492 US 257 (1989). See also Continental Trend gif Resources v. OXY USA, Inc., 44 F 3d 1465 (10th Cir. 1995) (antitrust claim failed, $30 million punitive damage award upheld).

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9.3.1 Inducement of Breach of Contract Steiner argues (without enthusiasm) for the application of this tort on the notion that there might be some factual situations which would fit, offering up the hypothetical case of a manufacturer who colludes with his dealer to prevent a price-cutting wholesaler from obtaining access to his goods where there already exists a contract to be breached between the dealer and the price cutter.28 While certainly such a situation undoubtedly might occur, it can hardly be regarded as a general solution. The tort reaches direct and indirect interference calculated to induce breach of a subsisting contract by unlawful (e.g., by a breach of Article 85, now 81, as in the example above) means.29 One difficulty here is that this approach burdens the exercise of Article 85 or 86 (now 81 or 82) rights by requiring a plaintiff to prove not only a violation of Article 85 or 86 (now 81 or 82), but also other elements of a separate domestic tort (e.g. that there was a subsisting contract which was interfered with) which are no part of the Community competition rules. As a secondary type of claim to be asserted in an action which also asserts a primary violation of the EC competition rules, this theory may be workable on those occasions where it fits the particular facts in issueit may be one way a plaintiff succeeds in showing how he was injured. But to say, as Steiner seems to imply, that EC antitrust provisions can only give rise to an action for damages where they form the underpinnings (e.g. unlawfulness) of a narrow and unrelated domestic head of claim clearly is an even more flagrant case of superimposing domestic rules on directly effective Community rights than was struck down in Dekker30 or Factortame III. This does considerable violence to the principle of supremacy of Community law. This approach falls foul of one of the major principles applied by the ECJ in assessing national remedies. In the case of violations of Article 85 and 86, now 81 or 82, which do not involve an infringement used to induce a breach of contract, it renders it effectively impossible to enforce Community antitrust rights in national courts. Therefore, as a general remedy, it is inadequate effectively to protect Article 85 and 86 rights. 9.3.2 Intimidation Steiner also suggests that the tort of intimidation is available to redress a narrow category of infringements of Community antitrust provisions, stating that 'such behaviour is not uncommon in EEC competition cases'.31 The tort is said to be available when a threat to commit an unlawful act (a violation of EC antitrust

85df07a2946c0bf5e633a71e91da97ad. 28 Steiner (1987), supra note 4, at 111. gif 85df07a2946c0bf5e633a71e91da97ad. 29 Steiner, supra. gif 30 Case C177/88, Dekker v. Stichting Vormingscentrum, [1990] ECR I3941. 85df07a2946c0bf5e633a71e91da97ad. gif 31 Steiner (1987), supra note 4, at 111. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_119


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rules) is made with the intention of causing a party to act or not act to his detriment. Such behaviour undoubtedly does occur, but again this is an extremely small subset of possible infringements of Article 85 or 86, now 81 or 82. Like the inducement of breach of contract theory discussed previously, this approach limits the role of Community antitrust rights to the establishment of the unlawfulness of an act, and then requires a plaintiff to prove elements unrelated to Community law in order to recover damages. The approach would most obviously burden a plaintiff by requiring proof of a threat as a precondition to recovery on any Article 85 or 86, now 81 or 82, claim, a requirement Dekker and Factortame III would not permit. The ultimate failure of this approach is that it posits the allowance of an action for damages to a plaintiff who has been merely threatened with acts infringing Community antitrust rules, but does not allow a claim for damages on behalf of a plaintiff who is injured by violations which were carried out but which were not the subject of threats announced in advance!32 This result would stand the doctrine of supremacy on its head. Moreover, in cases where there was no advance threat, this approach would violate the requirement that domestic law not render it excessively difficult or impossible to obtain relief. Again, as a secondary head of claim on particular facts, this approach seems occasionally workable, but it is not a substitute for a head of claim that allows a plaintiff to enforce the full scope of directly effective Community rights. 9.3.3 Unlawful Interference with Trade or Business This tort has been said to be a relatively recent development, and 'the precise limits of the tort have still to be defined'.33 The required elements are (1) that there was an unlawful act; (2) which foreseeably caused injury to the interests of another or which was done with the intention of harming another.34 It seems that the mere fact that a statutory prohibition has been breached does not render an act 'unlawful' for the purposes of this tort.35 The plaintiff must show that on a true construction the statute imposing the prohibition gives rise to a private civil remedyin effect, the same conditions necessary to give rise to an action for breach of statutory duty, that the loss suffered is within the scope of the statute and the statute gives rise to a civil cause of action.36

85df07a2946c0bf5e633a71e91da97ad. 85df07 32 In Cargill v. Montfort of Colo., 479 US 104, 112 (1986), the Court said '[i]t would be anomalous, we think, gif to read the Clayton Act to authorize a private plaintiff to secure an injunction against a threatened injury for gif which he would not be entitled to compensation if the injury actually occurred'. It would be similarly anomalous for British law to recognize a damages claim for threats to violate Community antitrust law, but not for violations consummated. A claim ought to be recognized in both situations.

85df07a2946c0bf5e633a71e91da97ad. 33 Brealey and Hoskins, supra note 7, at 70. gif 34Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 35 Dillon LJ in Lonrho plc v. Fayed, [1990] 2 QB 479, 488 (CA). 85df07a2946c0bf5e633a71e91da97ad. gif 36 Brealey and Hoskins, supra note 33. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_120


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In addition, '[i]t has to be proved by a plaintiff who seeks to rely on this tort . . . that the unlawful act was in some sense directed against the plaintiff or intended to harm the plaintiff'.37 While it appears that it may be sufficient that injury to the particular plaintiff was foreseeable, it has been said that it is the requirement of some degree of intent or foreseeability which distinguishes this tort from the tort of breach of statutory duty, and breach of statutory duty is easier to establish.38 Brealey and Hoskins suggest that this tort is appropriate in cases such as predatory pricing by a dominant firm directed at a specific competitor or instructions given by a supplier to his distributors not to supply a particular company desiring to undertake parallel imports of the supplier's goods.39 Indeed, it seems that on such facts the tort might well apply. However, this tort shares some of the shortcomings previously mentioned as regards other English torts. First, it has essentially the identical problem faced by the breach of statutory duty tort concerning whether the injury is within the scope of the statute relied upon for a determination of unlawfulness and whether the statute is intended to give rise to a civil cause of action. Secondly, this tort is also quite under-inclusive in that it reaches only infringements of Community antitrust rules which directly interfere with a known (or foreseeable) firm's business affairs. For example, a simple price-fixing cartel, a classic violation of Article 85, now 81, would not be reached by this tort. Because of this under-inclusiveness, this tort might be suitable as a secondary head of claim, but not as a primary vehicle for the enforcement of Community antitrust rules. British law would be in the position of allowing some Community antitrust infringements to be actionable under this tort, but not others, thus making it effectively impossible to protect the full scope of Community rights. Moreover, even in those cases where the Community antitrust violation might fit the fact pattern of interference with business, the erection of a domestic requirement of intent or foreseeability as to particular victims which is unknown in Community law cannot pass muster under Dekker and Factortame III.40 The intent/foreseeability element of the tort would have to be disapplied in Community cases,41 as the German requirement that legislation be aimed at an individual situation was set aside in Factortame III.

85df07a2946c0bf5e633a71e91da97ad. 37Lonrho v. Fayed, supra note 35. Steiner (1987), supra note 4, at 112 argues that where defendants act to gif further their own interests there is no liability even if harm to others is foreseeable. However, Steiner's

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argument (put forth prior to the decision in Lonrho v. Fayed) is premised on the judgment in Lonrho v. Shell, [1981] 2 All ER 456 (HL), which it seems was overruled on this point in Lonrho v. Fayed.

85df07a2946c0bf5e633a71e91da97ad. 38 Brealey and Hoskins, supra note 7, at 70. gif 39Supra, at 71. 85df07a2946c0bf5e633a71e91da97ad. gif 40 See R. Whish, 'The Enforcement of EC Competition Law in the Domestic Courts of Member States', (1994) 15 85df07a2946c0bf5e633a71e91da97ad. gif Eur. Comp. L Rev. 60, 65 (Sixth Baron De Lancey Lecture). 85df07a2946c0bf5e633a71e91da97ad. 41 Cf. Case C213/89, R. v. Secretary of State for Transport, ex parte Factortame Ltd (Factortame I), [1990] ECR gif 2433, discussed at § 6.1; Joined Cases C46/93 and C48/93, Brasserie du Pêcheur (footnote continued on next page)

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Hoskins argues in favour of adopting this tort on the ground that, since it is relatively new and its limits less refined, it would be 'easier' to base claims for competition damages on a developing tort which could be adapted, rather than 'squeeze' such a claim into the more 'concretely defined' tort of breach of statutory duty, or create a wholly new cause of action to give effect to such claims.42 With respect, it is difficult to see how in any sense it is 'easier' to adapt a 'developing' tort such as unlawful interference to competition claims than to create a new tort which can be crafted from the beginning to suit the purpose. Moreover, Hoskins' view that the tort of breach of statutory duty is 'concretely defined' is not universally shared. The principal appeal to Hoskins of the wrongful interference tort seems to be that it would more or less arbitrarily limit the availability of the damages remedy and reduce the burden of enforcement of competition rules on national courts.43 One might suggest that more appropriate criteria for evaluation would include whether the tort provided effective protection of the full range of rights under Community antitrust rules. 9.3.4 Conspiracy Liability for conspiracy is said to take two forms, one involving a combination of two or more parties with the predominant intention of causing injury to another through lawful means, or where two or more combine intentionally to injure another by use of unlawful means, even if their primary purpose is to further their own interests.44 Since the nineteenth century, efforts to use the tort of conspiracy to seek damages for restraints of trade at English common law had come to nought, as in the classic Mogul Steamship45 case, because there was no combination to do an unlawful act or a lawful act by unlawful meansrestraints of trade then being considered not unlawful even though the courts would not enforce themthe actions of a rapacious shipping 'conference' having done 'nothing more against the plaintiffs than pursue to the bitter end a war of competition waged in the interest of their own trade'.46 However, under the modern English approach to conspiracy exhibited in Fayed, a breach of Article 85, now 81, may (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. SA v. Federal Republic of Germany (Factortame III), [1996] ECR I1029, discussed at § 6.3, and Case gif C177/88, Dekker v. Stichting Vormingscentrum, [1990] ECR I3941.

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85df07a2946c0bf5e633a71e91da97ad. 42 M. Hoskins, 'Garden Cottage Revisited: The Availability of Damages in the National Courts for Breaches of gif the EEC Competition Rules', (1992) 13 Eur. Comp. L Rev. 257, 262. 85df07a2946c0bf5e633a71e91da97ad. 43Supra. This argument cannot be accepted. The English courts to date have not exactly been overwhelmed with gif Community antitrust cases. 85df07a2946c0bf5e633a71e91da97ad. 44Lonrho Plc v. Fayed [1991] 3 WLR 188 (HL). gif 45Mogul Steamship Co., Ltd. v. McGregor, Gow & Co., (1889) 23 QBD 598 (AC). 85df07a2946c0bf5e633a71e91da97ad. gif 46 H.B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (Baltimore, Mld., 1954), 34. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_122 next page >


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supply the unlawful element required, and the tort may be made out if there is also an intent to injure a competitor by the violation.47 At first glance, one may well have thought that conspiracy would offer an appropriate theory of action for enforcement of at least some of the Community antitrust rules. Of course, a conspiracy would reach only combinations of two or more undertakings, making it primarily suitable for enforcement of Article 81, formerly 85. Indeed, the Sherman Act itself provides in section 1 for the unlawfulness of 'every contract, combination . . . or conspiracy in restraint of trade'.48 However, the requirement in US law is a conspiracy directed to the agreement in restraint of trade, not to the lawfulness of the underlying act or the injury of a particular competitor or other victim, as would be the case in a common law conspiracy.49 Thus, while certain types of Article 81, formerly 85, infringements involving actions targeting a competitor might be brought, this tort is again under-inclusive. For example, a distribution agreement containing a general export ban would undoubtedly infringe Article 81, formerly 85, but it would not be actionable under the tort of conspiracy as formulated in Fayed unless it could be shown to be targeted at a particular firm. It is further under-inclusive in that many Article 82, formerly 86, infringements not involving collusive action would not be actionable as a conspiracy for lack of a multiplicity of actors. Thus, it is not effective as a general theory on which to protect Community antitrust rights in British courts. Indeed, Steiner dismisses the tort of conspiracy altogether on the basis that if the activity is actionable at all, it is actionable in English law without recourse to Community law.50 Rew also discounts this tort on the theory that acts to be considered 'unlawful' must already be a civil wrong, and if a breach of Article 81, formerly 85, is a breach of statutory duty there is already an adequate remedy. If a breach of Article 81, formerly 85, is not a breach of statutory duty, then defendants will be able to show their purpose was not to injure the plaintiff, but to further their own interests.51

85df07a2946c0bf5e633a71e91da97ad. 85df07 47 Brealey and Hoskins, supra note 7, at 71. The authors do not express an opinion on whether the tort would gif allow recovery by anyone other than competitors. gif 85df07a2946c0bf5e633a71e91da97ad. 48 15 USC § 1 (emphasis supplied). § 2 also prohibits conspiracies to monopolize. gif 49 P. E. Areeda, Antitrust Law vi, (Boston, Mass., 1986) 1402a at 9: '[t]he Sherman Act conspiracy is very 85df07a2946c0bf5e633a71e91da97ad. gif different [from common law conspiracy] in that the underlying act is not independently unlawful. For example, setting one's own profit-maximizing price is entirely lawful under the antitrust laws. The Sherman Act is concerned with such price fixing only when it is the subject or result of a conspiracy'.

85df07a2946c0bf5e633a71e91da97ad. 50 Steiner (1987), supra note 4, at 112 note 88. gif 85df07a2946c0bf5e633a71e91da97ad. 51 P. Rew, 'Actions for Damages by Third Parties Under English Law for Breach of Article 85 of the EEC Treaty', gif (1971) 8 CML Rev. 462, 463 note 4. However, Rew (in 1971) was without the benefit of the judgment in Lonrho v. Fayed, which acknowledged that the tort could be made out if there were intent to injure even if the primary purpose of the conspirators were to further their own interests.

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On the other hand, Staines takes issue with Rew's dismissal of the tort, arguing that a breach of Article 85 is 'unlawful' for purposes of the tort of conspiracy and that 'an injured party could almost invariably sue for damages under this tort'.52 Staines is concerned however that the main principles of this type of conspiracy (use of unlawful means) 'have not been fully established', that the tort itself is 'notoriously difficult to establish', and that 'just like the action for breach of statutory duty, it resides in one of the murkier areas of our law'.53 On the whole, none of the economic torts seems to offer a satisfactory or comprehensive solution for the categorization of actions brought under Community competition rules. As secondary heads of claim in particular factual circumstances, they may well be useful. However, a primary category of remedy with broader application is needed.

85df07a2946c0bf5e633a71e91da97ad. 52 M. Staines, 'The Right to Sue in Ireland for Violation of the EEC Rules on Competition', (1977) 2 Legal gif Issues of Eur. Integration 53, 63. 85df07a2946c0bf5e633a71e91da97ad. 53Supra. gif < previous page

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10 Community Antitrust Claims as a Breach of Statutory Duty

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85df07a2946c0bf5e633a71e91da97ad. 10.2 The Elements of the Tort of Breach of Statutory Duty gif

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10.1 Judicial Authority It has been said that the 'theory with the most judicial weight behind it (though not necessarily most theoretical weight) is that breaches of Articles 85 and 86 EEC Treaty [now 81 and 82 EC] may be pleaded in the national courts as ''breaches of statutory duty"'.1 The principal case is Garden Cottage Foods Ltd v. Milk Marketing Board,2 in which a four to one majority of the House of Lords reversed the Court of Appeal and reinstated the judgment of the High Court to the effect that no interlocutory injunction should be granted where the plaintiff had an adequate remedy in damages. In Garden Cottage, the plaintiff was a small company ('Mr and Mrs Bunch with limited liability') in the business of reselling bulk butter purchased from the Milk Marketing Board (MMB), a statutory body. When the MMB cut off supplies of its nectar to Garden Cottage, the result was the commencement of an action in the High Court alleging that the refusal to supply was the abuse of a dominant position in the supply of bulk butter in England and Wales, in violation of Article 82, formerly 86, EC. Lord Diplock, speaking for the majority, stated:

85df07a2946c0bf5e633a71e91da97ad. 85df07 This article of the Treaty of Rome (the EEC Treaty) was held by the European Court of Justice in Belgische Radio en gif Televisie v. SABAM (case 127/73) [1974] ECR 51, 62 to produce direct effects in relations between individuals and to gif create direct rights

85df07a2946c0bf5e633a71e91da97ad. 1 N. Green, 'The Treaty of Rome, National Courts, and English Common Law: The Enforcement of European gif Competition Law After Milk Marketing Board', (1984) 48 Rabels Zeitschrift 509, 516. Shaw has referred to this as

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'the dominant judicial approach': J. Shaw, 'United Kingdom', in P. Behrens (ed.), EEC Competition Rules in National Courts, Pt. 1 United Kingdom and Italy (Baden-Baden, 1992), 101. 85df07a2946c0bf5e633a71e91da97ad. 2 [1984] 1 AC 130 (HL).

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85df07a2946c0bf5e633a71e91da97ad. 85df07 in respect of the individuals concerned which the national courts must protect. This decision of the European gif Court of Justice as to the effect of article 86 [now 82] is one which section 3(1) of the European Communities gif Act 1972 requires your Lordships to follow. The rights which the article confers upon citizens in the United Kingdom accordingly fall within section 2(1) of the Act. They are without further enactment to be given legal effect in the United Kingdom and enforced accordingly.

85df07a2946c0bf5e633a71e91da97ad. 85df07 A breach of the duty imposed by Article 86 [now 82] not to abuse a dominant position in the common market gif or in a substantial part of it, can thus be categorised in English law as a breach of statutory duty that is gif imposed not only for the purpose of promoting the general economic prosperity of the common market but also for the benefit of private individuals to whom loss or damage is caused by a breach of that duty.3 Elsewhere in his speech, Lord Diplock stated that he found it 'difficult to see how it can ultimately be successfully argued . . . that a contravention of Article 86 [now 82] which causes damage to an individual citizen does not give rise to a cause of action in English law of the nature of a cause of action for breach of statutory duty . . .'.4 In dissent, Lord Wilberforce took issue with the notion that Article 86, now 82, automatically gave rise to an action for damages in English law when it had no such effect in Community law, where enforcement was limited to fines and orders to cease and desist. He observed that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 To say that thereby what is prohibited action becomes a tort or a 'breach of statutory duty' is in my opinion, a gif conclusionary statement concealing a vital and unexpressed step. All that Section 2 [of the European gif Communities Act 1972] says (relevantly) is that rights arising under the Treaty are to be available in law in the United Kingdom, but this does not suggest any transformation or enlargement in their character. Indeed the section calls them 'enforceable Community rights' not rights arising under United Kingdom law.5 The application of the tort of breach of statutory duty to breaches of EC law, especially competition law, has received numerous comments, including some prior to the UK's accession to the Community.6 In a limited number of instances, it has received some judicial adherence as well. In Bourgoin,7 Mann J at first instance

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf 3Garden Cottage, supra. gif gif 85df07a2946c0bf5e633a71e91da97ad. 4Supra (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 5Supra. gif 6 E.g., P. Rew, 'Actions for Damages by Third Parties Under English Law for Breach of Article 85 of the EEC 85df07a2946c0bf5e633a71e91da97ad. gif Treaty', (1971) 8 CML Rev. 462; M. Staines, 'The Right to Sue in Ireland for Violation of the EEC Rules on Competition', (1977) 2 Legal Issues of Eur. Integration 53; F. Jacobs, 'Damages for Breach of Article 86 EEC', (1983) 8 Eur. L Rev. 353; E. Picañol, 'Remedies in National Law for Breach of Articles 85 and 86 of the EEC Treaty: A Review', (1983) 2 Legal Issues of Eur. Integration 1; F. G. Jacobs, 'Civil Enforcement of EEC Antitrust Law', (1984) 82 Mich. L Rev. 1364; M. Friend and J. Shaw, 'Damages for Abuse of Dominant Position', (1984) 100 LQR. 188; Green, supra note 1; J. Shaw, 'Private Damage Suits for Breach of Community Law', (1984) 43 Cambridge LJ 255; J. Shaw, 'Actions for Damages in the English Courts for Breach of EEC Competition Law', (1985) 34 ICLQ 178; N. Green and A. Barav, 'Damages in the National Courts for Breach of Community Law', (1987) 6 YBEL 55; J. Steiner, 'How to Make the Action Suit the Case: Domestic Remedies for Breach of EEC Law', (1987) 12 Eur. L Rev. 102; P. Oliver, 'Enforcing


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accepted the Garden Cottage analysis in holding that a breach of Article 30, now 28, like a breach of Article 86, now 82, gave rise to a claim for breach of statutory duty. However, the Court of Appeal by a two to one majority concluded that no action for damages would lie as a breach of statutory duty in the case of Article 30, now 28, although the Court of Appeal accepted that an action for misfeasance in public office was available.8 Parker LJ referred to the Garden Cottage judgment in stating, obiter, 'that is clear authority that a private law action for breach of Article 86 [now 82] against an undertaking sounds in damages'. The Court of Appeal in Bourgoin thus appeared to approve of Garden Cottage as applied to Article 86, now 82, but distinguished Article 30, now 28, from Article 86, now 82, as a public right, not a private right. Bourgoin was settled out of court before a decision in the House of Lords was taken. However, it is now admitted to be greatly in doubt that Bourgoin was correctly decided on the right to damages point in light of the European Court of Justice's judgment in Francovich.9 Other decisions have also accepted the Garden Cottage judgment as creating a breach of statutory duty cause of action with respect to private law provisions of Community law. In The Queen v. Attorney General, ex parte Imperial Chemical Industries PLC, Woolf J stated '[i]f I had come to the conclusion that Article 93(3) had been infringed in a manner which gave ICI rights under the directly applicable last sentence, I would then have had no doubt that ICI had locus standi. ICI would then have a cause of action, as Lord Diplock makes clear in his speech in Garden Cottage Ltd v. The Milk Marketing Board'.10 In An Bord Bainne Co-operative v. Milk Marketing Board, Neil J was of the view that the speeches in Garden Cottage 'provide compelling support for the proposition that contraventions of EEC regulations which have ''direct effects" create direct rights in private law which the courts must protect'.11 In Plessey Co. plc v. General Electric Co. plc, (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. 85df07 Community Rights in the English Courts', (1987) 50 MLR 881; Shaw, supra note 1; M. Hoskins, 'Garden gif Cottage Revisited: The Availability of Damages in the National Courts for Breaches of the EEC Competition gif Rules', (1992) 13 Eur. Comp. L Rev. 257; E. Sharpston, Interim and Substantive Relief in Claims under Community Law (London, 1993); R. Whish, 'The Enforcement of EC Competition Law in the Domestic Courts of Member States', (1994) 15 Eur. Comp. L Rev. 60 (Sixth Baron De Lancey Lecture); A. Bell, 'Enforcing Community Law Rights Before National CourtsSome Developments', (1994) 1 Legal Issues of Euro. Integration 111; M. Brealey and M. Hoskins, Remedies in EC Law: Law and Practice in the English and EC Courts (London, 1994); I. Maher, 'A Question of Conflict: The Higher English Courts and the Implementation of European Community Law', in T. Daintith (ed.), Implementing EC Law in the United Kingdom: Structures for Indirect Rule (Chichester, 1995), 305, 319; and J. Steiner, Enforcing EC Law (London, 1995).

85df07a2946c0bf5e633a71e91da97ad. 7Bourgoin SA v. Ministry of Agriculture, Fisheries and Food, [1985] 1 CMLR 528, 542 [1985] 3 All ER 585 gif (QB), and [1985] 3 All ER 603 (CA). 85df07a2946c0bf5e633a71e91da97ad. 8Bourgoin, [1985] 3 All ER at 624 (CA). gif 9 See Kirklees MBC v. Wickes Building Supplies, Ltd, [1993] AC 227, 281 (HL). See also, Sharpston, supra note 85df07a2946c0bf5e633a71e91da97ad. gif 6, at 69, and M. Ross, 'Beyond Francovich', (1993) 56 MLR 55, 60. 85df07a2946c0bf5e633a71e91da97ad. 10 [1985] 1 CMLR 588, 608. gif < previous page page_127 next page >


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Morritt J stated that 'a breach of Article 85 [now 81] is, in English law, the equivalent to the breach of a statutory duty imposed for the benefit of private individuals to whom loss or damage is caused by a breach of that duty'.12 In Iberian UK Ltd v. BPB Industries plc and British Gypsum Ltd,13 Iberia brought an action in the High Court alleging that the defendants infringed Article 86, now 82, and thereby breached their statutory duty by abuse of their dominant position. Both defendants had been fined by the Commission for infringements of Article 86, now 82, and the High Court's ruling dealt with the issue of whether the defendants could relitigate the Commission's adverse findings in the High Court. Despite the several cases which appear to accept the breach of statutory duty approach to infringements of Articles 85 and 86, now 81 and 82, there seems to be no English appellate court decision which definitively holds that a breach of the competition rules gives rise to an action sounding in damages, and that action is named breach of statutory duty. Even Garden Cottage was decided by the House of Lords on the narrow ground of discretion to grant an interlocutory injunction. Lord Diplock expressly noted his confidence that a contravention of Article 86, now 82, gave rise to a cause of action in English law 'of the nature of' a cause of action for breach of statutory duty, and stated 'but since it cannot be regarded as unarguable that is not a matter for final decision by your Lordships at the interlocutory stage that the instant case has reached'.14 While it is certainly true that most commentators, with justification, have regarded Garden Cottage and 'subsequent judicial reaction to that case as broadly settling the issue of whether damages are available in principle, even in the absence of any decisive judicial holding',15 the procedural posture of the case, the ambiguity of the language used in the judgment, and subsequent judicial developments since 1986 make it impossible to say with confidence that the issue has been settled. Lord Diplock's remarks have themselves been considered obiter.16 Moreover, in each of the cases mentioned above in which Garden Cottage was referred to with approval, the remarks were also obiter, albeit nonetheless indicative of a strong degree of judicial acceptance. In none of the appellate court judgments mentioned has there been a full expla-

85df07a2946c0bf5e633a71e91da97ad. 11 [1984] 1 CMLR 519, 528. The Court of Appeal affirmed that the case, concerning Art. 86, involved gif 'private' law rights: [1984] 2 CMLR 589 (CA).

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85df07a2946c0bf5e633a71e91da97ad. 12 [1990] ECC 384, 3934. See also Cutsforth v. Mansfield Inns Ltd, [1986] 1 WLR 558, 563G, and Argyll Group gif v. The Distillers Co., 1987 SLT 514, [1986] 1 CMLR 764, 7679 (OH). The Argyll judgment accepted Garden Cottage, but eschewed the English law 'breach of statutory duty' classification.

85df07a2946c0bf5e633a71e91da97ad. 13Iberian UK v. BPB Industries plc, [1996] 2 CMLR 601 (Ch.). gif 14Garden Cottage, at 144 BE. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 15 Shaw, supra note 6, at 1045. gif 16 Steiner (1987), supra note 6, at 107 note 37. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_128


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nation of how Articles 85 or 86, now 81 or 82, satisfy the elements of the tort of breach of statutory duty. In Garden Cottage itself, Lord Diplock merely 'presumed' its application without undertaking to demonstrate it.17 Lord Diplock was carefully ambiguous in his speech in Garden Cottage, referring to an infringement of Article 86, now 82, as one that 'can thus be categorised in English law as a breach of statutory duty' and 'of the nature of a cause of action for breach of statutory duty' (emphasis supplied). He did not say in so many words that a breach of Article 86, now 82, is a breach of statutory duty. In the High Court in An Bord Bainne Co-operative Ltd, Neill J was careful in referring to the right to 'bring an action in his national court for the protection of a private law right in much the same way as an individual may in certain cases sue for breach of statutory duty'.18 In the Plessey Co. plc judgment, Morritt J only said 'a breach of Article 85 [now 81] is, in English law, the equivalent to the breach of a statutory duty'. In sum, it is submitted that the judiciary seems to have stopped short of the position that violations of Article 85 or 86, now 81 or 82, are literally breaches of statutory duty. The courts have also not said explicitly that breaches of Community antitrust rules are not breaches of statutory duty, although this perhaps could be inferred from the statements which have been made. If such infringements of Article 85 and 86, now 81 and 82, are not breaches of statutory duty, but nevertheless give rise to an action in damages as so strongly indicated in Garden Cottage, one is of course left to wonder what sort of action the courts think they actually are. One must wonder why the courts have halted short of the precipice. It could be because the statements were obiter. It might be because even though the judges recognized their obligation to permit damage awards under Community law, they were themselves uncertain about precisely how to go about it. It may even be that the House of Lords were unwilling to endorse Lord Denning's new torts approach, but were reluctant to name another new tort themselves when it arguably was not essential to decide the case before them and instead resorted to the device of speaking in terms of an action similar to a recognized English tort. After all, the EC Treaty is not a statute. However, because there is no recognized tort denominated 'similar to' or 'equivalent to' or 'in much the same way as' breach of statutory duty, the courts have come close to creating a novel tort while disclaiming the need for a novel tort. Either way, it seems a new tort name has been created.

85df07a2946c0bf5e633a71e91da97ad. 17 This was noted by Mann J in the High Court judgment in Bourgoin, supra note 7, at 5367, 541. Mann J gif briefly discussed the authorities and preconditions for the tort, but felt it sufficient to follow the lead of the

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House of Lords. 85df07a2946c0bf5e633a71e91da97ad. 18 [1984] 1 CMLR at 5268 (emphasis supplied).

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The solution to the mild lack of a statute puzzle has been to base the breach of statutory duty on the European Communities Act 1972, which of course is an English statute. A number of commentators have taken this approach,19 and it is obviously consistent with the UK traditional dualist transformation theory of incorporating Community law into national law. On the other hand, this willingness to conceive of causes of action 'only within the conventional doctrinal prescriptions of English private law . . . highlights the danger that Community law may be distorted in this transformation and that the type of remedies available to aggrieved parties may be insufficient for the needs of Community law'.20 10.2 The Elements of the Tort of Breach of Statutory Duty The elements of 'this most antiquated of remedies'21 are generally considered to be four in number. First, the statute imposes a duty that is owed to the plaintiff; secondly, the damage suffered is of the species which the statute is intended to prevent; thirdly, the defendant infringed his statutory obligation; and fourthly, the breach of duty caused the damage. In addition, the courts are reluctant to allow this theory where the statute itself provides remedies, or other common law remedies are available.22 A useful review of the law of this tort, without reference to the interface with EC law, notes that 'this branch of the law is unpredictable in its operation and difficult to state with any degree of clarity'.23 When the courts do come to consider in detail how infringements of Article 85 and 86, now 81 and 82, create, if they do, a cause of action for breach of statutory duty it is by no means clear that the result will be affirmative, the judgment in Garden Cottage notwithstanding. One description of the tort stated that '[t]he breach of statutory duty created for the benefit of an individual or a class is a tortious act, entitling anyone who suffers special damage therefrom to recover such damages against the tortfeasor'.24 One requirement of the tort is that the statute be

85df07a2946c0bf5e633a71e91da97ad. 85df07a 19 E.g., Whish, supra note 6, at 64, and Brealey and Hoskins, supra note 6, at 66. gif gif 85df07a2946c0bf5e633a71e91da97ad. 20 Shaw, supra note 6, at 102. gif 85df07a2946c0bf5e633a71e91da97ad. 21 Green, supra note 1, at 516. gif 22 Green, supra note 1, at 51718. See also Shaw, supra note 6, at 75, who describes it as a tort 'characterised in 85df07a2946c0bf5e633a71e91da97ad. gif English law by a singular lack of clarity and certainty', and lists the elements as (1) the plaintiff comes within the category of persons protected by the statute; (2) the plaintiff's injury was within the type contemplated by the statute, (3) the statute allows for civil or tortious liability; (4) the duty imposed on the defendant by the statute has not been fulfilled; and (5) the failure to fulfil the duty caused the damage to the plaintiff. Brealey and Hoskins, supra note 6, at 656, list the elements as (1) the loss suffered is within the scope of the statute; (2) the statute gives rise to a civil cause of action; (3) there has been a breach of statutory duty; and (4) the breach has caused the loss complained of. See also, Rew, supra note 6, at 4634; Green and Barav, supra note 6, at 98; and Steiner, supra note 6, at 108.

85df07a2946c0bf5e633a71e91da97ad. 23 R. A. Buckley, 'Liability in Tort for Breach of Statutory Duty', (1984) 100 LQR204. gif 24Per Farwell LJ in Dawson & Co. v. Bingley UDC[1911] KB 149, 156. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_130


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enacted for the benefit of a group of which the plaintiff is a member. Brealey and Hoskins argue that the concept of direct effect in Community law satisfies this criterion, so that any provision having direct effect also satisfies this condition.25 Green and Barav agree, stating that this condition of the tort is 'unequivocally satisfied by all directly applicable provisions of Community law'.26 On the other hand, Rew doubts that an English court would be interested in holding that 'such a vague and extensive category as participants in a large integrated market constitutes a class of persons for the purposes of tortious liability when users of the highway do not', and his view has recently prevailed in a case involving a previous UK competition statute.27 More recently, Steiner argues that the 'right' conferred on individuals by directly effective EEC law is 'in no way analogous to the benefit conferred by a specific statute on a particular class'.28 It is submitted that the correct resolution of this debate is determined by Community law, as discussed below. A similar dispute exists concerning the satisfaction of the condition whether the statute was intended to allow for civil liability. Brealey and Hoskins argue that since the national courts must protect directly effective rights, any breach of a directly effective right a fortiori must give rise to a cause of action. In contrast, Steiner argues that Community law gives no indication that a breach per se of Community law is intended to give rise to a remedy in damages and points to the competition rules, which provide only for fines as an example.29 She suggests that simple breaches of Articles 85 and 86, now 81 and 82, should not give rise to damages claims and should only be protected by injunction or declaration.30 Whish seemingly has doubts as well on the basis that the tort of statutory duty normally does not allow a cause of action when a financial penalty is available, as in the case of Regulation 17.31 Green and Barav32 answer that there is a distinction between the purposes of the exercise of powers granted to Community institutions and the guarantees to individuals for the safeguarding of their individual rights by national courts, as noted in Molkerei-Zentrale Westfalen,33 and

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 25 Brealey and Hoskins, supra note 6, at 66. gif gif 85df07a2946c0bf5e633a71e91da97ad. 26 Green and Barav, supra note 6, at 98. gif 27 Rew, supra note 6 at 474. Of course, Garden Cottage implies the contrary, but in the UK, Mid Kent Holdings 85df07a2946c0bf5e633a71e91da97ad. gif plc v. General Utilities plc [1996] 3 All ER 132, 1545 (Ch.) ruled against the existence of a right to sue under this tort.

85df07a2946c0bf5e633a71e91da97ad. 28 Steiner, supra note 6, at 109. gif 29 Steiner, supra. In fairness, it should be noted that this argument was put by Steiner prior to the judgments in 85df07a2946c0bf5e633a71e91da97ad. gif Francovich and Factortame III. However, in later work after Francovich, her position was not substantially changed. See Steiner (1995), supra note 6, at 104.

85df07a2946c0bf5e633a71e91da97ad. 30 Steiner (1995), supra note 6, at 104. Steiner does not seem to recognize the impact of Francovich on the gif correctness of Bourgoin. 85df07a2946c0bf5e633a71e91da97ad. 31 Whish, supra note 6, at 65. gif 85df07a2946c0bf5e633a71e91da97ad. 32 Green and Barav, supra note 6, at 101. gif 33 Case 28/67, Molkerei-Zentrale Westfalen v. Hauptzollamt Paderborn, [1968] ECR 143, 153. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_131 next page >


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that having 'different objects, aims and effects . . . a parallel may not be drawn between them'.34 10.3 Evaluation of the Statutory Duty Approach Academic and professional commentaries have identified a number of difficulties with the 'breach of statutory duty' approach to finding a vehicle in English law for the assertion of Community antitrust claims. First, the tort itself is sufficiently unpredictable as to create serious reservations concerning its suitability to the task. Shaw notes that the tort is 'characterised in English law by a singular lack of clarity and certainty',35 Steiner comments that the rules 'have been applied with a striking lack of consistency',36 and Rew finds that 'it has been found to be impossible to define its juridical character precisely',37 all of which lends much justification to Lord Evershed MR's remark that 'a lay mind might not unjustifiably be tempted to think that . . . the spin of a coin was as good a forecast as any of the results of a case'.38 Lord Denning obviously thought even a legal mind could reach the same conclusion, stating that 'the dividing line . . . is so blurred and ill-defined that you might as well toss a coin to decide it'.39 This unpredictability factor exists at least in part due to reliance on the 'presumed but unexpressed intention of the legislature'40 on such matters as whether the plaintiff belongs to a protected class of persons distinct from the public at large and whether the injury is of the kind the legislation was intended to prevent. Whether this is fatal to the application of the tort in the enforcement of EC competition law may depend on whether UK courts take their guidance from the direct effects jurisprudence of the Court of Justice, as Lord Diplock seemed to do in Garden Cottage, or whether they undertake an independent analysis based on UK case law. If, as some writers have argued, the Court of Justice's pronouncements on the direct effect of Community law provisions and the duty of national courts to protect those rights are accepted as satisfying per se the pertinent elements of the tort of breach of statutory duty, then clearly a basis in English law would exist for bringing an action for damages to enforce Community antitrust law. Under this approach, Lord Diplock's obiter dictum in Garden Cottage would seem justified despite its ambiguity.

85df07a2946c0bf5e633a71e91da97ad. 85df07 34Supra. See also the Opinion of Roemer AG in Case 9/70, Grad v. Finanzamt Traunstein, [1970] ECR 825, gif 846. gif 85df07a2946c0bf5e633a71e91da97ad. 35Supra, note 6, at 75. gif 85df07a2946c0bf5e633a71e91da97ad. 36 Steiner (1987) supra note 6, at 108. gif 37 Rew, supra note 6, at 463. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 38 Lord Evershed MR, 'The Impact of Statute on the Law of England', XLII Proceedings of the British Academy gif 259, quoted in Rew, supra. 85df07a2946c0bf5e633a71e91da97ad. 39Ex parte Island Records [1978] Ch. 122, 135A. gif 85df07a2946c0bf5e633a71e91da97ad. 40 Buckley, supra note 23, at 204. gif < previous page page_132 next page >


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On the other hand, Steiner's argument that the analysis of whether a provision of EC law produces direct effects is not comparable to the analysis of whether a protected class was intended to be benefited by a statute cannot be dismissed out of hand.41 The notion of legislative intent vis-à-vis a particular class or a particular mischief, however presumed and fictional, is largely absent from the discussion of whether EC law provisions create direct effects.42 Thus, if an English court undertakes an independent analysis of whether the Treaty of Rome, a regulation, a directive, or the European Communities Act intended to confer a special benefit on a protected class with a view to applying a precondition under English law for allowing enforcement of a directly effective Community law right, any finding which did not permit the action to proceed would have the prohibited effect of appending additional national obstructions to the requirements of Community law43 and would infringe upon the supremacy of Community law. In order for Community antitrust law to be enforced under the rubric of breach of statutory duty, British courts must therefore disapply certain elements of the tort as in Factortame I and III for constituting an interference with the supremacy of directly effective Community law. The result is that if the Court of Justice has said that a Community law provision has direct effect, this ends the inquiry on two elements of the tort of statutory duty, and whether this is considered to happen by reason of satisfaction or disapplication is immaterial from the EC law perspective. Whether under these conditions the breach of statutory duty approach is desirable from a domestic law perspective is another question. If, as is submitted, two elements of the tort are excised in the Community 'tort' context, this would create a disparity with the application of the tort in domestic law cases. It would seem anomalous to require all elements for domestic law cases, but not for Community cases. On the other hand, to eliminate two elements of the claim under domestic law might well transform and expand the scope and availability of the tort in the UK. Whether this is a policy the government would voluntarily choose to adopt is doubtful. Hence, the breach of statutory duty approach forces English courts to either tolerate inferior levels of protection for domestic rights or read into domestic tort law concepts of Community law which may not be welcomed with enthusiasm. Lord Goff has implied that the House of Lords will not contemplate a double standard.44 Some writers have argued against providing a remedy in damages for breach of statutory duty on the ground that the tort's standard of strict liability and the

85df07a2946c0bf5e633a71e91da97ad. 41 Steiner's conclusion from this is that no breach of statutory duty cause of action is available for gif competition law infringements. It is submitted that this conclusion is in error. 85df07a2946c0bf5e633a71e91da97ad. 42 See discussion in Chaps. 5 and 6. gif 43 See, e.g., Case C177/88, Dekker v. Stichting Vormingscentrum, [1990] ECR I3941. 85df07a2946c0bf5e633a71e91da97ad. gif 44Woolwich Equitable Building Society v. IRC, [1993] AC 70, 177 (HL). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_133


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'indeterminate' amounts of economic damages to be awarded would expose parties to 'an unacceptable degree of liability'.45 In the context of competition law actions there may be reasons for more restrictive rules on locus standi or damages,46 although not necessarily so,47 but if the breach of statutory duty approach is used, the Community principle of supremacy will not permit discrimination against a Community law claim on the scope of recoverable damages or allowance of locus standi. From a policy standpoint, if not a legal one, some may consider it preferable to avoid use of this tort. However, there may not be a choice given the judicial authority already accumulated.

