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The Private Competition Enforcement
Review
Law Business Research
Seventh Edition
Editor
Ilene Knable Gotts
The Private Competition Enforcement Review
The Private Competition Enforcement Review
Reproduced with permission from Law Business Research Ltd.This article was first published in The Private Competition Enforcement Review -
Edition 7(published in August 2014 – editor Ilene Knable Gotts).
For further information please [email protected]
The Private Competition Enforcement
Review
Seventh Edition
EditorIlene Knable Gotts
Law Business Research Ltd
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The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
ADDLESHAW GODDARD LLP
ARAQUEREYNA
ASHURST LLP
CHIOMENTI STUDIO LEGALE
CONSUMERS EMPOWERMENT ORGANISATION OF NIGERIA (CEON)
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MOTIEKA & AUDZEVIČIUS
ACKNOWLEDGEMENTS
Acknowledgements
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NORTON ROSE FULBRIGHT LLP
POPOVICI NIŢU & ASOCIAŢII
PRAGER DREIFUSS AG
SCWP SCHINDHELM
SRS ADVOGADOS
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WACHTELL, LIPTON, ROSEN & KATZ
WILSON SONSINI GOODRICH & ROSATI
iii
Editor’s Preface ..................................................................................................viiIlene Knable Gotts
Chapter 1 EUROPEAN PRIVATE ENFORCEMENT – THE CLAIMANT’S PERSPECTIVE........................................1
Lianne Craig and David Lawne
Chapter 2 EUROPEAN PRIVATE ENFORCEMENT – THE DEFENDANT’S PERSPECTIVE ..................................16
Mark Clarke and Euan Burrows
Chapter 3 AUSTRIA .................................................................................34Christina Hummer and Milosz Cywinski
Chapter 4 BELGIUM ................................................................................45Bertold Bär-Bouyssière, Dodo Chochitaichvili and Pierre M Sabbadini
Chapter 5 BRAZIL ....................................................................................58Carlos Francisco de Magalhães, Gabriel Nogueira Dias and Cristiano Rodrigo Del Debbio
Chapter 6 BULGARIA ..............................................................................73Bogdan Drenski and Evgenya Kosorova
Chapter 7 CANADA .................................................................................85Eliot Kolers and Danielle Royal
Chapter 8 CHINA .....................................................................................99Janet Hui (Xu Rongrong), Mabel Liu (Liu Dongping) and Stanley Xing Wan
CONTENTS
iv
Contents
Chapter 9 ENGLAND & WALES ..........................................................109Peter Scott, Mark Simpson and James Flett
Chapter 10 EUROPEAN UNION ............................................................154Rona Bar-Isaac and Andy Curtis
Chapter 11 FRANCE ................................................................................168Mélanie Thill-Tayara and Marta Giner Asins
Chapter 12 INDIA ....................................................................................181Amit Tambe, Upasana Rao and Gautam Chawla
Chapter 13 ISRAEL ...................................................................................191Eytan Epstein, Tamar Dolev-Green and Shiran Shabtai
Chapter 14 ITALY .....................................................................................214Cristoforo Osti and Alessandra Prastaro
Chapter 15 JAPAN ....................................................................................231Yoshihiro Toji and Landry Guesdon
Chapter 16 LITHUANIA ..........................................................................242Ramūnas Audzevičius
Chapter 17 NETHERLANDS ..................................................................254Naomi Dempsey, Albert Knigge and Weyer VerLoren van Themaat
Chapter 18 NIGERIA ................................................................................270Ebenezer Odubule
Chapter 19 POLAND ...............................................................................281Dorothy Hansberry-Bieguńska
Chapter 20 PORTUGAL ...........................................................................291Gonçalo Anastácio
v
Contents
Chapter 21 ROMANIA .............................................................................304Silviu Stoica, Mihaela Ion and Laura Bercaru
Chapter 22 SOUTH AFRICA ...................................................................317Jocelyn Katz and Wade Graaff
Chapter 23 SPAIN .....................................................................................331Helmut Brokelmann
Chapter 24 SWEDEN ...............................................................................343Kent Karlsson and Pamela Hansson
Chapter 25 SWITZERLAND ...................................................................359Bernhard C Lauterburg and Philipp E Zurkinden
Chapter 26 TURKEY ................................................................................372Esin Çamlıbel
Chapter 27 UNITED STATES .................................................................388Chul Pak, Daniel P Weick, and Tiffany L Lee
Chapter 28 VENEZUELA.........................................................................408Pedro Ignacio Sosa Mendoza, Pedro Luis Planchart and Rodrigo Moncho Stefani
Appendix 1 ABOUT THE AUTHORS .....................................................417
Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ...437
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EDITOR’S PREFACE
Private competition litigation can be an important complement to public enforcement in the achievement of compliance with the competition laws. For example, antitrust litigation has been a key component of the antitrust regime for decades in the United States. The US litigation system is highly developed – using extensive discovery, pleadings and motions, use of experts, and, in a small number of matters, trials, to resolve the rights of the parties. The process imposes high litigation costs (both in time and money) on all participants, but promises great rewards for prevailing plaintiffs. The usual rule that each party bears its own attorneys’ fees is amended for private antitrust cases such that a prevailing plaintiff is entitled to its fees as well as treble damages. The costs and potential rewards to plaintiffs create an environment in which a large percentage of cases settle on the eve of trial. Arbitration and mediation are still rare, but not unheard of, in antitrust disputes. Congress and the US Supreme Court have attempted to curtail some of the more frivolous litigation and class actions by adopting tougher standards and ensuring that follow-on litigation exposure does not discourage wrongdoers from seeking amnesty. Although these initiatives may, on the margin, decrease the volume of private antitrust litigation in the United States, the environment remains ripe for high levels of litigation activity, particularly involving intellectual property rights and cartels.
