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EU seeks more private lawsuits against price-fixers

Mar, 08 2007

European Union regulators plan to promote more private lawsuits against price-fixers while avoiding the creation of a legal culture similar to the US, which is seen as encouraging frivolous lawsuits, the EU's top competition chief said. Triple damages and certain kinds of class-action suits that allow plaintiffs to opt out „are simply not compatible with our European traditions,” EU Competition Commissioner Neelie Kroes said in a speech today at a conference in Brussels. The European Commission, the EU's regulatory arm in Brussels, is working on plans to encourage victims of illegal monopolies and cartels to sue for damages. Such lawsuits, in addition to regulatory fines, can help cartel victims recover losses and deter illegal activity, the commission said. „Private enforcement is nothing to do with encouraging a litigation culture,” Kroes said. „We should learn from our neighbors' experience - and then design European solutions. This initiative is not about importing a system from non-European jurisdictions.” Kroes has made fighting cartels one of her main priorities for her five-year term that began in November 2004. The regulator has the power to fine companies as much as 10 percent of global sales. Last year, the commission levied an annual record of €1.84 billion ($2.42 billion) in cartel fines. On February 21, the agency imposed €992.3 million in fines - its largest penalty ever - against Otis Elevator Co., ThyssenKrupp AG and three competitors for fixing the price of elevators and escalators. Kroes said her proposals, which will be released at the end of 2007 or early 2008, will be based on „truly European solutions” and be „grounded in our European legal traditions and cultures.” Private actions against cartels, which are permitted under EU law, have been slow to catch on in the 27-member EU. A commission study found that legal costs outweigh the benefits. Some governments prohibit punitive damages. Kroes said it's „worth considering” whether to allow double damages against cartels „but only if it's proven that single damages aren't enough to get the victims to court.” The EU already has some form of class-action suits. A German court last month allowed a €114 million damages claim against HeidelbergCement AG, Holcim Ltd. of Switzerland and rival cement makers filed by the Brussels-based Cartel Damage Claims SA, which pools cartel victims' claims. UK courts have also considered similar actions. „This kind of representative action - empowering groups that truly represent the interests of consumers -is closer to the heart of European traditions,” Kroes said. Most of the cartels investigated by the commission result from companies' leniency or immunity applications. Companies can avoid all fines or get a major reduction if they're the first to provide the EU with meaningful information about price-fixing. Since 2002 leniency rules took effect, the commission has been flooded with dozens of requests for fine reductions and „the number of leniency applications continues to increase,” Kroes said. To clear some of the pending cases, Kroes said the EU is considering giving companies accused of illegal price-fixing the option of settling charges rather than waiting years for fines to be resolved in court. The commission and the company would first agree on the extent of the firm's involvement, including how long it participated in the cartel. Fines would then be assessed with a reduction for cooperation and „voluntary assistance.” The commission is still working on the exact details on how to reduce the fines, Kroes said.