85df07a2946c0bf5e633a71e91da97ad. 45 Steiner (1995), supra note 6, at 1034; Steiner (1987), supra note 6, at 110; see also Brealey and Hoskins, gif supra note 6, at 69. 85df07a2946c0bf5e633a71e91da97ad. 46 See Chaps. 1316. gif 85df07a2946c0bf5e633a71e91da97ad. 47 Staines strongly disagrees with this contention: supra note 6, at 59. gif < previous page page_134


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11 UK Antitrust Claims as a Breach of Statutory Duty

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11.1 The National Treatment Principle and Community Claims in the UK The ECJ has said national remedies for protection of Community rights 'cannot be less favourable than those relating to similar actions of a domestic nature'.1 This principle of national treatment has received little development in the case law compared to the principle of adequacy, but it has important implications for private Community antitrust litigation in the UK. As has been noted in Chapter 4, the domestic law of the UK until recently lacked competition rules equivalent in all respects to Articles 85 and 86, now 81 and 82, but maintained a control of abuse system for regulation of competition. Under the national treatment principle, national courts must allow remedies for infringement at least equivalent to comparable types of actions available in the UK. The question of how similar a domestic type of action or remedy must be to the Community claim in order to be considered comparable has apparently not been extensively developed by the ECJ. A recent judgment which helps explain this principle is Palmisani v. Instituto Nazionale della Previdenza Sociale.2 In that case, the Court considered the equivalence of the limitations periods applied to the general system of non-contractual liability of the State (five-year period) to that of a special statutory benefits scheme, inter alia, under the insolvency directive involved in Francovich (a one year period). The Court considered that a statutory

85df07a2946c0bf5e633a71e91da97ad. 85df07a 1 Case 33/76, Rewe Zentralfinanz eG v. Landwirtschaftskammer für das Saarland [1976] ECR 1997. gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 Case C261/95, [1997] 3 CMLR 1356. gif < previous page page_135 next page >


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benefit scheme was not comparable to a general system of non-contractual liability.3 The reasoning of the ECJ and the Advocate General in Palmisani makes it clear that remedies or actions are similar for purposes of application of the Community law principle of non-discrimination when they on the whole have similar objectives. All English torts, including breach of statutory duty, share the objective as a whole of compensating individuals for unlawful non-contractual-based conduct. It seems that if British law allows breach of statutory duty tort liability for any type of domestic competition claim, it must also do so for Community competition claims. It also seems that if the British legal system allows general tort liability, which it obviously does, some form of tort liability must be allowed for Community antitrust claims whether the name is breach of statutory duty or not. Under the national treatment principle, it necessarily would seem to follow that violations of Articles 81 and 82, formerly 85 and 86, EC may be redressed in national courts as a breach of statutory duty. The previous domestic UK competition law, to which most of the following comments are directed, provided for damages where parties to a registrable agreement under the Restrictive Trade Practices Act 1976 (RTPA) failed to furnish particulars of the agreement to the Director General of Fair Trading. Section 35(2) of the RTPA 1976 provides that parties to such an agreement, who have a duty not to give effect to or enforce any such agreements, can be sued by anyone 'who may be affected by a contravention of it and any breach of that duty is actionable accordingly subject to the defences and other incidents applying to actions for breach of statutory duty'. No court has ever awarded damages under this provision, but at least one large settlement was obtained 'with it in mind'.4 The Resale Prices Act 1976 section 25(3) also made available an action for breach of statutory duty in favour of persons who have been injured by collective action or agreements to enforce resale price maintenance. Whish has taken the position that the circumstances in which former UK competition law allowed private actions for breach of statutory duty were so narrow compared to the breadth of practices condemned by Article 81, now 85, that a domestic court could refuse to provide an action in damages for many breaches without being guilty of discrimination.5 Whish apparently considers that only practices for which a breach of statutory duty remedy is expressly provided by the UK competition statutes and which also infringe Article 81, formerly 85, are required to be afforded an action

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 3Palmisani is discussed in more detail in Chap. 19. gif gif 85df07a2946c0bf5e633a71e91da97ad. 4 R. Whish and B. Sufrin, Competition Law (3rd edn., London, 1993), 173. The Post Office obtained a £9 million gif settlement from producers of wire and cables in 1978. 85df07a2946c0bf5e633a71e91da97ad. 5 R. Whish, 'The Enforcement of EC Competition Law in the Domestic Courts of Member States', (1994) 15 Eur. gif Comp. L Rev. 60, 63 (Sixth Baron De Lancey Lecture).

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in damages by a UK court. With respect, it is submitted that this view is flawed for failure to distinguish between analogy and identity. It is clear that under the statutory provisions referred to above, former UK law permitted a damages action in the form of the tort of breach of statutory duty for at least two specified violations of its competition laws. The argument that because some types of violations of Article 81, formerly 85, would not be caught by the domestic law provisions expressly designating a damages remedy in national courts overlooks the point that the kind of action (tort in general, competition law in particular) and the type of remedy (action for damages) provided in the UK must be available to remedy breaches of Article 81, formerly 85. Moreover, Whish's view takes too literal and restrictive an interpretation of 'similar' and 'comparable'. The fact that Article 85, now 81, comprises a broader prohibition than a similar domestic action should not be permitted to obscure the fact that the kinds of action are sufficiently similar to overlap. Because a person injured by collective agreements to maintain resale prices would be entitled to sue in Britain under the former domestic law for breach of statutory duty, it cannot be doubted that the principle of national treatment precludes a British court from denying the same person an action in damages for breach of statutory duty for infringement of Article 81, formerly 85, assuming the requirements of Article 81, formerly 85, were otherwise met. Where Community rights and the national right overlap even in part, it seems clear that the rights are comparable or similar for the purposes of the non-discrimination principle. The ECJ has never declared a principle that national courts may not discriminate against actions to enforce a Community right only so long as the substantive content of the Community right is no greater than that of a comparable national right, nor is such a declaration to be expected soon. Literal identity between a kind of national action and a Community action surely cannot be required before considering actions and remedies to be similar. There are few Community law rights which are identical to national law rights. If 'similar' or 'comparable' required the level of congruity advocated by Whish in order to benefit from the jurisprudence of direct effects, there would be little remaining of the national treatment doctrine. In this context, it is submitted that it is sufficient that the national claim be analogous or generally of the same type as the EC claim.6 For the same reason, it seems clear that a failure to provide a damages remedy for Article 82, formerly 86, would also violate the principle of national treatment, notwithstanding the fact that UK domestic law until recently did not provide a private remedy for abuse of a dominant position, but only a discretionary administrative system. While there may have been no procedural overlap in the sense of

85df07a2946c0bf5e633a71e91da97ad. 6 See J. Steiner, Enforcing EC Law (London, 1995), 109. gif

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express private actions, there is considerable substantive overlap between different systems of monopoly control. Perhaps more importantly, there is a degree of complementarity7 and overlap between Articles 81 and 82, formerly 85 and 86, a lesson Tetra-Pak found it expensive to learn.8 It is submitted that all competition rules are 'similar' or 'comparable' for purposes of the principle of national treatment, and a failure to recognize a damages remedy for any conduct in violation of Articles 81 and 82, formerly 85 and 86, would discriminate against EC rights. Accordingly, it is submitted that UK courts are required to supply victims injured by infringements of Articles 81 and 82, formerly 85 and 86, with a remedy in damages for breach of statutory duty in order not to discriminate, because UK law allows the breach of statutory duty tort remedy to victims of domestic competition rules. 11.2 The Position in Scotland: Discrimination Revealed? The issue of whether the competition rules of the EC Treaty are to be enforced in Scotland under the English concept of 'breach of statutory duty' has not yet been decided in Scotland. However, Scotland, like many of the civil law jurisdictions9 in the EC, has a developed law of general obligations, and it has been suggested by Judge David Edward (extrajudicially) and Robert Lane that:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Scots law need not characterise a breach of Community law as a breach of statutory duty or as an innominate gif tort. It is sufficient to give rise to a right of action that there be a breach of a legal obligation for which the gif remedy may lie in public law or private law or both, depending on the circumstances.10 In the Argyll Group judgment, Lord Jauncey noted that '[i]t is not in dispute that Article 86 [now 82] confers rights on persons who may suffer loss or damage as a result of a breach thereof' and proceeded to analyse the motion for interim interdict on its substantive merits.11 The manner in which a Scottish court recognized

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 7 S. Weatherill and P. Beaumont, EC Law (London, 1993), 6447. gif gif 85df07a2946c0bf5e633a71e91da97ad. 8 Case T51/89, Tetra Pak Rausing v. Commission, [1990] ECR II309. Tetra Pak violated Art. 86, now 82, by gif acquisition of a patent licence agreement which fell within the terms of a block exemption to Art. 85, now 81. 85df07a2946c0bf5e633a71e91da97ad. 9 Ireland and England have no 'overall conception of tort liability': M. Staines, 'The Right to Sue in Ireland for gif Violation of the EEC Rules on Competition', (1977) 2 Legal Issues of Eur. Integration 53, 57. 85df07a2946c0bf5e633a71e91da97ad. 10 D. A. O. Edward and R. C. Lane, European Community Law: An Introduction (Edinburgh, 1991), 36, at 88 gif (italics in original). The quoted comment pertained to claims against the State, but seems applicable in private actions as well.

85df07a2946c0bf5e633a71e91da97ad. 11Argyll Group v. The Distillers Co., 1987 SLT 514, 519, [1986] 1 CMLR 764 (OH). Another case involved a gif defender's attempted use of the Art. 85(2), now 81(2), nullity defence. Lord Kirkwood denied a request for interim interdict declaring a wool marketing programme void, but noted if defenders could prove their claim, damages would be available: British Wool Marketing Board v. John King and Others, unreported, CS, OH, 26 July 1993.

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the right and gave judgment on the request for relief was stunning in its simplicity and speed, in sharp contrast to the English judgments in Garden Cottage and Bourgoin. This seems exactly what the ECJ must have had in mind in its rulings that national remedies must be available to protect Community rights. If this is so in regard to Scots law, it is fair to ask whether persons seeking to enforce Community rights in English law must continue to be burdened with the search for a national cause of action pigeonhole? The discrimination point is one of failure in England to make available the kind12 of action available in Scotland. If an action for damages based directly on Articles 85 and 86, now 81 and 82, is available without the breach of statutory duty tort 'filtre' in Scotland, a part of the UK, then it would seem that direct treaty-based causes of action are one of the 'every kind of' national actions which the principle of national treatment requires be made available to protect Community rights. It is submitted that an English court therefore could be required by Community law to recognize a direct Treaty-based Article 81 or 82, formerly 85 or 86, damages remedy on the grounds that refusal to allow such a national action (albeit one present in Scots law) in aid of enforcement of competition rules would discriminate against Community rights. Admittedly, this argument disregards the differences between the English and Scottish legal systems, but the UK as a whole is the Member State concerned, and there seems to be no clear basis in Community law for differential application of the principle of national treatment in accordance with the domestic divisions of one Member State. Indeed, in another context, the ECJ remarked in Factortame III that 'the obligation to make good damage caused to individuals by breaches of Community law cannot depend on domestic rules as to the division of powers between constitutional authorities'.13 11.3 Breach of Statutory Duty under the Competition Act 1998 While previous UK law allowed some limited but clear instances in which private damage actions might be brought, the Competition Act 1998 (CA) replaces those particular provisions with ones more comparable to Articles 81 and 82, formerly 85 and 86. As has been previously noted in Chapter 4, there are few express mentions of private civil proceedings in the new Competition Act. Nonetheless, it is

85df07a2946c0bf5e633a71e91da97ad. 12 It appears the Scots law of delict generally embraces what English law calls tort law. See HMSO, The gif Legal System of Scotland (2nd edn., London, 1977), 12. It seems there may be no need to categorize a

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Community law claim other than by reference to the Treaty and the relief sought, damages or interdict.

85df07a2946c0bf5e633a71e91da97ad. 13 Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany and The Queen v. gif Secretary of State for Transport, ex parte Factortame Ltd and Others, [1996] ECR I1029, at 33. The Court was referring to the allocation of responsibility among different organs (legislative, executive) of the State, but the point seems applicable here as well.

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reasonably clear that the new CA 1998 continues to make private domestic antitrust damages actions available in expanded circumstances. It was noted in Chapter 4 that an express provision for private actions appeared in clause 31 (1) of the original Competition Bill, providing that '[i]f a person fails, without reasonable excuse, to comply with a direction under section 29 or 30(a) his default is actionable by any person who suffers loss or damage which is attributable to it. . . .' This language was deleted from the actual legislation, but it clearly contemplated private damage actions, at least where the Director General had given directions which were subsequently breached and caused loss or damage to 'any person'. This deleted legislative text is worth mentioning because it is arguably more express in terms of creating private rights to bring civil proceedings than the remaining text of the Competition Act, and because the 'any person' language is reminiscent of the language employed in the Fair Trading Act 197314 which was the subject of the judgment in Mid Kent Holdings.15 It is worth considering how the British court treated the FTA in that case in suggesting the outcome of the decisions which are sure to come with regard to private rights of action under the CA 1998. In Mid Kent Holdings, it was decided that certain provisions of the FTA 197316 did not give rise to an action for breach of statutory duty in favour of the plaintiff. The plaintiff in the case, Mid Kent Holdings, was a water company. One of the shareholders was engaged in negotiations to sell shares in the plaintiff to the defendants, also water companies, in apparent violation of undertakings given to the Secretary of State which would prevent them from holding or acquiring shares in Mid Kent Holdings beyond a certain level. Mid Kent Holdings brought an action to declare that the defendants were in breach of the undertakings and alleged that the consequent reference to the MMC would cause them economic loss, expense, and inconvenience. Knox J read section 93(2) narrowly as referring to civil proceedings by the Secretary of State only 'and, by inference, not by others', thereby ignoring the language 'without preju-

85df07a2946c0bf5e633a71e91da97ad. 85df07a 14 Fair Trading Act 1973 (c. 41) ss. 93, 93A (as inserted by Companies Act 1989 (c. 40), s. 148). gif gif 85df07a2946c0bf5e633a71e91da97ad. 15Mid Kent Holdings plc v. General Utilities plc [1996] 3 All ER 132 (Ch.), [1997] 1 WLR 14 (Ch.). gif 85df07a2946c0bf5e633a71e91da97ad. 16 S. 93(2) provided in pertinent part that '[n]othing in the preceding subsection shall limit any right of any person gif to bring civil proceedings in respect of any contravention or apprehended contravention of any such order, and (without prejudice to the generality of the preceding words) compliance with any such order shall be enforceable by civil proceedings by the Crown for an injunction or interdict or for any other appropriate relief'. The preceding subs., s. 93(1), indicated that no criminal proceedings would lie for violations of orders. S. 93A(2) noted that 'any person may bring civil proceedings in respect of any failure or apprehended failure, of the responsible person to fulfil the undertaking, as if the obligations imposed by the undertaking . . . had been imposed by an order . . .'.

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dice to the generality of the preceding words'. In addition, the judgment discounted the '[a]ny person may bring civil proceedings' language of section 93A(2) on the ground that '[i]t could hardly have been Parliament's intention that the whole population of this country should be entitled to bring civil proceedings for failure to fulfil an undertaking'.17 After holding that the specific statutory language did not enable private actions, the Court applied the general case law on the subject of breach of statutory duty and concluded that the express civil remedy in favour of the Secretary of State meant that Parliament intended no other remedy.18 The Court considered that exceptions to this rule did not apply. The first exception, that the statute is intended to benefit a class of persons and the injury is of the type sought to be prevented, was held inapplicable to Mid Kent Holdings on the grounds that the purpose of the undertaking was to protect the public by preventing reduction in the number of independent water companies.19 Mid Kent Holdings was not considered a member of the protected class and did not suffer the type of injury contemplated. The second exception, that a general public right is created and damage peculiar to the plaintiff is suffered as a result of interference with the right in question, was rejected on grounds that the particular undertakings (not the statute in general) were not intended to confer an immunity from being involved in an MMC inquiry. The Court thought the expense of responding to an MMC referral was injury peculiar to the plaintiff, but did not consider that the undertakings were intended to create such an immunity.20 Curiously, the judgment contained the following obiter statement which seems to conflict with the reasoning stated in the case:

85df07a2946c0bf5e633a71e91da97ad. 85df07 True it is that sections 93(2) and 93A(2) of the Fair Trading Act 1973 specifically contemplate the possibility gif of the existence of a private right to bring civil proceedings for the breach of an order or failure to fulfil an gif undertaking. That should not, consistently with the principles above, be regarded as extending beyond the area of civil proceedings to prevent detriment to a right directly conferred by the statutory enactment or its equivalent upon the plaintiff or more probably a class of person of whom the plaintiff is part. . . . It may very well be, although it is not necessary for me to hold, that persons with the benefit of an undertaking to reduce water charges would be in a position to bring civil proceedings as a remedy for a breach of an undertaking because the undertaking would then confer a direct private right upon a class of persons of whom the hypothetical customer could be one.21

85df07a2946c0bf5e633a71e91da97ad. 17Mid Kent Holdings, [1997] 1 WLR at 267. gif 85df07a2946c0bf5e633a71e91da97ad. 18Mid Kent Holdings, supra at 26, 37. gif 19Mid Kent Holdings, supra at 36. 85df07a2946c0bf5e633a71e91da97ad. gif 20Mid Kent Holdings, supra at 367. 85df07a2946c0bf5e633a71e91da97ad. gif 21Supra, at 367. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_141


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With respect, it seems that Mid Kent Holdings was wrongly decided. The judgment ignores or unduly minimizes key language which ought to have led to the conclusion that Parliament did intend that there be a civil remedy on the part of others than the Secretary of State. In addition, the judgment treats the purpose of the particular undertaking as the purpose of the statute as a whole, a result which must be considered conceptually in error. Moreover, despite this, the judgment then ignores the purpose of the provision allowing the creation of undertakings in lieu of orders. What purpose could such provisions have except to avoid the time, expense, and risks of a full MMC inquiry procedure leading to a formal order? For the court to conclude that the undertaking could not have been intended to avoid the expense of a referral to the MMC is simply oblivious of the statutory scheme which created the undertakings. Finally, although more could be said, the court's conclusion that Parliament could not have intended the 'whole population' to be able to bring civil proceedings and that no limit was contained on the phrase 'any person' is plainly wrong. Obviously, Parliament knows what 'any person' means, and has in mind the general principles of law, such as those involving breach of statutory duty, and must be assumed to know that civil proceedings normally cannot be brought except by those who can show actual or apprehended loss or damage. The court admitted that Mid Kent Holdings could show damage from the prospect of the MMC referral which would be triggered by defendants' breach of the undertakings, and there was no need to explore the outer limits of 'any person' in order to conclude that Mid Kent Holdings should have been allowed to press its claim. The Competition Act 1998 must be considered in the light of Mid Kent Holdings, correctly decided or not. The section 31 (1) right of action, contained in the original Bill and deleted from the final Act, expressly extended to 'any person who suffers loss or damage which is attributable to' a default. The express reference to 'any person who suffers loss or damage' might have overcome the problem perceived by the Court in Mid Kent Holdings, although a more express indication of Parliamentary intent would not have been amiss. If the court in Mid Kent Holdings strained to avoid the conclusion that a private remedy existed, how will the courts treat the CA 1998 on this point? It is submitted that CA 1998's 'Part I proceedings' under the new 'Chapter I'22 and 'Chapter II'23 prohibitions do create private rights of action for damages and other relief notwithstanding that the express language of the statute leaves something to be desired. This is so for a variety of reasons. First, it is clear that the intent of

85df07a2946c0bf5e633a71e91da97ad. 22 CA 1998, s. 2(1). gif 85df07a2946c0bf5e633a71e91da97ad. 23 CA 1998, s. 18(1). gif < previous page

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Parliament was to adopt competition rules which were harmonized with the relevant competition rules, principles, and decisions in the Community, especially Articles 81 and 82, formerly 85 and 86. Parliament must be considered well aware of the principle of direct effect and its corollary under Community law, the right to reparation for loss and damage. It therefore follows that Parliament, in adopting the EC rules and decisions, intended British citizens to have the same rights to reparation under British law which they had under the European law which they so carefully duplicated in key respects. Secondly, the CA 1998 expressly requires that British courts 'must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency' between the principles applied by the British court and 'the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in Community law'.24 This would seem to mean that British courts, even where they are not otherwise required to follow Community law (for example, with respect to direct effect), must do so in the context of the competition rules. Such a rule necessarily means that private rights to reparation exist for breaches of the UK prohibitions. This is confirmed by CA 1998 section 60(6)(b), which provides that 'relevant decisions' include decisions of any court or tribunal as to 'the civil liability of an undertaking for harm caused by its infringement of Community law'. In other words, where civil liability arises for harm caused by breach of Community law, civil liability must arise for a corresponding breach of the CA 1998. Moreover, because section 60(2) and (3) also apply to the Director,25 a private action resulting in a finding of infringement under the EC competition rules may well have binding effect on a decision of the Director under the UK statute. The fact that Parliament deleted the express provision in the original Bill for private actions when default on directions issued by the DGFT led to loss and damage does not impliedly negate a broader right to private actions. The clause 31 provision of the original Bill, had it survived, necessarily would have been considered as an expansion of private rights of action, not a contraction. Clause 31 of the Bill (now deleted in part and renumbered section 34 of the Act) created a right of action based strictly on the default as to a direction without requiring the plaintiff to prove the underlying breach of the Chapter I or Chapter II prohibitions. It would have been anomalous to say that a person injured by breach of a direction to halt an infringement has a right to damages, but a person injured by the

85df07a2946c0bf5e633a71e91da97ad. 24 CA 1998, s. 60(1)(2). The same rule applies in the administrative proceedings. gif 85df07a2946c0bf5e633a71e91da97ad. 25 CA 1998 s. 60(4). gif < previous page page_143


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pre-direction infringement has no such right.26 The fact that the private right of action for breach of a direction contained in clause 31 of the original Bill was deleted does not negate the existence of a broader right of private action. A more likely inference is that, given the intent of Parliament to allow private actions for breach of the underlying Chapter I and II prohibitions on a broader scale, it was not necessary to provide them for breach of directions. When such provisions were contained in the FTA 1973, no general private right of action was considered to exist. Where the broader right does exist, the narrower provisions are unnecessary. Other provisions of the CA 1998 support this conclusion. It has already been noted in Chapter 4 that section 55 contemplates that confidential information acquired by the Director may be made available for civil proceedings. Because the Director already has the information for use in civil proceedings to which he is party, this provision must be intended to facilitate other civil proceedings by private litigants. Other provisions make it clear that civil proceedings include private actions. For example, the CA 1998 section 58(1) refers to the binding nature of a 'Director's finding which is relevant to an issue arising in Part I proceedings'. Part I proceedings' are defined in that section to mean proceedings 'in respect of an alleged infringement of the Chapter I prohibition or of the Chapter II prohibition; but . . . which are brought otherwise than by the Director'.27 Part I proceedings clearly must embrace private claims for infringement of the Chapter I and Chapter II prohibitions, not just proceedings involving the Director. This is confirmed by section 58(3), which states that '[r]ules of court may make provision in respect of assistance to be given by the Director to the court in Part I proceedings'. These provisions are not very meaningful unless they refer to private actions. The CA 1998 contains additional provisions which seem aimed at facilitating private actions. Section 4 of the CA allows the Director to grant individual exemptions to the Chapter I prohibition in certain circumstances, and he may impose conditions on the exemption. Section 5(3) provides that 'breach of a condition has the effect of cancelling the exemption'. Because the Director has other procedures for formal cancellation of an exemption, it seems that at least one of the purposes of the informal automatic cancellation provision may be to allow private

85df07a2946c0bf5e633a71e91da97ad. 26 The counter-argument might be made that it was intended that no private action be available until the gif DGFT had determined the existence of an infringement. However, this argument cannot be accepted.

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Parliament intended a prohibition system, not an abuse system. The phrasing of the Chap. I and II prohibitions negates any requirement of a prior DGFT infringement decision before the prohibition operates. Like the Community models, the prohibition has effect until an exemption is declared. 85df07a2946c0bf5e633a71e91da97ad. 27 CA 1998, s. 58(2)(a) (emphasis supplied).

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parties to bring private proceedings against undertakings which have by their conduct forfeited their exemption. Considered in light of the elements of breach of statutory duty,28 the CA 1998 seems to impose a duty which really is intended to be owed to any person, similar to direct effect in the Community context. The exact nature of the injury suffered by the plaintiff would have to be assessed in the case but, given the broad nature of the statute, a broad construction of the type of damage intended to be prevented is clearly in order. The existence of provisions regarding penalties cannot be construed to negate the existence of a private damages action because several provisions of the CA 1998 indicate that private actions are intended to be available. Ultimately, the fact that section 60 requires consistent interpretation of UK competition law with EC competition rules should remove any doubts whether the CA 1998 creates a private cause of action for breach of statutory duty. The existence of a private damages action for breach of statutory duty reduces to the question of the intent of Parliament with respect to the particular statute. In the case of the CA 1998, the overall intent seems clear, even if more precision in expression could have been employed. At the time of introduction of the Bill and the receipt of Royal Assent, the government plainly announced its intent that private damages actions would be available. It is unfortunate that the government chose not to make express what is implicit concerning the availability of private actions. Until a definitive judicial ruling under the CA 1998 is obtained, businesses and litigants may continue to experience uncertainty and wasted time, energy, and resources when these ought to have been avoided.

85df07a2946c0bf5e633a71e91da97ad. 28 See 10.2 of this book. gif

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12 The Community (Antitrust) Remedy Solution

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12.1 New Torts and Old Bottles In contrast to Hoskins,1 Staines advocates the abandonment of 'old torts' and judicial establishment of a new remedy 'unencumbered by outdated principles or irreconcilable dictae'.2 Staines is one of the few writers to offer explicit support for Lord Denning's 'new torts' approach on the basis that '[i]f this approach is accepted, all the difficulties associated with the attempts to find the remedy in the actions for breach of statutory duty and conspiracy may be disregarded'.3 While not supporting what he regards as Lord Denning having 'plucked the two new remedies out of the air', he wholeheartedly accepts the general correctness of the approach because '[r]ather than utilizing the old tort remedies, encumbered as they are by rules and principles based on a laissez-faire philosophy long out of date, he [Lord Denning] has broken new ground and established a modern remedy for a modern wrong'.4 It has been seen that there is a vigourous debate within the judiciary in the UK and writers as to which species of domestic tort provides a suitable national remedy for breaches of Community antitrust law. This debate has been ongoing for 30 years5

85df07a2946c0bf5e633a71e91da97ad. 1 M. Hoskins, 'Garden Cottage Revisited: The Availability of Damages in the National Courts for Breaches of the gif EEC Competition Rules', (1992) 13 Eur. Comp. L Rev. 257.

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85df07a2946c0bf5e633a71e91da97ad. 2 M. Staines, 'The Right to Sue in Ireland for Violation of the EEC Rules on Competition', (1977) 2 Legal Issues of Eur. gif Integration 53. 85df07a2946c0bf5e633a71e91da97ad. 3Supra, at 64. gif 4Supra, at 65. 85df07a2946c0bf5e633a71e91da97ad. gif 5 At least since J. Temple Lang, The Common Market and The Common Law (Chicago, 1966), 4789, 81. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_146 next page >


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without any clear resolution. There can be little doubt that this uncertainty is one of the factors discouraging or preventing private parties from bringing their Community antitrust claims in British courts. The foregoing has demonstrated that each of the principal nominees for 'antitrust tort' in Britain suffers from one or more problems in terms of vagueness of the requirements for proof of a claim, under-inclusiveness, inability effectively to protect the full scope of Community antitrust rights, or renders it effectively impossible or extremely difficult to enforce Community rights. It may be argued that a 30-year debate on the issue without resolution alone indicates that English law as it now stands is incapable of fulfilling the obligation to protect Community rights in national courts. While no reported decision since Bourgoin has been found which declares that Community competition law claims cannot be brought as breaches of statutory duty (or 'in the nature of' or 'similar to' breaches of statutory duty), the courts in the UK have failed definitively to resolve the ambiguities remaining since Garden Cottage. If this failure continues and leads to denial of the right to bring Community antitrust claims, the principle of state liability for failure to implement Community law announced in Francovich will become a realistic possibility in the field of antitrust. It is submitted that the UK must now grasp the nettle and recognize Community antitrust claims based directly on Articles 81 and 82, formerly 85 and 86, without the domestic strait-jackets which have heretofore dominated the debate. The time for wandering in the thickets of domestic procedures has ended, and it is now time to return to first principles and the foundations of Community law. Green has argued that the theoretically correct approach to the problem of damage remedies for infringements of Community antitrust rules is to label the cause of action 'direct effect'6 on the theory that Community law does not 'like some chamaeleon, shed its Community guise and don a national visage simply because it makes an appearance in the national courts'.7 The obligation of the national courts to safeguard Community rights does not bestow a 'competence to transform the Community cause of action into a more parochial one'.8 Staines also wishes the courts to adopt a new remedy free from the strictures of 'old torts'.9 It is submitted that the only solution which complies in all respects with the obligations of Member States under Community law is to recognize a right of action founded directly on the provisions of Articles 81 and 82, formerly 85 and 86, and

85df07a2946c0bf5e633a71e91da97ad. 85df07 6 Green literally employs the term 'direct applicability', but for present purposes they have the same meaning: gif N. Green, 'The Treaty of Rome, National Courts, and English Common Law: The Enforcement of European gif Competition Law After Milk Marketing Board', (1984) 48 Rabels Zeitschrift 509, 526.

85df07a2946c0bf5e633a71e91da97ad. 7Supra. gif 85df07a2946c0bf5e633a71e91da97ad. 8Supra, at 527. gif 9 Staines, supra note 2, at 65, 69. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page

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affording a damages remedy also founded directly upon Community law.10 It is further submitted that at least in the case of the Community antitrust rules, a direct Treaty-based cause of action and damages remedy is most desirable for both the protection of the uniform application of Community law and minimizing the disruption of national remedial rules. The ECJ decisions in Factortame I, Francovich, and Factortame III have made it clear that a minimum standard set by Community law exists for a right to damages independently of domestic procedures and remedies. While the ECJ has put this in terms of a reservation to the national remedy principle, the likely effect is that domestic tort rules continue to co-exist more in their procedural aspects (e.g., evidence, trial procedure, etc.) than in their substantive ones. However, the 'Francovich reservation' does not eliminate the traditional requirements that domestic remedies for Community rights be not less favourable than those for national law rights, and that they not make it excessively difficult or impossible to enforce Community rightsthese continue to apply even after the minimum Community threshold has been crossed. The Community remedy principle goes beyond direct effects, so it may not be accurate to say that Green's proposed classification literally comports with the present state of the law. It adds nothing useful to the discussion to label a Community cause of action as one for 'direct effect' without further elaboration. While there may be a large number of types of Community law claims, the ECJ's explanation of how and when a Community right to reparation arises requires a particularized consideration of the details of the Treaty provision, regulation, or directive involved. The sensible approach, even if it means learning more 'names' for Community law claims, is to classify them according to the Community provision giving rise to the claim. Accordingly, my suggested solution is to say the category is a Community law claim for breach of Article 81 or 82, formerly 85 or 86. It is submitted that this is slightly preferable to Lord Denning's 'new torts' approach, although it is quite similar, in that it more concisely identifies the source of the claim while allowing a more particularized description of the specific claim asserted to be appended without allowing verbosity to get out of hand. Where does this leave the search for a 'national' cause of action? In theory, it may still be a viable question although in practice this may not matter. The example of the breach of statutory duty approach offers perhaps the best illustration. From the previous discussion, it seems clear that the UK must recognize a breach of statutory duty claim for infringements of Articles 81 and 82, formerly 85 and 86, in order to avoid discriminating against Community rights, since domestic claims for breach of statutory duty are allowed for some types of domestic competition

85df07a2946c0bf5e633a71e91da97ad. 10 This right was confirmed in Francovich and Factortame III. See Chap. 6. gif

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law violations. The claims further must be allowed for the same reason when compared to the situation in Scotland. However, particular elements of the breach of statutory duty tort may fall foul of the 'excessively difficult/virtually impossible' test and be disapplied. At the end of the analysis, the modified breach of statutory duty claim may so resemble the Community right to reparation that the domestic courts will accept it as the source of the claim and turn their attention to the areas where the Factortame III judgment indicated national law continues to have a roleexistence of causation, heads of damages, etc. 12.2 Translation Not Allowed If the above is not considered conclusive, there is a further argument that the domestic courts should no longer struggle to fit Community antitrust claims into a national cause of action pigeonhole. Courts should not re-enact Community rights any more than should legislatures. Articles 81 and 82, formerly 85 and 86, are of course Treaty provisions which share with regulations the characteristics of direct applicability and capability to produce horizontal direct effects. No judgment of the ECJ or CFI considers that the supremacy of Community law would permit Member States to reshape, redefine, or re-enact Treaty provisions for the convenience of domestic law. In the case of regulations, the ECJ has established a general rule that enactment as national implementation measures are improper.11 It is submitted that the principle against national re-enactment teaches important lessons in regard to directly effective Treaty provisions and national theories of action. The doctrine against re-enactment was first laid down in Commission v. Italy,12 a case in which the Italian government passed a decree incorporating the provisions of a regulation and appending to them procedural provisions of a domestic nature. The ECJ considered that Italy was in default because, inter alia, 'of the manner of giving effect to [the regulation] provided by the decree'. The ECJ stated:

85df07a2946c0bf5e633a71e91da97ad. By following this procedure, the Italian Government has brought into doubt both the legal nature of the gif applicable provisions and the date of their coming into force. . . . Consequently, all methods of

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implementation are contrary to the Treaty which

85df07a2946c0bf5e633a71e91da97ad. 85df07 11 T. C. Hartley, The Foundations of European Community Law (3rd edn., Oxford, 1994), 208. Exceptions gif would be where the reg. expressly provides for national implementation: Case 128/78, Commission v. United gif Kingdom, [1979] ECR 419, or where there is considered to be an implied permission, so long as the measures are not incompatible with the reg. See Case 31/78, Bussone v. Italian Ministry for Agriculture and Forestry, [1978] ECR 2429, at 32.

85df07a2946c0bf5e633a71e91da97ad. gif 12 Case 39/72, Commission v. Italy, [1973] ECR 101,

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85df07a2946c0bf5e633a71e91da97ad. would have the result of creating an obstacle to the direct effect of Community Regulations and of gif jeopardizing their simultaneous and uniform application in the whole of the Community.13

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The ECJ revisited this issue in Variola,14 where the Italian government had repealed certain charges having equivalent effect to customs duties and specified the effective date of repeal as subsequent to the effective date of regulations. The ECJ said:

85df07a2946c0bf5e633a71e91da97ad. 85df07 [M]ember States are under a duty not to obstruct the direct applicability inherent in regulations and other gif rules of Community law. Strict compliance with this obligation is an indispensable condition of simultaneous gif and uniform application of Community Regulations throughout the Community.15 The Variola case also involved discussion of Article 9 of the Treaty, and the effect of the Italian legislation was to reenact the effective dates provided for in the Treaty and the regulation. However, the ECJ made it clear that 'no procedure is permissible where the Community nature of a legal rule is concealed from those subject to it'. That the reenactment prohibition is applicable to Treaty provisions as well as regulations is apparent from the principle of supremacy of Community law and the comments of the ECJ:

85df07a2946c0bf5e633a71e91da97ad. A legislative provision of internal law could not be set up against the direct effect, in the legal order of gif Member States, of Regulations of the Community and other provisions of Community law, including the

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prohibition, under Articles 9 et seq. of the Treaty, of charges having equivalent effect to customs duties, without compromising the essential character of Community rules as such and the fundamental principle that the Community legal system is supreme.16 By analogy, if the UK were to apply the additional requirements of its various economic torts or the breach of statutory duty tort to Community antitrust claims, it would have the effect of re-enacting directly effective Community law, in violation of the Variola principle and adversely affecting the transparency of Community rights. Moreover, to the extent that conditions of the national tort differed from the substantive requirements of Articles 81 and 82, formerly 85 and 86, it would be akin to imposing fault requirements going beyond Community law or requirements of abuse of power as elements of the tort of misfeasance in public office, which were found inappropriate by the ECJ in Dekker and Factortame III.17 This confirms that the correct solution is the Community remedy principle.

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e9 13Supra. gif gif 85df07a2946c0bf5e633a71e91da97ad. 14 Case 34/73, Variola v. Italian Finance Administration, [1973] ECR 981, 990. gif 15Supra. (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. gif 16Supra, at 15 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 17 Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany and The Queen v. gif Secretary of State for Transport, ex parte Factortame Ltd and Others, [1996] ECR I1029, at

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12.3 Is the Remedy National or Community in Nature? Although the ECJ has continued to refer to the right to reparation in terms of a 'reservation' to the national remedies principle, it is submitted that in substance and form it is a Community remedy. It is a Community remedy because the criteria to be applied to determine its existence are set by Community law, not national law. It is a Community remedy because even where no similar right exists in national law, it is required to be protected by the national courts. It is a Community remedy because even where national law denies the existence of the remedy, Community law declares that it exists. The application of these principles is made clear by the continuing Factortame saga. After the ECJ's judgment in Factortame III, the Divisional Court considered whether the government had in fact committed a breach of Community law which was 'sufficiently serious' to give rise in principle to a right to recover damages. In holding that a sufficiently serious breach was committed, the Court discussed the nature of the remedy:

85df07a2946c0bf5e633a71e91da97ad. The whole Factortame litigation, and the various references to the ECJ which it has generated, owes its gif existence to the absence from English domestic law of any cause of action whereby a claim can be made for

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damage caused by the enactment of primary legislation in any circumstances or for damage caused by acts of the Executive unless, perhaps, misfeasance can be established. Thus any remedy has to be imposed by Community law which, of course, applies to domestic law by virtue of the European Communities Act 1972.18 The Divisional Court went on to note that Community law principles 'must be applied by the courts of the Member States so as to give a remedy' in an appropriate case:

85df07a2946c0bf5e633a71e91da97ad. These principles must be applied by the national court unless national law entitles an individual to redress gif under less strict circumstances. . . . English law does not provide for liability under less strict conditions and

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so the Community law principles will apply.19 The Divisional Court's holding that a sufficiently serious breach of Community law had occurred was affirmed by the Court of Appeal.20 The Court of Appeal made the following comments regarding the relationship between the Community remedy and national remedies:

85df07a2946c0bf5e633a71e91da97ad. None of the respondents has asked this court to go further than it is obliged as a matter of Community law to gif go. So we leave for consideration on another occasion the circumstances, if any, in which, quite apart from

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any requirement of Community

85df07a2946c0bf5e633a71e91da97ad. 85df07 18Regina v. Secretary of State for Transport, ex parte Factortame, Ltd and others, [1997] Eu. LR 475, [1998] gif 1 CMLR 1353 (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 19Factortame, Divisional Court, supra (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 20The Queen v. The Secretary of State for Transport, ex parte Factortame Limited and others, [1998] 3 CMLR gif 192 (CA).

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85df07a2946c0bf5e633a71e91da97ad. law, our law will give a remedy for damage caused by legislation enacted in breach of a superior legal rule. gif Traditionally, this remedy has not been available in our law. Now that it is undoubtedly available in

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circumstances which contain a Community law element it may be right on some future occasion to reexamine that tradition.21 Under the Francovich reservation, the primary source of the right is Community law. National law may give a remedy under less restrictive conditions, but Community law sets a minimum which national courts must protect. In sum, there is a Community law right to damages for loss or damage caused by infringement of the competition rules and the role of national law is to administer the remedy. It is not surprising that the Court of Appeal did not even discuss which category of English tort might embrace the Community rights at issue in Factortame. This is as it should be.

85df07a2946c0bf5e633a71e91da97ad. 21Supra, at part IV of the judgment, 14. gif

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13 Prudential Limitations on Private Actions

85df07a2946c0bf5e633a71e91da97ad. 13.1 Ripples and Floodgates: The Universal Plaintiff Problem gif

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85df07a2946c0bf5e633a71e91da97ad. 13.2 Persons gif

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85df07a2946c0bf5e633a71e91da97ad. 13.3 Business or Property gif

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85df07a2946c0bf5e633a71e91da97ad. 13.4 By Reason of gif

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13.1 Ripples and Floodgates: The Universal Plaintiff Problem The right to bring a private damages action in the USA is conferred explicitly by Section 4 of the Clayton Antitrust Act on '[a] ny person injured in his business or property by reason of anything forbidden in the antitrust laws. . . .'1 This simple language generates complex questions of law and policy in regard to who is entitled to seek compensation for injury. The nature of antitrust violations is such that they tend to inflict 'direct injury on more that one party or category of parties', and in addition, '[m]arket injuries have a way of rippling through the economy'.2 For example, the impact of the Organization of Petroleum Exporting Countries (OPEC) cartel and its price and supply policies affected not only immediate purchasers and their customers, but their customers' customers, and such diverse categories of victims as sellers of electric motors and copper wire, their stockholders and creditors, as well as tax collecting bodies, and thus even taxpayers.3 The Arab oil embargo of 1973 directly increased oil prices and indirectly increased the

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c 1 15 USC § 15, (emphasis supplied). gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice, (St Paul, Minn., 1994), § 16.2 at 542. gif 85df07a2946c0bf5e633a71e91da97ad. 3 P. E. Areeda and H. Hovenkamp, Antitrust Law (10 vols., Rev. edn., Boston, Mass., 1995), ii, 360c3 at 195. gif

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prices of virtually any product requiring energy for its manufacture. This caused substantial dislocations in several national economies.4 On a smaller scale, any antitrust violation has the potential for its injurious effects to create ripples throughout the economy.5 Many such violations will cause injury to more indirect victims than to direct victims. However, despite the breadth of the bare Clayton Act language, the US courts have limited the scope of the treble damage remedy so that not every person injured by a price-fixing cartel or monopolistic overcharge is in fact allowed to sue. The first 'direct injury' standing case, decided in 1909, rejected the antitrust complaint of a shareholder in an independent telephone company whose stock was allegedly rendered worthless when the American Telephone & Telegraph Company secured control of the stock of the independent company.6 The Court said that the injury was to the corporation, only the corporation could sue, and it warned that 'a construction of the [Sherman] act which makes the defendant liable to sextuple damages is certainly to be be avoided'.7 In a similar vein, the leading 'target area' standing opinion spoke of that familiar judicial creature, floodgates:

85df07a2946c0bf5e633a71e91da97ad. If the flood-gates were opened to permit treble damage suits by every creditor, stockholder, employee, subgif contractor, or supplier of goods and services that might be affected, the lure of a treble damage recovery,

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implemented by the availability of the class suit . . . would result in an overkill.8 The Supreme Court of the United States has noted concerns about the adverse effects of excessive treble damages,9 and other lower courts have referred to treble damage recoveries in terms of potentially 'ruinous recoveries'10 and unfair 'windfalls'.11 The fear of trebling has brought courts to limit the reach of the antitrust laws by judicial construction, especially in the area of standing: '[i]t is here [standing] that we see most unequivocally a limiting consequence of the treble damage

85df07a2946c0bf5e633a71e91da97ad. 85df07 4 See International Ass'n of Machinists v. OPEC, 649 F 2d 1354 (9th Cir. 1981), cert. denied, 454 US 1163 gif (1982). See H. Hovenkamp, 'Can A Foreign Sovereign be an Antitrust Defendant?' (1981) 32 Syracuse L Rev. gif 879.

85df07a2946c0bf5e633a71e91da97ad. 5 See D. Berger and R. Bernstein, 'An Analytical Framework for Antitrust Standing', (1977) 86 Yale LJ 809, 878. gif 6Ames v. American Tel. & Tel. Co., 166 F 820 (CCD Mass. 1909). 85df07a2946c0bf5e633a71e91da97ad. gif 7 The Ames court clearly considered the shareholder's injury to be duplicative of the corporate injury, so that treble 85df07a2946c0bf5e633a71e91da97ad. gif damages became 'sextuple' damages. 85df07a2946c0bf5e633a71e91da97ad. 8Calderone Enterprise Corp. v. United Artist Theatre Circuit, 454 F 2d 1292 (2d. Cir. 1971). gif 9 See, e.g., Hawaii v. Standard Oil Co. of California, 405 US 251 (1972) and Monsanto Co. v. Spray-Rite Service 85df07a2946c0bf5e633a71e91da97ad. gif Corp., 465 US 752 (1984). 85df07a2946c0bf5e633a71e91da97ad. 10 See, e.g., Mid-West Paper Products Co. v. Continental Group, Inc., 596 F 2d 573, 5967 (3rd Cir. 1979) and gif Jeffrey v. Southwestern Bell Tel. Co., 578 F 2d 1129, 1131 (5th Cir. 1975). 85df07a2946c0bf5e633a71e91da97ad. 11Conference of Studio Unions v. Loew's, Inc., 193 F 2d 51, 55 (9th Cir. 1951). gif < previous page page_154 next page >


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remedy. Plaintiffs would find standing rules more hospitable in a single-damage world'.12 Other prudential limitations such as the antitrust injury requirement (considered by some as a constituent element of standing) and the indirect purchaser rule may be argued to stem in part from the fear of 'overkill', but also are rooted in judicial views of the proper functioning of the private plaintiff in enforcement of the antitrust laws. All of these prudential rules insist that the plaintiff establish causation in fact between the alleged violation and the claimed injury. If this minimum requirement is not satisfied, then of course all other considerations are moot. If this minimum requirement is established, then the prudential rules of standing, antitrust injury, and indirect purchasers may yet be a barrier to a plaintiff's entitlement to the treble damages remedy. In an antitrust action, like any other civil action,13 the plaintiff must always prove that the injury of which he complains resulted from the acts of the defendant which violated the antitrust laws.14 The antitrust violation need not be the exclusive cause of a plaintiff's injuries, but it must be a 'material' cause15 in the sense that it contributes significantly to the injury, even if other factors were singly or in the aggregate also substantial causes.16 Where the causation-in-fact issue intersects with standing rules is where there are multiple and complex forces causing the plaintiff's injury and they cannot reasonably be separated. In such cases, standing will be denied if the plaintiff is unable to show that the antitrust violation was a material cause of his injury.17 Similarly, where no logical chain of causation can be shown, the causation in fact requirement can result in a dismissal for lack of standing.18

85df07a2946c0bf5e633a71e91da97ad. 12 S. Calkins, 'Equilibriating Tendencies of the Antitrust System, with Special Attention to Motions to gif Dismiss and For Summary Judgment', Georgetown Study of Private Antitrust Litigation: Papers from the

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Georgetown Conference on Private Antitrust Litigation (Airlie House, Virginia, 89 Nov. 1985), 41.