Until the last decade or so, the United States was one of the few outliers in providing an antitrust regime that encouraged private enforcement of the antitrust laws. Brazil provided another, albeit more limited, example: Brazil has had private litigation arise involving non-compete clauses since the beginning of the 20th century, and monopoly or market closure claims since the 1950s. In the last decade, we have seen other regimes begin to provide for private competition litigation in their courts, typically, as discussed below, only after (i.e., as a ‘follow on’) to public enforcement. In some jurisdictions (e.g., Lithuania, Romania, Switzerland and Venezuela), however, private actions remain very rare and there is little, if any, precedent establishing the basis for compensatory damages or discovery, much less for arbitration or mediation. Also, other jurisdictions (e.g., Switzerland) still have very rigid requirements for ‘standing’, which limit the types of cases that can be initiated.
Editor’s Preface
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The tide is clearly turning, however, with important legislation pending in many jurisdictions throughout the world to provide a greater role for private enforcement and courts beginning to act in such cases. In Japan, for example, over a decade passed from adoption of private rights legislation until a private plaintiff prevailed in an injunction case for the first time; also it is only recently that a derivative shareholder action has been filed. In other jurisdictions, the transformation has been more rapid. Last year in Korea, for example, private actions have been brought against an alleged oil refinery cartel, sugar cartel, school uniform cartel and credit card VAN cartel. In addition, the court awarded damages to a local confectionery company against a cartel of wheat flour companies. In the past few years, some jurisdictions have had decisions that clarified the availability of the pass-on defence (e.g., France and Korea) as well as indirect-purchaser claims (e.g., Korea). Moreover, we appear to be at a critical turning point in the EU: on 17 April 2014, the European Parliament voted to adopt the proposed directive on rules governing private actions for damages for infringements of competition law. Once approved by the European Council – possibly as early as the summer or autumn of 2014 – EU Member States will be required to implement the directive into national law within two years of its promulgation. As mentioned above, even prior to the entry of the directive, many of the Member States throughout the European Union have increased their private antitrust enforcement rights or are considering changes to legislation to provide further rights to those injured by antitrust law infringement. Indeed, private enforcement developments in some jurisdictions have supplanted the EU’s initiatives. The English and German courts, for instance, are emerging as major venues for private enforcement actions. Collective actions are now recognised in Sweden, Finland and Denmark. Italy also recently approved legislation allowing for collective damages actions and providing standing to sue to representative consumers and consumer associations, and France and England are currently also contemplating collective action or class action legislation. Differences will continue to exist from jurisdiction to jurisdiction regarding whether claimants must ‘opt out’ of collective redress proposals to have their claims survive a settlement (as in the UK), or instead must ‘opt in’ to share in the settlement benefits. Even in the absence of class action procedures, the trend in Europe is towards the creation and use of consumer collective redress mechanisms. For instance, the Netherlands permits claim vehicles to aggregate into one court case the claims of multiple parties. Similarly, in one recent case in Austria, several parties filed a claim by assigning it to a collective plaintiff. Some jurisdictions have not to date had any private damages awarded in antitrust cases, but changes to their competition legislation could favourably affect the bringing of private antitrust litigation seeking damages. Most jurisdictions impose a limitation period for bringing actions that commences only when the plaintiff knows of the wrongdoing and its participants; a few, however, apply shorter, more rigid time frames without a tolling period for the commencement of damages (e.g., Brazil, Canada and Switzerland, although Switzerland has legislation pending to toll the period) or injunctive litigation. Some jurisdictions base the statute of limitations upon the point at which a final determination of the competition authorities is rendered (e.g., India, Romania, South Africa and Austria) or from when the agency investigation commences (e.g., Hungary). In other jurisdictions such as Australia and Chile, it is not as clear when the statutory period will be tolled. In a few jurisdictions, it is only after the competition authority acts that a private action will be decided by the court.
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The interface between leniency programmes (and cartel investigations) and private litigation is still evolving in many jurisdictions; and in some jurisdictions it remains unclear what weight to give competition agency decisions in follow-on litigation private cases and whether documents in the hands of the competition agency are discoverable (see, for example, Germany and Sweden). Some jurisdictions such as Hungary seek to provide a strong incentive for utilisation of their leniency programmes by providing full immunity from private damages claims for participants. In contrast, other jurisdictions, such as the Netherlands, do not bestow any benefit or immunity in a follow-on damages action. These issues are unlikely to be completely resolved in many jurisdictions in the near term.
There is one point on which there is almost universal agreement among jurisdictions: almost all jurisdictions have adopted an extraterritorial approach premised on ‘effects’ within their borders. Canadian courts may also decline jurisdiction for a foreign defendant based on the doctrine of forum non conveniens as well as comity considerations. A few jurisdictions, such as the UK, however, are prepared to allow claims in their jurisdictions when there is a relatively limited connection, such as when only one of a large number of defendants is located there. In contrast, in South Africa, the courts will also consider ‘spill-over effects’ from antitrust cartel conduct as providing a sufficient jurisdictional basis.