85df07a2946c0bf5e633a71e91da97ad. 13 See, e.g., W. Keeton et al., Prosser & Keeton on the Law of Torts (5th edn., St Paul, Minn., 1984), §§ 414. gif 14 E.g., National Independent Theatre Exhibitors, Inc. v. Buena Vista Distrib. Co., 748 F 2d 602, 6078 (11th Cir. 85df07a2946c0bf5e633a71e91da97ad. gif 1984), cert. denied, 105 S Ct. 2120 (1985); Out Front Prods., Inc. v. Magid, 748 F 2d 166, 16970 (3d Cir. 1984); Flintkote Co. v. Lysfjord, 246 F 2d 368, 392 (9th Cir.), cert. denied, 355 US 835 (1957).

85df07a2946c0bf5e633a71e91da97ad. 15 See Zenith Radio Corp. v. Hazeltine Research, 395 US 100, 114 note 9 (1969). gif 16 See Fishman v. Wirtz, 19812 Trade Cas. (CCH) 64,378 (ND Ill.), citing Hecht v. Pro-Football, 570 F 2d 982, 85df07a2946c0bf5e633a71e91da97ad. gif 986 (DC Cir. 1977), cert. denied, 436 US 956 (1978); Weiman Co. v. Kroehler Mfg. Co., 428 F 2d 726, 729 (7th Cir. 1976). The Seventh Circuit later approved liability: Fishman v. Estate of Wirtz, 807 F 2d 520, 5335 (7th Cir. 1986).

85df07a2946c0bf5e633a71e91da97ad. 17 E.g., Greater Rockford Energy and Technology Corp. v. Shell Oil Co., 998 F 2d 391, 404 (7th Cir. 1993). gif 18Tose v. First Pennsylvania Bank, N.A., 648 F 2d 879, 8967 (3d Cir.), cert. denied, 454 US 893 (1981) (no causal 85df07a2946c0bf5e633a71e91da97ad. gif connection between the conspiracy to fix interest rates and the plaintiff's individual loan); Triple M. Roofing Corp. v. Tremco, Inc., 753 F 2d 242, 247 (2d Cir. 1985) (no causal connection between conspiracy to fix prices on roofing materials and injury to low bidder on a public roofing contract).

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However, the prudential limitations on private actions normally are litigated on preliminary motions,19 standing issues are often questions of law for the trial judge, and the sufficiency of proof in regard to the fact of injury is typically a matter for full trial before a jury, or before a judge if a jury trial is waived. As a general principle, the proper approach for evaluating antitrust standing is to assume the existence of an antitrust violation and consider whether the plaintiff has shown the elements of standing. The plaintiff must show both that he has standing and that there has been a substantive violation. Courts are often reluctant to determine the substantive violation issue at an early state of the case because discovery is almost always required, and resolution of the substantive question frequently involves determination of factual issues requiring a jury trial. Some courts have exhibited an unfortunate tendency to deny standing when they are actually making a determination that no substantive violation has taken place.20 This causes confusion in the case law and it is often necessary to examine carefully a judicial decision which seems to turn on standing, but the court perhaps really had another issue in mind:

85df07a2946c0bf5e633a71e91da97ad. [T]he lack of antitrust standing must not be confused, as it all too often has been, with the failure to state an gif antitrust cause of action. Many antitrust complaints are without merit and should be dismissed . . . in these

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cases it is unnecessarily confusing to suggest that a plaintiff lacks standing to challenge legal conduct.21 13.2 Persons The first requirement for bringing a treble damages action is the not particularly onerous one that the plaintiff must be a 'person' within the meaning of the Clayton Act §4. Persons include of course natural persons,22 as well as partnerships, corporations, unincorporated associations23 and other business entities

85df07a2946c0bf5e633a71e91da97ad. 85df07 19 Under the Federal Rules of Civil Procedure, potentially dispositive questions can be addressed as motions gif to dismiss under Rule 26, or motions for 'summary judgment' under Rule 56. Motions to dismiss tend to gif address the facial sufficiency of the pleadings without regard to factual matters not appearing in the complaint, which is the document by which plaintiff initiates the lawsuit. Motions for summary judgment test whether there is any genuine issue of material fact for a jury to resolve, or whether there are sufficient facts not in dispute for the District Court to resolve some or all issues and grant judgment as a matter of law. Motions for summary judgment typically involve a written motion, brief (cf. 'skeletal arguments') consisting of written legal arguments, and attachments which may be comprised of documents, affidavits of witnesses, answers to written interrogatories, and excerpts from transcripts of oral deposition testimony of witnesses taken prior to trial. See generally C. Wright, A. Miller, and M. Kane, Federal Practice & Procedure (St Paul, Minn., 1983 & 1996 Supp.), xA, §§ 2732 ff.

85df07a2946c0bf5e633a71e91da97ad. 20 Areeda and Hovenkamp, supra note 3, at 2034. gif 21 B. Kellman, Private Antitrust Litigation (Chicago, Ill., 1985), 3645. 85df07a2946c0bf5e633a71e91da97ad. gif 22 E.g., Blue Shield v. McCready, 457 US 465, 472 (1982). 85df07a2946c0bf5e633a71e91da97ad. gif 23 See, e.g., Hunt v. Washington State Apple Advertising Comm'n, 432 US 333 (1977). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_156


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recognized by federal, state, or foreign law.24 Municipal and state governments and other state and local entities are also 'persons' under the statute.25 Ironically, the United States government was initially considered not to be a 'person' on the basis of legislative intent.26 However, the statute has been amended twice, first to allow the United States to recover actual damages and secondly to allow the United States to recover treble damages.27 On the other hand, foreign governments were initially held by the Supreme Court in the Pfizer case to be persons entitled to recover treble damages, although the statute has now been amended to limit foreign sovereigns generally to actual damages.28 13.3 Business or Property The phrase 'business or property' as used in the Clayton Act encompasses a broad spectrum of personal and commercial activities, rights, and interests. 'Business' includes virtually any commercial interest or enterprise,29 including an occupation.30 The breadth of interests which can qualify is shown by the cases holding that an individual performing as a game show contestant was in a 'business',31 and that a person who survived by selling blood plasma to plasma banks stated a cause of action for price-fixing against the plasma banks.32 Most private actions allege injury to a business or business interest which the plaintiff owns. The term 'property' is nearly coextensive with the common law conceptanything in which the law recognizes and protects an ownership interest.33 This includes protection against the payment of an excessive purchase price. In Reiter v. Sonotone Corp.,34 the Supreme Court held that an individual consumer who purchased a hearing aid at a price inflated by an illegal price-fixing conspiracy was injured in her 'property' (viz., property = money), but not her business. The Court in Reiter seemed to exclude only personal injuries from the concept of

85df07a2946c0bf5e633a71e91da97ad. 24 15 USC § 12; Hovenkamp, supra note 2, at 553. See also Standard Oil Co. v. Arizona, 738 F 2d 1021, gif 1023 (9th Cir. 1984), cert. denied, 469 US 1132 (1985).

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85df07a2946c0bf5e633a71e91da97ad. 25 E.g., Georgia v. Pennsylvania R.R., 324 US 439, 447 (1945); Chattanooga Foundry & Pipe Works v. City of gif Atlanta, 203 US 390, 396 (1906). 85df07a2946c0bf5e633a71e91da97ad. 26United States v. Cooper Corp., 312 US 600, 614 (1941). gif 27 15 USC § 15a now permits the USA to recover treble damages. 85df07a2946c0bf5e633a71e91da97ad. gif 28Pfizer v. Government of India, 434 US 308, 31820 (1978). In 1982, 15 USC § 15(b) effectively changed the 85df07a2946c0bf5e633a71e91da97ad. gif result in the Pfizer case. 85df07a2946c0bf5e633a71e91da97ad. 29Hawaii v. Standard Oil Co., 405 US 251, 264 (1972). gif 30 E.g., Hennessey v. National Collegiate Athletic Ass'n, 564 F 2d 1136, 1148 (5th Cir. 1977); Nichols v. Spencer 85df07a2946c0bf5e633a71e91da97ad. gif Int'l Press, Inc., 371 F 2d 332, 334 (7th Cir. 1967). 85df07a2946c0bf5e633a71e91da97ad. 31Fine v. Barry & Enright Prods., 731 F 2d 1394, 13978 (9th Cir. 1984). gif 32Ancar v. Sara Plasma, Inc., 964 F 2d 465 (5th Cir. 1992). 85df07a2946c0bf5e633a71e91da97ad. gif 33E.g., Waldron v. British Petroleum Co., 231 F Supp. 72, 86 (SDNY 1964), affd, 361 F 2d 671 (2d Cir. 1966). 85df07a2946c0bf5e633a71e91da97ad. gif 34 442 US 330, 339 (1979). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_157 next page >


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business or property. Property has been held to include expenses incurred in defending patent infringement suits35 and the opportunity of a labour union to acquire members.36 Some lower courts have used the rubric of 'business or property' to exclude from recovery litigants who have asserted injury to corporations of which they are shareholders or municipalities of which they are taxpayers, as well as those who have not undertaken sufficiently definite steps to be considered engaged in business. It has been argued that such decisions, while likely correct on other grounds, are an excessively narrow reading of the 'business or property' phrase and are inconsistent with Reiter.37 In the case of a state government plaintiff, the Supreme Court has ruled that a state's general interest in its economy does not constitute 'business or property' for purposes of the Clayton Act.38 However, a state government injured as a purchaser of price-fixed goods can bring an action for injury to its property the same as any private concern,39 and states have been allowed to seek injunctions against antitrust violations threatening generalized injury to the state economy.40 13.4 By Reason of Most of the prudential limitations on private treble damage actions are thought to derive from the Clayton Act §4's provision for recovery for injuries suffered 'by reason of' anything forbidden in the antitrust laws. While certainly an injury not causally linked to an antitrust violation is not 'by reason of' such violation, a plaintiff who has not suffered 'antitrust injury' or who lacks standing is also said not to be injured 'by reason of' the violation of the antitrust laws.41 The courts are engaged in an exercise of policy as well as law when they apply considerations of proximity and type of injury to truncate the ability of some victims to recover for injuries which are causally linked to an antitrust violation. The difficulty of that exercise is shown by the variety of approaches and doctrinal confusion exhibited in court decisions since the beginning of the Sherman Act.

85df07a2946c0bf5e633a71e91da97ad. 35 E.g., City of Mishawaka v. American Elec. Power Co., 616 F 2d 976, 98990 (7th Cir. 1980), cert. denied, gif 449 US 1096 (1981).

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85df07a2946c0bf5e633a71e91da97ad. 36 See, e.g., Tugboat v. Mobile Towing Co., 534 F 2d 1172 (5th Cir. 1976); International Ass'n Heat and Frost gif Insulators and Asbestos Workers v. United Contractors Ass'n, 483 F 2d 384 (3d Cir. 1973), modified on other grounds, 494 F 2d 1353 (1974).

85df07a2946c0bf5e633a71e91da97ad. 37 Areeda and Hovenkamp, supra note 3, 361, at 209. gif 85df07a2946c0bf5e633a71e91da97ad. 38Hawaii v. Standard Oil Co., 405 US at 2634. gif 39Supra, at 261. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 40 E.g., Georgia v. Pennsylvania R. Co., 324 US 439 (1945); Burch v. Goodyear Tire & Rubber Co., 554 F 2d 633 gif (4th Cir. 1977). 85df07a2946c0bf5e633a71e91da97ad. 41 E.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. 429 US 477, 4879 (1977). gif < previous page page_158 next page >


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14 Limits on Permissible Private Plaintiffs in US Law

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85df07a2946c0bf5e633a71e91da97ad. 14.2 Article III Standing Distinguished gif

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85df07a2946c0bf5e633a71e91da97ad. 14.6 The Factual Matrix Test gif

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85df07a2946c0bf5e633a71e91da97ad. 14.7 The Multi-Factor Test: Out of the Analytical Swamp? gif

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14.1 Standing to Sue (Locus Standi) The term 'standing' is used in a number of different contexts in US law, so that a brief explanatory note is perhaps worthwhile. Generally speaking, the concept is equivalent to locus standi in the UK or the EC, although the Latin term itself rarely, if ever, appears in US court decisions. The most common usage of the term is in the fields of constitutional and administrative law, and most US lawyers or judges will recognize it in those contexts. Standing has an entirely different meaning in antitrust law, as will hopefully become apparent. 14.2 Article III Standing Distinguished Article III of the Constitution of the United States confers judicial power on the Federal courts of the United States to resolve 'cases or controversies'. The jurisdictional requirement that there be a genuine 'case or controversy' means that Federal courts in the USA may not render advisory opinions. A party has constitutional 'standing' when he has shown particularized injury or otherwise has a sufficient stake in the outcome of the dispute before the court to make it a genuine 'case or controversy'.1 However, 'for a court to find that a plaintiff has standing to bring an antitrust claim, more than constitutional standing

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must exist; the court must find a close relationship between the plaintiff's injury and the alleged antitrust violation'.2 There is arguably some overlap between the two concepts, since any party who lacks constitutional standing necessarily also lacks antitrust standing.3 However, the converse is not the casea party can have constitutional standing and yet lack antitrust standing. Consumers who purchase goods carrying overcharges resulting from price-fixing from innocent middlemen have constitutional standing even though the indirect purchaser rule may withhold antitrust standing.4 In the case of an illegal overcharge paid by a party who passes on the overcharge to subsequent purchasers, the party who initially paid the overcharge has constitutional standing, even though he may have been made whole.5 In a case involving challenges to regulations affecting the price of soyabean futures, an association of farmers was held to have Article III standing, but lacked antitrust standing where a less remote plaintiff group (futures traders) was considered better able to represent the public interest.6 14.3 The 'Direct Injury' Test The 'direct injury' test was first articulated at any length in the Third Circuit's decision in Loeb v. Eastman Kodak Co.,7 and it is considered the seminal 'direct injury' case. Although the Supreme Court decisions in McCready8 and AGC9 have superseded the direct injury test as such, the doctrine repays some attention with historical interest and perhaps some remaining scope for application. In Loeb, the plaintiff was a shareholder in a corporation which had allegedly been the victim of an antitrust violation. The court denied standing to sue on the ground that the injury to shareholder Loeb was 'indirect, remote and consequential'; the

85df07a2946c0bf5e633a71e91da97ad. 85df07 1 See Warth v. Seldin, 422 US 490, 504 (1975). See generally, Allen v. Wright, 468 US 737 (1984). gif gif 85df07a2946c0bf5e633a71e91da97ad. 2Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F 2d 1486, 1493 (11th Cir. 1985). gif 85df07a2946c0bf5e633a71e91da97ad. 3 See America West Airlines v. Burnley, 838 F 2d 1343 (DC Cir. 1988) (no need to consider antitrust standing gif where lacked constitutional standing due to lack of injury to plaintiff from defendant's conduct). 85df07a2946c0bf5e633a71e91da97ad. 4 See Illinois Brick Co. v. Illinois, 431 US 720, 728 note 7 (1977). The Court saw 'which persons have been gif injured from an illegal overcharge' as 'analytically distinct' from 'which persons have sustained injuries too remote to give them [antitrust] standing'.

85df07a2946c0bf5e633a71e91da97ad. 5County of Oakland v. City of Detroit, 866 F 2d 839 (6th Cir. 1989). gif 6American Agricultural Movement, Inc. v. Board of Trade, 942 Trade Cas. 70, 727 (ND Ill. 1994). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 7 183 F 704 (3d Cir. 1910). gif 8Blue Shield of Virginia v. McCready, 457 US 465 (1982). 85df07a2946c0bf5e633a71e91da97ad. gif 9Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 US 519 (1983) 85df07a2946c0bf5e633a71e91da97ad. gif (hereafter, AGC).

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direct injury was to the corporation.10 The Court thought that the statute was not intended by Congress to 'multiply suits' by allowing all shareholders to sue when wrongs 'could have been equally well and far more economically redressed by a single suit in the name of the corporation'.11 The essence of the 'direct injury' test is the focus on whether the victim and the antitrust violator are separated by intermediate tiers of victims.12 If not, the injury was considered 'direct'. If so, the injury was considered indirect, and standing was denied. Under this formulation, standing would generally be denied to shareholders,13 suppliers,14 franchisors,15 lessors,16 and licensors.17 These are all parties whose injury was considered derivative of a directly injured victimthe lessor whose rental income declines because it is calculated as a percentage of revenues of the tenant, which are reduced by the antitrust violation, or the licensor whose patent, trade mark, or copyright royalties decrease when the licensee's product-market revenues decline. Not all courts applied the direct injury test in a strictly mechanical fashion. In Sanitary Milk Producers v. Bergjans Farm Dairy, Inc.,18 the court was confronted with a dairy processor who maintained a separate sales corporation through which all milk sales flowed, so that technically there was an intervening tier of victim (the sales company). Then Circuit Judge, later Supreme Court Justice, Blackmun distinguished other supplier cases and found direct injury to exist:

85df07a2946c0bf5e633a71e91da97ad. 85df07 We feel, however, that these [other standing] cases are different factually from the present one and themselves gif indicate that the facts of the present case would be critically distinguishing. [The plaintiff] and its sales gif company do not occupy the relationship of raw material supplier and manufacturer. [The processor] put out the finished product. All the milk processed by [it] flows through this sales company. The latter performs no processing or manufacturing. All this demonstrates that there was directness of competition between [the processor] and [the defendant], that any recovery by [the processor] is not in the nature of a windfall, and that [the

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0 10Loeb, supra note 7, at 709. gif gif 85df07a2946c0bf5e633a71e91da97ad. 11Supra. gif 12 American Bar Association Antitrust Section, Antitrust Law Developments (2nd edn., Chicago, Ill., 1984), 395 85df07a2946c0bf5e633a71e91da97ad. gif and notes 924. 85df07a2946c0bf5e633a71e91da97ad. 13 E.g., Loeb, supra note 7; Solinger v. A. & M. Records, Inc., 718 F 2d 298, 299 (9th Cir. 1983). gif 14Volasco Prods. Co. v. Lloyd A. Fry Roofing Co., 308 F 2d 383 (6th Cir. 1962), cert. denied, 372 US 907 (1963); 85df07a2946c0bf5e633a71e91da97ad. gif Snow Crest Beverages, Inc. v. Recipe Foods, Inc., 147 F Supp. 90 (D. Mass. 1956). 85df07a2946c0bf5e633a71e91da97ad. 15Nationwide Auto Appraiser Serv. v. Association of Casualty & Sur. Cos., 382 F 2d 925, 929 (10th Cir. 1967). gif 16Melrose Realty Co. v. Loew's, Inc., 234 F 2d 518 (3d Cir.), cert. denied, 352 US 890 (1956); Harrison v. 85df07a2946c0bf5e633a71e91da97ad. gif Paramount Pictures, 115 F Supp. 312 (ED Pa. 1953), aff' d per curiam, 211 F 2d 405 (3d Cir.), cert. denied, 348 US 828 (1954).

85df07a2946c0bf5e633a71e91da97ad. 17Productive Inventions v. Trico Prods. Corp., 224 F 2d 678 (2nd Cir. 1955), cert. denied, 350 US 936 (1956). gif 18 368 F 2d 679 (8th Cir. 1966). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_161 next page >


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85df07a2946c0bf5e633a71e91da97ad. processor's] injury is something more than remote, is not derivative but direct, and is the proximate result of gif [the defendant's] misdoing.19

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The direct injury test, while appropriate in some circumstances, was subject to criticism for its restrictive mechanical nature and lack of flexibility to recognize those factual situations where injury occurred to the competitive process notwithstanding the appearance that what arguably amounted nearly to a privity requirement was lacking. A number of courts looked for a more adaptable approach consistent with the purposes of the antitrust laws. 14.4 The Target Area Test In Conference of Studio Unions v. Loew's, Inc.,20 the Ninth Circuit formulated and applied the 'target area' test to hold that persons incidentally injured lacked standing to sue. The Court declined to adhere to the direct injury test (although in the case before it the result would not have differed), and stated that the plaintiff must 'show that he is within that area of the economy which is endangered by a breakdown of competitive conditions in a particular industry'.21 This is the 'target area'. The case involved allegations that major motion picture studios conspired with a union to obtain preferential access to the services of union members as part of a larger plan to eliminate independent studios as competitors. The conspiracy was thus aimed at the independent studios but impacted upon the union and its members. The Court said:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Any restraint on commercial competition would occur in the production of motion pictures and we fail to see gif how the appellants are in a position to complain about that situation. They are not in the business of producing gif motion pictures; they do not exhibit motion pictures; they neither compete with the Majors nor purchase from them. In fact, they are employees of the companies whom it is alleged the appellees intend to destroy. The damage alleged to have been suffered by appellants does not flow from any injury to the competitive situation of the motion picture industry, that is, their injury has not arisen from the acts allegedly perpetrated against the Independents.22 The focus of the target area test on 'the area of the economy endangered by the breakdown of competitive conditions' places a premium on the court's characterization of which economic sector constitutes the target. In Billy Baxter,23 the plaintiff licensed information to bottlers of soft drinks who were injured by

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e6 19Supra, at 6889. gif gif 85df07a2946c0bf5e633a71e91da97ad. 20 193 F 2d 51, 54 (9th Cir. 1951), cert. denied, 342 US 919 (1952). gif 21Supra, at 545. 85df07a2946c0bf5e633a71e91da97ad. gif 22Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 23Billy Baxter, Inc. v. Coca-Cola Co., 431 F 2d 183 (2d Cir. 1970), cert. denied, 401 US 923 (1971). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_162 next page >


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alleged antitrust violations of their competitors. The court determined that the area of the economy endangered was the bottling of soft drinks. Because the plaintiff manufactured no products and bottled no drinks, but merely licensed others to use technical information, it was outside the target area and lacked standing. In Calderone Enterprise Corp. v. United Artists Theatre Circuit, Inc.,24 a lease agreement for a cinema contained minimal fixed rent terms plus a percentage of the theatre's gross receipts to be paid to the lessor. In denying standing, the court noted that '[w]e have drawn a line between those who have suffered economic damage by virtue of their relationships with ''targets" or with participants in an alleged antitrust conspiracy, rather than being "targets" themselves'. An office complex developer was held to have standing to complain of a conspiracy to restrain trade in the downtown office rental market, but a gas station and parking garage lessee in the complex were denied standing because they had no commercial interest in the area threatened by the conspiracythe office rental market.25 An antitrust conspiracy among growers of iceberg lettuce which may have reduced production and therefore reduced the need for farm workers could not be challenged by the workers, who were not within the area of the economy endangered by the breakdown of competitive conditions.26 Farmers who alleged a conspiracy among automobile manufacturers to suppress competition in the development of motor vehicle air pollution technology and equipment, with the alleged result that air pollution endangered their crops, were held to be outside the affected area of the economy and lacked standing.27 Residential subscribers of telephone services were found to lack standing to attack a conspiracy aimed at manufacturers, lessors, and sellers of telephone equipment.28 On the other hand, in Karseal v. Richfield Oil Corp.,29 the court defined the target area of the economy to include manufacturers and distributors of products excluded from the market by an unlawful exclusive dealing contract. This allowed a manufacturer whose products were excluded to sue, even though the plaintiff distributed its products through independent distributors, and there was an intervening tier of victimsthe distributors. In South Carolina Council of Milk Producers, Inc. v. Newton,30 milk producers had standing to challenge the use of milk as a loss leader by supermarkets, even though

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 24 454 F 2d 1292, 1295 (2d Cir. 1971), cert. denied, 406 US 930 (1972). gif gif 85df07a2946c0bf5e633a71e91da97ad. 25Juneau v. First Wisconsin Nat'l. Bank, 445 F Supp. 965 (ED Wis. 1978). gif 85df07a2946c0bf5e633a71e91da97ad. 26Contreras v. Grower Shipper Vegetable Ass'n, 1971 Trade Cas. (CCH) 73,592 (ND Cal. 1971), aff'd per gif curiam, 484 F 2d 1346 (9th Cir. 1973), cert. denied, 415 US 932 (1974). 85df07a2946c0bf5e633a71e91da97ad. 27In re Multi-District Vehicle Air Pollution Litigation, 481 F 2d 122 (9th Cir.), cert. denied, 414 US 1045 (1973). gif 28Jeffrey v. Southwestern Bell Tel. Co., 518 F 2d 1129 (5th Cir. 1975). 85df07a2946c0bf5e633a71e91da97ad. gif 29 221 F 2d 358 (9th Cir. 1955). 85df07a2946c0bf5e633a71e91da97ad. gif 30 360 F 2d 414 (4th Cir. 1966), cert. denied, 385 US 934 (1966). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_163 next page >


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they were not competitors of the defendants, because they were in the sector of the economy threatened with a breakdown in competitive conditions. Similarly, a firm which designed cameras and had them manufactured to specifications by others for sale by the designing company was found to have standing to challenge an alleged conspiracy involving the manufacture of photographic equipment; though the plaintiff was not itself a manufacturer, it was in the target area of the conspiracy.31 In Yoder Bros., Inc. v. California-Florida Plant Corp.,32 the court defined the affected area of the economy as the propagation and distribution of chrysanthemums, the result of which permitted an antitrust counterclaim to a patent infringement suit to proceed. As the foregoing examples demonstrate, use of the target area test did not resolve all of the problems of the direct injury test. There was great inconsistency in the application of the test according to whether the court considered those in the target area to be limited to intended victims or whether they include all who are foreseeable victims. In the first instance, the number of allowable plaintiffs is few; in the second instance, they may be so many as to pose little limitation on recoveries. In Schwimmer,33 the court said it was not necessary for a party to be individually 'aimed at' in order to fall within the target area, but if he were aimed at this would confer standing. Other cases have looked to see if it was reasonably foreseeable that the area of the economy occupied by the plaintiff would have been affected by the violation.34 The courts have never applied a pure foreseeability test, as that would have greatly expanded the number of categories of remote or indirect victims allowed to be plaintiffs. It is quite foreseeable that if an antitrust violation drives a firm out of business, there will be injury to its employees, their union, its creditors, stockholders, suppliers, and landlords, and 'All of these participate to some degree in that part of the economy that is threatened by the violation'.35 However, these groups have generally not been granted standing. The target area test is in some respects superior to the direct injury test, but by no means provides a consistent set of principles which can be applied to all factual situations.

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 31GAF Corp. v. Eastman Kodak Co., 519 F Supp. 1203 (SDNY 1981). gif gif 85df07a2946c0bf5e633a71e91da97ad. 32 537 F 2d 1347 (5th Cir. 1976), cert. denied, 429 US 1094 (1977). gif 33Schwimmer v. Sony Corp. of America, 637 F 2d 41, 479 (2nd Cir. 1980). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 34 E.g., Solinger v. A. & M. Records, Inc., 586 F 2d 1304 (9th Cir. 1978); Parks v. Watson, 716 F 2d 646 (9th Cir. gif 1983). 85df07a2946c0bf5e633a71e91da97ad. 35 H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (St Paul, Minn., 1994), 555. gif < previous page page_164 next page >


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14.5 The Zone of Interests Test Perhaps the most expansive approach to standing was that adopted by the Sixth Circuit in Malamud36 after finding the direct injury and target area test jurisprudence lacking. The Malamud court borrowed from the Federal Administrative Procedure Act the concept of standing as applied by the Supreme Court in Data Processing.37 The Administrative Procedure Act granted standing to anyone 'adversely affected or aggrieved by agency action'. The court's discussion is worth quoting at some length:

85df07a2946c0bf5e633a71e91da97ad. As discussed earlier, the doctrine of standing poses the question whether a particular person is a proper party gif to litigate a given issue. Undoubtedly, the principal function of the doctrine is as a device to eliminate those

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plaintiffs who are jurisdictionally barred by Article III from maintaining a suit. Clearly provided for under Section 4 is the requirement that any person must have suffered injury at the hands of the defendant before he can bring an action. This prerequisite both defines the real party in interest and satisfies the minimum criterion established by Article III. See Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. at 15152, 90 S.Ct. 827. The remaining prong of the standing concept pertains to those cases in which a party complies with Article III but yet is denied the right to pursue the case because of a policy of judicial selfrestraint. See, Barrows v. Jackson, 346 U.S. at 255, 73 S.Ct. 1031; 13 Wright 3531, at 176. It is this last portion of the doctrine that has caused the current confusion between a decision on the merits and one on standing. The courts have used one or the other of the two approaches as standing doctrines in order to arrest some antitrust litigation at an early stage. As we see it, however, by using either approach a court is enabled to make a determination on the merits of a claim under the guise of assessing the standing of the claimant. Under either theory the entire question of directness is one that must be resolved upon some factual showing, but standing is a preliminary determination ordinarily to be evaluated upon the allegations of the complaint.38 The two prongs of standing adopted by the Malamud court from Data Processing were, first, whether the plaintiff has properly alleged that the defendant caused him or her injury in fact; and secondly, 'whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question'.39 It has been said that 'Malamud thus granted standing very generously, for it rested on interests only ''arguably" congruent with the statute'.40 Following the Supreme Court's decision in Brunswick, the Sixth Circuit supplemented its two-prong test with the additional requirement that the plaintiff allege

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 36Malamud v. Sinclair Oil Corp., 521 F 2d 1142 (6th Cir. 1975). gif gif 85df07a2946c0bf5e633a71e91da97ad. 37Association of Data Processing Serv. Organizations v. Camp, 397 US 150, 153 (1970). gif 38 521 F 2d at 1150 (emphasis in original; footnote omitted). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 39Supra, at 1151, quoting from Data Processing. gif 40 P. E. Areeda and H. Hovenkamp, Antitrust Law (10 vols., Rev. edn., Boston, Mass., 1995), ii, 362 at 213 note 85df07a2946c0bf5e633a71e91da97ad. gif 17.

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antitrust injury when seeking treble damages.41 After the Supreme Court's AGC decision, the Sixth Circuit recognized that the multi-factor test is now mandated by the Supreme Court,42 and the court subsequently applied the multi-factor test to deny standing to employees of a newspaper who lost their jobs when the paper sold its assets to a competitor.43 During the life-span of the zone of interests test, no other circuit adopted it for antitrust standing. 14.6 The Factual Matrix Test Although the Third Circuit originated the 'direct injury' test in Loeb, it later recognized that there is 'no talismanic test capable of resolving all Section 4 standing problems' and utilized a 'balancing test comprised of many constant and variable factors'.44 Circuit Judge Garth ought to have won a prize for prescience for his judgment in Cromar,45 laying down principles of standing which very accurately anticipated the Supreme Court's later decision in AGC. The plaintiff in Cromar, a manufacturer of pre-finished wood parquet flooring, agreed to an arrangement whereby it produced wood 'fillets'. Nuclear Materials would process the fillets to increase their durability, Cromar would assemble the enhanced fillets into parquet panels, and Nuclear Materials' parent company would market the product. Cromar alleged that this arrangement was terminated in furtherance of the defendant's monopolization of the 'wood-plastic flooring industry'. Judge Garth framed the standing issue thus:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Determining in each case whether a plaintiff suing under §4 of the Clayton Act is one 'whose protection is the gif fundamental purpose of the antitrust laws' and therefore has standing is fraught with difficulty. By too gif narrowly limiting that class of plaintiffs the judiciary would be weakening the enforcement remedy created by Congress for insuring 'strong competition.' On the other hand, allowing the words of §4 to be applied literally might 'result in an overkill . . . far exceeding that contemplated by Congress.' . . .

85df07a2946c0bf5e633a71e91da97ad. 85df07 Each case, therefore, must be carefully analyzed in terms of the particular factual matrix presented. In making gif this factual determination, courts must look to, among other factors, the nature of the industry in which the gif alleged antitrust violation exists, the relationship of the plaintiff to the alleged violator, and the alleged effect of the antitrust violation upon the plaintiff. Then, while recognizing that breaches of the antitrust laws have effects throughout society, a court must decide

85df07a2946c0bf5e633a71e91da97ad. 85df07 41Chrysler Corp. v. Fedders Corp., 643 F 2d 1229, 1235 (6th Cir. 1981), cert. denied, 454 US 893 (1981). gif gif 85df07a2946c0bf5e633a71e91da97ad. 42Southhaven Co. v. Malone & Hyde, Inc., 715 F 2d 1079 (6th Cir. 1983). gif 43Province v. Cleveland Free Press Publishing Co., 787 F 2d 1047 (6th Cir. 1986). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 44Bravman v. Bassett Furn. Indus., Inc, 552 F 2d 90, 99 (3d Cir. 1977), cert. denied, 434 US 823 (1977). Bravman gif followed Cromar's lead. 85df07a2946c0bf5e633a71e91da97ad. 45Cromar Co. v. Nuclear Materials & Equipment Corp., 543 F 2d 501 (3rd Cir. 1976). gif < previous page page_166 next page >


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85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5 whether the plaintiff is one ''whose protection is the fundamental purpose of the antitrust laws'.46 gif gif Judge Garth then reviewed the case law of the various circuits, including direct injury and target area decisions, and concluded that neither was sufficient by itself to embrace all of the factors needing consideration:

85df07a2946c0bf5e633a71e91da97ad. Thus, we do not believe that the issue of Cromar's standing to assert its §2 Sherman Act claim may be gif resolved, as the parties urge, upon our application of either one test or another. Rather, as we understand the

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law of this Circuit, a detailed analysis on a case by case basis of the factual context presented is required so as to preserve the effectiveness of the treble damage remedy without overextending its availability. The plaintiff's relationship to the alleged violator of the antitrust lawsthe directness or indirectness of the injuryas well as the plaintiff's position in the area of the economy threatened by the alleged anti-competitive acts are among the facts to be considered in resolving standing. No single formula captures the many considerations involved in determining whether the plaintiff is one 'whose protection is the fundamental purpose of the antitrust laws'.47 When the Supreme Court finally confronted the standing question in McCready and AGC, it too found the existing tests for standing not so much wrong as incomplete, in the sense that neither was capable of accounting for all necessary factors. The 'factual matrix' approach employed by the Third Circuit, alone of all the circuits, seemed accurately to foreshadow the approach which the Supreme Court followed. 14.7 The Multi-Factor Test: Out of the Analytical Swamp? The Supreme Court finally took a hand in the formulation of standing rules in two decisions rendered within eight months of one another. In McCready,48 the Court upheld the standing of a health insurance subscriber whose treatment by a psychologist went un-reimbursed because of an alleged conspiracy by psychiatrists to boycott the psychologists. In AGC,49 the Court denied standing to a union which had sued an association of building contractors for pressuring others to employ firms using non-union labour. In the course of these decisions, the Court began to bring some doctrinal consistency to the law of antitrust standing. It has been said that, prior to these decisions, antitrust standing was an 'analytical swamp' that was 'virtually incoherent' due to the multiplicity of standing tests employed by different circuits,50 continuing failure of courts to distinguish

85df07a2946c0bf5e633a71e91da97ad. 85df07a294 46Supra, at 506 (footnote and citation omitted). gif gif 85df07a2946c0bf5e633a71e91da97ad. 47Supra, at 5089 (emphasis supplied, citation omitted). gif 48Supra note 8. 85df07a2946c0bf5e633a71e91da97ad. gif 49Associated General Contractors of California v. California State Council of Carpenters, 459 US 519 (1983). 85df07a2946c0bf5e633a71e91da97ad. gif (AGC). 85df07a2946c0bf5e633a71e91da97ad. 50 B. Kellman, Private Antitrust Litigation (Chicago, Ill., 1985), 3658. See also D. Berger and R. Bernstein, 'An gif Analytical Framework for Antitrust Standing', (1977) 86 Yale LJ 809, 83540.

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between dismissing a case for lack of standing as opposed to failure to state a substantive antitrust claim, and confusion over the relationship between standing and antitrust injury. In fact, there were four different standing tests employed by 11 Federal circuit courts of appeal, and few would argue that the tests were consistently applied. The Supreme Court's first51 standing decision was McCready, in which a prepaid group health insurance plan followed a practice of reimbursing subscribers for services provided by psychiatrists, but not for psychologists. Mrs McCready had consulted a psychologist and been refused reimbursement for her payments, as a result of an agreement between the insurer (Blue Shield) and psychiatrists that such reimbursements would not be made. The court prefaced its analysis by noting that its prior decisions in Reiter and Pfizer had taken the view that the Clayton Act section 4 contained little restrictive language and this reflected an expansive remedial purpose on the part of Congress. The Court thought that in the absence of some consideration of statutory policy suggesting a contrary conclusion on particular facts, the statute should be applied in accordance with its plain language and broad remedial and deterrent objectives.52 However, the Court did identify two limitations on the availability of the treble damages remedy. First, the need to avoid double recovery and, secondly, the question of remotenesswhile injury may ripple through the nation's economy, there must be a point beyond which the wrongdoer should not be liable. In regard to the remoteness question, the Court declined to adopt or reject existing standing formulations, stating only that '[w]e have no occasion to evaluate the relative utility of any of these possibly conflicting approaches toward the problem of remote antitrust injury'.53 Instead, the Court framed the issue in other terms:

85df07a2946c0bf5e633a71e91da97ad. 85df07 In the absence of direct guidance from Congress, and faced with the claim that a particular injury is too gif remote from the alleged violation to warrant §4 standing, the courts are thus forced to resort to an analysis no gif less elusive than that employed traditionally by courts of common law with respect to the matter of 'proximate cause.' . . . In applying that elusive concept to this statutory action, we look (1) to the physical and economic nexus between the alleged violation and the harm to the plaintiff, and (2) more particularly, to the relationship of the injury alleged with those forms of injury about which Congress was likely to have been concerned in making defendant's conduct unlawful and in providing a private remedy under §4.54

85df07a2946c0bf5e633a71e91da97ad. 51 Some have characterized the 1977 'antitrust injury' decision, Brunswick, as involving standing, e.g., gif Kellman, supra note 50, at 366. The better view is that expressed in Chrysler Corp., supra note 41, at 1235:

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'[u]nlike the ''direct injury" and "target area" tests, Brunswick does not inject an element of proximate cause into the standing inquiry; rather it compels the court to focus on the type of injury pleaded and its relationship to the alleged anticompetitive conduct'. 85df07a2946c0bf5e633a71e91da97ad. 52 457 US at 4723. gif 85df07a2946c0bf5e633a71e91da97ad. 53 457 US at 476 note 12. gif 54 457 US at 4778 (footnotes and citations omitted). 85df07a2946c0bf5e633a71e91da97ad.

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The Court did use some language reminiscent of the 'target area' test in its discussion, noting that the target metaphor did not imply the defendants must have had in mind the elimination of or injury to a particular individual, and stated 'the remedy can not reasonably be restricted to those competitors whom the conspirators hope to eliminate from the market'.55 Mrs McCready's injury was not 'remote' merely because the object of the conspiracy was to preserve a psychologist-free market, but rather:

85df07a2946c0bf5e633a71e91da97ad. McCready claims that she has been the victim of a concerted refusal to pay on the part of Blue Shield, gif motivated by a desire to deprive psychologists of the patronage of Blue Shield subscribers. Denying

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reimbursement to subscribers for the cost of treatment was the very means by which it is alleged that Blue Shield sought to achieve its illegal ends. The harm to McCready and her class was clearly foreseeable; indeed it was a necessary step in effecting the ends of the illegal conspiracy.56 The Court further found that Mrs McCready as a consumer of psychotherapy services entitled to financial benefits under the insurance plan was 'within the area of the economy . . . endangered by [the] breakdown of competitive conditions' by the refusal to reimburse.57 Moreover, her injury was 'inextricably intertwined with the injury the conspirators sought to inflict on psychologists'.58 Accordingly, she was held to have standing to sue.59 In AGC,60 the Supreme Court formally adopted a multiple factor approach to the problem of antitrust standing. The case involved two labour union plaintiffs who sued an association of building contractors for damages, alleging that the association violated the antitrust laws by pressuring its members and other non-member contractors to employ nonunionized firms. The plaintiffs alleged the coercion was intended to 'weaken, destroy and restrain the trade' of contractors who had employed unionized firms and to restrain 'the free exercise of the business activities' of the plaintiffs. The Court treated the complaints as alleging injury in the market for contracting and subcontracting services, not the market for labour itself.61 There were no allegations that any collective bargaining agreements were terminated as a result of the coercion, no allegations that the share of the contracting market controlled by union firms had decreased, and no allegation that

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 55Supra, at 479. gif gif 85df07a2946c0bf5e633a71e91da97ad. 56Id. at 4789. gif 57Id., at 479, 4801. 85df07a2946c0bf5e633a71e91da97ad. gif 58Id. at 484. 85df07a2946c0bf5e633a71e91da97ad. gif 59 The psychologists also filed a suit. See Virginia Academy of Clinical Psychologists v. Blue Shield of Va., 624 F 85df07a2946c0bf5e633a71e91da97ad. gif 2d 476 (4th Cir.), on remand, 501 F Supp. 1232 (ED Va. 1980), cert. denied, 450 US 916 (1981). 85df07a2946c0bf5e633a71e91da97ad. 60Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 US 519 gif (1983). 85df07a2946c0bf5e633a71e91da97ad. 61 459 US at 542. gif < previous page page_169 next page >


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the union's revenues in the form of dues or fees had decreased. They did not claim that anyone was prevented from doing business with unionized firms.62 The Court approached the reach of the Clayton Act section 4 somewhat differently from the manner in which it had in McCready, insisting that it was implicitly qualified and that Congress had not intended to provide a remedy for every tangentially affected person. Rather, Congress intended to create a 'remedy for consumers who were forced to pay excessive prices by the giant trusts'.63 Claims of other kinds were required to be analysed in the light of multiple factors identified by the court. The Court again, as in McCready, declined to select a single standing rule applicable in all cases and alluded to concepts of proximate cause:

85df07a2946c0bf5e633a71e91da97ad. 85df07 There is a similarity between the struggle of common-law judges to articulate a precise definition of the gif concept of 'proximate cause' and the struggle of federal judges to articulate a precise test to determine whether gif a party injured by an antitrust violation may recover treble damages. It is common ground that the judicial remedy cannot encompass every conceivable harm that can be traced to alleged wrongdoing. In both situations the infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the rule in every case. Instead, previously decided cases identify factors that circumscribe and guide the exercise of judgment in deciding whether the law affords a remedy in specific circumstances.64 Among the factors mentioned by the Court as circumscribing and guiding judgment were the nature of the injury, the directness or indirectness of that injury, whether the damages are speculative in nature, the feasibility and consequences of implementing the damage theory upon which the damages rest, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims. The Court said, in denying standing:

85df07a2946c0bf5e633a71e91da97ad. The Union's allegations of consequential harm resulting from a violation of the antitrust laws, although gif buttressed by an allegation of intent to harm the Union, are insufficient as a matter of law. Other relevant

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factorsthe nature of the Union's injury, the tenuous and speculative character of the relationship between the alleged antitrust violation and the Union's alleged injury, the potential for duplicative recovery or complex apportionment of damages, and the existence of more direct victims of the alleged conspiracyweigh heavily against judicial enforcement of the Union's antitrust claim.65 The plaintiffs in AGC had been less than clear about who actually was injuredthe unions or the contractors?and precisely how they had been injured. Secondly, the unions were several steps removed from injury to competition in the market for building contractor services, which would first affect developers and contractors, then unionized employers, then employees, with unions coming in

85df07a2946c0bf5e633a71e91da97ad. 62Supra. gif 85df07a2946c0bf5e633a71e91da97ad. 63 459 US at 52931. gif 64Supra, at 5356. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 65Supra, at 545. gif < previous page

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only in fourth place. There were more immediate potential plaintiffs, such as coerced contractors or developers, or even excluded union contractors. The Court said that 'the existence of an identifiable class of persons whose self interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party such as the Union to perform the office of a private attorney general'.66 In addition, the Court feared that allowing suit by all of the affected parties might create grave dangers of duplicative recoveries which could only be avoided by complex and perhaps un-administrable apportionment among them. Finally, the Court doubted that antitrust injury was present, since the impact on the unions of restricted competition in the market for contractor services was 'not clear'.67 Enhanced competition in the contractor market might drive contractors to use presumably cheaper non-unionized firms, but restricted competition might generate excess profits, making higher cost unionized firms more acceptable.68 In any case, the failure of the plaintiff unions to link alleged injury to them from reduced competition in the contractor services market was fatal to their claim. The Supreme Court again declined expressly to reject or approve either the target area or direct injury formulations of standing, although it did note that when such verbal formulae are detached from their rationales they can lead to 'contradictory and inconsistent results'.69 The lower courts were instructed to 'analyze each situation in light of the factors' set forth in AGC.70 Since the Supreme Court's decision, the lower courts have taken divergent views on the survival of the target area and direct injury tests. One court ruled that its previously decided 'target area' approach raised the same concerns as the Supreme Court's multi-factor test and did not produce 'materially different' results.71 Another court perceived that the Supreme Court had rejected the target area approach to standing and concluded

85df07a2946c0bf5e633a71e91da97ad. 66Supra, at 542. This factor does not seem to be dispositive. It did not prevent standing in McCready, where gif others had actually sued. Moreover, if there are reasons less remote parties might not sue or should not

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vindicate the public interest, this factor can be ignored. See, e.g., In re Insurance Antitrust Litigation, 938 F 2d 919, 926 (9th Cir. 1991), aff'd in part, rev'd in part sub nom. Hartford Fire Insurance Co. v. California, 509 US 764 (1993) (theoretically more appropriate plaintiffs were alleged to be dominated economically by defendants and unlikely to sue). The notion that 'second-best' plaintiffs do not have standing is based on the theory that if not all can sue, prospective plaintiffs 'must be ranked'. However, 'courts should not automatically assume that an alternative plaintiff is superior simply because it occupies a more proximate position in the market. Alternative plaintiffs might have a very small stake, be coconspirators, otherwise under the control of the violator, or fearful of suing lest they should lose a valuable contract': H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (St. Paul, Minn., 1994), 563. 85df07a2946c0bf5e633a71e91da97ad. 67 459 US at 539.

gif 68Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 69Supra, at 536 note 33. gif 70Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 71Amey v. Gulf Abstract & Title, 758 F 2d 1486 (11th Cir. 1985), cert. denied, 475 US 1107 (1986) (standing gif granted to builder and real estate developer who challenged bank's requirement that home buyers pay fees of attorneys hired by bank to give title opinions). See also Midwestern


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that some of its target area decisions were no longer good law.72 Other courts have abandoned the old terminology.73 The lower courts do not seem to be in precise agreement on which factors constitute the 'multi-factor' test.74 In many cases the results under the multi-factor test will not be very different from the earlier tests because the Supreme Court included the factors addressed in the earlier tests as some of the factors to be considered in its multi-factor analysis. The language of 'directness' and 'area of the economy endangered by the breakdown of competitive conditions' is still to be found; the important point is that standing is not limited to these factors where other indications exist that it should be allowed. Thus, older precedents may still have value, but some caution is required because the Supreme Court has eschewed reliance on labels as a determinant of standing and required the lower courts carefully to examine the factual circumstances in each case. It has been said that the net result of McCready and AGC has been to 'broaden standing but not by much'.75 This is not to say that standing law is yet at the point where clarity and predictability are its hallmarks, as any test so heavily reliant on precise factual analysis of the case at bar necessarily exchanges abstract certainty for flexibility to some degree. Hovenkamp argues that the law of private antitrust standing is 'far from clear' and that '[n]one of the generalized, conceptual tests adequately predicts whether a particular plaintiff will be granted standing'.76 Kellman suggests that standing law represents 'a far more rational judicial approach' than before, attributing this to an 'analysis built on common law principles of proximate cause',77 and that 'the Court has clarified much of the prior confusion' so that since AGC standing was denied only 'when there was a lack of causal nexus between the plaintiff's antitrust violation and the plaintiff's harm, or when the derivative nature of plaintiff's injury threatens duplicative recovery'.78 It seems that the law of standing has been improved in the sense that courts are now instructed to go behind the 'jargon to examine standing in terms which . . . [are] more concrete and more expressly connected to the underlying rationales for permitting private antitrust enforcement'.79 (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. Waffles v. Waffle House, 734 F 2d 705, 710 (11th Cir. 1984); Austin v. Blue Cross & Blue Shield, 903 F 2d gif 1385, 138993 (11th Cir. 1990) (target area approach viewed as 'not producing results' materially different

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from in AGC).

85df07a2946c0bf5e633a71e91da97ad. 72R. C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F 2d 139 (9th Cir. 1989). gif 73 E.g., Merican v. Caterpillar Tractor Co., 713 F 2d 958, 964 (3d Cir. 1983), cert. denied, 465 US 1024 (1984). 85df07a2946c0bf5e633a71e91da97ad. gif 74 Compare, Province v. Cleveland Press Publishing Co., 787 F 2d 1047, 10501 (6th Cir. 1986) with Bubar v. 85df07a2946c0bf5e633a71e91da97ad. gif AMPCO Foods, Inc., 752 F 2d 445, 448 (9th Cir. 1985). 85df07a2946c0bf5e633a71e91da97ad. 75 Kellman, supra note 50, at 369. gif 76 Hovenkamp, supra note 68, at 557. 85df07a2946c0bf5e633a71e91da97ad. gif 77 Kellman, supra note 50, at 369. 85df07a2946c0bf5e633a71e91da97ad. gif 78Supra, at 393. 85df07a2946c0bf5e633a71e91da97ad. gif 79 Areeda and Hovenkamp, supra note 40, at 199. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_172 next page >


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15 Special Issues of Standing and Antitrust Injury

85df07a2946c0bf5e633a71e91da97ad. 15.1 The 'Antitrust Injury' Doctrine gif

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85df07a2946c0bf5e633a71e91da97ad. 15.3 Preferred Plaintiffs: Consumers and Competitors gif

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15.1 The 'Antitrust Injury' Doctrine The second major prudential limitation on private enforcement actions in the USA, the 'antitrust injury' doctrine, was first articulated by the Supreme Court in its landmark 1977 Brunswick decision.1 In that case, the plaintiff was an owner of bowling alleys complaining of acquisitions of competing bowling alleys by Brunswick, a major national manufacturer of bowling equipment. Brunswick had extended credit to numerous bowling alleys for the purchase of equipment, many of these loans became delinquent, and attempts by Brunswick to sell repossessed equipment met with little success. Brunswick began acquiring and operating defaulting bowling alleys when their equipment could not be resold and a positive cash flow could be expected. The plaintiffs alleged that Brunswick's acquisition of bowling centres which competed with them violated section 7 of the Clayton Act (prohibiting mergers which may have an adverse affect on competition within a relevant market)2 and damaged them, in that they lost profits as a result of Brunswick's entry into the market. In other words, the plaintiffs had to compete against bowling centres which would have gone out of business but for Brunswick's acquisitions, thereby making lower profits.

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 1Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 US 477 (1977). gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 Sect. 7 is designed to prohibit restraints in their incipiency, and one theory on which a vertical merger (such as in gif Brunswick) violates the statute involves a situation where a giant firm (Brunswick) enters a market of pygmies (the bowling alleys), thereby creating a potential for damage to competition by the large firm. The merger was considered illegal on the prophylactic theory that it would enable Brunswick's retail operations to have 'unfair' advantages' (such as new investments and low-cost credit) and that it might engage in below cost sales (predation) to sustain itself against competition. See Brunswick v. Pueblo Bowl-O-Mat, Inc., 523 F 2d at 268. (9th Cir. 1975).

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A damage award of $2.3 million was reversed: '[b]ecause this holding divorces antitrust recovery from the purposes of the antitrust laws without a clear statutory command to do so, we cannot agree with it'.3 The Court found it anomalous and unacceptable that the plaintiff could recover damages resulting from competition on the basis that it was 'deprived of the benefits of increased concentration'.4 The Court concluded:

85df07a2946c0bf5e633a71e91da97ad. We therefore hold that for plaintiffs to recover treble damages on account of §7 violations, they must prove gif more than injury causally linked to an illegal presence in the market. Plaintiffs must prove antitrust injury,

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which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. It should, in short, be the 'type of loss that the claimed violations . . . would be likely to cause.' Zenith Radio Corp. v. Hazeltine Research, 395 US, at 125.5 Since the purpose of the antitrust laws is to preserve competition, not provide opportunities to profit from concentration, the Court found that 'the antitrust laws are not merely indifferent' to the plaintiff's injury, awarding damages for this type of injury 'is inimical to the purposes of those [antitrust] laws', and the plaintiff's injury did not occur ' ''by reason of anything forbidden in the antitrust laws"; while respondents' loss occurred "by reason of" the unlawful acquisitions, it did not occur "by reason of" that which made the acquisitions unlawful'.6 In Cargill v. Montfort of Colorado,7 the Court applied the antitrust injury concept to injunction actions due to the 'comparable' wording of the two statutory provisions (sections 4 and 16 of the Clayton Act) and its view that '[i]t would be anomalous, we think, to read the Clayton Act to authorize a private plaintiff to secure an injunction against a threatened injury for which he would not be entitled to compensation if the injury actually occurred'.8 Cargill involved an objection to a merger of two competitors in the beef packing/slaughtering industry by another competitor, Montfort. The Court found no antitrust injury, in that mergers are ordinarily condemned because the ensuing concentration leads to either higher prices or lower output. Because either result could only benefit Montfort, there was no injury resulting from the factors which might render the merger unlawful. Montfort's allegation of a feared 'cost-price

85df07a2946c0bf5e633a71e91da97ad. 3 429 US at 487. gif 85df07a2946c0bf5e633a71e91da97ad. 4 429 US at 488. gif 85df07a2946c0bf5e633a71e91da97ad. 5Supra, at 489 (footnote omitted). gif 6Supra, at 488. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 7 479 US 104 (1986). gif 8Supra, at 112, note 12. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page


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squeeze'9 was interpreted by the Court, in the absence of any claim that prices were at predatorily low levels, as an objection to vigorous competition, which did not demonstrate antitrust injury. The most recent Supreme Court decision10 on antitrust injury involved allegations of an agreement on maximum retail prices, then a per se violation of the Sherman Act.11 The Supreme Court rejected the argument that antitrust injury need not be shown in cases involving per se violations, stating:

85df07a2946c0bf5e633a71e91da97ad. 85df07 The per se rule is a method of determining whether §1 of the Sherman Act has been violated, but it does not gif indicate whether a private plaintiff has suffered antitrust injury and thus whether he may recover damages. . . . gif The per se rule is a presumption of unreasonableness based on 'business certainty and litigation efficiency'. . . .12 The purpose of the antitrust injury requirement is to ensure that the injury claimed by the plaintiff is congruent with the rationale for finding an antitrust violation and prevents private enforcement actions from seeking relief for injury which stems from competition.13 The Court rejected the view that antitrust injury occurs whenever a price agreement 'distorts' the market, because that would equate injury-in-fact with antitrust injury. Every antitrust violation 'can be assumed to ''disrupt" or "distort" competition', for 'otherwise there would be no violation'.14 In ARCO, the plaintiffs were rival dealers selling other brands of petrol. Their allegations were that the ARCO dealers, but for the maximum resale price agreement, would have raised their retail prices, allowing the plaintiffs to charge more for their own brands and earn higher profits. In other words, but for price competition, the plaintiffs would have made more profits. The Supreme Court declined the opportunity to protect the plaintiffs from low price competition, so long as the prices were not so low as to constitute predatory prices. The Court required that the plaintiffs be injured by 'an anticompetitive aspect of the defendants' conduct', but considered that in the context of low pricing by rivals, 'only predatory pricing has the anticompetitive effect', because when a vertical agreement 'lowers prices but maintains them above predatory levels, the business lost by rivals cannot be viewed as "an anticompetitive" consequence of the claimed violation'.15 The Court considered that damage suffered by competing retailers flowing from competition was not the type of injury the antitrust laws were designed to prevent.

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 9Supra, at 1078. gif gif 85df07a2946c0bf5e633a71e91da97ad. 10Atlantic Richfield Co. v. USA Petroleum Co., 495 US 328 (1990) (ARCO). gif 85df07a2946c0bf5e633a71e91da97ad. 11 E.g., Albrecht v. Herald Co., 390 US 145 (1968). In State Oil Co. v. Khan, et al., 522 US 3, (1997), the per se gif rule against maximum price fixing announced in Albrecht was overruled. The rule of reason now applies to vertical maximum price fixing. 85df07a2946c0bf5e633a71e91da97ad. 12 495 US at 342.

gif 85df07a2946c0bf5e633a71e91da97ad. 13 See, supra. gif 14 495 US at 340. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 15 495 US at 339, 337. gif < previous page

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The plaintiffs had argued that ARCO's objective was to drive the independent retailers out of business and that the strategy was succeeding. The Court acknowledged the possibility that the maximum resale price maintenance could be used to facilitate a kind of predatory pricing, but considered that the prices shown were not predatory. On remand, the Ninth Circuit determined that the prices imposed on the ARCO dealers could have been predatory, and reinstated the claim.16 If the plaintiffs could prove maximum resale price maintenance was used to ensure that a predatory wholesale price is carried 'down' to a predatory retail price, then 'they would be victims of antitrust injury'.17 As has been seen, the traditional approach to antitrust standing has been compared to a common law court's search for the limits of proximate cause. On the other hand, the antitrust injury rule focuses on whether the injury resulting from an antitrust violation is the type of injury the statute was intended to prevent. The one looks primarily at remoteness while the other looks to the relationship between the rationale of the violation and the claimed injury. As one court put it, '[t] he analytical distinction between standing and antitrust injury is somewhat elusive'.18 Another court perhaps put it better:

85df07a2946c0bf5e633a71e91da97ad. Unlike the 'direct injury' and 'target area' tests, Brunswick does not inject an element of proximate cause into gif the standing inquiry; rather it compels the court to focus on the type of injury pleaded and its relationship to

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the alleged anticompetitive conduct.19 It is submitted that there is a distinction, as noted by Handler:

85df07a2946c0bf5e633a71e91da97ad. 85df07 For example, the plaintiffs in Brunswick, as defendant's competitors, clearly had standing to challenge the gif acquisitions under the deep pocket theory; what was lacking was their inability to relate their claimed injury to gif the acquisition's alleged anti-competitive consequences'.20 Nonetheless, there has been considerable confusion whether antitrust injury is properly an element of standing, or whether it is a separate requirement. Some courts have included antitrust injury as an 'additional element of standing' while others have considered the two as 'analytically distinct'.21 Neither McCready nor AGC expressly said whether antitrust injury was an element of standing, although

85df07a2946c0bf5e633a71e91da97ad. 85df07a 16USA Petroleum, Inc. v. Atlantic Richfield Co., 972 F 2d 1070 (9th Cir. 1992). gif gif 85df07a2946c0bf5e633a71e91da97ad. 17 H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (St Paul, Minn., 1994), gif 5489. 85df07a2946c0bf5e633a71e91da97ad. 18Engine Specialties, Inc. v. Bombardier, Ltd, 605 F 2d 1, 12 note 16 (1st Cir. 1979), cert. denied, 440 US 983 gif (1980). 85df07a2946c0bf5e633a71e91da97ad. 19Chrysler Corp. v. Fedders Corp., 643 F 2d 1229, 1235 (6th Cir. 1981), cert. denied, 454 US 893 (1981). gif 20 J. Handler, 'Changing Trends in Antitrust Doctrines: An Unprecedented Supreme Court Term1977', (1977) 77 85df07a2946c0bf5e633a71e91da97ad. gif Colum. L Rev. 979, 997 (emphasis in original). 85df07a2946c0bf5e633a71e91da97ad. 21Local Beauty Supply v. Lamaur, 787 F 2d 1197, 1201 (7th Cir. 1986). gif < previous page page_176 next page >


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the Court indicated that both proximately caused injury-in-fact and antitrust injury were 'essential' elements of the plaintiff's case.22 Some commentators have suggested that since both must be shown, the debate seems 'quite inconsequential'23 and that the scope of the term is 'unimportant'.24 Others have taken the position that antitrust injury is an element of standing.25 It is submitted that the analytical distinction between the two should be preserved, not only as a matter of correct theory, but because the concepts underlying the rules must be laid bare and kept segregated in determining whether either concept is to some degree usefully exportable to private actions in the EC. Accordingly, this work will attempt to treat antitrust injury separately from standing and the terms should be considered used narrowly unless otherwise indicated. 15.2 The Indirect Purchaser Rule: Passing On In Hanover Shoe, Inc. v. United Shoe Machinery Corp.,26 a direct purchaser from a monopolist was allowed to claim as damages the entire overcharge, notwithstanding that some of the monopolistic overcharge had been passed on to the purchaser's customers. The plaintiff was a shoe manufacturer suing a manufacturer which made shoe-making equipment available on a lease-only (no sales) basis as part of its monopolization of the shoe production machinery market. The defendant United Shoe argued that the plaintiff suffered no legally cognizable injury because the overcharge was passed on to Hanover's customers and reflected in the price charged for shoes. The Court refused to allow the defence of 'passing on'27 because it feared the tracing of the overcharge would unduly complicate litigation28 and because it believed that permitting the defence would lessen the effectiveness of the private enforcement remedy.29 In regard to the complexity of litigation, the Court said:

85df07a2946c0bf5e633a71e91da97ad. We are not impressed with the argument that sound laws of economics require recognizing this defense. . . . gif Normally the impact of a single change in the relevant 85df07a2946c0bf5e633a71e91da97ad. 22Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 US 519, gif 539, 5424 (1983); Blue Shield of Virginia v. McCready, 457 US 465, 4789 (1982).


85df07a2946c0bf5e633a71e91da97ad. 23 H. Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice (St Paul, Minn., 1994), 545 gif note 4. 85df07a2946c0bf5e633a71e91da97ad. 24 P. E. Areeda and H. Hovenkamp, Antitrust Law (10 vols., Rev. edn., Boston, Mass., 1995), ii, 200. gif 85df07a2946c0bf5e633a71e91da97ad. 25 P. C. Jones, Litigating Private Antitrust Actions (Colorado Springs, Colo., 1985; 1995 Supp.), § 19.04 at 164. gif 26 392 US 481 (1968). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 27 '[W]hen the buyer shows that the price paid by him for materials purchased for use in his business is illegally gif high and also shows the amount of the overcharge, he has made out a prima facie case of injury and damage within the meaning of § 4': 392 US at 489. 85df07a2946c0bf5e633a71e91da97ad. 28 392 US at 4923.

gif 85df07a2946c0bf5e633a71e91da97ad. 29Supra, at 494. gif < previous page

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85df07a2946c0bf5e633a71e91da97ad. 85df07 conditions cannot be measured after the fact; indeed a businessman may be unable to state whether, had one gif fact been different . . . he would have chosen a different price. . . . Treble damages actions would often require gif long and complicated proceedings involving massive evidence and complicated theories.30 The Court also feared that a passing-on defence would allow wrongdoers to 'retain the fruits of their illegality' because 'ultimate consumers, in today's case the buyers of single pairs of shoes, would have only a tiny stake in a lawsuit'; thus no one would be available to sue and '[t]reble damage actions . . . would be substantially reduced in effectiveness'.31 The Court thought that direct purchasers were best positioned to sue and, if the passing-on defence were allowed, it would increase the risks and reduce the benefits of direct purchaser suits so that suits might not be brought, thus weakening antitrust enforcement. The 'other shoe' dropped in Illinois Brick Co. v. Illinois,32 when the Court faced the issue whether the indirect purchaser on the receiving end of the passed-on over-charge could also sue the violatorwhether the pass-on could be used offensively even though Hanover Shoe had settled that it could not be used defensively. The Court opted in favour of symmetry and denied the offensive use of passing-on. Local government units in Illinois alleged a price-fixing conspiracy between producers and distributors of concrete block. The blocks were purchased from the defendant distributor-producers by masonry contractors, who entered into sub-contracts with general contractors, who sold completed buildings to plaintiffs. Hence, there were two intervening purchasers between the conspirators and the plaintiffs, none of whom were alleged to be part of the price-fixing conspiracy. The Supreme Court dismissed the action for failure of the local government plaintiffs to allege injury to their 'business or property' within the meaning of the Clayton Act §4.33 The Court felt that symmetry with Hanover Shoe was essential for two reasons:

85df07a2946c0bf5e633a71e91da97ad. 85df07 First, allowing offensive without defensive use of pass-on would create a serious risk of multiple liability for gif defendants. . . . Second, the reasoning of Hanover Shoe cannot justify unequal treatment of plaintiffs and gif defendants with respect to the permissibility of pass-on arguments. The principal basis for the decision in Hanover Shoe was the Court's perception of the uncertainties and difficulties in analyzing price and output decisions 'in the real economic world rather than an economist's hypothetical model,' and of the costs to the judicial system and the efficient enforcement of the antitrust laws of attempting to reconstruct those decisions in the court-room.34

85df07a2946c0bf5e633a71e91da97ad. 30Supra, at 4923. gif 85df07a2946c0bf5e633a71e91da97ad. 31Supra, at 494. gif 32 431 US 720 (1977). 85df07a2946c0bf5e633a71e91da97ad. gif 33 431 US at 7289. 85df07a2946c0bf5e633a71e91da97ad. gif 34Supra, at 7303. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page


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The Illinois Brick Court also reaffirmed its view that the treble damages remedy was best effected by direct purchasers, and if both direct and indirect purchasers could sue, there would be grave risks of duplicative treble damages findings and inconsistent holdings in cases involving both types of plaintiff. The Court also recognized two exceptions to its rule barring indirect purchaser suits, exceptions also present in Hanover Shoe. First, a pre-existing cost-plus, fixed quantity contract would allow an indirect purchaser to sue, since the direct purchaser is insulated from any decrease in sales which might otherwise result from passing on the overcharge and the effect of the overcharge is determined in advance without the need for complex factual determinations.35 Secondly, where the direct purchaser is owned or controlled by its customer, there is really one economic entity and no real problem of tracing complexities.36 The rule in Illinois Brick is not especially comprehensive as it applies only to certain categories of cases, those involving damages from overcharges.37 It does not apply to actions for injunctive relief, as there are no concerns of multiple liability or tracing the allocation of the overcharge among different levels of purchasers.38 It does not apply to vertical price fixing (resale price maintenance) situations because the retailer who has a claim at all has one for lost profits while the indirect purchaser has the claim for the overcharge.39 Non-price restraints do not ordinarily present Illinois Brick problems because damages are generally based on lost profits, not overcharges.40 The Illinois Brick rule has been heavily criticized and debated at length.41 While those who see antitrust solely in terms of economic efficiency tend to approve of the rule, those who are concerned with compensating victims generally disapprove. However, there is no doubt that the rule deprives injured parties of their claim to damages. Legislation to repeal Illinois Brick was introduced into Congress

85df07a2946c0bf5e633a71e91da97ad. 85df07 35Supra, at 735. The Court confirmed that this exception is limited to contracts with a fixed quantity term, not gif merely cost-plus, in Kansas & Mo. v. Utilicorp United, 497 US 199 (1990). gif 85df07a2946c0bf5e633a71e91da97ad. 36 See, supra note 32, at 736 note 16. gif 37Dart Drug Corp. v. Corning Glass Works, 480 F Supp. 1091, 1101 (D Md. 1979); see Fontana Aviation, Inc. v. 85df07a2946c0bf5e633a71e91da97ad. gif Cessna Aircraft Co., 617 F 2d 478, 481 (7th Cir. 1980). 85df07a2946c0bf5e633a71e91da97ad. 38Midwest Paper Products Co. v. Continental Group, Inc., 596 F 2d 573, 58994 (3d Cir. 1979). gif 39Link v. Mercedes Benz of N. America, 788 F 2d 918 (3d Cir. 1986). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 40 It is doubtful that the indirect purchaser rule should be considered a 'standing' rule at all. Although it deals with gif 'remoteness' in one sense, the fact that it is limited to certain types of cases and is inapplicable to injunctive relief at all suggests that it is not standing in the usual sense. The Sup. Ct. has noted that 'which persons have been injured by an illegal overcharge' is 'analytically distinct' from 'which persons have sustained injuries too remote to give them standing'. 431 US at 728 note 7. 85df07a2946c0bf5e633a71e91da97ad. 41 E.g., R. G. Harris and L. A. Sullivan, 'Passing on the Monopoly Overcharge: A Comprehensive Policy gif Analysis', (1979) 128 U Pa.L Rev. 269; W. M. Landes and R. A. Posner, 'Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick', (1979) 46 U Chi. L Rev. 602; W. M. Landes and R.A. Posner, 'The Economics of Passing On: A Reply to Harris and Sullivan', 128 U Pa.L Rev. 1274 (1980).

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on several occasions, but never passed. However, a number of states have passed 'repealer statutes' amending their state antitrust statutes (generally so-called 'little Sherman Acts' which normally track the federal law) to expressly allow recovery by indirect purchasers. The US Supreme Court has upheld the constitutionality of these statutes.42 Ironically, federal courts have allowed indirect purchaser suits under state repealer statutes as pendent claims to injunction suits under federal antitrust law,43 while not permitting the indirect purchasers to sue for damages under the federal law. The indirect purchaser rule is a clear policy choice made by the Supreme Court as to which of two rules best promotes the private enforcement of the antitrust laws. As such, it is largely independent of the specific US statutory scheme and susceptible of being remade in the context of EC and UK law. 15.3 Preferred Plaintiffs: Consumers and Competitors Because one of the central concerns of US antitrust law from its inception has been the effect of 'trusts' on prices of goods paid by consumers, they are considered preferred plaintiffs where they can show antitrust violations caused them to pay more for goods than they would have paid absent the violation. Monopolistic pricing and price-fixing conspiracies are the typical claims advanced by consumers. Since the Supreme Court's Reiter v. Sonotone decision, the preferred position of the consumer has seemed well settled. The chief limitation on consumer recovery is the indirect purchaser rule of Illinois Brick, previously discussed. However, whenever consumers (in the sense of end users, not restricted to individual shoppers) pay an illegal overcharge as a result of purchasing goods or services, they are not the only consumers injured. There frequently will be consumers who, faced with a higher price, elect not to purchase the illegally priced goods at all, or perhaps substitute some less desirable product. These consumers are injured as well, but due to the difficulty of identifying them, they are usually ignored.44 Subject to these exceptions, consumers normally can sue if they satisfy the requisites of causation and antitrust injury. Competitor suits are usually also favoured, although this is more controversial. Certain types of monopolistic conduct, such as exclusion from markets or predatory pricing, invariably are challenged by competitors who normally have stand-

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 42California v. ARC America Corp., 490 US 93 (1989). gif gif 85df07a2946c0bf5e633a71e91da97ad. 43City of St Paul v. FMC Corp., 1991 Trade Cas. (CCH) 69305 (D Minn. 1990). gif 85df07a2946c0bf5e633a71e91da97ad. 44 E.g., Montreal Trading v. AMAX, 661 F 2d 864 (10th Cir. 1981), cert. denied, 455 US 1001 (1982) (would-be gif purchaser lacked standing).

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ing to sue. Boycotts, by their very nature, are often aimed at competitors and are challengeable by them, as are concerted refusals to deal.45 Competitor suits have been criticized on the grounds that competitors can be injured by vigourous competition or the efficiency of rivals, and thus lack the proper 'motives' to enforce the antitrust lawsthey may hope to protect themselves from competition.46 Nonetheless, competitors who are able to show causation and antitrust injury normally will be allowed to sue. Competitors have a great incentive to sue, usually know more about what is happening in the relevant market, and they are enabled to bring suit earlier. Despite these critiques, it is clear that competitor plaintiffs are regarded as serving the interests of antitrust enforcement and appropriate plaintiffs to challenge many antitrust violations. 15.4 Distribution Restraints One of the most common types of private actions in the USA involves suits by various categories of plaintiffs alleging injury suffered from some form of distribution restraint. Such restraints take many forms, but this normally includes both maximum and minimum resale price maintenance, restrictions on the freedom of dealers to choose territories or customers, or tying and exclusive dealing arrangements. Consumers who pay inflated prices or have reduced choices (or fewer services) have standing to obtain damages when these injuries occur. However, not all restraints generate an overcharge or even a palpable reduction in services. Where maximum resale prices are imposed, leading to lower prices than would otherwise exist, consumers have suffered no compensatable injury absent other facts. If a price ceiling causes a dealer to forego providing services, the lost value of the services may be a compensatable injury, but it may be that the value of the lost service is offset by the reduction in the otherwise prevailing price. If a fixed minimum price is higher than would otherwise exist, it has been argued that consumers may have the higher price offset by the value of additional services provided by the dealer.47 Proof of such additional services actually received by a customer would be

85df07a2946c0bf5e633a71e91da97ad. 45 E.g., Z Channel Limited Partnership v. Home Box Office, 931 F 2d 1338 (9th Cir. 1991); Los Angeles gif Memorial Coliseum Comm'n v. National Football League, 791 F 2d 1356 (9th Cir. 1986), cert. denied, 484

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US 826 (1987); In re Insurance Antitrust Litigation, 938 F 2d 919 (9th Cir. 1991), aff'd in part, rev'd in part sub nom. Hartford Fire Insurance Co. v. California, 509 US 764 (1993).

85df07a2946c0bf5e633a71e91da97ad. 46 See, e.g., E. Snyder and T. Kauper, 'Misuse of the Antitrust Laws: The Competitor Plaintiff', (1990) 90 Mich. L gif Rev. 551. Hovenkamp argues that the solution to any misuse of competitor suits is 'aggressive' application of the antitrust injury requirement: Hovenkamp, supra note 23, at 559. 85df07a2946c0bf5e633a71e91da97ad. 47 The favourite justification for RPM advanced by Chicago-school adherents is that it is efficient because it gif enables dealers to provide services which arguably strengthen inter-brand competition. Areeda and Hovenkamp, supra note 24, at 334, argue that if increased services are provided, (footnote continued on next page)

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unlikely, and might well cross the border into the realm of speculation.48 It should be noted that where a consumer purchases from a restrained dealer, he is not purchasing from an innocent middleman, and there is thus no Illinois Brick problem. The dealer who is restrained by a manufacturer's conditions will ordinarily have standing to seek an injunction against the restraint or treble damages, but actual relief may turn on whether he can show injury-in-fact and antitrust injury. Typically, a dealer will bring an antitrust suit against his former supplier after his dealership was terminated, alleging that he was terminated for refusing to comply with an illegal restraint. Of course, the dealer will have to be able to prove that it was the illegal restraint that caused his termination, not some other unchallenged requirement or the fact that he was not paying for his goods, not providing adequate services, etc. If the dealer alleges an illegal RPM scheme, he will have to prove that in the absence of the artificially higher price, he would have earned more profits. If being able to reduce his prices cannot be shown to generate sufficient additional business to offset the reduced margin and generate larger profits, he may not have been injured by the illegal restraint. Similarly, if he attacks a maximum RPM scheme, he will have to show that increasing his prices above the sanctioned maximum would not have reduced demand so much that his profits would be less. If other dealers do not increase their prices because they are adhering to the scheme, then it may be difficult to show that his profits would increase in the face of such competitors keeping their prices down. One of the arguable, if controversial, implications of the antitrust injury rule which has been suggested is that a plaintiff does not necessarily suffer antitrust injury if his claim for damages is dependent on the continuation of the restraint which he is challenging.49 One court has held that where a plaintiff measures his damages by comparing his pricecutting to prices of other dealers which are artificially high due to an illegal RPM agreement, he is in fact assuming a continuation of the restraint on everyone else in the market and claiming profits resulting from an antitrust violation,50 which would not constitute 'antitrust injury compensatable by a damage award'. Instead, damages must be based on the assumption, according to that court, that once a restraint is declared illegal, the defendant (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. 85df07 there may be no net injury to the consumer. While one can say that this may occur theoretically, it would be a gif rare case in which the defendant could show a particular plaintiff as having received sufficient additional gif valuable services to offset an illegal price fix. The additional services justification for RPM has been shown to apply in few real-world cases, and the author is unaware of any study tying a particular quantity of additional service (and fixing its value) to a particular plaintiff. 85df07a2946c0bf5e633a71e91da97ad. 48 Even Areeda and Hovenkamp concede 'the presence or value of such services to the particular plaintiff may be gif obscure': supra, at 334 note 6.

85df07a2946c0bf5e633a71e91da97ad. 49 See Hovenkamp, supra note 23, at 5501. gif 50Isaksen v. Vermont Castings, 825 F 2d 1158, 1165 (7th Cir. 1987), cert. denied, 486 US 1005 (1988). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_182 next page >


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will no longer impose RPM on its dealers. A dealer may still be able to show damages from the RPM collusion, but its lost profits claim may have to be based on the assumption that its sales would have increased absent the restraint being imposed on any of the dealers. In another case, non-RPM, a copyright holder restrained its foreign (non-US) licensees from selling in the USA and an unlicensed importer was denied the right to challenge what amounted to a territorial restraint on the grounds that it was the restraint which created the high prices in the USA from which the importer was profiting.51 A broker who was prevented by a territorial restraint from making purchases in low-priced areas and reselling them in higher-priced areas lacked antitrust injury because the restraint created the opportunity to profit, so he could not have obtained the profit in an unrestricted market.52 It is unclear to what extent these few cases represent the prevailing law. It is submitted that to the extent they maintain there is no antitrust injury in the Brunswick sense, they misapply the rule. Vertical53 territorial restraints are prohibited (when they violate the rule of reason) under US law because they suppress or eliminate intra-brand competition. Thus, if a dealer shows he would have profited from engaging in spirited intra-brand competition but for the territorial restraint imposed on him, he has clearly satisfied the Brunswick requirement that his injury stem from that which makes defendant's acts unlawfulthe suppression of intra-brand competition. On the other hand, where a plaintiff's evidence is projecting lost profits from sales he was prevented from making because of the restraint he is challenging, it seems reasonable as a matter of causation-in-fact that his evidence must take into account the behaviour of the market, including the possibility that other dealers might reduce their prices, or that the restraint might not be continued indefinitely. However, that is a matter of how much the plaintiff's proof reasonably establishes, not a question of true antitrust injury. The plaintiff is not in any sense profiting from the restraint on intra-brand competition, but from his ability to engage in intra-brand competition.54 This is not a lack of antitrust injury.

85df07a2946c0bf5e633a71e91da97ad. 51 See Original Appalachian Artworks v. Granada Elec., 816 F 2d 68 (2nd Cir.), cert. denied, 484 US 847 gif (1987).

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85df07a2946c0bf5e633a71e91da97ad. 52Tomac v. Coca-Cola Co., 418 F Supp. 359 (MD Cal. 1976). This result seems perverse and questionable. gif 53 Horizontal territorial restraints are per se illegal under US law, but we are dealing here with distribution issues, 85df07a2946c0bf5e633a71e91da97ad. gif which are normally vertical in nature. 85df07a2946c0bf5e633a71e91da97ad. 54 The premise of Isaksen is that a plaintiff must assume a defendant found guilty of imposing illegal RPM would gif cease imposing it on any of its dealers. However, this is only one of several plausible possible reactions, unless an injunction is sought. It is ironic that the economic case for RPM rests upon the notion that dealers will compete on services, not price, so that the consumer is better off. If so, dealers should, under the Chicago-school theory, want to maintain their prices and continue to compete on services on the basis that customers will prefer to have extra services even if the price is higher. The real-world situation is probably that some dealers will cut prices and some will


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A manufacturer's restraints on his own dealers, to the extent they result in higher prices, restricted distribution, or even lower output are not normally considered to injure other rival manufacturers.55 This is because such results give the rival an opportunity to underprice the competition, or expand their own output. Maximum resale price restraints are not considered antitrust injury, but are considered vigourous competition, at least where the prices are not set at predatory levels.56 (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. 85df07 not, and the most reasonable proof will determine the outcome. A defendant who has spent the trial defending gif a territorial restriction (or RPM) on the basis that customers will prefer the services will be hard put to it gif suddenly to change his posture to argue that the plaintiff has no damages because now all the dealers will compete on price.

85df07a2946c0bf5e633a71e91da97ad. 55 See, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 US 574, 586 (1986); Pope v. Mississippi Real gif Estate Commission, 695 F Supp. 253 (ND Miss. 1988), aff'd, 872 F 2d 127 (5th Cir. 1989); Cargill, supra note 7. 85df07a2946c0bf5e633a71e91da97ad. 56Atlantic Richfield Co. v. USA Petroleum Co., 495 US 328, 345 (1990). gif < previous page page_184 next page >


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16 Limits on Permissible Private Plaintiffs under EC Law

85df07a2946c0bf5e633a71e91da97ad. 16.1 Locus Standi in Private Community Antitrust gif

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85df07a2946c0bf5e633a71e91da97ad. 16.2 Direct Effect and Antitrust Locus Standi gif

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85df07a2946c0bf5e633a71e91da97ad. 16.3 Locus Standi and the Division of Powers gif

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85df07a2946c0bf5e633a71e91da97ad. 16.4 The Antitrust Injury Limitation in the Community? gif

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85df07a2946c0bf5e633a71e91da97ad. 16.5 Indirect Purchasers and Passing-on in the Community gif

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The case law in the USA concerning the standing and other prudential rules in private antitrust actions has been developed in many judgments given since 1890. In contrast, not a single decision awarding damages under EC antitrust law has yet been reported, much less any judgments concerning prudential rules in private actions. Any attempt to predict how the law will develop in this area puts chalk to the proverbial blank slate with attendant risks of being considered at least erroneous, if not presumptuous as well. As Craig and de Búrca have said, '[p]redicting future developments is never easy. It may well be foolish even to try'.1 Nonetheless, it is submitted that the US experience provides useful guidepostsand cautionsfor Community antitrust. 16.1 Locus Standi in Private Community Antitrust It is clear from the outset that a comparison of antitrust standing as it has developed in the USA with the Community cannot be grounded on any textual similarity in any applicable legislation or treaty provision. The USA has developed its limitations on standing by judicial interpretation of statutory language which has no direct analogue in Community legislation. The Community provisions (e.g. Articles 173 (now 230), 175 (now 232), 184 (now 241), and 215 (now 288)) which have produced a body of locus standi jurisprudence offer limited assistance

85df07a2946c0bf5e633a71e91da97ad. 1 P. Craig and G. de Búrca, EC Law: Text, Cases, and Materials (Oxford, 1995), 479. gif

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due to the plain non-comparability of rules intended to prevent challenges to Community acts and legislation from bringing the Community to a grinding halt and provisions of the EC Treaty (e.g., Articles 85 and 86, now 81 and 82) which have been held to confer rights on individuals entitling them to compensation. It is submitted that the Community doctrine of standing in private antitrust litigation necessarily derives its shape from more general Community law principles and the nature of the Community system. Only one of the US-origin rules concerning antitrust standing, the 'zone of interests' test, seems appropriate for export to the Community, as discussed below. 16.2 Direct Effect and Antitrust Locus Standi It is submitted that the appropriate rule in private actions based on Articles 85 and 86 (now 81 and 82) should be that 'antitrust locus standi' is granted to natural or legal persons who plead that: (1) The defendant or defendants have infringed Article 85 or 86 (now 81 or 82); and (2) The infringement is likely adversely to affect the legitimate interests of the plaintiff or adversely has affected the legitimate interests of the plaintiff. There are several reasons for adopting such a broad rule of antitrust locus standi in the context of the Community system as distinct from following the lead of US courts in the application of a restrictive gloss. First, there is a substantial and material difference between the status of competition rules in the Community legal order and the position of the Sherman Act in the USA. The EC Treaty has been referred to as the 'constitutional charter' of the Community2 and Articles 81 and 82 (formerly 85 and 86) have consistently been held directly to confer individual rights which the national courts must protect. In recent decisions, previously reviewed, the ECJ has stated that 'the right to reparation is the necessary corollary of the direct effect of the Community provision whose breach caused the damage sustained'.3 If a right to reparation is a necessary corollary of the direct effect of a provision of Community law, then a fortiori with regard to antitrust locus standi. A right to reparation would be without meaning if an additional corollary to direct effect is not the existence of locus standi.4

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 2Opinion 1/91, Draft EEA Agreement, [1991] ECR 6079, 21. gif gif 85df07a2946c0bf5e633a71e91da97ad. 3 E.g., Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany (Factortame gif III), [1996] ECR I1029, at 22. 85df07a2946c0bf5e633a71e91da97ad. 4 Cf. M. Ross, 'Refining Effective Enjoyment', (1990) 15 Eur. L Rev. 476, 478, who put it inversely as 'direct gif effect is not just a locus standi rule but a matter of substantive enjoyment of rights'. In The Queen v. Attorney General, ex parte Imperial Chemical Industries PLC, ICI [1985] 1 CMLR 588, 608, the English Court accepted that direct effect meant there was 'no doubt' of locus standi.

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While the Sherman Act rhetorically has been called the 'Magna Carta of free enterprise', it is no constitution. It is fundamentally a criminal statute which private parties may enforce only by reason of the separate statutory provisions for treble damages and injunctive relief. The Sherman Act does not confer constitution-level rights in the manner of a directly effective right in the Community. The private remedy statute offers compensation and a supplemental means of enforcement. The narrow interpretation of antitrust standing utilized in US courts does not implicate a fundamental right as it might in the Community. One US court has said that the 'mere presence' of an antitrust violation 'does not by itself bestow on any plaintiff a private right of action for damages', but such actions are a 'gift of section 4 of the Clayton Act'.5 It would seem that under the doctrine of direct effect in Community law, a plaintiff who can show injury caused by an infringement has a private right of action which is coextensive with the substantive reach of the directly effective competition rules of the EC Treaty. It is submitted that under the EC regime, the principal limitation on who can sue for damages will be the plaintiff's evidence of causation. 16.3 Locus Standi and the Division of Powers The locus standi rules developed in reference to review of Community acts or failure to act according to whether the applicant is 'individually and directly concerned'6 are unsuitable for application in the private antitrust litigation context.