The litigation system in each jurisdiction to some extent reflects the respective perceptions of what private rights should protect. Most of the jurisdictions view private antitrust rights as an extension of tort law (e.g., Austria, Canada, France, Hungary, Israel, Japan, Korea, Norway, the Netherlands and the UK), with liability arising for participants who negligently or knowingly engage in conduct that injures another party. Turkey, while allocating liability on the basis of tort law, will in certain circumstances award treble damages as a punitive sanction. Some jurisdictions treat antitrust concerns as a defence for breaching a contract (e.g., Norway and the Netherlands); others (e.g., Australia) value the deterrent aspect of private actions to augment public enforcement, with some (e.g., Russia) focusing on the potential for ‘unjust enrichment’ by the defendant. In Brazil, there is a mechanism by which a court can assess a fine to be paid by the defendant to the Fund for the Defence of Collective Rights if the court determines the amount claimed as damages is too low as compared with the estimated size and gravity of the antitrust violation. Still others are concerned that private antitrust litigation might thwart public enforcement and may require what is in essence consent of the regulators before allowing the litigation or permitting the enforcement officials to participate in the case (e.g., in Brazil, as well in Germany, where the competition authorities may act as amicus curiae). Some jurisdictions believe that private litigation should only be available to victims of conduct that the antitrust authorities have already penalised (e.g., Chile, India, Turkey and Venezuela). Interestingly, no other jurisdiction has chosen to replicate the United States’ system of routinely awarding treble damages for competition claims; instead, the overwhelming majority of jurisdictions take the position that damages awards should be compensatory rather than punitive (Canada does, however, recognise the potential for punitive damages for common law conspiracy and tort claims, as does Turkey). In Venezuela, however, the plaintiff can get unforeseen damages if the defendant has engaged is gross negligence or wilful conduct. Only Australia seems to be more receptive than the United States to suits being filed by a broad range of plaintiffs – including class-
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action representatives and indirect purchasers – and to increased access for litigants to information and materials submitted to the antitrust authorities in a cartel investigation. Finally, in almost all jurisdictions, the prevailing party has some or all of its costs compensated by the losing party, discouraging frivolous litigation.
Cultural views also clearly affect litigation models. Outside the EU and North America, the availability of group or class actions varies extensively. A growing minority of jurisdictions embrace the use of class actions, particularly following a cartel ruling by the competition authority (e.g., Israel). Some jurisdictions (e.g., Turkey) permit group actions by associations and other legal entities for injunctive (rather than damages) relief. Jurisdictions such as Germany and Korea generally do not permit representative or class actions but instead have as a founding principle the use of courts for pursuing individual claims. In some jurisdictions (e.g., China, Korea and Switzerland) several claimants may lodge a collective suit against the same defendant if the claims are based on similar facts or a similar legal basis, or even permit courts to join similar lawsuits (e.g., Romania and Switzerland). In Japan, class actions have not been available except to organisations formed to represent consumer members; a new class action law will come into effect by 2016. In contrast, in Switzerland, consumers and consumer organisations do not currently have legal standing and cannot recuperate damages they have incurred as a result of an infringement of the Competition Act. In Poland, only entrepreneurs, not individuals, have standing to bring claims under the Unfair Competition Act, but the Group Claims Act is available if no administrative procedure has been undertaken concerning the same case.
Jurisdictions that are receptive to arbitration and mediation as an alternative to litigation (e.g., Germany, Hungary, Japan, Korea, the Netherlands, Switzerland and Spain), also encourage alternative dispute mechanisms in private antitrust matters. Some courts prefer the use of experts and statements to discovery (e.g., in Chile; in France, where the appointment of independent experts is common; in Japan, which does not have mandatory production or discovery except in narrowly prescribed circumstances; and in Germany, which even allows the use of statements in lieu of documents). In Korea, economic experts are mainly used for assessment of damages rather than to establish violations. In Norway, the Civil Procedure Act allows for the appointment of expert judges and advisory opinions of the EFTA Court. Other jurisdictions believe that discovery is necessary to reach the correct outcome (e.g., Canada, which provides for broad discovery, and Israel, which believes that ‘laying your cards on the table’ and broad discovery are important). Views towards protecting certain documents and information on privilege grounds also cut consistently across antitrust and non-antitrust grounds (e.g., no attorney–client, attorney work product or joint work product privileges in Japan; limited recognition of privilege in Germany; extensive legal advice, litigation and common interest privilege in the UK and Norway), with the exception that some jurisdictions have left open the possibility of the privilege being preserved for otherwise privileged materials submitted to the antitrust authorities in cartel investigations. Interestingly, Portugal, which expressly recognises legal privilege for both external and in-house counsel, nonetheless provides for broad access to documents to the Portuguese Competition Authority. Some jurisdictions view settlement as a private matter (e.g., France, Japan and the Netherlands); others view it as subject to judicial intervention (e.g., Israel and Switzerland). The culture in some jurisdictions, such as Germany, so
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strongly favours settlement that judges will require parties to attend hearings, and even propose settlement terms. In Canada, the law has imposed consequences for failure to accept a reasonable offer to settle and, in some jurisdictions, a pretrial settlement conference is mandatory.