85df07a2946c0bf5e633a71e91da97ad. 85df07 5Indiana Grocery Co. v. Super Valu Stores, 864 F 2d 1409, 141819 (7th Cir. 1989). In United State v. Topco gif Associates, 405 US 596, 610 (1972), the Court said '[a]ntitrust law in general and the Sherman Act in gif particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.' 85df07a2946c0bf5e633a71e91da97ad. 6 There is of course a substantial body of case law concerning the rights of natural and legal persons as well as gif Community institutions to challenge the actions or failures to act of Community institutionsmore than enough to serve as the subject of a dissertation in its own right. In fact, it has been one. For a current, comprehensive, and most thorough analysis, see generally, A. Albors-Llorens, Private Parties in European Community Law: Challenging Community Measures (Oxford, 1996). However, the existing case law is of only limited relevance to the scope of locus standi available to private parties who are challenging not Community measures but private practices alleged to infringe directly effective competition rules. It is submitted that this is so because of clear differences in the purpose of locus standi rules in these different contexts as well as the fact that much of the case law appears to turn on the particular language of Art. 173, now 230.

85df07a2946c0bf5e633a71e91da97ad. The decisions of greatest initial interest are those concerning the locus standi of private parties challenging gif decisions not addressed to them. The majority of such decisions involve, as did the seminal Plaumann case, Case

25/62, Plaumann & Co. v. Commission, [1963] ECR 95, challenges to decisions taken by the Commission and addressed to a Member State in areas of the general management of the marketcustoms duties, protective measures, and the Common Agricultural Policy: Albors-Lloren, supra at 45. The ECJ's interpretation in such cases of Art. 173(4)'s (now 230) textual requirement that the contested decision be 'of direct and individual concern' has been


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Indeed, the Court has essentially found them unsuitable in the context of Regulation 177 and has developed a more liberal standing doctrine in accordance with the 'legitimate interest' and 'sufficent interest' language of that regulation. Yet, it cannot be said that these 'draconian' rules are totally irrelevant because of the implications of the division of powers between the Commission and the national courts in respect of the application of Articles 85 and 86, now 81 and 82. It has been seen that the right of applicants to seek annulment of Commission decisions which do not fully protect their legitimate interest is generally upheld by (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. described as 'draconian': supra, at 217. The effect of the requirement of 'individual' concern has been that a gif party who is not part of a closed category whose membership is fixed at the time of the decision in question

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has been that the party lacks locus standi. Moreover, even where the challenging party is part of such a closed class, Albors-Lloren argues that having an individual right affected by the decision is required, and that the effect on a mere interest is insufficient to render an applicant individually concerned: supra, at 219. 85df07a2946c0bf5e633a71e91da97ad. In the case of 'direct' concern, the issue is fundamentally one of cause and effect between the challenged decision gif and the damage inflicted upon the individual rights of the applicant: T. C. Hartley, The Foundations of European Community Law (3rd edn., Oxford, 1994), 383; Albors-Lloren, supra, at 220. Although lack of directness may be indicated by the presence of a measure of discretion on the part of addressees of the decision, the presence of discretion criterion does not provide a complete explanation for the cases: Albors-Lloren, supra. In general, it appears that the ECJ requires causation to injury to rights, not merely interests, except in a few categories of decisions. 85df07a2946c0bf5e633a71e91da97ad. 7 In certain categories of cases, most notably competition, anti-dumping, and state aids matters, the ECJ has gif seemed much more willing to find locus standi. The more liberal locus standi cases in the area of competition law involve the extent to which third parties may complain about the Commission's action or failure in act in accordance with the wishes of the third party. Reg. 17 expressly provides in Art. 3(2)(b) for complaints to the Commission by 'any natural or legal person who claims a legitimate interest'. Art. 19(2) grants a right to be heard in Commission proceedings to persons who 'show a sufficient interest'.

85df07a2946c0bf5e633a71e91da97ad. The ECJ first addressed the locus standi of complainants in First Metro, Case 26/76, Metro v. Commission, [1977] gif ECR 1875, involving a wholesaler excluded from a selective distribution system in Germany. Metro had filed a

complaint when SABA had refused to admit Metro as part of its wholesaler network, and the Commission had required SABA to alter certain provisions of its wholesaler agreements. Metro was not satisfied with parts which were not altered and brought an action to annul the Commission's decision that the distribution system did not infringe Art. 85 (now 81). SABA's objection to Metro's locus standi was rejected on the grounds that Metro had initiated the complaint, the provisions which were the subject of the complaint adversely affected Metro's desire to be admitted to SABA's distribution network, and that Arts. 85 and 86 (now 81 and 82) and the 'satisfactory administration of justice' required that if Metro had sufficient interest to complain, it also had the right to follow through to protect its interests: supra, at point 14. It is fairly implied that the source of Metro's interest sufficient to complain was its allegation of infringement of Art. 85 (now 81) by SABA. Part of the Commission's decision concerned a matter within its exclusive jurisdictionan Art. 85(3), now 81, exemption.

85df07a2946c0bf5e633a71e91da97ad. In the Second Metro Case, Case 75/84, Metro v. Commission, [1986] ECR 3021, Metro brought an action for gif annulment of the Commission's new exemption decision, and SABA intervened. The ECJ upheld Metro's standing

because its applications to be a wholesaler had been rejected, Metro had stated its objections pursuant to Art. 19 of Reg. 17, and the Commission had rejected Metro's objections in a portion of the contested decision. The Court found the decision of be of direct and individual concern to Metro. In Case 210/81, Demo-Studio Schmidt v. Commission, [1983] ECR 3045, the Court said a refusal to grant Mr. Schmidt a dealership was 'capable of affecting his legitimate interests'.

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the ECJ.8 In contrast, the ECJ and the CFI have consistently held that there is no right on the part of an applicant to require the Commission to render a decision finding an infringement.9 One consequence is that the Commission has in some cases declined to act at all on a complaint, as in Automec (No. 2), or started and then abandoned proceedings, as in BEMIM.10 In the latter case, the CFI upheld the locus standi of an association representing owners of French discothèques who alleged violations of Articles 81 and 82 (formerly 85 and 86) by the copyright-management society SACEM. The Commission sought to shelve the complaint for what it considered the lack of a Community interest and informed the applicant that the complaint was 'rejected and referred to the national courts'.11 The CFI stated:

85df07a2946c0bf5e633a71e91da97ad. In view of the division of that power between the Commission and the national courts and the resulting gif protection available to individuals before the national courts, it has been consistently held by the Court of

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Justice and the Court of First Instance that Article 3 of Regulation No. 17 does not confer upon a person who lodges an application under that article the right to obtain from the Commission a decision within the meaning of Article 89 [now 85] of the EC Teaty, regarding the existence or otherwise of an infringement of Article 85 or Article 86 [now 81 or 82] of the Treaty or of both . . . [citations omitted]. The position is different only if the complaint falls within the exclusive purview of the Commission, as in the case of the withdrawal of an exemption granted under Article 85(3) [now 81(3)] of the Treaty. . . .12

85df07a2946c0bf5e633a71e91da97ad. 85df07 8 In a number of decisions, the CFI has reiterated that a party having a legitimate interest within the meaning gif of Art. 19 has the locus standi to seek annulment of a Commission decision: e.g., Case T138/89, Nederlandse gif 314; Case Bankiersvereniging en Nederlandse Vereniging van Banken v. Commission, [1992] ECR I2181, T37/92, BEUC v. Commission, [1994] ECR II285, 36; Case T114/92, Bureau Européen des Médias de l'Industrie Musicale v. Commission (BEMIM), [1995] ECR II147, 26; Case T96/92, Comité Central de la Société Générale des Grand Sources v. Commission, [1995] ECR II 1213, 46; and Case T12/93, Comité Central d'Entreprise de la Société Anonyme Vittel v. Commission, [1995] ECR II1247, 59. In a merger case involving Air France, the CFI found that a proposed merger between British Airways and Dan-Air would weaken Air-France's competitive position on certain routes and this was sufficient to render Air France individually concerned: Case T3/93, Société Anonyme à Participation Ouvrière Compagnie Nationale Air France v. Commission, [1994] ECR II121, 82. A second merger case involved an Air France challenge to a decision regarding a concentration between British Airways and TAT, and the CFI found Air France individually concerned because of its participation in administrative proceedings and the fact that its position in the market would be adversely affected: Case T2/93, Société Anonyme à Participation Ouvrière Compagnie Nationale Air France v. Commission, [1994] ECR II323, 456.

85df07a2946c0bf5e633a71e91da97ad. 9 Case 125/78, GEMA v. Commission, [1979] ECR 3173, 17; Case T24/90, Automec v. Commission (No. 2), gif 756; Case T16/91, Rendo N.V. et al. v. Commission, [1992] ECR II2417, 98; Case [1992] ECR II2223, T37/92, BEUC v. Commission, [1994] ECR II285, at 36; Case T114/92, Bureau Européen des Médias de l'Industrie Musicale v. Commission (BEMIM), [1995] ECR II147, at 62.

85df07a2946c0bf5e633a71e91da97ad. 10 Case T114/92, Bureau Européen des Médias de l'Industrie Musicale v. Commission (BEMIM), [1995] ECR gif II147, at 81. 85df07a2946c0bf5e633a71e91da97ad. 11BEMIM, supra note 10, at 14. gif 85df07a2946c0bf5e633a71e91da97ad. gif

12BEMIM, supra, at

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Both Automec (No. 2) and BEMIM have founded the Commission's right to 'refer' a case to national courts on the sufficiency of the national courts to adequately safeguard the rights of the complainants.13 It is submitted that this rule necessarily implies that individuals who 'claim a legitimate interest' within the meaning of Article 19 of Regulation 17 must be considered to have locus standi in the national courts. Were the situation otherwise, the Commission would have been bound to dismiss applications for lack of sufficient or legitimate interest instead of lack of Community interest. The Commission may not decline to pursue complaints on grounds of lack of a sufficient Community interest absent a determination that the national courts suffice to safeguard the directly effective Article 81 and 82 (formerly 85 and 86) rights of applicants, and this can only be so if applicants routed to the national courts have locus standi when they arrive. In BEMIM, the CFI expressly held that the applicant had locus standi under Article 3 of Regulation 17, stating:

85df07a2946c0bf5e633a71e91da97ad. 85df07 The court considers that an association of undertakings may claim a legitimate interest in lodging a complaint gif even if it is not directly concerned, as an undertaking operating in the relevant market, by the conduct gif complained of, provided however that, first, it is entitled to represent the interests of its members and, secondly, the conduct complained of is liable adversely to affect the interests of its members.14 The CFI in BEMIM noted that the conduct criticized in the complaint (discriminatory music royalty rates and partitioning national markets for music licences) 'is all of such a kind as to harm the interests of the discothèques making up its membership'.15 Other locus standi cases such as the Metro cases, Demo-Studio Schmidt, and the Air France cases have recognized legitimate interests based on adverse effects on an applicant's economic interests from the conduct alleged to infringe the competition rules. The division of powers between the national courts and the Commission in regard to the Commission's discretion to 'refer' cases deemed to lack a Community interest to the national courts clearly implies that locus standi in the national courts must be at least as broad as the 'legitimate interests' test incorporated in Regulation 17. The formulation proposed above would be similar in substance to the test employed in Regulation 17.16 This division of powers consideration is not present in US law because the Department of Justice has

85df07a2946c0bf5e633a71e91da97ad. gif 13Supra, at 86; Case T24/90, Automec v. Commission (No. 2), [1992] ECR II2223 741, at 85df07a2946c0bf5e633a71e91da97ad. 14BEMIM, supra note 10, at 28. gif 85df07a2946c0bf5e633a71e91da97ad. 15Supra, at

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29.

gif 85df07a2946c0bf5e633a71e91da97ad. 16 Art. 3 of Reg. 17 employs the phrase 'legitimate interests' as a statement of the requirements to file a complaint. gif Art. 19 mentions 'sufficient interests' in the context of when a party may be heard in the proceedings. The qualifications and references to the Commission's discretion in Art. 19 suggest that the language of Art. 3 is more appropriate and more consistent with the division of powers principle, as well as direct effect.

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virtually unfettered prosecutorial discretion and exclusive power only in criminal matters. Thirdly, there is substantial reason to believe, as previously mentioned, that a major factor in the thinking of the US courts in their limitation of the Clayton Act's 'any person' language on standing grounds was an aversion to allowing universal invocation of the statutory treble damages provision. One of the underlying assumptions was that a literal interpretation with consequently generous standing rules would not have been in accord with Congressional intent in the light of the size of the potential liability created by the mandatory trebling of actual damages. Whether or not this perception of Congressional intent was accurate, the same cannot be said of the ECJ's doctrine of directly effective individual rights. It is clear from over 30 years of Community jurisprudence that directly effective Community rights are intended to be available on a universal basis to natural and legal persons in the Community. Absent the inhibiting aspect of mandatory treble damages, it is submitted that the ECJ is not likely to adopt the limiting constructions which characterize US antitrust standing jurisprudence, for to do so would require limitation of the fundamental doctrine of direct effect. Of the several approaches to antitrust standing exhibited in US law, the one which most resembles the 'legitimate interests' test proposed here is the 'zone of interests' test adopted by the Sixth US Circuit Court of Appeals in Malamud. It will be recalled that this test derived from US administrative law provisions recognizing standing on the party of plaintiffs who allege injury in fact and an interest 'arguably within the zone of interests' of the antitrust laws. This test relegated considerations of directness of injury to the proof of the substance of the violation and causation of damages rather than to the preliminary determination of standing, an approach which seems consistent with the proposed statement of the rule for antitrust locus standi in the Community. It is submitted that the directly effective nature of EC antitrust law will require a similar approach. In sum, it seems that in the Community locus standi rules at least will be coextensive with the substantive reach of the competition rules, unlike in the USA. This means that antitrust locus standi in the Community will be much broader than in the USA with the potential for private enforcement to be even more commonplace in Europe. 16.4 The Antitrust Injury Limitation in the Community? In US antitrust jurisprudence, the antitrust injury doctrine originated in the reluctance of the Supreme Court in Brunswick to countenance a decision which 'divorces antitrust recovery from the purposes of the antitrust laws without a clear

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statutory command to do so'.17 It may be that in the Community the purposes of the 'antitrust laws' are sufficiently different or there is a sufficient analogy to a 'statutory command' that the doctrine will not be suitable for import into Community law. In particular, the broader concept of 'competition' in the Community as compared to the USA has been noted previously. US antitrust doctrine in recent years has been greatly influenced by developments in economic theory, chiefly the socalled 'Chicago School' approach which emphasizes allocative efficiency and 'consumer welfare' (narrowly defined) as the only legitimate objectives of antitrust policy.18 Under this approach, other objectives of antitrust are minimized if not entirely disregarded, and the focus is on purely economic effects (e.g., restriction of output).19 Some of the court decisions reviewed above have analysed antitrust injury expressly in terms of whether the plaintiff's injury was caused by the specific economic reason the practice challenged was considered to violate the antitrust laws. This conceptual tie of economic effect as the rationale for declaring a restraint illegal found in some US court decisions does not readily apply to Articles 85 and 86 (now 81 and 82), at least where infringements may be found on the basis of principles which are not purely economic. Accordingly, the doctrine would seem to have limited application at the outset, and the nature of the limits suggest that the doctrine may be inappropriate in the Community system. The EC Treaty's concern expressed in Article 3(g) that competition in the common market 'is not distorted' and Article 85's (now 81) prohibition against the 'prevention, restriction or distortion of competition' indicate that in the context of the internal market, 'distortion' of competition is equally as prohibited as restriction or prevention. This concern is largely absent from US antitrust law. In ARCO, the Supreme Court rejected the view of the lower court that 'antitrust injury' could be found whenever a practice distorts the market. The Court declined to equate injury-in-fact with antitrust injury on the grounds that '[e]very antitrust violation can be assumed to ''disrupt" or "distort" competition', for 'otherwise there would be no violation'.20 There is thus a textual basis for concluding that the Community competition rules reach more broadly in this regard than do the relevant statutes in the USA. Moreover, adoption of the antitrust injury limitation in the Community would create a disparity between the substantive reach of the competition rules and the scope of the private remedy. Where the right of individuals to enforce the compe-

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 17Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. 429 US 477, 487 (1977). gif gif 85df07a2946c0bf5e633a71e91da97ad. 18 See generally, B. Hawk, 'The American (Antitrust) Revolution: Lessons for the EEC?', (1988) 9 Eur. gif Competition L Rev. 53, 5861. 85df07a2946c0bf5e633a71e91da97ad. 19 See N. Green, T. C. Hartley, and J. A. Usher, The Legal Foundations of the Single European Market (T. C. gif Hartley, ed), (Oxford, 1991), 2035. 85df07a2946c0bf5e633a71e91da97ad. 20Atlantic Richfield Co. v. USA Petroleum Co. (ARCO), 495 US 328, 340 (1990). gif < previous page page_192 next page >


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tition rules derives from their direct effect, the scope of the private remedy must be coterminous with the substantive reach of the Treaty rule or one of the 'pillars' of the Community system has been seriously weakened. It therefore seems that the Community should not import this doctrine as a limitation on private actions. On the other hand, as Brunswick indicates, there should be some approach which prevents the award of damages in circumstances where damages are sought to compensate for injuries suffered 'from' competition. For example, the entry of the giant Brunswick as a competitor to the 'pygmies' in the bowling centre market doubtless 'distorted' competition in the sense that increased resources or lower costs were made available to some bowling centre operators which were not available to others. However, even under the broad concept of competition in the Community, it is difficult to imagine that a damages award resulting from increased competition generated through acquisition and operation of failing businesses makes any sense. It is submitted that the best protection against such anomalies is the development of sound substantive competition law, not artificial limitations on the scope of private enforcement of directly effective Treaty provisions. 16.5 Indirect Purchasers and Passing-on in the Community The passing-on of taxes or administrative charges found unlawful due to incompatibility with Community law has been discussed in several judgments of the ECJ, although none of these cases deals with competition law. In Hans Just,21 Denmark unlawfully charged excessive taxes on spirits. Mr. Just had added the additional tax charge to his prices along with his usual profit margin, thereby increasing his price to his customers. The increased prices resulted in lower sales, lower imports, and redundancy among Mr. Just's staff. When Mr. Just sought compensation, Denmark argued that repayment of the excessive taxes would result in unjust enrichment due to Just's having 'passed-on' the tax increase. Denmark also feared it might face claims from consumers who ultimately bore the burden of the excessive taxes. The ECJ ruled that it was not incompatible with Community law for Denmark to apply its national principle of unjust enrichment where the unlawful charges had been passed on. In other cases of this type, the ECJ has upheld what may be considered in part analogous to 'defensive' passing-on of pricefixed overcharges in the antitrust field.22

85df07a2946c0bf5e633a71e91da97ad. 85df07a 21 Case 68/79, Hans Just I/S v. Danish Ministry for Fiscal Affairs, [1980] ECR 501. gif gif 85df07a2946c0bf5e633a71e91da97ad. 22 E.g., Case 61/79, Amministrazione delle Finanze v. Denkavit Italiana [1980] ECR 1205; Case 130/79, Express gif Dairy v. IBAP [1980] ECR 1887; Case 811/79, Amministrazione delle Finanze v. Ariete [1980] ECR 2545; and Case 826/79, Amministrazione delle Finanze v. MIRECO [1980] ECR 2559.

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Significantly, the Court also said it was compatible with Community law for Just to collect damages resulting from lower imports and sales caused by the increased tax. In the recent judgment in Société Comateb,23 the issue arose concerning repayment of unlawfully levied dock dues where French legislation required the charges to be passed on. The ECJ reviewed its case law on the point and required the national court to determine how much, if any, of the unlawful charge had in fact been passed on without regard to the legislative compulsion. In addition, the Court pointed out that if the charge had been passed on this did not necessarily result in unjust enrichment in particular because the increased price of goods and reduced sales may have caused damage which excluded unjust enrichment, and the Court noted that traders could not be prevented from seeking in national courts having jurisdiction under the conditions laid down in Factortame III reparation for loss caused by levying charges not due, irrespective of whether the charges had been passed on. It seems that Société Comateb comes close to sayingbut does not quitethat where an unlawful levy is made the reimbursement from 'passing on' does not render the trader's 'enrichment' unjust. It will be recalled that Italy's procedural requirement that written proof that unlawful charges were not passed on be furnished as a condition of obtaining a refund of such charges was the subject of the ECJ's judgment in San Giorgio, previously discussed. In that case, what the ECJ struck down was the requirement of a particular mode of proof, not the application of the general principle of unjust enrichment. Even before Société Comateb, the ECJ appeared to limit the scope of the principle of unjust enrichment in Cotter,24 where Ireland was rebuffed in an attempt to use the principle to prevent paying certain increases in benefits to women without proof of dependency where men were allowed such increases without being required to prove dependency. In addition to the Member State passing on cases, the ECJ has looked at the passing on issue in damage claims involving the non-contractual liability of the Community under Article 215 EC. In the Gritz and Quellmehl litigation,25 the Court seemed to accept in principle that if price increases compensating for unpaid 'production refunds' were passed on, those sums were not recoverable to the extent that the damages claim is calculated on the basis of lost refunds. However, loss or damage measured by lost sales, distinct from refund or subsidy benefit amounts, is a different matter entirely.

85df07a2946c0bf5e633a71e91da97ad. 85df07 23 Joined Cases C192/95, to C218/95, Société Comateb and Others v. Directeur général des douanes et droits gif indirects, [1997] ECR I165. gif 85df07a2946c0bf5e633a71e91da97ad. 24 Case 377/89, Cotter and McDermott v. Minister for Social Welfare and Attorney General, [1991] ECR I1155. gif 25 E.g., Cases 64, 113/76, 167, 239/78, 27, 28, 45/79, Dumortier Frères SA v. Council, [1979] ECR 3091 (Gritz 85df07a2946c0bf5e633a71e91da97ad. gif cases), and Case 238/78, Ireks-Arkady v. Council and Commission [1979] ECR 2955, 2974.

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None of these cases involves damages claims against private undertakings, as will normally be the case in an EC antitrust claim for damages. The question is whether the Court will follow the US antitrust approach to the problem of passing on in private litigation when it has not in litigation against the Community and its Member States. It is submitted that the Court will probably take a middle course. The US antitrust approach to passing on is comprised of two components, the llinois Brick rule and the Hanover Shoe rule as previously discussed. Illinois Brick forbids an indirect purchaser plaintiff from the offensive use of passing-on evidence by claiming, for example, that price-fixing overcharges were passed on by an intervening purchaser and paid by the indirect purchaser. It is submitted that Community law does not permit adoption of the Illinois Brick rule. The rule in Illinois Brick would deny compensation to 'indirect purchaser' legal and natural persons suffering actual injury from infringement of their directly effective rights. As previously discussed in the standing context, this would result in an intolerable disparity between the scope of the remedy and the substance of directly effective rights. Accordingly, it seems that in the Community, indirect purchasers able to prove injury must be allowed to do so without the artificial limitation imposed by Illinois Brick in the USA. The remaining part of the question is whether the ECJ will apply its Article 215 (now 288) unjust enrichment jurisprudence to permit the defensive use of passing on in EC private damages actions, or whether it will adopt the Hanover Shoe rule which does not allow evidence of passing on as a defence. The Article 215, now 288, jurisprudence implies that the ECJ would allow defensive use of passing on. However, there are substantial reasons to think the Court might follow the Hanover Shoe rule and prohibit defensive use of passing-on evidence. First, there are conceptual difficulties with the unjust enrichment approach. Toth has argued against such a rule on the grounds that the determination of whether a firm could have passed on a cost increase is complex and difficult to assess, highly variable among different firms, and wrong in principle because the loss is then borne by consumers, not wrongdoers.26 I would take the argument further and suggest that the application of the unjust enrichment principle is inappropriate in the antitrust law context. The effectiveness and fairness of Community antitrust law is arguably enhanced if the wrongdoer is required to pay the full amount of the overcharge to the first purchaser. To illustrate, take the case of the plaintiff who is a governmental

85df07a2946c0bf5e633a71e91da97ad. 26 A. G. Toth, 'The Concepts of Damage and Causality as Elements of Non-Contractual Liability', in H. G. gif Schermers, T. Heukels, and P. Mead (eds.), Non-contractual Liability of the European Communities

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(Deventer, 1988), chap. 3, 2930.

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purchaser paying millions of ECUs in overcharges due to price fixingsuch as the £9 million settlement apparently received by the Post Office from wire and cable manufacturers.27 Does the fact that the government is reimbursed for the overcharge from taxes levied on its citizensor sale of postage stampsconstitute 'unjust enrichment' so that the wrongdoer ought not have to pay? One might have thought not. If a private retailer plaintiff increases his prices in response to an illegal overcharge by his wholesaler and his consumer customers pay it, then two parties arguably have been unjustly enrichedan infringing wholesaler and an innocent retailer. To say that it is permissible for a price-fixing wholesaler to be unjustly enriched by not having to repay the overcharge in order to avoid unjust enrichment to an innocent retailer who brings an antitrust action is not at bottom a particularly compelling or persuasive argument. One has to question whether the concept of 'unjust' enrichment may fairly be applied to shield violators from liability in a situation where the source of the 'reimbursement' is another 'downstream' victim. It is submitted that if a choice must be made between unjustly enriching an innocent victim and unjustly enriching an infringing wrongdoer, the correct choice is to enrich the innocent victim. Secondly, the existing ECJ case law is concerned with non-contractual liability of Community institutions or national governments, not the liability of private undertakings. Moreover, these strict rules were formulated in a particular context where 'the legislative function must not be hindered by the prospect of actions for damages' and 'a legislative context characterized by the exercise of a wide discretion which is essential for implementing Community policy'.28 This rationale has no application to claims against private undertakings who infringe the Community antitrust rules. Accordingly, the rule should not apply in these types of actions. Thirdly, the adoption of Hanover Shoe seems to represent the best choice from the standpoint of the effectiveness of Community antitrust law. The dilemma as to overcharges is that forbidding the defensive use of passing on may grant a windfall to the direct purchaser, and granting the defence of passing-on puts the burden of the overcharge on innocent victims who may be unable or unwilling to sue. The justification for the windfall in the first case is the incentive thereby given to the direct purchaser to enforce the antitrust laws.29 In the Community, absent automatic treble damages, the windfall perhaps is not so great as in the US and may be less troublesome.

85df07a2946c0bf5e633a71e91da97ad. 85df07a 27 R. Whish and B. Sufrin, Competition Law (3rd edn., London, 1993), 173 note 10. gif gif 85df07a2946c0bf5e633a71e91da97ad. 28Factortame III, supra note 3, at 45. gif 85df07a2946c0bf5e633a71e91da97ad. 29 Of course, even if the overcharge is passed on other injury may occur, such as lost profits due to a reduction in gif sales stemming from the price increase. The ECJ, in Hans Just and Comateb, it will be recalled, allowed such recovery to be pursued.

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In the latter case, the indirect purchaser must prove how much of the overcharge was passed on to him and, if he is not the end user, how much he in turn passed on. The result may be that if the direct purchaser does not sue, no one will sue. If it is argued that the end-consumer can sue for the overcharge which was passed on, then the issue is joined on whether the diffusion of damages to indirect purchasers cripples private enforcement because no one plaintiff has enough of an economic stake to undertake litigationone of the major reasons the US Supreme Court barred defensive passing on in Hanover Shoe. In the USA, class action procedures are sometimes available to aggregate claims, but such methods are not generally available in the Community. At present, there is insufficient experience with private litigation in the Community to form a judgement whether the defensive passing-on rule will seriously inhibit damages actions. It is bound to deter some actions, but only some types of claims will be affected by the defensive passing-on rule. If the defensive use of passing-on is permitted by the ECJ, then the question of offensive use by plaintiffs to show they paid unlawful overcharges is non-controversial and follows automatically. However, if the ECJ elects to embrace the rule in Hanover Shoe, it does not automatically follow that it should also embrace Illinois Brick. If an indirect purchaser is willing and able to prove the amount of overcharge passed on to it, then an actual injury has been inflicted, and there is no obvious reason in principle why actual injury should not be recompensed. Sarris's thoughtful study of the effect on private antitrust enforcement of Illinois Brick concluded that the Hanover Shoe decision should be retained and Illinois Brick should be overruled because of the relative unimportance of direct purchasers as plaintiffs, noting that price-fixing is often profitable to those middle-men who resell upon a standard markup, and direct purchasers are reluctant to disrupt 'cosy' business relationships with their suppliers by suing them for antitrust violations.30 The result of Illinois Brick is that indirect purchasers cannot sue and direct purchasers often do not sue, which reduces the effectiveness of private enforcement. The argument for retaining Hanover Shoe even though direct purchaser enforcement is less common than might be desired is to prevent the creation of further disincentives to sue on the part of direct purchasers. The retention of Hanover Shoe together with the repeal (or in the Community, non-adoption) of Illinois Brick is considered preferable because it maximizes the ability of both direct and indirect purchasers to bring actions.

85df07a2946c0bf5e633a71e91da97ad. 85df07 30 V. Sarris, The Efficiency of Private Antitrust Enforcement: The 'Illinois Brick' Decision (New York, 1984), gif 1334, 138. gif

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The principal argument against maintaining Hanover Shoe while doing away with Illinois Brick is the possibility of 'duplicate' recoveries (or inconsistent verdicts) in different actions. In other words, there would be 'duplicate' recovery if a direct purchaser recovered the full amount of the overcharge in one private action, while an indirect purchaser recovered a portion of the overcharge passed on to him against the same defendant in a separate action. In the Community context, the multiple liability objection may not carry the same force as in the USA due to the absence of mandatory treble damges. In addition, while theoretically possible, during the period between 1968 and 1977, when this was the state of the law in several circuits in the USA, there was not a single reported instance of such duplicate recovery occurring.31 Moreover, it has been argued that even the rare or occasional occurrence of multiple liability32 is preferable to the consistent under-deterrence of potential antitrust violations, because such a rule in many cases would shield a violator who has injured more than one class of plaintiff from all liability in order to guard against the rare case of multiple liability.33 Sarris has argued that the Illinois Brick rule has the effect (in combination with Hanover Shoe) of over-compensating the direct purchaser, barring all recovery from indirect purchasers, and therefore guaranteeing incorrect compensation.34 While the complexities of proof of offensive passing-on by indirect purchasers may not guarantee correct compensation, the assurance of incorrect compensation does not seem a reasonable or acceptable alternative. A number of procedural devices have been proposed to solve the potential problem of double recovery, but Community legislation would be required to adopt any of them, so they will not be discussed here. The theoretical possibility of double recovery is inherent if defensive passing-on is not allowed but offensive passing-on is allowed. However, if defensive passing on is allowed and fewer than all indirect purchasers sue, then the wrongdoer retains at least some of the fruits of his violation. Both major alternatives have aspects which are unsatisfactory. At bottom, the ECJ will have to choose the approach which it considers best serves fair and effective Community law. It is submitted that Community law permits the ECJ to adopt the rule of Hanover Shoe, but not that of Illinois Brick.

85df07a2946c0bf5e633a71e91da97ad. 31Effective Enforcement of the Antitrust Laws, 1977: Hearings on H.R. 8359 Before the Subcomm on gif Monopolies and Commercial Law of the House Committee on the Judiciary, 95th Cong., 1st Sess. 41 (1977)

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(testimony of Kenneth Reed, Assistant Attorney General for Antitrust, State of Arizona). 85df07a2946c0bf5e633a71e91da97ad. 32 It should be emphasized that duplicate recovery or multiple liability in this context does not mean recovery of gif damages by the same plaintiff for the same injury, but the situation in which a price-fixing overcharge is recovered in full by the direct purchaser and in part by an indirect purchaser in separate actions against the same defendant.

85df07a2946c0bf5e633a71e91da97ad. 33 Sarris, supra note 30, at 161. gif 34 Sarris, supra, at 131. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page

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17 Antitrust Damages Principles in US Law

85df07a2946c0bf5e633a71e91da97ad. 17.1 The Role of Damages Rules in Private Actions gif

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85df07a2946c0bf5e633a71e91da97ad. 17.2 General Types of Recoverable Damages gif

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85df07a2946c0bf5e633a71e91da97ad. 17.3 The Fact of Injury Must Be Strictly Proven gif

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85df07a2946c0bf5e633a71e91da97ad. 17.4 The Measurement of Damages May Be Estimated gif

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85df07a2946c0bf5e633a71e91da97ad. 17.4.1 Just and Reasonable Estimates, but Not Speculation gif

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85df07a2946c0bf5e633a71e91da97ad. 17.4.2 Plaintiffs Have Flexibility in Choosing a Mode of Proof gif

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85df07a2946c0bf5e633a71e91da97ad. 17.4.3 Disaggregation of Damages May Be Required gif

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85df07a2946c0bf5e633a71e91da97ad. 17.4.4 Offsetting Benefits Must Be Taken into Account gif

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17.1 The Role of Damages Rules in Private Actions It is difficult to overstate the importance of rules concerning recoverable damages to the likelihood, development, and frequency of any type of private litigation, although other forms of relief may well be of critical importance in particular cases. Private antitrust actions are no exception, and it has been argued that such rules are even more important in this area. It is thought by some in Europe that private antitrust actions under Community law will never be of importance due to the absence of the legislative provision for treble damages which so ubiquitously characterizes the remedy provisions of the Sherman Act. It is submitted that the perceived superiority of the treble damages provisions of US law over damages rules available in Europe is exaggerated. In fact, the following chapters are intended to demonstrate that other components of the damage system in the USA are such that 'treble' damages under US law are essentially mythical and that comparable results are in fact obtainable in Europe, especially in the UK, without a treble damage multiplier. As has been previously noted, effective private antitrust enforcement in the USA did not spring full-blown into existence upon passage of the Sherman Act. One practitioner has suggested that private antitrust litigation did not really get started

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in the USA until the formulation of damages rules in the Bigelow1 decision in 1946:

85df07a2946c0bf5e633a71e91da97ad. 85df07 At one time, I made a listing of cases which has [sic] resulted in plaintiffs' verdicts under the antitrust laws, gif and while the laws have been in existence for many, many years, up until the time of the Bigelow case, I think gif there were less than 10 cases which have resulted in actual judgments for treble damages. And, of course since then there have been a tremendous number of cases.

85df07a2946c0bf5e633a71e91da97ad. 85df07 I think that any fair evaluation of the history of this law would have to conclude that really, treble damages gif suits did not get started until after the Supreme Court had formulated the rules for the proof of damages in the gif Bigelow case.2 While this may be an exaggeration,3 it is certainly the case that private antitrust damages actions, like other types of damage actions in the USA, have been much more numerous since the conclusion of the Second World War. How national courts and the ECJ develop proof of damage rules for private antitrust cases will obviously influence the quantity of private litigation in Europe. It would be unreasonable to expect substantial private Community antitrust enforcement unless the projected damages award or injunctive relief will justify the costs and risks of litigation. This chapter will demonstrate how the courts in the USA have applied damage rules in antitrust cases and may offer insight for similar application in the Community. Two characteristics of the Sherman Acts's approach to damages are worth noting briefly here and are more extensively discussed in the next chapter. First, there is no general provision in US antitrust law for an award of pre-judgment interest to a successful private plaintiff.4 By pre-judgment interest is meant interest calculated on the amount of the damages award from the time of the injury (or in some cases the time of filing suit) to the time judgment is rendered. A private party has a limited right to pre-judgment interest (but not treble damages) under the special provisions of the National Co-operative Research Act,5 but no general right to recover such interest exists in US antitrust law. As later discussion indicates, the absence of a pre-judgment interest award severely undermines the efficacy (or at

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 1Bigelow v. RKO Radio Pictures, 327 US 251 (1946). gif gif 85df07a2946c0bf5e633a71e91da97ad. 2 T. C. McConnell, testimony in Nolo Contendere and Private Antitrust Enforcement: Hearings before the gif Subcomm. on Antitrust and Monopoly of the Senate Comm. on the Judiciary, 89th Cong., 2d Sess. 7, 8 (1966). Mr. McConnell was counsel to the successful plaintiff in Bigelow, supra note 1.

85df07a2946c0bf5e633a71e91da97ad. 3Bigelow elaborated on the principles laid down some years previously in Eastman Kodak Co. v. Southern Photo gif Materials Co., 273 US 359 (1927) and Story Parchment Co. v. Paterson Parchment Paper Co., 282 US 555

(1931). 85df07a2946c0bf5e633a71e91da97ad. 4 The US government may recover prejudgment interest when it acts as a civil plaintiff: 15 USC § 15a (1994). In gif addition, a private litigant may recover pre-judgment interest for the period beginning with the filing of the complaint which initiates the lawsuit in the US system if certain specific conditions having to do with unwarranted delay or abuse of the litigation process by defendants are met. However, this provision is aimed at misbehaviour causing delay during the course of the litigation, not general compensation for the time value of money. 85df07a2946c0bf5e633a71e91da97ad. 5 15 USC § 4303 (1994).

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least the 'trebleness') of the 'treble' damages remedy. Conversely, the fact that pre-judgment interest is apparently recoverable in Community antitrust litigation goes much of the way to making up the difference between recoverable amounts in the Community 'single' damages and the US treble damages systems. Secondly, the US treble damages system does not allow punitive (exemplary) damages to be assessed. It is likely that in the UK, punitive damages will be considered recoverable in many Community antitrust cases. While such damages are no guarantee of trebling, it is also true that a punitive damage award could be a greater multiple than three. As the later detailed discussion will demonstrate, the combination of potentially available pre-judgment interest and punitive damages in the UK seems to more than offset the lack of a statutory treble damages remedy when compared to the US system. These points are made in brief here to emphasize that litigants in Europe, especially the UK, ought to resist the tendency automatically to reject a private damages action on the basis of the absence of a statutory multiplier without considering in detail all aspects of the recoverable damages which are available. 17.2 General Types of Recoverable Damages The types of damages which are recoverable in a US antitrust action will vary greatly according to the precise conduct in the case, the nature of the business or industry concerned, and the nature of the violation. Nonetheless, except for price discrimination claims, there are at bottom three varieties of damages. First, the plaintiff may have paid too much (or been paid too little) for a product due to actions of the seller which violate the antitrust laws. Examples include unduly high prices charged by a monopolist or cartel, a vertical price-fixing overcharge, or conversely, the payment of too little by a purchasing cartel or monopsonist. These are generally referred to as 'overcharge' damages, although one could be pardoned for calling those resulting from a monopsony 'underprice' damages. Secondly, a plaintiff's business was damaged or incurred losses due to conduct violating the antitrust laws. The amount of past lost profits is recoverable in such cases. Thirdly, the defendant's unlawful conduct may have destroyed the plaintiff's business or otherwise impaired its future earnings capacity. In such cases, the plaintiff may recover the future loss of anticipated profits or the present loss of going concern value, but not both (since it would be duplicative). These types of damages are not mutually exclusive, and many cases may involve multiple forms of culpable conduct and the possibility of multiple types of

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damages. The plaintiff might be entitled to any or all of these types of damages depending on the nature of the injuries suffered. For example, a purchaser from a monopolist or a price-fixing cartel might well pay an overcharge and suffer lost profits if his own sales decline. A business might suffer losses for a time and then be driven out of business, possibly allowing recovery of past lost profits as well as loss of anticipated future profits or loss of going concern value. The result is fact-driven in the particular case according to what will make the plaintiff whole. It is apparent from this brief overview that a large part of the damages proof in antitrust cases will frequently involve attempts to prove lost profits of undertakings, whether past or anticipated. Historically, courts on both sides of the Atlantic have been reluctant to entertain such claims, especially to lost anticipated profits, except on limited terms which often had the effect of denying recovery as too uncertain and speculative. In antitrust cases, the US courts have developed an approach to damages which is more congenial to plaintiffs than the older rule at common law. 17.3 The Fact of Injury Must Be Strictly Proven The approach followed in US courts begins with the premise that plaintiffs are required to establish the fact of their injury by reason of the defendant's antitrust violation and then to establish the amount of the damages sustained. While a somewhat relaxed standard of proof applies to showing the amount of damages, the injury itself is required to be proven 'as a matter of fact and with a fair degree of certainty'.6 The evidence required to establish the amount of damages is less than is required to show the fact of damage,7 and the ' ''constant tendency of the courts is to find some way in which damages can be awarded where a wrong has been done. Difficulty of ascertainment is no longer confused with right of recovery" for a proven invasion of the plaintiff's rights'.8 Early court decisions under the Sherman Act were strict in requiring precision in proof of damages, especially those based on anticipated profits. One court, in denying recovery for lost profits, said:

85df07a2946c0bf5e633a71e91da97ad. 85df07 6Shreve Equip., Inc. v. Clay Equip. Corp., 650 F 2d 101, 105 (6th Cir. 1981); Copper Liquor, Inc. v. Adolph gif Coors Co., 624 F 2d 575, 580 (5th Cir. 1980); accord, O.K. Sand & Gravel v. Martin Marietta Techs., 36 F 3d gif 565, 573 (7th Cir. 1994); Amerinet, Inc. v. Xerox Corp., 972 F 2d 1483 (8th Cir. 1992); National Farmers Org. v. Associated Milk Producers, 850 F 2d 1286, 12923 (8th Cir. 1988) ('must be established by a preponderance of the evidence'); In re Plywood Antitrust Litigation, 655 F 2d 627, 635 (5th Cir. 1981) (injury need only be proven by preponderance of the evidence, not with certainty).

85df07a2946c0bf5e633a71e91da97ad. 7Story Parchment Co. v. Paterson Parchment Paper Co., 282 US 555, 562 (1931). gif 8Bigelow v. RKO Radio Pictures, 327 US 251, 2656 (1946) (quoting Story Parchment, 282 US at 565). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_202 next page >


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85df07a2946c0bf5e633a71e91da97ad. 85df07 [T]he anticipated profits of a business are generally so dependent upon numerous and uncertain contingencies gif that their amount is not susceptible of proof with any reasonable degree of certainty; hence the general rule gif that the expected profits of a commercial business are too remote, speculative, and uncertain to warrant a judgment for their loss.9 The modern law of damages for the Sherman Act may have begun with Southern Photo,10 in which a distributor of photographic supplies claimed lost profit damages when Eastman Kodak refused to continue to supply the plaintiff as part of a scheme to monopolize the photographic materials market. Southern proved its damage by showing the gross profit differential before and after its supply was discontinued. Southern then estimated its net profits during the damage period by comparison to its sales expenses during the prior period. Kodak attacked this showing by arguing that Southern's failure to break down separate costs attributable to handling Kodak goods, the existence of net losses in some prior years, and estimates of sales and expenses by Southern were speculative. The Court approved Southern's proof, stating: '[d]amages are not rendered uncertain because they cannot be calculated with absolute exactness. It is sufficient if a reasonable basis of computation is afforded, although the result be only approximate'.11 The Court then pronounced an important theme to which it has returned in subsequent cases:

85df07a2946c0bf5e633a71e91da97ad. Furthermore, a defendant whose wrongful conduct has rendered difficult the ascertainment of the precise gif damages suffered by the plaintiff is not entitled to complain that they cannot be measured with the same

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exactness and precision as would otherwise be possible. . . .12 Southern Photo was the easier case because it concerned an established business with a proven record of profitable distribution of products, including the Kodak products which were later denied to it. In Story Parchment Co. v. Paterson Parchment Paper Co.,13 the Court faced the more difficult problem of a new entrant to the market which lacked prior experience to serve as the foundation for an estimate of lost profit damages. The plaintiff, Story Parchment, alleged that the defendant had conspired with others to exclude Story from the vegetable parchment sector by concerted reduction of prices until Story was driven from the business. Story's damage evidence was a claim for lost revenues, calculated by the difference between the prices actually realized and the prices at which its products could have been sold but for the conspiracy (pre-conspiracy prices), and a claim for the diminished value of the assets of the business.

85df07a2946c0bf5e633a71e91da97ad. 9Central Coal & Coke Co. v. Hartman, 111 F 96, 98 (8th Cir. 1901). gif 85df07a2946c0bf5e633a71e91da97ad. 10Eastman Kodak Co. v. Southern Photo Materials Co., 273 US 359 (1927). gif 85df07a2946c0bf5e633a71e91da97ad. 11 273 US at 379. gif 12Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 13 282 US 555 (1931). gif < previous page page_203


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The Court of Appeals had considered both items of damage speculative, the first on the grounds that the pre-conspiracy prices were not certain to have remained stable under the conditions of Story's entry into the market, and the second on the grounds that plaintiff's poor financial position meant its failure was inevitable. The Supreme Court overturned the Court of Appeals on both points and drew a sharp distinction between the evidence required to establish the fact of damage and that required to show the amount of damages:

85df07a2946c0bf5e633a71e91da97ad. 85df07 It is true that there was uncertainty as to the extent of the damage, but there was none as to the fact of damage; gif and there is a clear distinction between the measure of proof necessary to establish the fact that petitioner had gif sustained some damage, and the measure of proof necessary to enable the jury to fix the amount. The rule which precludes the recovery of uncertain damages applies to such as are not the certain result of the wrong, not to those damages which are definitely attributable to the wrong and only uncertain in respect to their amount.14 In addition, the Court returned to the theme of unfairness which would be created if a defendant were to be allowed to escape any damage liability due to uncertainties created by its own conduct:

85df07a2946c0bf5e633a71e91da97ad. 85df07 Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with gif certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, gif and thereby relieve the wrongdoer from making any amend for his acts. In such a case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise.15 These principles were further developed in Bigelow,16 in which the owners of an independent cinema alleged that major film distributors conspired with other cinemas to distribute desirable 'first run' feature films to the selected cinemas before distributing them to independent cinemas such as the plaintiff. This selective distribution arrangement caused damage in that independent cinemas could not receive feature films until after the preferred cinemas had already shown them at more desirable and profitable times.17 The plaintiff presented two alternative approaches to damages evidence. First, a comparison between the plaintiff's earnings and the earnings of a comparable cinema was made, the 'yardstick' approach. Secondly, a before-and-after comparison of the plaintiff's receipts during the five-year damage period with its revenues during the four years preceding the conspiracy was made. The plaintiff claimed

85df07a2946c0bf5e633a71e91da97ad. 14 282 US at 562. gif 85df07a2946c0bf5e633a71e91da97ad. 15Supra, at 566. gif 16Bigelow v. RKO Radio Pictures, 327 US 251 (1946), reh'g denied, 327 US 817 (1946). 85df07a2946c0bf5e633a71e91da97ad. gif 17Supra, at 254. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_204



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approximately $120,000 in lost earnings damages. The Court of Appeals reversed the damages award on the sole ground that the evidence of damages was insufficient to be submitted to the jury. The Supreme Court reversed the Court of Appeals and reinstated the jury verdict, drawing on its previous decisions in Story Parchment and Southern Photo:

85df07a2946c0bf5e633a71e91da97ad. In [Story] we held that the evidence sustained the verdict for the plaintiffs, and that in the absence of more gif precise proof, the jury could conclude as a matter of just and reasonable inference from the proof of the

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defendant's wrongful acts and their tendency to injure plaintiffs' business, and from the evidence of the decline in prices, profits, and values, not shown to be attributable to other causes, that defendant's wrongful acts had caused damage to the plaintiffs.18 The Court went on to point out that it was not authorizing guesswork or speculation and returned to its theme that the wrongdoer must bear the burden of uncertainty resulting from its own actions:

85df07a2946c0bf5e633a71e91da97ad. [E]ven where the Defendant by his own wrong has prevented a more precise computation, the jury may not gif render a verdict based on speculation or guesswork. But the jury may make a just and reasonable estimate of

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damage based on relevant data, and render its verdict accordingly. In such circumstances, 'Juries are allowed to act upon probable and inferential, as well as direct and positive proof.' . . . Any other rule would enable the wrongdoer to profit by his wrongdoing at the expense of his victim. It would be an inducement to make wrongdoing so effective and complete in every case as to preclude any recovery, by rendering the measure of damages uncertain. Failure to apply it would mean that the more grievous the wrong done, the less likelihood there would be of a recovery.

85df07a2946c0bf5e633a71e91da97ad. 85df07 The most elementary conceptions of justice and public policy require that the wrongdoer shall bear the risk of gif the uncertainty which his own wrong has created. . . .19 gif The result of these cases and others has been the formulation of the rule that antitrust plaintiffs are required to present strict proof of the fact of damage, but that the amount of damages is subject to reasonable estimation. In Zenith Radio Corp. v. Hazeltine Research, Inc.,20 the Supreme Court noted that:

85df07a2946c0bf5e633a71e91da97ad. Trial and appellate courts alike must also observe the practical limits of the burden of proof which may be gif demanded of a treble damage plaintiff who seeks recovery for injuries from a partial or total exclusion from

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the market; damage issues in these cases are rarely susceptible of the kind of concrete, detailed proof of injury which is available in other contexts.21 The Court also noted that a plaintiff's 'burden of proving the fact of damages under section 4 of the Clayton Act is satisfied by its proof of some damage flowing from the unlawful conspiracy; inquiry beyond this point goes only to the

85df07a2946c0bf5e633a71e91da97ad. 18Supra, at 264. gif 85df07a2946c0bf5e633a71e91da97ad. 19Supra, at 2645 (citations omitted). gif 20 395 US 100 (1969). 85df07a2946c0bf5e633a71e91da97ad. gif 21Supra, at 123. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page


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amount and not the fact of damage'.22 In J. Truett Payne Co. v. Chrysler Motors Corp.,23 the Court noted that plaintiffs need not prove the amount of damages with absolute certainty and reaffirmed 'the traditional rule excusing antitrust plaintiffs from an unduly rigorous standard of proving antitrust injury'. 17.4 The Measurement of Damages May Be Estimated 17.4.1 Just and Reasonable Estimates, but Not Speculation As the foregoing has demonstrated, 'Courts have been properly sympathetic to the antitrust plaintiff's plight in proving what might have been, but not so sympathetic that they have permitted damage claims to be grounded on speculation rather than on relevant data'.24 The fundamental problem is that in almost all cases the plaintiff is seeking to collect damages calculated according to events which in actuality did not take place due to the actions of the defendantsproof of 'what might have been'. As the Supreme Court noted in J. Truett Payne, '[t]he vagaries of the marketplace usually deny us sure knowledge of what the plaintiff's situation would have been in the absence of defendant's antitrust violation'.25 Yet, sympathy for the problems of proof of antitrust plaintiffs has not by any means been overdone, as one court succinctly summarized:

85df07a2946c0bf5e633a71e91da97ad. In short, the law is clear: the courts are to take a charitable view of the difficulties of proving damages in a gif case when a treble damage plaintiff must try to prove what would have accrued to him in the absence of the

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defendant's anticompetitive practice. But this tolerant view is limited by our responsibility not to allow damages to be determined by 'guess-work' or 'speculation'; we must at least insist upon 'a just and reasonable estimate of the damage based on relevant data'.26 Courts have said that the plaintiff's evidence may not leave the jury to speculation or guesswork in determining the amount of damages.27 The plaintiff must establish a 'reasonable foundation from which a jury can calculate the amount of damages'.28 In addition, a reasonable basis may need to include evidence which

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 22Zenith Radio, 395 US at 114 note 9. gif gif 85df07a2946c0bf5e633a71e91da97ad. 23 451 US 557, 565 (1981). See also Texaco, Inc. v. Hasbrouck, 496 US 543 (1990). gif 24In re IBM Peripheral EDP Devices Antitrust Litigation, 481 F Supp. 965, 1020 (ND Cal. 1979), aff'd sub nom. 85df07a2946c0bf5e633a71e91da97ad. gif Transamerica Computer Co. v. IBM, 698 F 2d 1377 (9th Cir.), cert. denied, 464 US 955 (1983). 85df07a2946c0bf5e633a71e91da97ad. 25 451 US at 566. gif 26Lehrman v. Gulf Oil Corp., 464 F 2d 26, 46 (5th Cir.), cert. denied, 409 US 1077 (1972). 85df07a2946c0bf5e633a71e91da97ad. gif 27McGlinchy v. Shell Chem. Co., 845 F 2d 802, 808 (9th Cir. 1988); Dolphin Tours v. Pacifico Creative Serv., 773 85df07a2946c0bf5e633a71e91da97ad. gif F 2d 1506, 150910 (9th Cir. 1985). 85df07a2946c0bf5e633a71e91da97ad. 28Yentsch v. Texaco, 630 F 2d 46, 59 note 19 (2d Cir. 1980); Bigelow, 327 US at 264; Olympia Equip. Leasing gif Co. v. Western Union Tel. Co., 797 F 2d 370, 383 (7th Cir. 1986) (no damages awarded where evidence provided no basis for rational estimation of damages); Farley Transp. Co. v. Santa Fe Trail Transp. Co., 786 F 2d 1342, 1351 (9th Cir. 1985) (no damages where jury would be required to speculate); Multiflex, Inc. v. Samuel Moore & Co., 709 F 2d 980, 995 (5th Cir. 1983) (must be 'rational basis by which a jury can assess the amount of antitrust damages').

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accounts for other suggested causes of the plaintiff's damages apart from the defendant's conduct. In Amerinet,29 the Court cited Bigelow and stated:

85df07a2946c0bf5e633a71e91da97ad. When a plaintiff improperly attributes all losses to a defendant's illegal acts, despite the presence of gif significant other factors, the evidence does not permit a jury to make a reasonable and principled estimate of

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the amount of damage. This is precisely the type of 'speculation or guesswork' not permitted for antitrust jury verdicts. A few courts have said that the plaintiff has the obligation to present the best available evidence of damages,30 but it is not clear that this is any more exacting a requirement than the evidentiary standards imposed in ordinary cases. Where proof of violation and the fact of injury are sufficient, but damages cannot be measured except through guesswork or speculation, an award of nominal damages is permitted.31 17.4.2 Plaintiffs Have Flexibility in Choosing a Mode of Proof There is no single approved or required method which must be employed by an antitrust plaintiff who seeks to prove the measure of his damages. Whether overcharge damages, lost profit damages to a continuing business, or the lost going concern value of a terminated business are sought to be established, there are a variety of methods of proof which have been accepted by the courts and which may be used as appropriate to the nature of the case and type of damages sought. However, in each case a proper evidentiary foundation must be laid for a plaintiff's attempt to prove what might have been:

85df07a2946c0bf5e633a71e91da97ad. [T]he courts are not strict about the kind of foundations or theories which are employed so long as [the gif foundation] is credible and substantial; nevertheless some such foundation must be shown. It will not be

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rejected where there is some prior experience with which to make a comparison. With such an evidentiary foundation there can be a projection; where, on the other hand, the profits are mere possibilities and are too far removed from reality, they must be held unacceptable.32

85df07a2946c0bf5e633a71e91da97ad. 85df07 29Amerinet, Inc. v. Xerox Corp., 972 F 2d 1483, 1494 (8th Cir. 1992). Some commentators have said that gif speculation in damages exists where plaintiff's damage projections fail 'to account rationally for factors other gif than the defendant's illegal conduct' that may have caused or significantly contributed to the plaintiff's projected damages. R. D. Blair and W. H. Page, 'Speculative Antitrust Damages', (1995) 70 Wash. L. Rev. 423, 427.

85df07a2946c0bf5e633a71e91da97ad. 30 See, e.g., Harkins Amusement Enters. v. General Cinema Corp., 748 F Supp. 1399, 14056 (D. Ariz. 1990) gif (expert witness used admittedly unreliable 'flash sheets' as evidence of revenues) and ILC Peripherals Leasing

Corp. v. IBM, 458 F Supp. 423, 436 (ND Cal. 1978), aff'd per curiam sub nom. Memorex Corp. v. IBM, 636 F 2d 1188 (9th Cir. 1980), cert. denied 452 US 972 (1981).

85df07a2946c0bf5e633a71e91da97ad. 31United States Football League v. National Football League, 664 F Supp. 1040, 10514 (SDNY 1986) (nominal gif damages of $1.00 upheld where jury could not determine how much of the losses resulted from antitrust violation and how much from the plaintiff's mismanagement.), aff'd 842 F 2d 1335, 1377 (2nd Cir. 1988); Roseborough Monument Co. v. Memorial Park Cemetary Ass'n, 666 F 2d 1130, 1147 (8th Cir. 1981).

85df07a2946c0bf5e633a71e91da97ad. 32Webb v. Utah Tour Brokers Ass'n, 568 F 2d 670, 678 (10th Cir. 1977). gif < previous page page_207


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In the case of overcharge damages, four 'primary methods' have been accepted by the courts for proof of these claims: (1) a 'pre-post' approach, (2) a 'yardstick' measure, (3) use of economic models, and (4) cost measurement.33 The idea of the 'pre-post' method is that there is a 'normal' period (possibly before or after, or even intervening) in which normative price levels can be compared to price levels influenced by the antitrust violation in order to judge the effect of the violation on pricing. In the case of the 'yardstick' method, price data from the affected market would be compared to that from markets presumably unaffected by the violation, and the overcharge would be calculated by comparing actual prices in the affected versus unaffected markets. The economic model approach typically involves sophisticated economic studies prepared by expert witnesses (economists, business consultants, etc.) in an attempt to correlate and identify the causal relations between various factors and price levels. The cost measurement approach uses the defendant's cost and profit data, either to determine the increase in the defendant's profits over time or by comparison to profit rates in 'competitive' industries.34 In cases involving lost revenue or profits, a plaintiff can use (1) a pre-post approach, (2) a yardstick approach, (3) a market share approach, (4) a transactional approach which examines particular lost sales or customers, and (5) a more general lost sales projection based on multiplying net profit per unit times the estimated lost unit sales. The market share approach usually involves creation of sophisticated economic models and theories to determine an estimated market share plaintiff would have attained but for the violation, and use of this market share to calculate lost revenues. The approach to recovery of damages to a terminated business is normally to estimate either (1) anticipated lost future profits of the business to a specific date of termination, or (2) the 'going concern' value of the business, measured by what a willing buyer in an arm's length transaction would have paid for a business not destroyed by an antitrust violation. Going concern values generally may be proven by share prices where available, expert valuation opinion evidence, or a capitalization of earnings calculation. More than one of these types of damages may be available in a single lawsuit, and more than one approach to proving each type of damages may be used by the plaintiff in the same case. Plaintiffs commonly use alternative measurements or calculation methods for two important reasons. First, alternative damages calculations may be used in case the court were to consider one or more of the approaches not to be sufficiently grounded in the evidence. In Harkins

85df07a2946c0bf5e633a71e91da97ad. 33 C. D. Floyd and E. T. Sullivan, Private Antitrust Actions: The Structure and Process of Civil Antitrust gif Litigation (Boston, Mass., 1996), 9991000.

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85df07a2946c0bf5e633a71e91da97ad. 34Supra., at 1002. See W. B. Erickson, 'Costs and Conspiracy: Use of Cost Data in Private Antitrust Litigation', gif (1969) 14 Antitrust Bull. 347.

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Amusement, the plaintiff's damage witness used three alternative damage calculationsa market share study, a yardstick measurement, and a transactional analysis of losses flowing from defendant's conduct with respect to particular motion pictures.35 Secondly, a plaintiff may consider it more persuasive proof that several different approaches to damages measurement yield consistent damage figures. In Brown v. Pro-Football, Inc.,36 the plaintiff presented several damages calculations prepared according to different approaches, each resulting in similar figures. In some circumstances, a plaintiff who has been able to prove the fact of injury even though it never entered the market affected by the antitrust violation has been permitted to show damages. A plaintiff who did not enter the market must be prepared to 'show that it intended to enter and was prepared to do so within a reasonable time, if it wants to collect damages . . . for being excluded'.37 It is not always necessary that a plaintiff be able to prove that he made a profit, provided that he can offer probative evidence that he would have made profits in the future except for the defendant's antitrust violation.38 As one court noted:

85df07a2946c0bf5e633a71e91da97ad. 85df07 To deny recovery to a businessman who has struggled to establish a business in the face of wrongful conduct gif by a competitor simply because he never managed to escape from the quicksand of red ink to the dry land of gif profitable enterprise would make a mockery of the private antitrust remedy.39 A plaintiff seeking to collect damages when it actually never entered a business shows its ability and preparedness to enter by introducing evidence on the following criteria: (1) the plaintiff's background or experience in the area of business it claims it would have entered; (2) the acts actually undertaken to effect entry or expansion; (3) the plaintiff's ability to fund or finance the new business; and (4) the plaintiff's access to the facilities necessary to conduct the intended business (e.g., contracts, franchises, access to raw materials, etc.).40

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 35Harkins Amusement, supra note 30, 748 F Supp. 1399. gif gif 85df07a2946c0bf5e633a71e91da97ad. 36 821 F Supp. 802 (DDC 1993). gif 85df07a2946c0bf5e633a71e91da97ad. 37Grip-Pak, Inc. v. Illinois Tool Works, 694 F 2d 466, 4745 (7th Cir. 1982), cert. denied, 461 US 958 (1983) ('[the gif plaintiff] may be able to recover lost profits as a manufacturer even though it has not yet started manufacturing, if it had reasonable prospects of doing so which [the defendant] snuffed out'). See also Gas Utilities v. Southern Natural Gas Co., 996 F 2d 282, 283 (11th Cir. 1993), cert. denied, 114 S Ct. 687 (1994); Hayes v. Solomon, 597 F 2d 958, 973 (5th Cir. 1979) (actual going business not necessary); Heatransfer Corp. v. Volkswagenwerk, AG, 553 F 2d 964, 988 (5th Cir. 1977) ('a plaintiff who has attempted to enter a market but who has not succeeded must demonstrate his preparedness and intention to enter that market before he may recover damages for an antitrust violation'), cert. denied, 434 US 1087 (1978); Helix Milling Co. v. Terminal Flour Mills Co., 523 F 2d 1317, 1320 (9th Cir. 1975), cert. denied, 423 US 1053 (1976)('[a] major purpose of § 1 of the Sherman Act is . . . to protect the ability of competitors to enter markets'.).

85df07a2946c0bf5e633a71e91da97ad. 38Graphic Prods. Distribs. v. Itek Corp., 717 F 2d 1560, 15823 (11th Cir. 1983). gif 85df07a2946c0bf5e633a71e91da97ad. 39Terrell v. Household Goods Carriers Bureau, 494 F 2d 16, 23 note 12 (5th Cir.), cert. denied, 419 US 987 gif (1974). 85df07a2946c0bf5e633a71e91da97ad. 40 See Arthur S. Langenderfer v. S.E. Johnson Co., 917 F 2d 1413 (6th Cir. 1990); Practice Perfect, Inc. v. gif Hamilton County Pharmaceutical Assoc., 732 F Supp. 798 (SD Ohio 1989); and Hess v. Inland Asphalt Co., 19901 CCH Trade Cas.

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While certain types of damages and modes of proof have been accepted by the courts, none of these is considered as excluding the possibility that other approaches to damages proof may be offered by a plaintiff. Some other, less common, approaches are noted in the following discussions. Plaintiffs retain considerable flexibility in the means which may be employed to prove the amount of damages necessary to compensate them for the injury to their 'business or property' as specified in the Sherman Act. 17.4.3 Disaggregation of Damages May Be Required Some lower courts in the USA have formulated and applied what has become know as a 'disaggregation' or 'segregation' requirement regarding antitrust damages.41 The Supreme Court has yet to consider the issue. The concept is that plaintiffs are required in some circumstances to segregate the harms which are caused by the anticompetitive (illegal) conduct of the defendant distinct from those harms which may result from lawful competition by the defendant. The situation in which disaggregation may be required normally arises where a plaintiff challenges multiple discrete acts or practices of a defendant as violations of the antitrust laws, but less than all of them are ultimately found to be illegal. A leading case is the judgment of the Seventh Circuit in MCI Communications Corp. v. AT&T.42 MCI initially asserted 22 separate counts of allegedly monopolistic (roughly equivalent to abuse of dominant position) exclusionary conduct against AT&T, but seven were dismissed prior to trial, and the jury found liability on ten of the remaining 15 counts and awarded $600 million in damages before trebling. On appeal, AT&T argued the damages evidence was inadequate because it failed to 'establish any variation in the outcome depending on which acts of AT&T were held to be legal and which illegal'.43 The Seventh Circuit accepted this argument and stated that 'the jury was left with no way to adjust the amount of damages to reflect lawful competition from AT&T'.44 The court considered that this was 'precisely the type of ''speculation or guesswork" not permitted for antitrust jury verdicts' and remanded the case to the trial court for a new trial on the issue of damages.45

85df07a2946c0bf5e633a71e91da97ad. 85df07 41 See M.S. Royall, 'Disaggregation of Antitrust Damages', (1997) 65 Antitrust Law J 311; J. R. McCall, 'The gif Disaggregation of Damages Requirement in Private Monopolization Actions', (1987) 62 Notre Dame Law J gif 643; and C.N. Charnas, 'Segregation of Antitrust Damages: An Excessive Burden on Private Plaintiffs', (1984) 72 Calif. L Rev. 403.

85df07a2946c0bf5e633a71e91da97ad. 42 708 F 2d 1081 (7th Cir.), cert. denied, 464 US 891 (1983). gif 85df07a2946c0bf5e633a71e91da97ad. 43 708 F 2d., at 1163. gif 44Supra. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 45Supra, at 1162. See also City of Vernon v. Southern California Edison, 955 F 2d 1361 (9th Cir.), cert. denied, gif 506 US 908 (1992), and Multiflex, Inc. v. Samuel Moore & Co., 709 F 2d 980 (5th Cir. 1983), cert. denied, 465 US 1100 (1984).

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Of course, there may well be cases in which a judge or jury finds that all of the multiple practices challenged are unlawful. A few courts46 have held that in such a case, disaggregation is still required in order to avoid the jury being compelled to speculate whether the individual acts complained of were sufficient to cause the full amount of damage claimed.47 Other courts have stated that if all of the defendant's challenged acts or practices are found to be unlawful, 'a plaintiff need not disaggregate damages among those acts found to be unlawful'.48 The Seventh Circuit said in MCI:

85df07a2946c0bf5e633a71e91da97ad. Since the Supreme Court has been willing to accept a degree of uncertainty in the calculation of damages, gif strict proof of what damages have been caused by which acts has not been required. Not requiring strict

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disaggregation of damages among the various unlawful acts of the defendant serves to prevent the defendant from profiting from his own wrongdoing and makes sense when damages arise from a series of unlawful acts intertwined with one another.49 Even those courts which apply the disaggregation rule do not do so in all cases. First, the rule seems to have been applied most often in cases involving monopolization claims premised on multiple examples of exclusionary conduct. Other types of claims do not necessarily raise the same issue. Moreover, ostensibly lawful conduct which furthers unlawful conduct may well be considered part of an unlawful scheme and so not be required to be segregated at all. Secondly, if it is impractical to separate the lawful conduct from unlawful conduct, courts do not apply the disaggregation rule. The 'impracticability exception' was recognized by the Seventh Circuit in Spray-Rite Service Corp. v. Monsanto Co.50 In upholding the jury verdict, the court stated that '[w]e will not deprive Spray-Rite of this recovery merely because the jury may have found that Monsanto combined lawful conduct with unlawful conduct making it impossible to determine which portion of the total damages was caused by the unlawful conduct'. Thirdly, even where disaggregation is not shown to be impractical, courts will decline to apply the rule if the conduct which is found to be unlawful is capable of supporting the entire damages award. In National Farmers Organization, Inc. v. Associated Milk Producers, Inc.,51 the Court noted that even if lawful conduct contributed to the plaintiff's damages, this did not necessarily mean that the damages would be reduced:

85df07a2946c0bf5e633a71e91da97ad. 46 E.g., Northeastern Tel. Co. v. AT & T, 497 F Supp. 230, 247 (D Conn. 1980), reversed on other grounds, gif 651 F 2d 76 (2d Cir. 1981).

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85df07a2946c0bf5e633a71e91da97ad. 47ILC Peripherals Leasing Corp. v. IBM Corp., 458 F Supp. 423, 434 (ND Cal. 1978), aff'd sub nom. Memorex gif Corp. v. IBM Corp,. 636 F 2d 1188 (9th Cir. 1980), cert. denied, 452 US 972 (1981). 85df07a2946c0bf5e633a71e91da97ad. 48MCI, 708 F 2d at 1163. gif 49Supra, 708 F 2d at 1161. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 50 684 F 2d 1226, 1243 (7th Cir. 1982), aff'd 465 US 752 (1984). gif 51 850 F 2d 1286, 1307 (8th Cir. 1988), cert. denied, 489 US 1081 (1989). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_211 next page >


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85df07a2946c0bf5e633a71e91da97ad. [T]he fact that the [defendants'] illegal conspiracy was composed of lawful and unlawful conduct so tightly gif intertwined as to make it difficult to determine which portion of the damages claimed were caused by the

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unlawful conduct should not diminish the recovery. Similarly, the Court should recognize that the harmful consequences of certain unlawful conduct may have been exacerbated by otherwise lawful conduct. In such a situation, the fact that lawful conduct contributed to additional injury should not prohibit recovery for that injury.52 It has been suggested that the reasoning of the Eighth Circuit in this case reflects the notion that if defendants do lawful acts in furtherance of their unlawful ends, such that the lawful conduct increases the damages caused by the unlawful conspiracy, such damages are also recoverable.53 The Supreme Court has supported this principle in dicta, stating that 'acts which are in themselves legal lose that character when they become constituent elements of an unlawful scheme'.54 Fourthly, a plaintiff is not required to disaggregate damages where his damages evidence did not rest on conduct which was found to be lawful. In Litton Systems, Inc. v. AT & T,55 the plaintiff challenged several types of the defendant's conduct, but its damages study only addressed one type of exclusionary conductone which the jury found unlawful. The appellate court rejected the disaggregation argument on these facts and affirmed the damages award. Fifthly, although no court has as yet accepted this argument, it has been suggested that disaggregation may not be required if the lawful conduct can be characterized as contributing a quantitatively insignificant portion to the overall damages awarda sort of de minimis rule. This argument is based on some language in the MCI judgment56 and is developed in detail elsewhere.57 17.4.4 Offsetting Benefits Must Be Taken into Account It will frequently be the case in fact situations involving a distribution agreement or system that the plaintiff will have been a party to the contract or a member of the system. In such circumstances, and possibly others, the plaintiff may have received financial benefits from the agreement as well as have suffered damage from certain aspects of restraints imposed by it. This has led to what variously has been referred to as the 'compensating benefits', 'offsetting damages', or 'offsetting

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633a71e9 52Supra. gif gif 85df07a2946c0bf5e633a71e91da97ad. 53 Royall, supra note 41, at 333. gif 54Continental Ore Co. v. Union Carbide & Carbon Corp., 370 US 690, 707 (1962). 85df07a2946c0bf5e633a71e91da97ad. gif 55 700 F 2d 785, 825 (2d Cir. 1983). 85df07a2946c0bf5e633a71e91da97ad. gif 56 E.g., 508 F 2d at 11634. 85df07a2946c0bf5e633a71e91da97ad. gif 57 Royall, supra note 42, at 3367. 85df07a2946c0bf5e633a71e91da97ad. gif 58 American Bar Association Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic Issues 85df07a2946c0bf5e633a71e91da97ad. gif (Chicago, Ill., 1996), 39; P. C. Jones, Litigating Private Antitrust Actions (Colorado Springs, Colo., 1995 Supp.) 238; and C. D. Floyd and E. T. Sullivan, Private Antitrust Actions: The Structure and Process of Civil Antitrust Litigation (Boston, Mass., 1996), 1034.

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benefits' rule.58 The rule in essence states that a plaintiff who receives both benefit and detriment caused by the defendant's antitrust violation must subtract the value of the benefit received from the detriment incurred in calculating damages. In the case of the plaintiff who receives benefits from an illegal arrangement in which he participates, the Supreme Court indicated in Perma-Life that this can be taken into account in determining damages: '[t]he possible beneficial byproducts of a restriction from a plaintiff's point of view can of course be taken into consideration in computing damages . . .'.59 However, there need not always be an element of fault on the part of the plaintiff present to trigger the application of this rule. In a later case, the Supreme Court made it clear that it is a general principle of damages under the antitrust laws that the plaintiff receives compensation for net injury, and the relevant inquiry is 'what plaintiff's situation would have been in the absence of defendant's violation'.60 The 'net' offset rule was applied by the Ninth Circuit in Los Angeles Memorial Coliseum v. National Football League,61 in which a professional football team (the 'Raiders') and a football stadium successfully sued the league under Sherman Act § 1 for blocking the team's move from Oakland, California, to Los Angeles. The Court did not apply the 'faultbased' rule of Perma-Life on the ground that it found no antitrust violation to which the Raiders were a party.62 However, the Court applied the net benefit rule because it concluded that in moving from Oakland to Los Angeles, the Raiders benefited by appropriating a valuable expansion opportunity (Los Angeles) which existed because the league had refused to allow other teams to go there.63 The Court concluded that damages should be calculated by determining the Raiders' lost profits, less the value of the expansion opportunity in Los Angeles minus the value of the Oakland expansion opportunity returned to the league, with the net figure being trebled under the statute.64 An earlier example of the net offset rule is Hanover Shoe, Inc. v. United Shoe Machinery Corp.,65 in which the Supreme Court found that United Shoe's practice of leasing, not selling, its shoe machinery violated the antitrust laws. However, the Court noted that absent the illegal act, the plaintiff would have bought the machinery, incurring a capital cost which it avoided by leasing the equipment. The Court concluded that the plaintiff's savings in capital costs should be

85df07a2946c0bf5e633a71e91da97ad. 85df07 59Perma-Life Mufflers, Inc. v. International Parts Corp., 392 US 134, 140 (1968). In this case, the Sup. Ct. gif rejected the application of an in pari delicto defence to antitrust claims based on plaintiff's participation in the gif violation.

85df07a2946c0bf5e633a71e91da97ad. 60J. Truett Payne Co. v. Chrysler Motors Corp., 451 US 557, 566 (1981). gif 61 791 F 2d 1356, 1366 (9th Cir. 1986). 85df07a2946c0bf5e633a71e91da97ad. gif 62 791 F 2d at 1369. 85df07a2946c0bf5e633a71e91da97ad. gif 63 791 F 2d at 1371. 85df07a2946c0bf5e633a71e91da97ad. gif 64Supra, at 1372. 85df07a2946c0bf5e633a71e91da97ad. gif 65 392 US 481 (1968). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_213


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deducted from the damages in order to put the plaintiff in the position it would have occupied in the absence of the violation.66 17.4.5 Mitigation of Damages Is Required It has been said that an antitrust plaintiff must mitigate its damages.67 However, the burden is on the defendant to show by a preponderance of the evidence that the plaintiff failed to mitigate its loss.68 The mitigation rule is applied to the determination of whether the plaintiff suffered injury in fact, not to the calculation of the damages.69 In order to show the plaintiff failed to mitigate its loss, the defendant must establish that the plaintiff's conduct 'was unreasonable and aggravated the harm'.70

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e6 66 392 US at 5034. gif gif 85df07a2946c0bf5e633a71e91da97ad. 67 See Pierce v. Ramsey Winch Co., 753 F 2d 416, 436 (5th Cir. 1985) and Malcom v. Marathon Oil Co., 642 F 2d gif 845, 863 (5th Cir.), cert. denied, 454 US 1125 (1981). 85df07a2946c0bf5e633a71e91da97ad. 68Sheldon v. Munford, Inc., 950 F 2d 403, 408 (7th Cir. 1991); Pierce, supra note 67. gif 85df07a2946c0bf5e633a71e91da97ad. 69Malcom, 642 F 2d at 863. gif 70Supra. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_214 next page >


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18 How Damages Are Calculated in Particular Cases

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18.1 Overcharges and 'Enhanced Price' Damages Many, perhaps most, of the cases which involve price enhancement damages are claims for horizontal price fixing in which the plaintiff purchased goods at unlawfully inflated prices from the cartel. Other types of violations which typically generate these sorts of damages include vertical price fixing, tying arrangements, price discrimination, concerted refusals to deal, monopsony purchasing (at unfairly low pricing), and forced disposition of assets. Other monopolistic (abuse of dominant position) practices may also cause such damage. An early case of the horizontal price-fixing type is the Chattanooga Foundry1 judgment of the Supreme Court, in which the City of Atlanta recovered damages for purchases from a cartel measured by 'the difference between the price paid and the market or fair price that the city would have had to pay under natural conditions had the combination been out of the way'.2 In Thomsen v. Cayser, the plaintiffs were entitled to recover as 'an element of injury' any amounts paid in excess of a 'reasonable rate'.3 As developed by the lower courts, damages will be awarded based on the amount by which the (conspiracy-enhanced) price paid exceeds the prevailing (free) market rate, or the market rate which would have prevailed in the absence of the conspiracy.4

85df07a2946c0bf5e633a71e91da97ad. 1Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 US 390 (1906). gif 85df07a2946c0bf5e633a71e91da97ad. 2 203 US at 396. gif 3Thomsen v. Cayser, 243 US 66, 88 (1917). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 4 E.g., Jeffrey v. Southwestern Bell, 518 F 2d 1129 (5th Cir. 1975); Commonwealth Edison Co. v. gif

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The problem which remains is of course to determine what the theoretical free market price would have been. The most common mode of proving this is to determine the price during a normative period, sometimes called the 'before-andafter' or 'pre-post' method. It calls for a comparison of price levels5 before the conspiracy began with those price levels prevailing after the conspiracy began, during the period of its duration. There may be situations in which no prerestraint normative period exists, in which case a post-conspiracy or post-restraint period may be used. There may even be interruptions in pricing levels during the conspiracy period, caused for example by new entrants who come upon the scene and then exit, in which case adjustments may be made. An example of the traditional before-and-after approach is American Crystal Sugar Co. v. Mandeville Island Farms,6 in which there was a conspiracy among agricultural product buyers to fix (low) the prices at which they would purchase from growers. The Court determined that the appropriate measure of damages was the difference between the price at which the plaintiff-growers sold their products and the higher price which would have existed in the absence of the conspiracy. The Court approved the use of prices from a two-year normative period immediately preceding the conspiracy. In Armco Steel Corp. v. North Dakota,7 the evidence presented used both a pre-restraint and post-restraint normative period to determine the appropriate market price in a price-fixing conspiracy case. The plaintiff's expert testified that prices were 17.7 per cent higher during the conspiracy period that during either a normative period of three years before the conspiracy or the period of three years after the end of the conspiracy, and this differential could not be accounted for by market conditions or other factors. Another case, Wall Products Co. v. National Gypsum Co.,8 involved expert opinion evidence analysing the combination of pre-conspiracy and post-conspiracy normative pricing periods together with other market data to establish that the differences in pricing were attributable to the conspiracy. The plaintiff dealers sued the manufacturers for price-fixing. Their evidence showed that prices were dropping precipitously immediately before the conspiracy began and, (footnote continued from previous page)

85df07a2946c0bf5e633a71e91da97ad. 85df07 Allis-Chalmers Mfg. Co., 315 F 2d 564 (7th Cir. 1963); Minnesota v. United States Steel Corp., 299 F Supp. gif 596 (D Minn. 1967), vacated on other grounds, 438 F 2d 1380 (8th Cir. 1967); Ohio Valley Electric Corp. v. gif General Electric Co., 244 F Supp. 914, 9337 (SDNY 1965). 85df07a2946c0bf5e633a71e91da97ad. 5 'Price levels' need not be taken literally, but may include other charges which generate revenue. In one case, the gif overcharge was measured by the amount of uniform 'phantom freight' charges which the conspirators agreed to impose on sale of certain plywood on top of the 'price'. See In re Plywood Antitrust Litigation, 655 F 2d 627 (5th Cir. 1983). Cf. Catalano, Inc. v. Target Sales, 446 US 643, 64850 (1980) (agreement not to extend credit treated as price fixing). 85df07a2946c0bf5e633a71e91da97ad. 6 195 F 2d 622 (9th Cir. 1952). gif 7 376 F 2d 206 (8th Cir. 1967). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 8 357 F Supp. 832 (ND Cal. 1973).

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after the termination of the conspiracy, prices had dropped until they were lower than at any time during the conspiracy period. The pricing evidence was compared to cost and market data for the industry, which showed that prices were higher in the conspiracy period than in the normative periods even though production cost data, industry capacity utilization figures, demand data, construction price data, and freight rate data all suggested the case ought to have been otherwise. In Ohio Valley Electrical Corp. v. General Electric Co.,9 the plaintiff used only a post-restraint normative period due to the very extensive duration of the conspiracy to fix prices in heavy electrical equipment. The market price was established by comparing price discounts off list price offered during the conspiracy period with those offered after the conspiracy was made public. The difference in the discount factors was applied to actual prices charged to establish the amount of the overcharge. Another mode of proof of enhanced price damages is a 'yardstick' approach, in which price data from the affected market are compared to prices from other markets which are not affected by the defendant's practices, and the overcharge is calculated by the difference in the prices between the affected market and the unaffected market. In short, the unaffected 'yardstick market' is used to determine what the free market price would have been in the affected market in the absence of the conspiracy. In Phillips v. Crown Central Petroleum Corp.,10 four independent service station dealers sued their supplier for horizontally and vertically fixing the price of petrol. Damages were computed by comparing the prices at which defendant sold to a yardstick station with the artificially high prices at which supplies of petrol were sold to the plaintiffs and multiplying the price differential times the number of gallons purchased. In one case, the defendant's own profits were utilized as a yardstick due to the related profitability of the plaintiff supplier of raw material and the defendant refiner. In Union Carbide & Carbon Corp. v. Nisley,11 the Court considered the amount which the refiner could have profitably paid for the raw material compared to the amount which actually was paid. It was thought that the sales of the finished product (in a monopolistic market) were relevant to the free market value of the raw material which was a component of the refiner's profits, and the refiner's profits could therefore be used as a basis for calculating damages.

85df07a2946c0bf5e633a71e91da97ad. 9 244 F Supp. 914 (SDNY 1965). gif 85df07a2946c0bf5e633a71e91da97ad. 10 426 F Supp. 1156, 1158 (D Md. 1977), aff'd in part, 602 F 2d 616 (1979). gif 11 300 F 2d 561 (10th Cir. 1962). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_217


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18.2 Lost Profit and Diminished Revenue Damages Perhaps the most common type of damages claim asserted in all of antitrust is for some variation of lost past profits, diminished revenues, or diminished capital in the context of a continuing business.12 The methodology will vary according to the particulars of the case and the nature of the violation, but may include the before-and-after and yardstick approaches previously discussed in the context of enhanced price damages, a market-share approach in which an appropriate market share is calculated for the plaintiff and lost profits are calculated on the basis of that share of industry revenues, lost sales tied to particular transactions or customers, or projections of lost sales. Some general principles do apply.13 Claims for lost profits may include damages based on diminished revenues on sales already made and loss of profits on transactions which would have taken place but for the violation. If projected future lost profits are sought, they must be reduced to present value to take into account the time value of money. In appropriate circumstances, diminution in the value of capital investment may be recoverable as an item of damages so long as it does not overlap with other items, causing duplication.14 An example of a case utilizing the 'normative period' or 'before-and-after'/pre-post approach in a diminished revenue case is Elyria-Lorain Broadcasting Co. v. Lorain Journal Co.,15 which involved an attempt to monopolize by a newspaper which sought to prevent businesses in Lorain, Ohio, from purchasing advertising on the plaintiff's radio station. In this case, the plaintiff showed lost advertising revenue from certain specific customers and showed additional damage by comparing its revenues from Lorain, Ohio, merchants as a percentage of its total revenues before, after, and during the conspiracy period. The comparison showed that revenues from Lorain were higher during both normative periods than during the time of the conspiracy. The plaintiff bolstered this by showing that its revenues in nearby Elyria, which was a market unaffected by the conspiracy, tracked those in Lorain before and after the conspiracy, but remained higher than those in Lorain during the conspiracy period. In this case, the plaintiff was able to use strong normative period evidence combined with the use of its own business in another local market as a yardstick during the conspiracy period to confirm its damage approach. However, obviously such evidence will not be available in all cases.

85df07a2946c0bf5e633a71e91da97ad. 85df07 12 See Pierce v. Ramsey Winch Co., 753 F 2d 416 (5th Cir. 1985), for an example of a formula for calculation gif of lost profits. gif 85df07a2946c0bf5e633a71e91da97ad. 13 P. C. Jones, Litigating Private Antitrust Actions (Colorado Springs, Colo., 1995 Supp.), 4723. gif 85df07a2946c0bf5e633a71e91da97ad. 14 See Atlas Bldg. Products, Inc. v. Diamond Block & Gravel Co., 269 F 2d 950, 9589 (10th Cir. 1959). gif 15 358 F 2d 790 (6th Cir. 1966). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_218 next page >


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In another case, the plaintiff established liability against the defendant based on a number of acts of unfair competition and compared its sales during an unrestrained base year with those during the damage period. The plaintiff then determined its damages by applying a profit-to-sales percentage to the lost sales without increasing its overhead expenses correspondingly. This approach was upheld in the case, but a factor was that this methodology was not directly challenged by the defence.16 It normally will be the case that increased gross sales will carry with them some level of increased (variable) overhead expenses which must be factored into the lost profits determination, but this may not be required where it is shown that the increase in overhead is de minimis. In a case in which a distributor was refused unlawfully a line of Piaget watches for resale, the incremental operating expenses incurred in carrying the line were minimal. Accordingly, the Court approved gross profits (not the more usual net profits) on lost sales as the measure of damages.17 In another case involving a successful antitrust counterclaim to a patent infringement suit, the plaintiff extrapolated gross sales, but for the antitrust violation from prior years' sales, deducted actual sales from that figure and multiplied the result by a profit-to-sales ratio. The special master in the case reduced the ratio somewhat to adjust for the fact that net sales (sales exclusive of credits, returns, allowances, sales attributable to products not affected by the conspiracy, and where appropriate, foreign sales), not gross sales, are normally used in damages calculations.18 An interesting application of the lost profit approach was present in Copper Liquor, Inc. v. Adolph Coors Co.,19 in which a liquor store owner20 used a popular brand of beer as a 'loss leader', sometimes selling the 'leader' product below cost. The 'leader' rationale is that the attractive price on a particular item lures customers into the store, and the customers then also purchase other items less heavily discounted in price. The plaintiff was able to show that his overall sales of Coor's beer were at a profit, and after the defendant terminated his supply of the leader product, he had to discount all products in the store 10 per cent. The appellate court upheld the jury verdict, but indicated that if the plaintiff had sold the defendant's product at a loss overall, no damages could have been awarded.

85df07a2946c0bf5e633a71e91da97ad. 85df07a 16C. Albert Sauter Co. v. Richard S. Sauter Co., 368 F Supp. 501 (ED Pa. 1973). gif gif 85df07a2946c0bf5e633a71e91da97ad. 17Trabert & Hoeffer, Inc. v. Piaget Watch Corp., 633 F 2d 477 (7th Cir. 1980). gif 18Locklin v. Day-Glo Color Corp., 429 F 2d 873 (7th Cir. 1970). See 2361 State Corp. v. Sealy, Inc., 263 F Supp. 85df07a2946c0bf5e633a71e91da97ad. gif 845 (ND Ill. 1967). 85df07a2946c0bf5e633a71e91da97ad. 19 624 F 2d 575 (5th Cir. 1980). gif 20 In some states in the USA, alcoholic beverages (including beer and wine in some cases) may only be sold in 85df07a2946c0bf5e633a71e91da97ad. gif licensed liquor stores, not general grocery or retail stores.