As suggested above, private antitrust litigation is largely a work in progress in many parts of the world. Change occurs slowly in some jurisdictions, but clearly the direction is favourable to the recognition that private antitrust enforcement has a role to play. Many of the issues raised in this book, such as the pass-on defence and the standing of indirect purchasers, remain unresolved by the courts in many countries and our authors have provided their views regarding how these issues are likely to be clarified. Also unresolved in some jurisdictions is the availability of information obtained by the competition authorities during a cartel investigation, both from a leniency recipient and a party convicted of the offence. Other issues, such as privilege, are subject to change both through proposed legislative changes as well as court determinations. The one constant across all jurisdictions is the upward trend in cartel enforcement activity, which is likely to be a continuous source for private litigation in the future.
Ilene Knable GottsWachtell, Lipton, Rosen & KatzNew YorkAugust 2014
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Chapter 16
LITHUANIA
Ramūnas Audzevičius1
I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
The most recent amendments of the Competition Law of the Republic of Lithuania of 1992 (LoC) came into effect on 1 May 2012 and are discussed below.
The aim of the LoC is to protect the freedom of bona fide competition in Lithuania. The LoC has laid down fundamental rules for the prohibition of anti-competitive agreements and concerted practices, the abuse of a dominant position and unfair competition, and it has provided rules for merger control. The national supervisory authority and competition watchdog in Lithuania is the Competition Council (the NCA or the Council).
The NCA has passed a good deal of secondary legislation facilitating the implementation of the provisions of the LoC. For example, on 18 January 2012 the Lithuanian government adopted a resolution establishing a new methodology for setting the amount of fines (the Resolution). The Resolution resembles the 2006 Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No. 1/2003. The Resolution envisages that fines may be based on up to 30 per cent of those of the company’s annual sales to which the infringement relates, multiplied by the number of years of participation in the infringement. Moreover, it aims to deter infringers by imposing higher fines on recidivists.
In addition, the LoC and the NCA’s legislation are not the only sources of competition law in Lithuania. The aforementioned secondary legislation and the LoC have been drafted closely following the principles set out in the Treaty Establishing the European Community (the Treaty), the Treaty on the Functioning of the European Union (TFEU) and other sources of EU competition law. The Lithuanian courts have
1 Ramūnas Audzevičius is a partner at Motieka & Audzevičius.
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ruled precedents that national competition laws are to be construed in the light of the EU competition law rules, including notices passed by the European Commission.
i Anti-competitive agreements and concerted practices (prohibition).
Article 5 of the LoC contains a prohibition on all agreements that have as their object restriction of competition, or that may restrict competition, including agreements:a to fix, directly or indirectly, prices of certain goods or other conditions of sale or
purchase;b to share a product market on a territorial basis, according to groups of buyers,
suppliers or in any other way;c to fix production or sale volumes for certain goods, as well as to restrict technical
development or investment;d to apply dissimilar (discriminating) conditions to equivalent transactions with
individual undertakings, thereby placing them at a competitive disadvantage; ande to make conclusion of contracts subject to the assumption by other parties of
supplementary obligations which, by their commercial nature or according to their purpose, have no direct connection with the subject of the contract.
The provisions above reflect those of Article 101 TFEU and must be interpreted in the light of the EU case law under Article 101 TFEU.
ii Case law and recent developments
On 11 December 2013, the Supreme Court of Lithuania (final instance) resolved a private competition enforcement case, Urbico v. Nordea, in which Urbico claimed that the bank Nordea acquired de facto control of Urbico by the means of credit and supplementary agreements (pledge of 100 per cent of shares and transfer of more than 80 per cent of claimants assets) without a merger clearance decision from the NCA, and such acquisition of de facto control constitutes a merger. The claimant sought to annul the credit and supplementary agreements. The Court dismissed the action stating that credit agreements per se cannot be held as means of control and the supplementary agreements were aimed at ensuring debtors’ obligations to the creditor and not to acquire control. The Lithuanian courts refused to refer the case to the European Court of Justice (ECJ) for a preliminary ruling, even though the claimant requested that the legal notion of de facto control should be interpreted by the ECJ.
On 23 September, 2013 the NCA also terminated an unprecedented investigation in which it analysed whether a commercial bank, Swedbank AB, had acquired de facto control over a publicly listed Lithuanian alcohol company, Alita, by the means of credit and supplementary agreements. In this case Swedbank allegedly had veto rights over Alita’s business plans, appointing senior executives and other business decisions. The NCA’s decision to terminate the investigation is currently subject to appeal and is being investigated by the Lithuanian courts.
In the spring of 2014, an independent electricity provider sued the Lithuanian Electricity transmission system operator for damages, claiming such damages arose from the provider’s anti-competitive practices. The case is currently being heard in the court of first instance and is expected to be decided in the next two years.
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Finally, another publicly known private antitrust claim is also currently being reviewed by the Lithuanian courts. The currently bankrupt Lithuanian national air carrier ‘flyLAL Lithuanian Airlines’ sued its competitor, Air-Baltic Corporation, and Riga’s international airport for damages exceeding €57 million, alleging that the respondents caused these damages as a result of their anti-competitive agreements and unilateral actions. This is the one of the first private antitrust cases in Lithuania and the court proceeding has already taken almost six years.