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In Graphic Products Distributors v. Itek Corp.,21 a distributor of graphic products who was in business only for nine months had his distributorship terminated for failure to comply with a manufacturer's territorial and customer restrictions. The plaintiff established its lost profits damages on the basis that a 'normative period' of three months (the second quarter of its operation) showed a profit of $8,440. The jury award was upheld on appeal. In another case, a jury verdict on lost profit damages was affirmed even though the plaintiff had never been profitable.22 In cases where no normative period of profits can be demonstrated, plaintiffs frequently utilize the 'yardstick' approach, in which damages are calculated by reference to a comparable profitable firm in a market unaffected by the restraint. Of course, the plaintiff will have to demonstrate that the firm serving as a yardstick is actually comparable or the evidence may not be admissible.23 However, exact comparability is not required,24 and the trier of fact may adjust for minor differences.25 An example of a yardstick case is Richfield Oil Corp. v. Karseal Corp.,26 in which the plaintiff was excluded from the market for car waxes sold in the defendant's service stations. The plaintiff's evidence was that its product sold three to seven times better than a competitive product sold in the defendant's stations. The sales of the competing product in the defendant's stations were the yardstick, multiplied by three, multiplied by the plaintiff's net profits per case. The jury verdict was upheld as a fair and accurate estimate. In a tying case involving the compelled purchase of tyres, batteries, and accessories (TBA) along with gasoline (petrolthe tying product), the plaintiff measured its damages by comparing the prices of the 'tied' TBA sold by the defendants with the (lower) prices of comparable products sold by third parties.27 Note that the circuit courts in the USA are divided on whether a plaintiff with a tying claim is required to show that only the price of the tied product is higher,28 or whether the plaintiff must show that the combined price of the tying and tied products are higher.29

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 21 717 F 2d 1560, 15823 (11th Cir. 1983). gif gif 85df07a2946c0bf5e633a71e91da97ad. 22Terrell v. Household Goods Carriers' Bureau, 494 F 2d 16, 23 (5th Cir. 1974). gif 23 E.g., Home Placement Service v. Providence Journal Co., 819 F 2d 1199, 1206 (1st Cir. 1987); Fargo Glass & 85df07a2946c0bf5e633a71e91da97ad. gif Paint Co. v. Globe American Corp., 201 F 2d 534, 540 (7th Cir. 1953). 85df07a2946c0bf5e633a71e91da97ad. 24 E.g., Charles Rubenstein, Inc. v. Columbia Pictures Corp., 176 F Supp. 527 (D Minn. 1959), aff'd, 289 F 2d gif 418 (8th Cir. 1961); William Goldman Theaters, Inc. v. Loew's, Inc. 69 F Supp. 103 (ED Pa. 1946), aff'd, 164 F 2d 1021 (3rd Cir. 1948); Cf. Volasco Products Co. v. Lloyd A. Fry Roofing Co., 308 F 2d 383 (6th Cir. 1962).

85df07a2946c0bf5e633a71e91da97ad. 25 See Theater Inv. Co. v. RKO Radio Pictures, 72 F Supp. 650 (WD Wash. 1947). gif 26 271 F 2d 709 (9th Cir. 1959). 85df07a2946c0bf5e633a71e91da97ad. gif 27Lessig v. Tidewater Oil Co., 327 F 2d 459 (9th Cir. 1964). 85df07a2946c0bf5e633a71e91da97ad. gif 28 E.g., Northern v. McGraw-Edison Co., 542 F 2d 1336, 1347 (8th Cir. 1976); Pogue v. International Industries, 85df07a2946c0bf5e633a71e91da97ad. gif Inc., 524 F 2d 342, 344 (6th Cir. 1975). 85df07a2946c0bf5e633a71e91da97ad. 29 E.g., Kypta v. McDonald's Corp., 671 F 2d 1282, 1285 (11th Cir. 1982); Siegel v. Chicken Delight, 448 F 2d gif 43, 52 (9th Cir. 1971).

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Another use of the yardstick approach occurred in an antitrust challenge to the US National Football League's player 'draft',30 in which rookie football player 'Yazoo' Smith sought to measure his lost compensation by comparing himself to another player who was an eight-year veteran twice selected 'all-pro'.31 The appellate court regarded this approach as not clearly erroneous. Another approach to lost profit damages is the market share approach, often using complex economic and market analysis combined with elements of the normative period and yardstick approaches. An example is Mount Hood Stages, Inc. v. Greyhound Corp.,32 in which a bus company (Greyhound) attempted to eliminate competition from Mount Hood (another bus company) on certain routes. The market share study showed that on certain routes 95 per cent of customers would choose Mount Hood over Greyhound, and the expert witnesses calculated lost revenue damages based on a 95 per cent market share for those routes. In Independence Tube Corp. v. Copperweld Corp.,33 the plaintiff's claim was that the defendants conspired to block his entry into the market, and the plaintiff was entitled to lost profits for the period he was unable to compete in the market. The plaintiff's expert employed what he called 'pull-back' analysis, examining the demand, price, and costs of manufacture in the steel tubing market and calculating the plaintiff's market share in its first two years of operation. This market share was used in the damage period to estimate what the plaintiff's performance would have been had entry not been delayed. In Olsen v. Progressive Music Supply, Inc.,34 the plaintiff was a distributor of musical instruments who was unlawfully terminated. The plaintiff established its market share by comparison to a base year, the first full year after the defendant resumed supplying the plaintiff. The plaintiff's post-resumption market share in the state of Utah was applied to the fouryear damage period to calculate the plaintiff's lost sales during the damage period. The actual damage calculations appear in the district court opinion.35 Other methods of establishing lost profits are based on identifying specific customers or transactions on which lost profits can be calculated. In Advanced Business Systems & Supply Co. v. SCM Corp.,36 the plaintiff received damages based

85df07a2946c0bf5e633a71e91da97ad. 30 In the player 'draft', professional American football teams gain exclusive rights as against other teams in gif the league to sign contracts with college players who are entering the professional arena for the first time.

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85df07a2946c0bf5e633a71e91da97ad. 31Smith v. Pro-Football, Inc., 593 F 2d 1173 (DC Cir. 1978), on remand, 528 F Supp. 1266, 12723 (D.D.C. 1981). gif 85df07a2946c0bf5e633a71e91da97ad. 32 555 F 2d 687, 7012 (9th Cir. 1977), vacated on other grounds, 437 US 322, remanded, 583 F 2d 394 (9th Cir. gif 1978), aff'd reinstatement of judgment, 616 F 2d 394 (9th Cir. 1980). 85df07a2946c0bf5e633a71e91da97ad. 33 691 F 2d 310, 331 (7th Cir. 1982), reversed on other grounds, 467 US 752 (1984). gif 85df07a2946c0bf5e633a71e91da97ad. 34 703 F 2d 432 (10th Cir. 1983). gif 35Olsen v. Progressive Music Supply, Inc., 19822 Trade Cas. (CCH) 64,928 (D Utah 1992). 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 36 415 F 2d 55 (4th Cir. 1969). gif < previous page

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on lost sales to a customer who was prevented from purchasing by threats to terminate the customer's service contract if the customer used the plaintiff's product. In another case, lost profits on a particular joba one-year contract for court reporting servicesserved as the measure of damages where the defendant had submitted a below-cost 'predatory' bid in an effort to monopolize the market.37 In a refusal to deal case involving cinemas, damages were calculated based on the difference in earnings between expected earnings on specific films which were not shown and earnings on the less desirable films which were shown instead.38 In a case involving monopolization of the market for computer leasing, the plaintiff calculated its damages based on the number of computers it would have purchased and the profits which had been earned on earlier purchases.39 In another leading case, the plaintiff was excluded from the opportunity to supply welding equipment and supplies to General Electric Corporation, its largest customer, and its distributorship was terminated for violation of territorial restrictions. Damages were calculated based on the quantity of products purchased by General Electric during the damage period and an estimate of the profits which would have been earned on that amount of sales.40 If specific lost customers or transactions cannot be identified, plaintiffs will normally use a sales projection to calculate lost profits. In theory, this is simply the arithmetical result of multiplying a plaintiff's net profit per unit of sales by the number of sales lost by reason of the antitrust violation. Of course, there first must be a reasonable estimate of the plaintiff's net profit per unit and a reasonable estimate of the number of additional sales which would have been realized absent the defendant's unlawful conduct. Plaintiffs generally approach the calculation of net profit per unit either by examination of their own financial records to determine actual profit or by deduction of per unit manufacturing expenses from the selling price.41 The number of additional sales is usually calculated by use of statistics and economic modelling to show a demand in the market which the plaintiff could have met but for the

85df07a2946c0bf5e633a71e91da97ad. 85df07a 37National Reporting Co. v. Alderson Reporting Co., 567 F Supp. 1011 (ED Mo. 1983). gif gif 85df07a2946c0bf5e633a71e91da97ad. 38Beech Cinema, Inc. v. Twentieth Century-Fox Film Corp., 622 F 2d 1106 (2d Cir. 1980). gif 39Greyhound Computer Corp., Inc. v. International Business Machines Corp., 559 F 2d 488, 507 (9th Cir. 1977). 85df07a2946c0bf5e633a71e91da97ad. gif 40Hobart Bros. Co. v. Malcom T. Gilliland, Inc., 471 F 2d 894 (5th Cir. 1973). 85df07a2946c0bf5e633a71e91da97ad. gif 41 See, e.g., Ford Motor Co. v. Webster's Auto Sales, Inc., 361 F 2d 874 (1st Cir. 1966); Westman Com. Co. v. 85df07a2946c0bf5e633a71e91da97ad. gif Hobart Corp., 541 F Supp. 307 (D Colo. 1982); White & White, Inc. v. American Hospital Sup. Corp., 540 F Supp. 951 (WD Mich. 1982); and N.W. Controls, Inc. v. Outboard Marine Corp., 333 F Supp. 493 (D Del. 1971).

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defendant's actions,42 projections of lost sales by market share as previously noted,43 or projection of lost sales by overall business growth.44 18.3 The Terminated Business A third major category of damages is sought when the result of anticompetitive conduct is to drive the plaintiff out of business or out of the market. The plaintiff not only seeks to be compensated for past lost profits, but for future profits which would have been earned had the plaintiff remained in the market. The courts have generally accepted two approaches: projected future lost profits or lost going concern value. Either approach normally involves the determination of base profit figures which would have been earned but for the violation according to methods previously described, such as use of a normative period, yardstick, or market share analysis.45 Once base profit figures are estimated, the plaintiff's market share for the future must be estimated46 and the future profits figure adjusted to reflect the length of time the plaintiff's business could realistically be expected to be viable in the market. In addition, the total future profit amount must be adjusted (downward) by discounting to present value and accounting for other revenues earned by a plaintiff presumably engaged in other endeavours now that his business has failed.47 The going concern value approach assesses what a 'willing third party, in arm's length negotiations, could reasonably be expected to offer for the business prior to the impact of the antitrust violation in question'.48 The going concern value of a business can be calculated a number of different ways, including stock prices (if shares are publicly traded or there is an identifiable private market), bona fide offers, industry rules of thumb, balance sheets, and complex studies by accountants, economists, or business brokers.

85df07a2946c0bf5e633a71e91da97ad. 85df07 42 E.g., Richfield Oil Corp. v. Karseal Corp., 271 F 2d 709 (9th Cir. 1959); Kobe, Inc. v. Dempsey Pump Co., gif 198 F 2d 416 (10th Cir. 1952); Martin B. Glauser Dodge Co. v. Chrysler Corp., 418 F Supp. 1009 (D NJ gif 1976), reversed on other grounds, 570 F 2d 72 (3rd Cir. 1977); De Filippo v. Ford Motor Co., 378 F Supp. 456 (ED Pa. 1974), reversed on other grounds, 516 F 2d 1313 (3rd Cir. 1975).

85df07a2946c0bf5e633a71e91da97ad. 43 E.g., Moore v. Jason H. Matthews & Co., 682 F 2d 830 (9th Cir. 1982); Elyria-Lorain Broadcasting Co. v. gif Lorain Journal Co., 358 F 2d 790 (6th Cir. 1966); Columbia Pictures Corp. v. Charles Rubenstein, Inc., 289 F 2d 418 (8th Cir. 1961); Sablosky v. Paramount Film Distrib. Corp., 137 F Supp. 929 (D Pa. 1955).

85df07a2946c0bf5e633a71e91da97ad. 44 E.g., Independence Tube Corp. v. Copperweld Corp., 691 F 2d 310 (7th Cir. 1982), reversed on other grounds, gif 467 US 752 (1984); Frey & Son, Inc. v. Welch Grape Juice Co., 240 F 114 (4th Cir. 1917); M & H Tire Co. v. Hoosier Racing Tire Corp., 560 F Supp. 591 (D Mass. 1983).

85df07a2946c0bf5e633a71e91da97ad. 45 Jones, supra note 13, at 487. gif 46 E.g., Heatransfer Corp. v. Volkwagen, AG, 553 F 2d 964 (5th Cir. 1977). 85df07a2946c0bf5e633a71e91da97ad. gif 47 E.g., Lehrman v. Gulf Oil Corp., 464 F 2d 26, 467 (5th Cir. 1972). 85df07a2946c0bf5e633a71e91da97ad. gif 48 Jones, supra note 13, at 491. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_223


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Plaintiffs may seek past lost profit damages for the period up to the date of termination of the business and going concern value as at the date of termination, but may not seek both future lost profits and loss of going concern value. The two approaches are duplicative, so a plaintiff must choose between future profits after the date of termination or loss of going concern value as of the date of termination.49 The most common method of determining the going concern value of a business is the capitalization of earnings approach.50 This involves the determination of an average annual 'normal' profit for the business and the selection of an appropriate capitalization (discount) rate. The profit projection is divided by the capitalization rate to approximate the firm's earnings.51 This is the going concern value of the business.52 Any salvage value of the business assets must be deducted from the capitalized earnings and the amount must be reduced to present value. Several cases illustrate these methods.53 18.4 Damages Studies and Their Flaws The plaintiff ordinarily will be offering a damages study, typically through expert witness testimony, in support of damages claims. Defendants will of course seek to induce the court to deny admission into evidence of the study or opinions based on the study as speculative. Defendants may offer countervailing damages studies, and either side will certainly seek to undermine the credibility of the opponent's study by pointing out its flaws. Therefore, when a damages study is designed, attention should be paid to those factors which have led courts to reject such evidence. Proponents of damages studies, whether plaintiffs or defendants, must of course always ensure that a proper evidentiary foundation is laid for the study and any assumptions to be utilized by an expert witness. Courts are highly likely to reject estimates which lack a proper foundation, are based on unsupported assump-

85df07a2946c0bf5e633a71e91da97ad. 85df07a 49Farmington Dowel Prods. Co. v. Forster Mfg. Co., 421 F 2d 61 (1st Cir. 1969). gif gif 85df07a2946c0bf5e633a71e91da97ad. 50 Jones, supra note 13, at 4934. gif 51 American Bar Association Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic Issues 85df07a2946c0bf5e633a71e91da97ad. gif (Chicago, Ill., 1996), 129 (hereafter, Antitrust Damages). 85df07a2946c0bf5e633a71e91da97ad. 52 In theory, the earnings during the 'damaged' period (after the violation) also are estimated and divided by the gif appropriate discount rate. The difference between the two amounts is the plaintiff's damages. Supra. In practice, since this approach is used when the plaintiff firm is forced out of business, the second number is always zero. Hence, no second calculation is necessary, even if possible.

85df07a2946c0bf5e633a71e91da97ad. 53 E.g., Eiberger v. Sony Corporation of America, 459 F Supp. 1276 (SDNY 1978), aff'd in part & rev'd in part, gif 622 F 2d 1068 (1980); Vandervelde v. Put & Call Brokers & Dealers Ass'n, 344 F Supp. 118 (SDNY 1972); Taxi Weekly, Inc. v. Metropolitan Taxicab Bd. of Trade, Inc., 539 F 2d 907 (2d Cir. 1976); Port Terminal & Warehousing Co. v. John S. James Co., 695 F 2d 1328 (11th Cir. 1983).

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tions, or fail to account for legitimate competitive responses or for market forces beyond the defendant's control.54 A damages study in which a plaintiff's assumptions of its performance during the damage period were either unsupported by or contradicted by evidence in the trial record was rejected as inadequate as a matter of law in Joseph E. Seagram & Sons v. Hawaiian Oke and Liquors, Ltd.55 Among the rejected claims made by the expert was a claim that net profits would have increased 1,800 per cent in one year but for the termination of the plaintiff's distributorship. In another case involving a motor vehicle dealership, the appellate court rejected the plaintiff's evidence of damages because its assumptions about the value of the business and its projected growth rates were not supported.56 The Court stated that 'self-serving and unsupported assumptions cannot sustain a calculation of going concern value'.57 A claim of projected future lost profits was rejected in Webb v. Utah Tour Brokers Ass'n,58 where the plaintiffs were unable to offer evidence of previous experience in the business to support a profit projection assumption that all tours they were unable to offer would have generated a profit of 25 per cent. Other judgments illustrate this point in a variety of contexts.59 The failure of damages studies to reflect the effects of anticipated competitive responses has also doomed the plaintiff's evidence in several cases. Expert witnesses may not assume that competitors will stand by and ignore new competition or otherwise fail to act in a rational60 profit-seeking manner. For example, in Murphy Tugboat Co. v. Crowley,61 the Court considered that a reasonable jury could not indulge in the assumption made by the plaintiff's expert that a competitor would not cut prices in response to a new entrant's taking 25 per cent of its previous market share, stating that 'economic rationality must be assumed for all competitors, absent the strongest evidence of chronic irrationality'. In a case involving a discount real estate broker excluded from the El Paso, Texas, market by a group boycott, the plaintiff's expert witness assumed the plaintiff would grow to a 20 per cent market share before its competitors began to compete

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 54Antitrust Damages, supra note 51, at 49. gif gif 85df07a2946c0bf5e633a71e91da97ad. 55 416 F 2d 71, 87 (9th Cir. 1969). gif 85df07a2946c0bf5e633a71e91da97ad. 56Chrysler Credit Corp. v. J. Truett Payne Co., 670 F 2d 575 (5th Cir. 1982). gif 57Id., at 582. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 58 568 F 2d 670, 677 (10th Cir. 1977). gif 59 E.g., Bausch Mach. Tool Co. v. Aluminum Co. of America, 79 F 2d 217, 227 (2d Cir. 1935); Gray v. Shell Oil 85df07a2946c0bf5e633a71e91da97ad. gif Co., 469 F 2d 742, 74950 (9th Cir. 1972); Southern Pac. Communications Co. v. AT&T, 556 F Supp. 825, 107595 (DDC 1983), aff'd, 740 F 2d 1011 (DC Cir. 1984); Herman Schwabe, Inc. v. United Shoe Mach. Corp., 297 F 2d 906, 91113 (2d Cir. 1962); and ILC Peripherals Leasing Corp. v. IBM, 458 F Supp. 423, 436 (ND Cal. 1978), aff'd sub nom. Memorex Corp. v. IBM, 636 F 2d 1188 (9th Cir. 1980). 85df07a2946c0bf5e633a71e91da97ad. 60 If a competitor is not acting rationally, plaintiff may prove it but may not assume it. gif 61 658 F 2d 1256, 1262 (9th Cir. 1981). 85df07a2946c0bf5e633a71e91da97ad.

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on the basis of price.62 The expert gave no basis for these assumptions, had not studied the behaviour of other real estate markets, and admitted he was unaware of any realty firm in the country which had a market share larger than 6.5 per cent. The Court found that the 20 per cent market share lacked a rational basis in fact and ordered that a revised damages study with a basis for its assumptions be provided on remand.63 In Coleman Motor Co. v. Chrysler Corp.,64 a judgment in favour of an independent automobile dealership was reversed and remanded for a new trial in part because the dealer failed to reduce his sales projection to account for sales lost to lawful competition from other dealers. Other cases also illustrate this point.65 In those cases where the plaintiff uses a yardstick approach, courts have rejected estimates unless there is evidence that the yardstick firm is actually comparable to the plaintiff. In Home Placement Service v. Providence Journal Co.,66 the Court rejected the suggested yardstick firm because the plaintiff had not introduced sufficient evidence of comparability. Other cases also make this point.67 Damages studies also must account for market and other forces which may have adversely affected the plaintiff in addition to the defendant's conduct. In ILC Peripherals Leasing Corp. v. IBM,68 the Court considered the plaintiff's damage estimates speculative where it had not explained the effects on its performance of its own mismanagement and a recession while basing those damage estimates on a comparison of forecast and actual sales results. In Amerinet v. Xerox Corp.,69 the plaintiff claimed that its business decline was caused by the defendant's antitrust violation, but evidence showed the decline began prior to the alleged violations, and the plaintiff had claimed in another lawsuit that it had been harmed by employee theft of trade secrets. The plaintiff's failure to account for these factors resulted in a finding of no causation.70

85df07a2946c0bf5e633a71e91da97ad. 85df07a2 62Park v. El Paso Board of Realtors, 764 F 2d 1053, 10668 (5th Cir. 1985). gif gif 85df07a2946c0bf5e633a71e91da97ad. 63Supra. gif 64 525 F 2d 1338, 1352 (3d Cir. 1975). 85df07a2946c0bf5e633a71e91da97ad. gif 65 E.g., Southern Pac. Communications Co. v. AT&T, 556 F Supp. 825, 1078 (DDC 1983), aff'd, 740 F 2d 1011 85df07a2946c0bf5e633a71e91da97ad. gif (DC Cir. 1984) and R.S.E., Inc. v. Pennsy Supply, 523 F Supp. 954, 966 (MD Pa. 1981). 85df07a2946c0bf5e633a71e91da97ad. 66 819 F 2d 1199, 12068 (1st Cir. 1987). gif 67 See, e.g., Farmington Dowel Prods. Co. v. Forster Mfg. Co., 421 F 2d 61, 82 note 48 (1st Cir. 1969) and 85df07a2946c0bf5e633a71e91da97ad. gif Herman Schwabe, Inc. v. United Shoe Mach. Corp., 297 F 2d 906, 911 (2d Cir. 1962). 85df07a2946c0bf5e633a71e91da97ad. 68 458 F Supp. 423, 435 (ND Cal. 1978), aff'd sub nom. Memorex Corp. v. IBM, 636 F 2d 1188 (9th Cir. 1980). gif 69 972 F 2d 1483, 14957 (8th Cir. 1992). 85df07a2946c0bf5e633a71e91da97ad. gif 70 See also, Coleman Motor Co. v. Chrysler Corp., 525 F 2d 1338, 1352 (3d Cir. 1975); Continental Baking Co. v. 85df07a2946c0bf5e633a71e91da97ad. gif Utah Pie Co., 396 F 2d 161, 179 (10th Cir. 1968); Sunkist Growers, Inc. v. Winckler & Smith Citrus Prods. Co., 284 F 2d 1 (9th Cir. 1960), rev'd on other grounds, 370 US 19 (1962); and Wolfe v. National Lead Co., 225 F. 2d 427, 4334 (9th Cir. 1955).

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It is common for owners and officers of plaintiffs to seek to offer their own opinions on damage estimates, but courts do not necessarily consider that ownership or employment alone is a sufficient qualification in the absence of a reliable factual basis for the testimony. Assertions regarding profits or market behaviour based merely on 'experience' in the business are frequently rejected without a more solid evidentiary foundation.71

85df07a2946c0bf5e633a71e91da97ad. 85df07 71 E.g., Lessig v. Tidewater Oil Co., 327 F 2d 459, 4734 (9th Cir. 1964); Pacific Mailing Equipment Corp. v. gif Pitney Bowes, Inc., 499 F Supp. 108, 11920 (ND Cal. 1980); and Hanson v. Shell Oil Co., 541 F 2d 1352, gif 1361 (9th Cir. 1976).

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19 Damage Principles in Community Antitrust Cases

85df07a2946c0bf5e633a71e91da97ad. 19.1 Misperceptions of the Importance of 'Treble' Damages: An Overview gif

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85df07a2946c0bf5e633a71e91da97ad. 19.2 Lack of Pre-Judgment Interest Makes Treble Damages Single gif

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85df07a2946c0bf5e633a71e91da97ad. 19.3 Pre-Judgment Interest in the Community: Are Single Damages Treble? gif

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85df07a2946c0bf5e633a71e91da97ad. 19.4 Exemplary Damages in UK Courts gif

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85df07a2946c0bf5e633a71e91da97ad. 19.5 Limited Application of Article 215 (Now 288) Case Law gif

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85df07a2946c0bf5e633a71e91da97ad. 19.6 Damages in Community Antitrust Cases in the UK Compared to US Damage Rules gif

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85df07a2946c0bf5e633a71e91da97ad. 19.6.1 Reasonable Estimation of Damages gif

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85df07a2946c0bf5e633a71e91da97ad. 19.6.2 Heads of Damages gif

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19.1 Misperceptions of the Importance of 'Treble' Damages: An Overview Many European discussions of the potential for private antitrust damages litigation in the Community have discounted its likelihood on the grounds that US law offers treble damages under the Sherman Act, an inducement apparently not present under Community (or national) law. Some may therefore consider that the law of compensation in Europe is inadequate to make injured parties whole, or that plaintiffs will not engage in private antitrust litigation in the absence of a 'bounty' over and above actual injury. It is submitted that neither is the case, and the perception that treble damages are a necessity to induce antitrust victims to seek compensation is mistaken. Others have expressed distaste for the American treble damages rule under the mistaken belief that it represents a sort of excessive punishment which society ought to leave to criminal law. Such views typically take no notice of either the legislative history of the Sherman Act or its case law, which establish that 'compensation is a goal, perhaps even the dominant goal, of antitrust's damages remedy'.1 A

85df07a2946c0bf5e633a71e91da97ad. 1 R. H. Lande, 'Are Antitrust ''Treble" Damages Really Single Damages?', (1993) 54 Ohio St. Law J 115, 122. gif

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substantial number of Supreme Court decisions have stated that compensation and deterrence are the purposes of the treble damages remedy.2 Vold, in early writing, has persuasively argued that the purpose of the trebling is compensatory:

85df07a2946c0bf5e633a71e91da97ad. 85df07 In other words, closely analyzed, the threefold damage provision is remedial to the plaintiff, compensatory in gif its nature in liquidating compensation for accumulative intangible harm incurred outside of and beyond the gif ordinarily recoverable legal damages to the business or property. It is a penalty upon the defendant only in the loose sense of penalty as signifying a burden encountered by the defendant as a consequence of his wrongdoing. In that broad sense of penalty this provision of course is a burden to the defendant in requiring him to make compensation for damage wrongfully caused, comparable to the burden that is imposed by every provision which imposes legal liability to make compensation to the injured party. The threefold damage provision is a provision for liquidated compensation for accumulative harm, largely intangible in its nature, which is so conspicuous a part of the loss suffered when a going business is destroyed in violation of the antitrust act.3 While the treble damage multiplier may seem to create an award which exceeds actual compensation, several studies have indicated that in fact an injured plaintiff may not be made even whole as to actual damages, much less receive a windfall. It is well-accepted in the USA that the antitrust law's 'failure to provide for prejudgment interest is a shortcoming that leaves a plaintiff less than whole'.4 As the following discussion shows, treble damages do not make a plaintiff whole even once where the measure of 'actual' recoverable damages is itself deficient. 19.2 Lack of Pre-Judgment Interest Makes Treble Damages Single The flaw in US law which generally precludes the award of pre-judgment interest is a substantial one. There are no decisions awarding pre-judgment interest under the statutory provision which allows pre-judgment interest to be awarded only in narrow circumstances (to counter excessive delay in the litigation process caused by a defendant).5 One study of antitrust enforcement used the example of the Hanover Shoe case to estimate the effect on compensation to the plaintiff of the lack of availability of pre-judgment interest. Sarris concluded:

85df07a2946c0bf5e633a71e91da97ad. 85df07 2 E.g., Atlantic Richfield Co. v. USA Petroleum, 495 US 328, 330 (1990); California v. ARC America Corp., gif 490 US 93, 102 (1989); American Soc'y of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 US 556, 557 gif (1982); Reiter v. Sonotone Corp., 442 US 330, 343 (1979); Illinois Brick Co. v. Illinois, 431 US 720, 746, 748, 749 (1977); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 US 477, 486 (1977); and Perma-Life Mufflers, Inc. v. International Parts Corp., 392 US 134, 139 (1968).

85df07a2946c0bf5e633a71e91da97ad. 3 L. Vold, 'Are Threefold Damages under the Antitrust Act Penal or Compensatory?', (1940) 28 Ky. Law J 117, gif 1578. 85df07a2946c0bf5e633a71e91da97ad. 4 ABA Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic Issues (Chicago, Ill., 1996), gif 109 note 16. 85df07a2946c0bf5e633a71e91da97ad. 5 15 USC § 15(a), as amended by the Antitrust Procedural Improvements Act of 1980, Pub. L. No. 96349, 94 Stat. gif 2716.

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85df07a2946c0bf5e633a71e91da97ad. In addition, interest is not paid on treble damages awarded to compensate for the time value of money gif between the time of the violation and the time of recovery. In the case of Hanover Shoe, the lag between the

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original court decision in which United Shoe was convicted of monopolizing, and the Supreme Court decision awarding Hanover Shoe treble damages was 14 years. At a modest 10 percent rate of discount, the present value of one dollar of damage payment was worth only 23 cents at the time of conviction. This alone would effectively reduce the treble damages in real terms to less than single damages.6 While post-judgment interest is recoverable under US law, the time lag between the violation and the judgment itself can reduce treble damages to single damages. As one noted practitioner stated:

85df07a2946c0bf5e633a71e91da97ad. Working with my calculator and current interest rates, a judgment in 1987 for conduct committed today in gif 1981 needs to be three times the amount of actual damages to fairly compensate a plaintiff. Yet that time lag

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of six years between date of injury and date of judgment is abnormally short in a typical antitrust case.7 The most thorough and comprehensive study of the real effect of 'treble' damages to date is by Lande.8 Lande meticulously lays out a number of adjustments to the treble damages multiplier, including the lack of pre-judgment interest, under a range of high to low assumptions in order to calculate the actual magnitude of the treble damages remedy. His overall conclusion is that 'antitrust damages are currently not trebled' and that one can safely 'conclude that awarded [treble] damages are much more likely to be the equivalent of actual damages than treble damages'.9 More specifically, Lande concludes that:

85df07a2946c0bf5e633a71e91da97ad. As Table 2 shows, the effects of the low adjustments demonstrate that awarded damages are approximately gif equal to actual damages (they are actually ten percent larger), while the high estimate shows that awarded

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damages are nearly half of actual damages (forty-three percent). The mean of the high and low damage awards produces an estimate that is less than actual damages (sixty-three percent).10 While Lande's figures include adjustments other than pre-judgment interest, prejudgment interest is a substantial component of the adjustments and, depending on the length of time lag from injury to judgment and applicable interest rates, the lack of pre-judgment interest alone can reduce nominally treble damages to single damages.

85df07a2946c0bf5e633a71e91da97ad. 85df07 6 V. Sarris, The Efficiency of Private Antitrust Enforcement: The 'Illinois Brick' Decision (New York, 1984), gif 1718 (emphasis supplied). gif 85df07a2946c0bf5e633a71e91da97ad. 7 S. D. Susman, in panel discussions, 'Mandatory Treble Damages Time For a New Look?', Committee on gif Corporate and Antitrust Law of the Section of Corporation, Banking, and Business Law, 1981 American Bar

Association Annual Meeting, New Orleans, reprinted in Antitrust Damage Allocation: Hearings before the Subcomm. on Monopolies and Commercial Law of the House Comm. on the Judiciary, 97th Cong., 1st and 2d Sess. 170, 177 (19812) (statement of J. Sims). Note that 'current' interest rates in 1981 were about 20 per cent.

85df07a2946c0bf5e633a71e91da97ad. 8Supra note 1. gif 9 Lande, supra note 1, at 171. 85df07a2946c0bf5e633a71e91da97ad. gif 10Supra, at 163 (emphasis supplied). 85df07a2946c0bf5e633a71e91da97ad. gif < previous page

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19.3 Pre-Judgment Interest in the Community: Are Single Damages Treble? The treble damages formula so identified with US antitrust law is in practical effect essentially the same as an award of single damages with pre-judgment interest. Pre-judgment interest is the Community's damage multiplier. It seems clear that Community law will insist that pre-judgment interest be included under the recoverable heads of damage in order to make the plaintiff whole. Under these circumstances, single damages under Community antitrust law in most cases will be equivalent or close to an award of treble damages under US law. Hence, from a real economic perspective, Community antitrust claims virtually are treble damage claims. While there is variation among the Member States, it is accepted among them and by the European Court that full reparation for loss or damage includes an award of interest on the principal sum.11 This principle was clearly illustrated in the Court's two Marshall judgments. In the first Marshall case,12 the Court ruled that Miss Marshall could rely on Directive 76/207 and seek compensation in the UK national courts for damages based on unlawful discrimination. In the second Marshall judgment, the Court examined the question whether she was entitled to receive interest on the award as part of full compensation.13 The Court found that she should:

85df07a2946c0bf5e633a71e91da97ad. 85df07 31. With regard to the second part of the second question relating to the award of interest, suffice it to say that gif full compensation for the loss and damage sustained as a result of discriminatory dismissal cannot leave out gif of account factors, such as the effluxion of time, which may in fact reduce its value. The award of interest, in accordance with the applicable national rules, must therefore be regarded as an essential component of compensation for the purpose of restoring real equality of treatment.14 In Marshall II, the Industrial Tribunal was required to award pre-judgment interest notwithstanding considerable doubt whether it possessed that authority under UK law. It seems clear from Francovich, Factortame III, and their progeny that antitrust damage actions under EC law will likewise create entitlement to full compensation, including prejudgment interest. Therefore, Community

85df07a2946c0bf5e633a71e91da97ad. 85df07 11 Cf. A. van Casteren, 'Article 215(2) EC and the question of interest', in T. Heukels and A. McDonnell, The gif Action for Damages in Community Law (The Hague, 1997), 199, 200 ('[i]n national law, interest is considered gif an essential part of the damages').

85df07a2946c0bf5e633a71e91da97ad. 12 Case 152/84, Marshall v. Southampton and South-West Hampshire Area Health Authority (Teaching) gif (Marshall I), [1986] ECR 723. 85df07a2946c0bf5e633a71e91da97ad. 13 Case C271/91, Marshall v. Southhampton and South-West Hampshire Area Health Authority (Teaching) gif (Marshall II), [1993] ECR I4367. 85df07a2946c0bf5e633a71e91da97ad. 14Supra, at 31 (emphasis supplied). The interest in question included pre-judgment interest from the date of the gif discrimination: Supra, at 9.

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antitrust actions may not offer 'treble' damages, but they will offer at least full compensation which will be the close equivalent of the US treble damages action. 19.4 Exemplary Damages in UK Courts An additional potential enhancement of damages available in the UK is the possibility that exemplary or punitive damages may be awarded in addition to compensatory damages. In US antitrust, no punitive damages beyond the statutory 'treble' damage award can be awarded. If punitive damages may be awarded in UK courts with respect to Community antitrust claims, the combination of this factor with recoverable pre-judgment interest actually could render the Community antitrust remedy superior to the US treble damages action in some cases. Punitive damages are the UK's multiplier and are in addition to pre-judgment interest. It will be recalled that the plaintiffs in Factortame III included a claim for exemplary damages under their heads of claim and the Court of Justice considered the question whether exemplary damages were available under the right to reparation derived from Community law. The Court held that 'it must be possible to award specific damages, such as the exemplary damages provided for by English law, pursuant to claims or actions founded on Community law, if such damages may be awarded pursuant to similar claims or actions founded on domestic law'.15 This shifts the issue to whether 'similar claims or actions' founded on English law permit the award of exemplary damages. It is submitted that such damages are available in principle in similar actions and therefore must be allowed in cases asserting Community antitrust claims. A brief review16 of the current state of punitive damages law in England may be helpful. Exemplary or punitive damages are intended to punish the defendant, to deter repetition of wrongful conduct by the defendant or others, and to convey the disapproval of the jury or court.17 The leading cases governing their award are Rookes v. Barnard,18 Broome v. Cassell,19 and AB v. South West Water Services Ltd.20 Taken

85df07a2946c0bf5e633a71e91da97ad. 15 Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of Germany and The gif Queen v. Secretary of State for Transport, ex parte Factortame Ltd and Others, [1996] ECR I1029, at

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90. 85df07a2946c0bf5e633a71e91da97ad. 16 An extensive review of the state of punitive damages law in England may be found in Law Commission No. gif 247, Aggravated, Exemplary and Restitutionary Damages: Item 2 of the Sixth Programme of Law Reform: Damages (London, 1997). The suggestions for reform include the expansion of the availability of exemplary damages. See also the earlier consultation paper, (1993) Consultation Paper No 132, Aggravated, Exemplary and Restitutionary Damages.

85df07a2946c0bf5e633a71e91da97ad. 17 Law Commission No 247, supra at note 16, 53. gif 18 [1964] AC 1129. 85df07a2946c0bf5e633a71e91da97ad. gif 19 [1972] AC 1027. 85df07a2946c0bf5e633a71e91da97ad. gif 20 [1993] QB 507. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_232


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together, these cases establish 'categories' and 'cause of action' tests for determining which claims allow the award of punitive damages. The 'categories' of cases in which punitive damages may be awarded per Lord Devlin's speech in Rookes were those involving (1) oppressive, arbitrary, or unconstitutional action by servants of the government; (2) wrongful conduct which has been calculated by the defendant to make a profit for himself which may well exceed the compensation payable to the plaintiff; and (3) statutes expressly providing for such awards. The 'cause of action' test derives from AB v. South West Water Services Ltd, in which the Court of Appeal concluded, that in addition to fitting within the categories named by Lord Devlin, a case must present a cause of action for which punitive damages had been awarded prior to the judgment in Rookes. The torts in AB v. South West Water Services Ltd considered by the Court to fail the cause of action test were negligence, public nuisance, and breach of statutory duty. In the context of private Community antitrust litigation, the principal category 'fit' is the second category, conduct calculated to make a profit.21 In many, if not most, antitrust claims, the rational defendant seeking to maximize profits will have undertaken acts or arrangements of a business nature precisely because of a belief that its profitability will thereby be enhanced. While the case law indicates that the mere fact that a defendant is engaged in business in not itself sufficient,22 the element of calculation 'is not intended to be limited to the kind of mathematical calculations to be found on a balance sheet'.23 Although unlawful conduct 'must have been motivated by mercenary considerations, the belief that he would be better off financially if he violated the plaintiff's rights than if he did not',24 typical antitrust violations such as price-fixing, bans on parallel imports, or abuse of dominant position are of such a nature that the profit-seeking motivation ordinarily should not be difficult to show. This issue of whether exemplary damages could be awarded under a Community law damages claim was addressed by the Divisional Court in Factortame (No 5)25 following the decision of the European Court in Factortame III. The Divisional Court found that the conduct of the defendants made out a proper claim for

85df07a2946c0bf5e633a71e91da97ad. 85df07 21 The first category, oppressive, arbitrary, or unconstitutional action by servants of the government, also gif could apply if the defendant were a public undertaking such as a state monopoly of a commercial character or gif which is controlled by the State or given a privileged legal status.

85df07a2946c0bf5e633a71e91da97ad. 22 Cf. John v. Mirror Group Newspapers Ltd, [1997] QB 586, 618G619A. gif 85df07a2946c0bf5e633a71e91da97ad. 23Broome v. Cassell, [1972] AC 1027, 1078H1079A, 1094C, 1101BC, 1130DF. gif 24John, supra at note 22. 85df07a2946c0bf5e633a71e91da97ad. gif 85df07a2946c0bf5e633a71e91da97ad. 25R. v. Secretary of State for Transport, ex parte Factortame Ltd (No 5), [1997] Eu. LR 475, [1998] 1 CMLR gif 1353 (Div. Ct.). The Court of Appeal affirmed the judgment of the Div. Ct., but did not address the issue of

exemplary damages, which was reserved by the plaintiffs: The Queen v. The Secretary of State for Transport, ex parte Factortame Ltd and others, [1998] 3 CMLR 192 (CA).

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liability for damages for breach of Community law in favour of the plaintiffs, but declined to permit the claim for exemplary damages to proceed. The Court characterized the plaintiffs' claims as a breach of statutory duty, cited the judgments in Bourgoin SA and others v. Ministry of Agriculture, Fisheries and Food26 and Garden Cottage Foods Ltd v. Milk Marketing Board,27 and stated '[t]hus, whilst it can be said that the cause of action is sui generis, it is of the character of a breach of a statutory duty'.28 The plaintiffs in Factortame (No 5) based their claim for exemplary damages on the principle that remedies available in national law actions must also be available in Community law actionsthe non-discrimination principle.29 Their argument was that:

85df07a2946c0bf5e633a71e91da97ad. [T]he tort of misfeasance is directly similar to the breach of statutory duty which constitutes their cause of gif action, that penal damages are available under Lord Devlin's first category for misfeasance and that to fail to

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make such damages available here would be discriminatory and contrary to the ruling of the ECJ.30 The Divisional Court acknowledged that '[i]f the claim made by the applicants in the present case is similar to a claim in the tort of misfeasance, they have made out this step in their argument'.31 The Court then proceeded to compare the mental [fault] elements of the tort of misfeasance to the fault elements of a Community law damages claim:

85df07a2946c0bf5e633a71e91da97ad. Thus the relevant question is whether there is a similarity between a claim in respect of the tortious gif misfeasance by a government servant and the claims which are made by the applicants for the breach by the

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United Kingdom of its Treaty obligations. . . . The tort [of misfeasance] is dependent upon knowledge by the defendant that he is breaking the law or at least his being reckless whether he is doing so or not. That is not the present case. The actionable breach by the United Kingdom of Community law does not depend on subjective factors. As explained in the section of this judgment which deals with the question whether the breaches were sufficiently serious, the criteria do not require a consciousness that the Community law was being broken, nor is absence of recklessness an answer to liability. The criteria have a different character. A comparison of, on the one hand, a liability based upon the guilty mind of an individual and, on the other hand, a liability based on an objective assessment of the clarity and character of the law broken and the gravity of the breach discloses an important dissimilarity not a similarity.32 With respect, it is submitted that the Divisional Court's analysis of the 'similarity' of claims or actions under domestic law and the right to reparation under

85df07a2946c0bf5e633a71e91da97ad. 26 [1986] QB 716. gif 85df07a2946c0bf5e633a71e91da97ad. 27 [1984] AC 130. gif 28 [1997] Eu. LR at 531. 85df07a2946c0bf5e633a71e91da97ad. gif 29 See full discussion in Chaps. 1011. 85df07a2946c0bf5e633a71e91da97ad. gif 30 [1997] Eu. LR at 5312. 85df07a2946c0bf5e633a71e91da97ad. gif 31Supra, at 532. 85df07a2946c0bf5e633a71e91da97ad. gif 32Supra, at 532. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page


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Community law is deeply flawed. The most glaring flaw is that the Court's characterization of a Community claim as a breach of statutory duty has resulted in comparing one UK tort (breach of statutory duty) with another UK tort (misfeasance in office) in order to discover if two UK torts are 'similar' to each other! The correct similarity is that both Community claims and UK claims are ones for non-contractual liability. Another problem is that the Court did not expressly consider the similarity of the tort of misfeasance and the Community right to damages, but halted its analysis immediately upon discovery of a dissimilarity in the mental element it thought was required. The Court did not express any views on what degree of similarity is required to avoid discrimination against Community rights and did not describe any criteria by which the similarity should be evaluated. I have found no case which suggests that the mental element of fault required is an appropriate basis on which to distinguish between Community remedies and national remedies. The Divisional Court neither referred to any authorities on this point nor explained its rationale for selection of the mental element test as the touchstone of similarity. Thirdly, the Divisional Court's conclusion seems to conflict with the judgment of the ECJ in Factortame III. It will be recalled that in discussing the restrictions that exist in domestic legal systems, the ECJ singled out 'any condition that may be imposed by English law on state liability requiring proof of misfeasance in public office' as one which would make it extremely difficult or impossible to obtain 'effective reparation for loss or damage resulting from a breach of Community law'.33 By judging the similarity of Community claims and domestic claims on the basis of elements of a tort which the Factortame III Court expressly stated could not be required of plaintiffs asserting Community law claims, the Divisional Court seems to be doing indirectly, albeit in a more limited fashion, what it could not have done directly. Fourthly, the Divisional Court, in characterizing the Community law claim as one for statutory duty, seemed to overlook the fact that the Court of Appeal in Bourgoin had expressly found that the breach of Article 30 (now 28) EC in that case disclosed a cause of action for the tort of misfeasance in public office.34 The point here is that there was Court of Appeal authority for the proposition that Community law claims could be brought under the tort of misfeasance in office as well as the tort of breach of statutory duty. If Community law damages claims may be brought under both breach of statutory duty and misfeasance in office torts, the conclusion that the torts are 'similar' for Community law purposes is virtually irresistible.

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946 33Factortame III, supra note 15, at 73. gif gif 85df07a2946c0bf5e633a71e91da97ad. 34Bourgoin SA v. Ministry of Agriculture, Fisheries and Food, [1986] 1 QB 716, 775H777H. gif < previous page page_235 next page >


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Fifthly, the Divisional Court's approach to similarity was adopted without reference to the judgment of the ECJ in Palmisani v. Instituto Nazionale della Previdenza Sociale.35 This judgment sheds some light on the criteria utilized by the ECJ to determine when a domestic claim or action is similar to one grounded in Community law. In that case, the plaintiff suffered loss of unpaid wages when her employer was declared insolvent, but Italy had not established a guarantee mechanism as required by Directive 80/987, the directive involved in the Francovich case. When Italy did implement the directive, post-Francovich, two procedures were created: one for payment of wage guarantees as required by the Directive, and one for compensation to those individuals who were injured by the failure of Italy timeously to implement the Directive. The wage guarantee benefits procedure was administrative in nature, and the compensation procedure was judicial in nature. Each provided for a one-year time limit, which Miss Palmisani allowed to expire before asserting her claim. The administrative benefits procedure provided for a one-year prescription period which under certain conditions could be stayed or extended, but the judicial compensation procedure was considered to have a one-year limitation period after which the claim was forfeited, and the time could not be stayed or extended. In contrast, ordinary actions for damages governed by sections 2043 ff. of the Italian Civil Code provided for a five-year prescription period, which under certain conditions could be stayed or otherwise extended. Palmisani argued that the judicial compensation scheme for protection of Community rights under the Directive was less favourable than similar actions for domestic law claims. In particular, she argued that the administrative benefits procedure, considered a domestic claim, was more favourable because of the distinction between its prescription period of one year and the judicial compensation scheme's less desirable limitation period of one year. Moreover, she argued the judicial compensation scheme was less favourable than the Civil Code damages claim, with its prescription period of five years. The ECJ stated that because the administrative benefits procedure and the judicial compensation procedure 'differ as to their objective, there is no need to undertake a comparison of the procedural rules governing them'.36 Therefore, the Court considered that the difference in the objectives sought (payment of wage guarantee benefits versus compensation for loss or damage suffered due to failure to timely pay the wage benefits) meant that the two procedures were not comparable or similar. However, the Court applied the same test in suggesting that the judicial compensation procedure could be compared to the ordinary Civil Code claims. The ECJ stated:

85df07a2946c0bf5e633a71e91da97ad. 35 Case C261/95, [1997] 3 CMLR 1356. gif 85df07a2946c0bf5e633a71e91da97ad. 36Palmisani, supra, at 36. gif

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85df07a2946c0bf5e633a71e91da97ad. As far as the ordinary system of non-contractual liability is concerned, it must be pointed out that, unlike the gif procedures examined under paragraphs [34] to [37] of this judgment, that system is on the whole, in terms of

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its objective, similar to that introduced by section 2(7) of the Legislative Decree, inasmuch as it is intended to guarantee reparation of the loss or damage sustained as a result of the conduct of the perpetrator.37 The Court concluded that it lacked sufficient information necessary to determine whether the Italian Civil Code action could be directed against public authorities for failure to act or having acted unlawfully in the exercise of their powers. It therefore fell to the national court to make that determination. The ECJ stated that if the Civil Code action could not be directed against public authorities for unlawful conduct, and no other relevant domestic action or claim could be used for comparison, the judicial compensation procedure would not be precluded by Community law, as it stands at present.38 The reasoning of the ECJ and the Advocate General in Palmisani makes it clear that claims or actions are similar for purposes of application of the Community law principle of non-discrimination when they on the whole have similar objectives. All English torts, including breach of statutory duty and misfeasance in office, share the objective as a whole of compensating individuals for unlawful non-contractually based conduct. With respect, it is therefore submitted that the Divisional Court was in error in judging the similarity of the Community law claim in Factortame (No. 5) classified as breach of statutory duty to the tort of misfeasance in office on the basis of a dissimilarity in mental elements required. The Divisional Court ought to have said that the non-contractual right of reparation under Community law on the whole is similar in objective to either domestic tort, and exemplary damages must be capable of being recovered in a Community claim, because they are recoverable in a domestic action or claim. Sixthly, the Divisional Court's characterization of the right to damages under Community law as 'sui generis' and 'of the character of a breach of statutory duty' takes too literally the grafting of the nuances of English tort doctrine onto Community law rights. In particular, the Court noted that 'English law is that, unless the statute expressly provides that penal damages may be awarded, only compensatory damages (i.e., reparation) should be awarded for such breaches'.39 This appears to be an extension of the requirement as an element of the tort that the legislature's (actual, presumed, or fictional) intent governs the existence and extent of availability of a claim under this tort with respect to any given statute. The problem with this approach is, as discussed earlier,40 that whether a rule of

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e63 37Supra, at 38. gif gif 85df07a2946c0bf5e633a71e91da97ad. gif 38Supra, at 3940. 85df07a2946c0bf5e633a71e91da97ad. 39Factortame (No. 5), [1997] Eu. LR at 531. However, no authority was cited by the Div. Ct. for this point. gif 40 See Chap. 10. 85df07a2946c0bf5e633a71e91da97ad. gif < previous page page_237 next page >


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Community law such as Article 86, now 82, creates rights in individuals (i.e., was intended to create a cause of action) is matter of Community law, not the presumed intent of Parliament in enacting the European Communities Act 1972. It cannot be considered that Parliament's intent or lack thereof to allow punitive damages to be awarded for breach of the 1972 Act can override the Community law doctrines of supremacy and equivalence and deny to Community law claims any damages which are available in similar domestic tort claims. The Divisional Court's view that this is not discriminatory rests upon the suggestion that the rule that exemplary or penal damages are not available in breach of statutory duty claims unless the statute so provides is uniformly applied in construing domestic statutes as well as the 1972 Act. However, this calls into question the idea that the Court may call a Community damages claim sui generis and then apply a rule unique to the breach of statutory duty category in order to exclude a type of damages from the recovery. In fact, it calls into question the use of the breach of statutory duty rubric in any respect on the ground that Community law is being improperly perverted to fit the nuances of domestic law. It may be significant that the Court of Appeal made no reference in its judgment in this case to the classification of the right to damages as a breach of statutory duty. A few other points concerning Factortame (No. 5) are worth noting. The Divisional Court considered Lord Devlin's first category (oppressive, arbitrary, or unconstitutional acts by servants of the government) and appeared to accept that misfeasance in office fell within that category. However, the Court did not accept that the conduct of the government's servants was sufficiently egregious to satisfy the elements of this claim. Interestingly, the Court acknowledged that it was bound by the cause of action test laid down in AB v. South West Water Services Ltd., but eschewed any reliance on that judgment as excluding exemplary damages in breach of statutory duty cases. The Court seemed to accept that such a test would have been discriminatory against Community law claims:

85df07a2946c0bf5e633a71e91da97ad. If it were the case that English law declines to award penal damages simply because the statutory obligation gif was one which first came into existence after 1964, a case of discrimination against Community law might

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have been made out. But that is not the case here. It is simply that the 1972 Act does not provide for penal damages.41 The foregoing arguments represent my views on the correctness of the Divisional Court's refusal to allow an award of punitive damages for a breach of Community law. Whether or not these views are accepted, the consideration of exemplary damages as recoverable in Community law cases may come about through UK legislation. The Law Commission's review of exemplary damages has resulted in a proposal to rationalize and expand the availability of exemplary damages to virtually all English torts. The Law Commission has said:

85df07a2946c0bf5e633a71e91da97ad. 41 [1997] Eu. LR at 531. gif

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85df07a2946c0bf5e633a71e91da97ad. 85df07 We propose that punitive damages be available for any tort, for (most) equitable wrongs, and for civil wrongs gif which arise under statutes where such an award would be consistent with the policy of the statute in gif question. . . . This would entail a general rejection of the rationally indefensible position which the common law reached following AB v. South West Water Services Ltd, according to which specific causes of action are selected soley on the basis of the existence or absence of pre-1964 precedents for awards of exemplary damages.42 In particular, the Law Commission strongly recommends that exemplary damages should be allowed in cases of civil wrongs arising under statutes:

85df07a2946c0bf5e633a71e91da97ad. 85df07 We do not think that punitive damages can be refused for a civil wrong, merely because it arises under an Act gif rather than at common law. Our starting-point is therefore that punitive damages should prima facie be gif available for any wrong which arises under an Act for which the victim of the wrong may recover compensation or damages. But this proposition is subject to one important qualification. Punitive damages should only be available for such a wrong if an award of punitive damages would be consistent with the policy of the statute under which the wrong arises ('the consistency test') . . . Many of the better known statutes under which statutory civil wrongs arise do not specify expressly what remedies are available, or may do so only in the most general terms. Parliament is often content to provide that a wrong should be civilly actionable, or actionable as a tort or an equitable wrong, without stipulating the remedial implications of that proposition. It is a reasonable inference that at least compensatory damages are available for the civil wrong so created. And we think that, in general, the availability of punitive damages would be consistent with the policy of such Acts.43 With regard to claims under Community law, the Law Commission noted that:

85df07a2946c0bf5e633a71e91da97ad. It seems that the claim to damages will be treated as based on a tort, and in particular, the tort of breach of gif statutory duty, with the statutory duty in question arising by virtue of the European Communities Act 1972. 85df07a2946c0bf5e633a71e91da97ad. Applying that analysis, our recommendations would mean that such breaches of Community law could trigger gif an award of punitive damages if the courts took the view that such an award would be consistent with the


policy of the European Communities Act 1972. . . .

85df07a2946c0bf5e633a71e91da97ad. It is therefore the consistency test which provides the primary means for ensuring that our Bill conforms with gif Community law, in relation to this category of wrong. . . . 85df07a2946c0bf5e633a71e91da97ad. We would not seek to provide a definitive answer here to the question of whether an award of punitive gif damages would, or would not, be consistent with Community law. The arguments seem finely balanced. . . .


On the other hand, Community law requires national courts not to discriminate against claims that are founded on Community law as compared with claims founded on domestic law. It may be argued that, in the absence of clear indications to the contrary in the 1972 Act, or in specific Community legislation, or in general principles of Community law,

85df07a2946c0bf5e633a71e91da97ad. 42 Law Commission No. 247, Aggravated, Exemplary and Restitutionary Damages: Item 2 of the Sixth gif Programme of Law Reform: Damages (London, 1997), 110. 85df07a2946c0bf5e633a71e91da97ad. 43Supra, at 113, 11516. gif < previous page

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85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e633 punitive damages should be available (provided the other criteria in our Bill are satisfied).44 gif gif While it is speculation at this point whether the Law Commission's recommendations and Bill will be accepted, or in what form, if at all, legislation will pass, it is submitted that sound reasons exist for judicial findings that punitive damages should be available in Community antitrust claims. If legislation is adopted, the present uncertainty may be resolved more quickly. The potential importance of punitive damages to antitrust claims is suggested by the view of one distinguished US practitioner who took the view that punitive damages awarded by a jury would in many cases be superior to the US statutory treble damages provision.45 In the UK, punitive damages may be awarded by a judge instead of a jury in competition law cases, but there is still a potential for a very substantial enhancement of actual damages in appropriate cases. 19.5 Limited Application of Article 215 (Now 288) Case Law There exists a body of Community law46 concerning damages recoverable in claims based on the non-contractual liability of the Community under the provisions of Article 215 EC. It is submitted that for the most part such cases have limited application in the context of claims against private undertakings for infringement of EC competition rules. They should be regarded, where applicable at all, as minimum guidelines and not limits on recoverability of damages. This is because, in particular, damage rules in such cases were formulated with a particular goal in mind, as summarized by the Court of Justice:

85df07a2946c0bf5e633a71e91da97ad. 85df07 45. The strict approach taken towards the liability of the Community in the exercise of its legislative activities gif is due to two considerations. First, even where the legality of measures is subject to judicial review, exercise gif of the legislative function must not be hindered by the prospect of actions for damages whenever the general interest of the Community requires legislative measures to be adopted which may adversely affect individual interests. Secondly, in a legislative context characterised by the exercise of a wide discretion, which is essential for implementing a Community policy, the Community cannot incur liability unless the institution concerned has manifestly and gravely disregarded the limits on the exercise of its powers: Bayerische HNL Vermehrungsbetriebe G.m.b.H. & Co. K.G. v. Council and

85df07a2946c0bf5e633a71e91da97ad. 85df07a2946c0bf5e6 44Supra, at 11819. gif gif 85df07a2946c0bf5e633a71e91da97ad. 45 S. D. Susman, supra note 7, at 177: '[i]n the antitrust cases which I have tried, where I've gotten a verdict for gif the plaintiff, had I been able to argue punitive damages to the jury I would have gotten punitive damages in many cases in excess of twice the actual damages' (viz., more than treble damages, since punitive damages are added to actual damages). 85df07a2946c0bf5e633a71e91da97ad. 46 See generally A. G. Toth, 'The Concepts of Damage and Causality as Elements of Non-contractual Liability', in gif T. Heukels and A. McDonnell, The Action for Damages in Community Law (The Hague, 1997), 179.

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85df07a2946c0bf5e633a71e91da97ad. Commission of the European Communities (Joined Cases 83/76, 94/76, 4/77, 15/77 and 40/77) [1978] ECR gif 1209, 1224, paras. 5 and 6.47

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In the same case, Advocate General Tesauro commented that '[t]he limits laid down by the case law in regard to actions brought under Article 215 [now 288] of the Treaty are in fact based on the widespread view that, as a matter of principle, compensation may not be recovered for injury caused by the legislature'.48 Moreover, 'to date the number of awards of damages made against Community institutions comes to just eight'.49 No such considerations apply to private damages actions under Community competition law, where the view of the European Court is that national courts are charged with the duty to ensure full effectiveness and protection of Community rights. It is obvious that in the case of damage actions against undertakings under Community competition rules, there is no legislative context, the legislative function will not be hindered, the public purse will not be endangered, and there is no question of interference in wide discretion of Community institutions implementing Community policy if damage rules are not unduly restrictive. Indeed, the opposite is the case. Even in the context of Member State liability, the European Court has indicated that in the absence of wide legislative discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach of Community law.50 Damage rules which allow private actions to recover full damages based on reasonable evidence, even if falling short of full certainty, will promote enforcement of Community competition policy, compensate victims of infringements, help deter additional infringements, and generally make Community competition law more effective. 19.6 Damages in Community Antitrust Cases in the UK Compared to US Damage Rules In general it is submitted that, apart from the absence of treble damages and pre-judgment interest issues already discussed in detail, there is broad similarity and comparability of the approach to damages followed in antitrust cases in the USA and likely to be followed in Community antitrust claims brought in UK courts. The examples of US cases are given as illustrations, and it may be that UK judges

85df07a2946c0bf5e633a71e91da97ad. 47Factortame III, Joined Cases C46/93 and C48/93, Brasserie du Pêcheur SA v. Federal Republic of gif Germany and The Queen v. Secretary of State for Transport, ex parte Factortame Ltd and Others, [1996] ECR I1029, at

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45.

85df07a2946c0bf5e633a71e91da97ad. 48 Opinion of Tesauro AG, Factortame III, supra note 47, at 64. gif 85df07a2946c0bf5e633a71e91da97ad. 49Supra, at

63.

gif 85df07a2946c0bf5e633a71e91da97ad. 50 Case 5/94, R. v. Ministry of Agriculture, Fisheries, and Food, ex parte Hedley Lomas (Ireland) Limited, [1996] gif ECR I2553, at 28.

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will accept them as persuasive authority so long as counsel take care to fit them properly into the EC and UK context. 19.6.1 Reasonable Estimation of Damages It is submitted that the US principle which accepts evidence comprising 'just and reasonable' estimates of damages without requiring a level of absolute certainty of proof is consistent with Community damages law and will be accepted in Community antitrust cases. Even in the restrictive Article 215 (now 288) EC case law, the Court has accepted realistic approximations and allowed damage calculations to be based on the profitability of 'yardstick' firms:

85df07a2946c0bf5e633a71e91da97ad. In principle, the Court always aims at an exact assessment of the damage based on all available evidence. gif Since, however, the Court is involved in reconstituting a fictitious (hypothetical) situation, it may be faced

85df07 gif

with circumstances in which certain elements of the damage cannot be calculated with complete accuracy. In such cases, the Court is prepared to accept realistic approximations, such as averages based on comparisons, reached by sampling methods customarily used in economic surveys, provided that the basic facts are sufficiently reliable. Thus, for example, in the Mulder case the Court indicated that the basis which should be taken for calculating the income which the applicants (farmers in the Netherlands and Germany) would have received in the normal course of events, i.e., if they had made milk deliveries to which they would have been entitled in the absence of the illegal Community measures, was the profitability of a farm representative of the type of farm run by each of the applicants. This hypothetical income was to be reduced by any income which the applicants obtained or could have obtained from any replacement activities in which they were or could have been reasonably engaged, since they were obliged to show reasonable diligence in limiting the extent of their losses. . . . The damages which the Community had to make good was to be assessed on the basis of the loss of earnings consisting in the difference between the hypothetical income thus calculated and the income actually obtained.51 In calculating damages in antitrust cases, the courts are inherently engaged in the process of determining by estimation the economic result of transactions which never took place. So long as guesswork and speculation are avoided, proper evidentiary foundations are laid, and reasonable estimates of damages are arrived at by accepted methods, there seems no reason in principle why EC and UK courts will not accept a rule similar in content to that utilized by the courts in the USA. Private antitrust claims are outside the legislative context of the Article 215 (now 288) EC case law. It seems that because the ECJ has accepted approximations in the Article 215 (now 288) EC context, they must be accepted in private antitrust litigation as well. In fact, given the inherently 'what might have been' exercise which occurs in calculating antitrust damages, acceptance by national courts of reasonable damage estimates when laid on a proper foundation is required by the

85df07a2946c0bf5e633a71e91da97ad. 51 Toth, supra note 46, at 1867. gif

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familiar doctrine that national remedies 'must not be such as in practice to make it impossible or excessively difficult to obtain reparation'.52 19.6.2 Heads of Damages In general, the types of damages recovered in US antitrust cases seem to be types that would also be recoverable in Community antitrust cases. The very common types of damages awarded in US antitrust cases, lost profits or diminished revenue damages, have been awarded in Article 215 EC cases, as noted above. Moreover, in the case of national courts considering admissible heads of damage in claims derived from Community law, the ECJ has expressly held that lost profits damages may not be excluded. In Factortame III, the German government inquired whether lost profits were required to be awarded where German law did not regard the opportunity to market products from other Member States 'as forming part of the protected assets of the undertaking'.53 The Court indicated that Community law required that lost profit damages be available:

85df07a2946c0bf5e633a71e91da97ad. 85df07 87. Total exclusion of loss of profit as a head of damage for which reparation may be awarded in the case of a gif breach of Community law cannot be accepted. Especially in the case of economic or commercial litigation, gif such a total exclusion of loss of profit would be such as to make reparation of damage practically impossible.54 Antitrust cases obviously concern economic and commercial litigation almost exclusively. Hence, lost profit damages must in principle be recoverable if victims are to receive reparation for injury or damage. The Divisional Court in Factortame III asked whether Community law required national courts to award damages and interest under several heads of claim, including:

85df07a2946c0bf5e633a71e91da97ad. 85df07 (a) Expenses and/or loss of profit and/or loss of income during the period subsequent to the entry into force of gif the said conditions [nationality, domicile, etc.], during which the vessels were forced to lay up, to make gif alternative arrangements for fishing and/or to seek registration elsewhere; (b) losses consequent on sales at an undervalue of the vessels, or of shares therein, or of shares in vessel-owning companies; (c) losses consequent on the need to provide bonds, fines and legal expenses for alleged offences connected with exclusion of vessels from the national register; (d) losses consequent on the inability of such persons to own and operate further vessels; (e) loss of management fees; (f) expenses incurred in an attempt to mitigate the above losses; (g) exemplary damages as claimed?55

85df07a2946c0bf5e633a71e91da97ad. 52Factortame III, supra note 47, at 83. gif 85df07a2946c0bf5e633a71e91da97ad. 53Supra, at 86. gif 85df07a2946c0bf5e633a71e91da97ad. 54Supra, at

85df07a2946 gif

87.

gif 85df07a2946c0bf5e633a71e91da97ad. 55Supra, at 14. gif

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The ECJ noted as to the other heads of damage not already mentioned that 'Community law imposes no specific criteria' and referred the Divisional Court to the general principles that national remedies must not discriminate and must be adequate.56 However, depending on the circumstances of the particular plaintiff, most57 of the heads listed seemed to be consistent with what might be claimed under the US damage rules. As a general principle, it may be said that where an award of a particular item of damages is necessary to make the plaintiff whole, the Community principle of adequacy will dictate that the national court make it available upon proper proof.

85df07a2946c0bf5e633a71e91da97ad. 85df07a29 56Supra, at 88, referring to 83 of the same judgment. gif gif 85df07a2946c0bf5e633a71e91da97ad. 57 Some of the damages, such as diminution in the value of shareholdings or receipt of management fees might gif well be considered in the USA to be derivative and such parties might lack antitrust standing. However, Community law may require actual injury to be compensated, derivative or not.

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20 Conclusions: The Labours of Sisyphus The objective of this work was to study the nature and development of private Community and UK antitrust litigation in the national courts of the UK by reference to the more developed private enforcement system which has existed in the USA for over 100 years. Antitrust law in general, whether UK, Community, or US, and private litigation in particular constitute a vast subject area of study within which this work has touched only some of the fundamental points. However, as the dearth of private damages awards in the first 40 years of the EC attests, until the fundamental theory and structure of private antitrust litigation are understood, supported by precedent and authority, and put into practice, more detailed issues will not arise. The fundamental difficulty faced by private litigants in the UK and Community systems is obvious: there are almost no legislative rules governing private enforcement to set any of the parameters in which private actions may operate. The principal possible exception, in the Community, is the negative impact of the Commission's exclusive Article 81(3) (formerly 85(3) ) power to decide exemptions and the Article 81(2), formerly 85(2), provision to declare infringing agreements a nullity. The consequence has been mass uncertainty by lawyers and clients over a period of decades not only as to the finer points of private damages actions, but too frequently over basic points such as whether a private right to damages existed at all and how it should be pleaded. The 30-year-old debate in the UK over what sort of tort is represented by Articles 81 (formerly 85) and 82 (formerly 86) still goes on, although it is to be hoped that the Francovich reservation and Factortame III have brought it to a close. This work has attempted to contribute to the relief of some of the uncertainty by comparing the developing Community private antitrust action to the US system and suggesting how US experience may (or may not) offer useful insights for the Community. It is to be hoped that even where differences between the Community and US systems render particular solutions inappropriate, they may illuminate areas in which perhaps better choices might be made.

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The first conclusion reached is the arguably unremarkable one that private antitrust actions for damages under Community antitrust law are required to be available in the national courts. However, by tracing the development of the private action through the judicially announced doctrines of direct effect, supremacy, national remedies, and the Community remedy principle (Francovich reservation), the theoretical foundations have been laid out for inspection and aid in determining how US private enforcement doctrines fit into the scheme of the EC Treaty, if they do. A similar conclusion applies to the UK under the Competition Act 1998. The second conclusion is that pluralistic private antitrust litigation can work surprisingly well in the Community system, notwithstanding the Commission's apparent exclusivity in the matter of granting exemptions to Article 81, formerly 85. Article 82, formerly 86, allows for no exemptions, and this makes the exclusivity point not a factor in such cases. Even in Article 81 (formerly 85) cases, infringements involving core misconduct will not be affected, and national judges applying narrow constructionism should be able to avoid possible conflicts with Commission decisions. Where this is not possible, stays, interim measures, and preliminary references to the ECJ can resolve issues while minimizing the adverse consequences of the consequent delays. The same principles are generally applicable to the new UK system. The third conclusion is that Community antitrust actions can and should be brought in the UK courts as Community claims for breach of Articles 81 (formerly 85) and 82 (formerly 86). Moreover, the UK is required by its existing jurisprudence and the principle of non-discrimination in remedies to allow such actions to be brought as a breach of statutory duty. In addition, a number of economic torts can use Articles 81 (formerly 85) and 82 (formerly 86) as a basis or element so long as the conditions of such torts are not used to prevent the bringing of Community claims for breach of Articles 81 or 82 directly. In other words, direct Community claims for breach of Articles 81 (formerly 85) and 82 (formerly 86) are not the exclusive remedy allowed. UK national law may permit liability on a less restrictive basis but may not make recovery under Community law more onerous than under similar national remedies. The fourth conclusion is that the division of powers in the Community and the nature of the direct effect principle make certain US prudential limitations inappropriate for use in Community antitrust. Locus standi rules are broader in the Community than in the USA because of the directly effective nature of the Treaty provisions. Similarly, the antitrust injury principle in the USA seems inapplicable because of its focus on purely economic considerations and because of textual differences between US and Community rules. Finally, the ECJ should not allow the defensive use of passing-on in private antitrust cases, although it may. The ECJ most

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probably will find the US rule barring indirect purchaser recovery inappropriate in the Community as an unwarranted curtailment of the doctrine of direct effect. On the basis of the conditions of private antitrust litigation reviewed in this work, it appears that private antitrust litigation has the potential to be as much, if not more, of a factor in the Community as it has been in the USA. While this work has not embraced a substantive comparison of US and Community antitrust law, a few fundamental aspects stand out. First, despite the absence of treble damages in the Community system, offsetting elements of damage allowed in Community actions in UK courts which are not allowed in the USA include pre-judgment interest and exemplary damages. The combination may in some cases be comparable to or even exceed what a statutory treble damages award would represent in the USA. Secondly, generous rules of locus standi and the absence of an Illinois Brick-type indirect purchaser restriction mean that many more private parties will have admissible actions than would be the case in the USA. Finally, the absence of a rule of reason for Article 81 (formerly 85) cases means that once a practice is shown to be caught by Article 81(1), formerly 85(1), without a Commission exemption, liability often will be virtually automatic since the defences amounting to reasonableness which might be offered in a US court will not be allowed in the Community. Similarly, in Article 86 cases the burden of proving abuse of a dominant position is apparently substantially less than proof of monopolization in the USA, and no exemption is available. All of this points toward an impressive potential for antitrust litigation in Europe. The principal barrier to the realization of this immense potential stems from the lack of a legislative basis for private litigation coupled with the nature of the Community legal order. Because almost no issues are settled by statutory or other legislative provisions, each and every problem must be solved for the first time in the litigation. The way it is solved is a recipe for satellite litigation because of the impact of preliminary references under Article 177, now 234. Each new substantive or procedural issue must be considered by one or more national courts before a reference to the ECJ is made. The ECJ may then give judgment, sending the case back, only to see it return later in the form of another preliminary reference on another issue. For example, the plaintiffs in Factortame have been to the ECJ at least three timesso farsince 1989. There can be no assurance they will not be back. The piecemeal review process has made satellite litigation a growth industry in Luxembourg. Unfortunately, but understandably, this Sisyphean labour can deter even the most enthusiastic of litigants, as suggested by Picañol:

85df07a2946c0bf5e633a71e91da97ad. 85df07 If a plaintiff has to go up to the highest court in his country and through a reference to the Court of Justice, to gif have a procedural obstacle removed, and if successful, gif

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85df07a2946c0bf5e633a71e91da97ad. down again to the trial of the case until the next procedural obstacle appears and then have to start the whole gif exercise again, he may well be far better off trying his chances with a complaint to the Commission.1

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In the absence of legislation, the incremental approach will likely continue until sufficient rulings have been obtained to alleviate the uncertainty. At that point, a rapid acceleration in private litigation may yet occur. It may even be that a noncompetition law decision, Factortame III, will be the judgment that finally infuses vitality into private Community antitrust litigation. Until private litigation becomes a force in the Community, the Commission will remain overwhelmed by its caseload, and overall enforcement efforts will remain at too low a level to ensure that competition in the common market is not distorted. Under the new UK Competition Act 1998, this Sisyphean labour has not yet even begun at the time of this writing. However, perhaps the experience in the EC over the last 40 years will enable counsel and judges to shorten the interval needed to go from new statute to effective private enforcement. Those counsel in the UK and elsewhere who wish further to consider the American experience as a guide to the practicalities of litigating private antitrust suits should obtain some of the numerous practice-oriented publications of the Section of Antitrust Law of the American Bar Association. Although the authorship at times seems unduly defenceoriented, they are nonetheless extremely valuable for plaintiffs' counsel as well. The greatest practical challenge to private antitrust litigation in Europe seems to me to be the difficulties of gathering evidence when it is necessary to do so in multiple jurisdictions. There are substantial variations among the Member States in regard to the scope and extent of discovery allowed which will in some types of cases limit the availability of evidence. Even when sufficient discovery of documents is allowed, in the absence of legislation there may be no method of compelling pre-trial oral testimony comparable to the oral deposition2 procedure routinely available in US Federal courts. This procedure is in many cases extremely important to successful litigation. Of course, the Commission has managed for decades without comparable powers to compel oral testimony, but it has felt the lack. Private litigants might greatly benefit from the creation of a procedure for pretrial oral depositions.

85df07a2946c0bf5e633a71e91da97ad. 1 E. Picañol, 'Remedies in National Courts For Breach of Articles 85 and 86 of the EEC Treaty: A Review', gif (1983) 2 Legal Issues of Eur. Integration 1, 32.

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85df07a2946c0bf5e633a71e91da97ad. 2 In the USA, counsel are allowed to take oral depositions by compelling the attendance of witnesses before trial gif to be questioned by the party originating the deposition under oath and before a licensed court reporter who

records and produces a transcript of the deposition. Depositions are sometime recorded on videotape as well as in a written transcript for the purpose of being able to show the judge or jury the demeanor of the witness and aid in the assessment of credibility.

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It is hoped that this work has helped to dispel some of the myths about private antitrust litigation in the USA. The widely-held view among European academics and practitioners that treble damages statutes are necessary to provide sufficient incentive to encourage private litigation in Europe does not withstand careful examination. The availability of pre-judgment interest in Europe (and perhaps punitive damages) is a factor which is rarely considered when such statements are made. Every case will not be worth the expense and risk of bringing, but the idea that the whole concept should be dismissed out of hand on such grounds is a disservice to clients and wrong. A careful examination of particular cases is required. Similarly, the idea that there is no point in antitrust litigation without contingency fees or class actions is another myth which should not be accepted without careful inquiry. In the past, many antitrust cases in the USA were brought on a contingency basis, but this is now the exception rather than the rule. Companies in the USA have learned that firms of a size to fund their own litigation can be antitrust plaintiffs against other large firms. The antitrust laws protect large firms against threats to competition as well as small firms. Antitrust plaintiffs are not now, if they ever were, confined to small businesses unable to engage in litigation without contingency fees or legal aid. A number of antitrust class actions have been brought in the USA with success, but class actions have never accounted for more than a small percentage of private antitrust claims. There are undoubtedly many cases of anti-competitive injury to consumers or others whose individual claims are too small to justify antitrust litigation. Unless the UK or the EC develops means of aggregating such claims or allowing them to be brought by representative associations, it will be difficult to obtain compensation for small consumers through private litigation. These types of cases may be more appropriate for injunctive relief or government enforcement unless other aggregation procedures develop. Nonetheless, there will be very many cases where the size of claims will justify the effort and expense of private litigation. European (and now UK) antitrust laws may have begun in the shadow of the American antitrust tradition, but the position of competition law as a foundational principle of the Community gives it a rank in the legal order which surpasses that of the Sherman Act in the USA. A policy so vital to the founding and development of the Communities deserves enforcement efforts commensurate with its 'constitutional' rank. It was never imagined in the USA that the government's efforts alone would be sufficient to enforce the Sherman Act. It cannot be imagined now that ubiquitous private enforcement is not needed to enforce competition rules in the Community, the economy of which now exceeds that of the USA in size.

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Index A abuse of process 11011 Acheson, Dean 23 adequacy, rule of 64, 11819, 133, 1467, 1489, 2424 Antitrust Division, Department of Justice (US) 15, 23, 85 antitrust injury doctrine 1737, 1824, 1913 Archer Daniels Midland Co. 9 B Bowie, Robert 4, 25 breach of statutory duty 12545, 1489, 246 British Telecom litigation 108 n. 63 Bush administration, antitrust policy 15 business or property, meaning of 1578 business review letters 15 by reason of, meaning of 158 C cartels 235, 28, 36 Clayton Act 1011 Clinton administration, antitrust policy 15 comfort letters 31, 94 Commission (EC) decisions, effect of, see private enforcement, concurrent jurisdiction Community remedy principle 708, 14652, 246 Competition Act (UK) 3944, 13945 Competition Commission (UK) 39


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competition legislation & bills (UK) 3544 competition rules (EC) 2332 competitors, as preferred plaintiffs 1801 concurrent jurisdiction, see private enforcement actions (EU) conditions of exemptions 1078 conspiracy, see economic torts approach consumers, as preferred plaintiffs 180 Co-operation notices (Commission):

85df07a2946c0bf5e633a71e91da97ad. National Authorities 967, 99 gif 85df07a2946c0bf5e633a71e91da97ad. National Courts 99103 gif corrugated cardboard litigation 84 Cotton Oil Trust 7 criminal enforcement 15, 19 D damages, calculation 20810, 21527

85df07a2946c0bf5e633a71e91da97ad. capitalization of earnings 224 gif 85df07a2946c0bf5e633a71e91da97ad. customers/transactions 2212 gif 85df07a2946c0bf5e633a71e91da97ad. flaws in damages studies 2257 gif 85df07a2946c0bf5e633a71e91da97ad. going concern value 223 gif 85df07a2946c0bf5e633a71e91da97ad. lost profits 208 gif 85df07a2946c0bf5e633a71e91da97ad. market share 221 gif 85df07a2946c0bf5e633a71e91da97ad. overcharges 208, 21517 gif 85df07a2946c0bf5e633a71e91da97ad. pre-post method 21617, 21820 gif 85df07a2946c0bf5e633a71e91da97ad. sales projections 222 gif 85df07a2946c0bf5e633a71e91da97ad. terminated or damaged businesses 208, 223 gif 85df07a2946c0bf5e633a71e91da97ad. unprofitable plaintiffs 209 gif 85df07a2946c0bf5e633a71e91da97ad. yardstick method 217, 2201 gif damages, Community right to, see Community remedy principle damages, principles 199249


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85df07a2946c0bf5e633a71e91da97ad. Art. 288 (ex 215) law inapplicable 2401 gif 85df07a2946c0bf5e633a71e91da97ad. Community single as treble 2312, 247 gif 85df07a2946c0bf5e633a71e91da97ad. disaggregation 21012 gif 85df07a2946c0bf5e633a71e91da97ad. exemplary, see exemplary damages gif 85df07a2946c0bf5e633a71e91da97ad. fact of injury 2026 gif 85df07a2946c0bf5e633a71e91da97ad. flexible methods of proof 20710 gif 85df07a2946c0bf5e633a71e91da97ad. heads of claim, see types of recoverable damages gif 85df07a2946c0bf5e633a71e91da97ad. interest 2001, 22932 gif 85df07a2946c0bf5e633a71e91da97ad. measurement by estimation 2067, 2423 gif 85df07a2946c0bf5e633a71e91da97ad. offsetting benefits 21214 gif 85df07a2946c0bf5e633a71e91da97ad. precluded entry 209 gif 85df07a2946c0bf5e633a71e91da97ad. role of damages rules 199201 gif 85df07a2946c0bf5e633a71e91da97ad. trebling 22832, 247 gif 85df07a2946c0bf5e633a71e91da97ad. types of recoverable damages 2012, 2414 gif decisions, binding effect of Commission, see private enforcement, concurrent jurisdiction delict, 1389 Department of Justice (US) 14, 19, 85 Deutsche Telekom litigation 108 n. 63 direct effects principle 4759, 756, 78, 187, 191 Director-General of Fair Trading 37 distribution restraints 1814 dominant position 31 Dyno Nobel 9 E economic torts approach 11824 economists, see also expert witnesses 22 electrical equipment conspiracy 834 excessively difficult or impossible, see adequacy, rule of exemplary damages 35, 110, 118, 201, 23240 file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_261.html (3 of 4)7/30/2009 1:56:56 PM

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exemptions (EC) 2930, 901, 945, 1039 exemptions (US) 1718, 19

85df07a2946c0bf5e633a71e91da97ad. judicial 18 gif

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(cont.) exemptions:

85df07a2946c0bf5e633a71e91da97ad. Noerr-Pennington 18 gif 85df07a2946c0bf5e633a71e91da97ad. state action 18 gif 85df07a2946c0bf5e633a71e91da97ad. statutory 17 gif expert witnesses 22 F Federal courts (US) 202

85df07a2946c0bf5e633a71e91da97ad. binding effect of decisions 21 gif 85df07a2946c0bf5e633a71e91da97ad. citation format 21 gif 85df07a2946c0bf5e633a71e91da97ad. Courts of Appeal 21 gif 85df07a2946c0bf5e633a71e91da97ad. District Courts 21 gif 85df07a2946c0bf5e633a71e91da97ad. jury trial 22 gif 85df07a2946c0bf5e633a71e91da97ad. Supreme Court 20 gif Federal Trade Commission 11, 14, 15, 16, 17 n. 14, 19 Federal Trade Commission Act 1112 Federation of British Industries 34 fines 89, 16, 27, 39 France Télécom litigation 108 n. 63 Francovich reservation, see Community remedy principle Freiburg School 24 G General Electric Corp. 84 Georgetown Study 813 H High Authority (ECSC) competition policy 25 Hoar, George 35 file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_262.html (1 of 5)7/30/2009 1:56:49 PM

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Hobbes, Thomas 45 I IBM Corp. 83 ICI Explosives, USA, Inc. 9 impossible or excessively difficult, see adequacy, rule of indirect purchaser rule 17780, 1938 inducement of breach of contract, see economic torts approach industrial development, role of cartels 234 injunctions 10, 14, 68 integration, single market 5, 25, 26 interest, see damages, principles, interest intimidation, see economic torts approach J jury trial 22 L legal certainty 53, 57, 58 legal order (EC) 467 Linseed Oil Trust 7 locus standi, see standing to sue M Mandelson, Peter 42 merger control 323 Monnet, Jean 23 Monopolies & Mergers Commission (UK) 37 multiple damages, see treble damages actions N National Association of Attorneys General 16 national remedy principle 6270 file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_262.html (2 of 5)7/30/2009 1:56:49 PM

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national treatment principle, see non-discrimination, rule of negative clearance (Reg. 17) 30, 94 new remedies, creation of 6570 new torts theory 11417, 1467, 152 non-discrimination, rule of 64, 1359, 148, 2328 notification system (Reg. 17) 29, 90 P parens patriae actions 16 parliamentary sovereignty 113 passing on, see indirect purchaser rule persons, meaning of 1567 pharmaceutical litigation 84 pre-judgment interest, see damages, principles, interest price discrimination 12 prima facie evidence, effect of government judgments 11 primacy (of EC law), see supremacy private enforcement actions (EU) 8592

85df07a2946c0bf5e633a71e91da97ad. Competition Act (UK) 13945 gif 85df07a2946c0bf5e633a71e91da97ad. concurrent jurisdiction 93112 gif 85df07a2946c0bf5e633a71e91da97ad. narrow constructionism 1039 gif 85df07a2946c0bf5e633a71e91da97ad. not provided for 33 gif 85df07a2946c0bf5e633a71e91da97ad. objections to 8892 gif 85df07a2946c0bf5e633a71e91da97ad. stays 978, 1003 gif private enforcement actions (US) 16, 7984 provisional nullity principle 956 provisional validity principle 52 n. 32, 53, 54 prudential limits on private actions 153198 punitive damages, see exemplary damages


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R Reagan administration, antitrust policy 15 re-enactment of EC law, see translation Regulation 17, reform of 109 n. 65, 112 remedies principles, see Community remedy principle; national remedy principle res judicata 110 resale price maintenance (RPM) 15, 1823 Robinson-Patman Act 12 rule of reason 10, 95 S sham exception 1819 Schuman Declaration 23 Schuman, Robert 23 Sherman Act 89 Sherman, John 6, 8 single market integration, goal of 5 state aid rules 1213 state enforcement (US) 16 statute of limitations 11, 624 Standard Oil Trust 7 standing to sue 1536, 159172, 18591

85df07a2946c0bf5e633a71e91da97ad. Art. III (US Const.) standing 15960 gif 85df07a2946c0bf5e633a71e91da97ad. Arts. 8182 (ex 8586) standing 18691 gif 85df07a2946c0bf5e633a71e91da97ad. Art. 173 EC standing 1878 nn. 68 gif 85df07a2946c0bf5e633a71e91da97ad. direct injury test 1602 gif 85df07a2946c0bf5e633a71e91da97ad. factual matrix test 1667 gif 85df07a2946c0bf5e633a71e91da97ad. multi-factor test 16772 gif 85df07a2946c0bf5e633a71e91da97ad. target area test 1624 gif 85df07a2946c0bf5e633a71e91da97ad. zone of interests test 1656 gif file:///C|/Users/Keshilltari%20Juridik/Desktop/EDI/0198268688/files/page_262.html (4 of 5)7/30/2009 1:56:49 PM

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stay of private actions, see private enforcement actions (EC) sufficiently serious breach 72, 77 Sugar Trust 7 supremacy (of EC law) 5961, 1334, 14950

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T translation (of EC law) 14950 treble damages actions

85df07a2946c0bf5e633a71e91da97ad. goals 20 gif 85df07a2946c0bf5e633a71e91da97ad. Sherman & Clayton Acts 811 gif 85df07a2946c0bf5e633a71e91da97ad. UK 356 gif trusts, business 7 U unlawful interference with trade or business, see economic torts approach V Vertical Restraint Guidelines 15, 16 W Westinghouse Electric Corp. 84 Whisky Trust 7

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