Bearing in mind the fact that follow-on antitrust claims (i.e., private claims, that are initiated after an official investigation by a competent state authority took place) require a lesser burden of proof, it is important to analyse the NCA’s investigations and decisions which lead or could lead to potential private actions. From 2000 to the summer of 2014, the NCA has investigated 44 cases of restrictive agreements (under Article 5 of the LoC). Most of these are the cases that impose the least burden of proof on the NCA (i.e., horizontal price-fixing and market-sharing agreements). Investigating horizontal agreements has been declared a priority of the NCA, in contrast to investigations that require proving an economic effect on competition (e.g., abuse of a dominant position). Although the NCA has adopted a number of infringement decisions, follow-up actions have not yet seen an increase.
The Council has adopted its most recent decision on 4 March 2014 (No. 2S-1/2014) involving the beer production market. The Council found that between 2004 and 2013 the Lithuanian Guild of Breweries and its members in the Brewers’ Code of Honour had agreed not to produce beer of a certain strength. The Council concluded that this agreement infringed competition law; created opportunities to avoid competition in a certain segment within the beer market; predicted the behaviour of competitors; and foresaw their actions relating to the volume of beer production. This decision might lead to a private action.
What is more, on 8 April 2014, the Supreme Administrative Court of Lithuania confirmed the NCA’s findings that vertical agreements in the cash services market involving the three major Lithuanian banks and a leading security services provider restricted competition in the Lithuanian cash services market, having resulted in anti-competitive market foreclosure effects and limiting the possibilities of bank clients to choose the provider of cash-in-transit services. The Court, however, annulled the fines that were imposed on the parties to the agreements by the NCA because the NCA had not properly evaluated the commitments proposed by the security services provider and, therefore, referred the relevant part of the case back to the Competition Council for further investigation. Thus, on 24 April 2014 the Competition Council reopened the investigation into the vertical agreements in the cash services market.
iii Abuse of dominant position
Article 7 of the LoC prohibits abuse of a dominant position (by performing actions in the relevant market that have as their object or effect the restriction of competition, limiting the opportunity for other undertakings to participate in the market or violating consumer interests) and lists cases of conduct likely to constitute an abuse, similar to Article 102 TFEU. These are:a directly or indirectly imposing unfair purchase or selling prices or other unfair
trading conditions;
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b limiting production, markets or technical development to the pre judice of consumers;
c applying dissimilar (discriminatory) conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
d making 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 contracts.
Part 2 of Article 3 of the LoC defines a ‘dominant position’ as the position of one or more undertakings that face no direct competition in a relevant market or the position that enables them to exert unilaterally a decisive influence in that market by effectively restricting competition therein. The LoC defines presumptions of dominance and collective dominance, stating that:a an undertaking with a market share of not less than 40 per cent shall be considered
to have a dominant position in the market, unless it is proved otherwise; andb each of a group of three or fewer undertakings with the largest shares of the
market, jointly holding 70 per cent or more of the market shall be considered to enjoy a dominant position, unless it is proved otherwise.
iv Case law and recent developments
The NCA officially states that investigations in cases where an economic effect on competition has to be proven (inter alia, abuse of a dominant position) are not an NCA priority – as opposed to horizontal agreements restricting competition. Therefore the case law concerning abuse of dominance is expected to decline.
One of the main cases where abuse of dominance was analysed related to the dominant position in the fuel supply market enjoyed by AB Mažeikių Nafta (now AB Orlen Lietuva), a major oil refinery in the Baltics. On 21 January 2013, the Supreme Administrative Court upheld the Competition Council’s decision to impose a fine on AB Orlen Lietuva for the abuse of its dominant position with the aim of restricting fuel imports into the territory of Lithuania. Among other Competition Council cases, this one was subject to the longest examination in court and took seven years. The Supreme Administrative Court noted that when setting the fine the Competition Council correctly evaluated the abuse of dominance as a very serious infringement and the fact that the company had repeatedly infringed the LoC.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
i Regulatory framework
The relevant antitrust legislation is both national and adopted from the EU. The national legislation relevant to private antitrust claims includes:a the Constitution of the Republic of Lithuania;b the LoC;c the Civil Code;d the Law on the Prohibition of Unfair Actions by Retail Trade Companies;
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e the Law on Advertising;f the Law on Prices;g the Law on Electronic Communication Networks;h the Law on Electricity;i the Law on Natural Gas; andj various resolutions by the NCA.
In addition to the national legislation, the following EU legislation also applies to antitrust litigation:a the TFEU;b Regulation No. 1/2003; and c Council Regulation No. 139/2004 (on the control of concentrations between
undertakings).
The LoC and the TFEU comprise the core legislation regulating antitrust policy in Lithuania. The purpose of the LoC is to protect and secure the freedom of fair competition in the country, and to harmonise the Lithuanian and European Union law regulating competition relations.
The institutions relevant to the execution of state competition policy are the NCA and administrative and civil courts. Private antitrust cases are resolved in the Lithuanian civil courts (courts of general competence). There are no specialised courts and no specialised divisions in courts committed to resolution of antitrust cases, although Vilnius Regional Administrative Court has sole jurisdiction to hear private antitrust cases as the court of first instance.
In addition, antitrust cases are arbitrable; therefore, antitrust cases can be resolved by an ad hoc or institutional arbitration tribunal. Other antitrust cases (i.e., non-private) are resolved in the Lithuanian administrative courts (Vilnius Regional Administrative Court and the Supreme Administrative Court).
III EXTRATERRITORIALITY
Article 2 of the LoC states that the law applies to undertakings that are not registered in Lithuania if their actions limit free competition in the Lithuanian domestic market. The LoC is not applied to undertakings (including undertakings registered in Lithuania) whose actions limit free competition in foreign markets unless international treaties to which Lithuania is a party provide otherwise.
If certain actions that are performed or have effects in Lithuania are investigated in another jurisdiction, it may trigger a separate investigation in Lithuania. The fact that an undertaking has already been penalised in another jurisdiction does not prevent the NCA from conducting an investigation or imposing sanctions, and the amount of the fine will not necessarily be adjusted to take into account any other fines already levied. However, as investigations by national competition authorities frequently focus on the effects of an infringement within local markets, the problem of double punishment will generally not arise.
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As regards parallel investigations by the NCA and the European Commission, the NCA cannot investigate the case if the Commission has already initiated its own investigation. According to Regulation No. 1/2003, the NCA may not prohibit or penalise behaviour contravening Lithuanian competition law if such behaviour is permissible under Article 101 TFEU.
IV STANDING
The standing of a person’s right to initiate an action for breaches of competition law is determined by the nature of the procedures (administrative or civil) or the nature of the claimant.
i Administrative procedures
Article 23 of the LoC provides the following subjects the right to initiate an investigation concerning matters restricting competition:a undertakings whose interests have allegedly been violated by restrictive practices;b public administration entities;c associations or unions representing the interests of undertakings and consumers;
andd the NCA, which may start an investigation on its own if it deems necessary.
This list applies when taking the claim to the NCA or appealing the NCA’s decision to Vilnius Regional Administrative Court.
ii Civil procedures
If the private competition-enforcement claim is brought to a civil court under Article 47 LoC, the rules set out in the Code of Civil Procedure apply regarding who can bring a claim to the court. These rules provide a wide notion of ‘interest’. The party bringing the claim must show that its rights and interests may have been violated by the alleged breaches of the LoC.
iii Multiple claim mechanisms
Amendments to the Code of Civil Procedure relating to class actions will take effect from 1 January 2015. From this date, individuals will be able to bring class action lawsuits. Taking into account the Code of Civil Procedure provisions in Article 1, class actions will be available in respect of antitrust claims (see Section VII, infra).
V THE PROCESS OF DISCOVERY
The Lithuanian legal system does not have the equivalent of discovery procedures, as they are understood in common-law systems.
On the other hand, a pretrial administrative procedure can be carried out by the NCA. In a private antitrust action, evidence can be collected by attorneys-at-law, who
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all have the right to request information held by official institutions and also collect evidence without using any coercive measures. In practice, these methods are ineffective.
Furthermore, after initiating court proceedings, the applicant can request the court to extract from any person (private or public) any evidence necessary for the resolution of the case, except for information that is a state secret or a professional secret. This includes extraction of evidence from competition authorities. Before evidence is extracted, the party requesting the extraction is obliged to prove the relevance of such evidence, the fact that it exists, and the fact that the party cannot obtain the evidence without a court order. Non-compliance with court orders is backed up by fines and contra spoliatorem presumption. Lastly, if a competition authority has found an infringement, the applicant can, on his or her own initiative or by court order, request the case file from the competition authority. If requested by the applicant, part of the case file, comprising commercial secrets, cannot be obtained. During court hearings regarding possible breaches of the LoC, the NCA may be involved as an official authority to bring an official finding at the trial. Courts usually ground their decisions on these NCA findings, which are considered to be official evidence and also have higher legal value (prima facie).
Finally, on 17 April 2014, the European Parliament adopted a text of the Directive on antitrust damages actions, which was agreed between the European Parliament and the Council during the ordinary legislative procedure. The agreed text of the Directive has been sent to the EU Council of Ministers for final approval. After this EU Directive comes into force, disclosure procedures in antitrust damages award cases will be introduced to all EU Member State legal systems and should become standard procedure.
VI USE OF EXPERTS
The use of experts (including economists) is in accordance with the laws. Experts may be appointed by the court to perform an investigation and provide an act of expertise, or the parties may use the services of experts privately and present an expert’s opinion as written evidence in favour of their position. The evidential value of a court-appointed expert’s findings is greater than that of a private expert’s opinion.
VII CLASS ACTIONS
Amendments to the Code of Civil Procedure relating to class actions will take effect from 1 January 2015. From this date, individuals will be able to bring class action lawsuits. Taking into account the Code of Civil Procedure provisions in Article 1, class actions will be available in respect of antitrust claims.
A class action will be possible if the following conditions are fulfilled: a the class action is based on identical or similar facts and it aims at the same
remedies to enforce rights or legitimate interests of a group of persons that are identical or similar;
b the class action is the more economical, more effective and more appropriate way to resolve a particular dispute than individual actions;
c the pre-court dispute resolution procedures have been complied with;d the group has a representative;
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e the group also has and is represented by an attorney-at-law; andf at least 20 natural or legal persons, in writing, have expressed their will to be
members of the group and to bring legal action.
VIII CALCULATING DAMAGES
According to the Civil Code of the Republic of Lithuania, damages include the amount of direct expenses related to the injury (direct losses) and the income not received due to the infringement (indirect losses). The claimant has to prove the size of the damages claimed. Interest for damages is also awarded. The minimum interest rates are set in the Civil Code which provides an annual interest rate of either 5 or 6 per cent depending on whether the case at hand is civil or commercial respectively. The claimant may also seek compensation for extra reasonable expenses such as expenses suffered to prevent the need for greater damages, expenses to evaluate damages or collect them without litigation.
In general, the courts in Lithuania are entitled to award damages based on their own estimation and discretion if the plaintiff is able to prove the causality but fails to prove the exact amount of damages. Estimating the amount of damages based on the defendants’ profit gained from illegal actions is also an apt method of evaluation. Lithuanian courts are not limited to awarding damages that have already been incurred – future damages may also be awarded, if sufficient evidence is provided that such damage shall occur in the future. The legal costs are borne by the unsuccessful party to the litigation. Attorney-at-law fees are calculated on a statutory basis, therefore fees paid to attorneys by the winning side usually cannot be recovered fully.
IX PASS-ON DEFENCES
Even though the ‘pass on’ defence is not currently recognised as a legitimate form of defence in Lithuania, the Directive on antitrust damages actions, which provides this type of defence, has now been adopted and will come into force in the future. Thus, the fact that the claimant passed on all or part of the overcharge resulting from the infringement could be relied on by the defendant, though the defendant would have the burden to prove this fact.
X FOLLOW-ON LITIGATION
Private antitrust actions are available in four major types of cases, where infringements derive from: (1) conclusion of prohibited agreements, (2) abuse of a dominant position, (3) breaches in concentration regulation, and (4) unfair competition practices. Private actions are provided for breaches of both national and EU legislation.
A finding of infringement by a competition authority is not required to initiate a private antitrust action, although such a finding is regarded as proof of the fact of an infringement, and also the rebuttable presumption that damages have been incurred. In addition, the evidence or findings in those proceedings can usually be relied on by the parties to the private claim. Evidence gathered in a public enforcement action is usually
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extremely important if there is a lack of other evidence to prove the merits of the private claim.
Also private antitrust actions can be brought against both legal and natural persons, including subjects from other jurisdictions. The best recent example of private antitrust litigation between corporations is the claim by flyLAL Lithuanian Airlines, the Lithuanian national carrier, against Air-Baltic Corporation and Riga’s international airport.
As with prior public enforcement actions, defendants who have previously applied for leniency programmes are not exempt from private follow-on litigation. Nonetheless, their liability has limits, since according to Article 11.2 of the Directive on private antitrust damages actions, an undertaking that has been granted immunity from fines under a leniency programme shall be liable to injured parties other than its direct or indirect purchasers or providers only when such injured parties show that they are unable to obtain full compensation from the other undertakings that were involved in the same infringement.
XI PRIVILEGES
The rules on privilege can be found in the administrative, criminal as well as the civil procedure laws. However, the most comprehensive regulation is set out in Article 46 of the Law of Advocacy, which provides the following guarantees for lawyers.
i Guarantees for lawyers
A lawyer cannot be examined as a witness regarding circumstances that became known to him or her while acting in his or her professional capacity.
Examination, monitoring or seizure of any documents relating to a lawyer’s professional activity is forbidden, also any media with such documents, letters, telephone calls, other information disseminated via telecommunications and any other communication or activities, except when the lawyer is suspected or accused of criminal charges. That exception is only applicable with respect to the documents or other information related to such suspicions or criminal charges.
Search or seizure at the premises of the lawyer’s office, domicile or means of transport is only permissible in the presence of a member of the NCA of the Lithuanian Bar Association or a lawyer instructed by such member, who must ensure that no documents or information unrelated to the suspicions or criminal charges are seized or searched.
It is forbidden for a person to publicly or privately acquaint him or herself with information that is subject to a lawyer’s ‘professional secrecy’ and to use it as evidence. Professional-secrecy requirements extend to all workers at a law firm. The client may permit the lawyer to disclose certain information covered by professional secrecy.
ii Privileged communication
Communication between clients and lawyers is privileged. Both lawyer–client communications and lawyers’ work product are privileged to preserve the efficiency and legitimacy of adversarial proceedings, to protect the rights of the client and to allow the
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lawyer to provide legal services to the client with full disclosure of relevant information. Although communication between corporate clients and outside lawyers is privileged, communication with in-house counsel is not.
iii Privilege and leniency
The LoC provides exemptions from or reductions of fines to undertakings that produce information or documents to the NCA. Basic leniency provisions are set out in Article 38 of the LoC. Provisions of the leniency programme are set forth in the Rules on Setting Fines and the Resolution of the Competition Council No. 1S-132 of 28 February 2008 on the rules of exemption from and reduction of fines for the participants of prohibited agreements.
A party to a prohibited agreement between competitors, upon presenting to the NCA full information relating to the agreement, is exempted from fines if all the following conditions are satisfied:a the undertaking provides information prior to the beginning of the investigation
of the agreement;b the undertaking is the first of the parties to the prohibited agreement to provide
such information;c the undertaking provides complete information available to it regarding the
prohibited agreement and cooperates with the NCA during the investigation; andd the undertaking has not been the initiator of the prohibited agreement and has
not induced other undertakings to participate in such an agreement.
If an undertaking does not qualify for exemption from fines, the imposed fines can be reduced by up to 75 per cent if the NCA had already adopted a decision to start the investigation and the undertaking satisfies all the following conditions:a the undertaking is the first of the parties to the prohibited agreement to provide
such information;b the undertaking provides evidence of the prohibited agreement that is not already
in the possession of the NCA and that is significant for proving the existence of the prohibited agreement;
c the undertaking has not been the initiator of the prohibited agreement and has not induced other undertakings to participate in such an agreement;
d the undertaking immediately ceases participation in the prohibited agreement (unless the NCA orders otherwise); and
e the undertaking continuously and fully cooperates with the NCA until the end of the investigation.
The initiator of a prohibited agreement or an undertaking that has induced other undertakings to participate in such an agreement may only apply for a 50 per cent reduction of the imposed fine.
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XII SETTLEMENT PROCEDURES
Administrative proceedings regarding appeals against the NCA’s decisions are carried out in accordance with the Law on Administrative Proceedings. The law provides settling as a means to conclude administrative proceedings, thus settling is possible in antitrust claims that are heard in administrative courts.
Settling is also recognised in civil proceedings; hence private antitrust claims heard in civil courts can be resolved by a settlement agreement. Settlement agreements in civil proceedings are subject to judicial approval, but only insofar as to ensure they do not contradict imperative legislation, the interests of third parties or the public interest. A settlement agreement validated by court has the power of a final court decision to its signatories (res judicata).
Once the civil proceedings are initiated, the plaintiffs may withdraw their claim in accordance with the Code of Civil Procedure. Depending on the stage of litigation, such a withdrawal may be subject to judicial authorisation.
XIII ARBITRATION
The primary domestic sources of law governing the arbitration procedure are the Code of Civil Procedure and the Law on Commercial Arbitration. It is noteworthy that according to the amendments of the Law on Commercial Arbitration of the Republic of Lithuania from 30 June 2012, claims related to the compensation of damage caused through violation of rules of the competition law became arbitrable.
Another form of alternative dispute resolution (ADR) available in private antitrust claims is court mediation. Court mediation is a voluntary procedure: a pilot project was launched on 1 January 2008; mediation may be commenced upon the agreement of the parties. It is free of charge and is conducted on court premises by special mediators, who are judges, assistant judges or other persons having the necessary qualification. Any party can quit the procedure at any time without specifying a reason. If a settlement agreement cannot be drawn up during the generally accepted four-hour period and this period is not extended, the mediation procedure terminates and the dispute returns to the court.
Although such ADR procedures are available, most disputes in Lithuania, including private antitrust claims, are conducted in civil courts in accordance with the Code of Civil Procedure.
XIV INDEMNIFICATION AND CONTRIBUTION
Where damage was caused by the actions of several subjects (legal or natural persons), each defendant is liable for the damage suffered by the claimant. The defendants are jointly liable and the court can impose separate liability on each defendant.
In cases where several defendants have caused the damage, one defendant is entitled to sue another for contribution pursuant to the scope of their participation.
A party that has provided compensation for damage caused in part or in entirety by other co-defendants has the right to sue them to recover their losses in the scope of their actions.
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Plaintiffs have the right to sue any participant of a prohibited agreement. The sued party is severally liable and must compensate full damage; this defendant may file a subsequent lawsuit against other members of the cartel agreement for the amount of excess damages that the selected defendant has had to cover.
XV FUTURE DEVELOPMENTS AND OUTLOOK
The number and popularity of private antitrust actions is expected to increase for several reasons.
First, to date, private antitrust actions, even though recognised in Lithuania, have been relatively rare, are not widely publicised and have not yet attracted a lot of public attention. One of the reasons for this might be that historically class actions were de facto unavailable under local laws. Starting in January 2015, however, individuals will be entitled to bring class action lawsuits with an opt-in procedure; hence, more publicity is expected, which should, in turn, lead to an increase in such claims.
In addition, the fact that the Directive on antitrust damages actions has now been adopted and will come into force in the near future should also has a positive impact for the number of antitrust cases as it unifies and clarifies and alleviates the burden of proof in such cases.
On the other hand, there are still obstacles for private antitrust litigation in Lithuania. First of all there is a lack of well-established competition tradition. The courts are reluctant to award full or at least a large part of the litigation costs in such cases. Lastly, these cases are complex and there is a lack of local economic competition advisers.
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ABOUT THE AUTHORS
RAMŪNAS AUDZEVIČIUSMotieka & AudzevičiusRamūnas Audzevičius has been a partner and the co-head of the dispute resolution practice at Motieka & Audzevičius since 2003. Ramūnas is highly experienced in business, commercial and regulatory disputes involving the application of EU, international and foreign law, as well as shareholder conflicts and corporate investigations.
His practice involves representation of the clients under UNCITRAL, ICC, SCC, LCIA, MKAS, GAFTA, FOSFA and Vilnius Court of Commercial Arbitration rules. He also handles matters before the Supreme Court, the Supreme Administrative Court, and the Court of Appeal in Lithuania. Ramūnas has been involved in advising clients in litigious matters decided by courts of the highest instances in Russia, Ukraine, Belarus, Azerbaijan, Latvia and Estonia.
A graduate of Harvard Business School (PLDA), Ramūnas Audzevičius obtained a master of laws degree (LLM) from the Moscow School of Social and Economic Sciences (degree with the University of Manchester). He also holds MA degrees from King’s College London and the Institute of Advanced Legal Studies, both attached to the University of London. Ramūnas went to Vilnius University, Faculty of Law, for his undergraduate law degree. He also graduated from the International Business School at Vilnius University with a diploma in business administration.
His working languages are English, Russian and Lithuanian.
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MOTIEKA & AUDZEVIČIUSGyneju Street 401109 VilniusLithuaniaTel: +370 5 2 000 777Fax: +370 5 2 000 [email protected]
