by Maria Barros Silva, Trainee Lawyer at SRS Advogados
Directive 2014/104/EU was finally transposed into the Portuguese legal system by Law No. 23/2018 of 5 June, which regulates the right to compensation for victims of infringements to competition law. The Damages Directive was published on 26 November 2014, having a deadline for transposition on 27 December 2016. Portugal was the last Member State to transpose the Directive, almost a year and a half after the deadline, following a call from the Commission to take the necessary steps to ensure its full implementation. Hopefully, this will avoid an infringement procedure from the Commission and any possible fines.
In essence, the content of the Law corresponds to the text of the Directive, although it does go beyond it in certain aspects, with some innovative solutions.
Firstly, the scope of the Law. It applies not only to actions for damages for infringements of European Union competition law (Articles 101 and 102 TFEU, with or without parallel application of equivalent national rules), as laid down in the Directive; but also to actions for damages based on purely national infringements, with no cross-border effects (Articles 9, 11 and 12 of the Competition Law – Law no. 19/2012, of 8 May) or corresponding legal norms in other Member States. Secondly, the law applies not only to actions for damages, but also to other claims based on infringements of competition law.
Regarding liability for damages, the Law also went beyond the Directive. In addition to the company which committed the infringement, whoever exercised a dominant influence over the infringer during the infringement is also liable. There is a presumption of a dominant influence if the influencing entity holds 90% or more of the share capital of the infringing party. Recoverable damages include actual damages, loss of profits and interest, counted from the time the damages occurred until such time as compensation for such damages is paid.
Furthermore, there is joint and several liability when several undertakings mutually infringe competition rules. The injured party can demand full compensation from any of those undertakings. However, there are some exceptions applicable to small and medium sized enterprises and to leniency recipients. In order to limit the consequences of increased exposure by a beneficiary of immunity (as it provides self-incriminatory documents), the company only responds: (i) to the damages that it caused to its own direct or indirect purchasers; (ii) directly to such injured parties, when they demonstrate that they cannot obtain full compensation from the other undertakings involved in the infringement. Thereafter, these companies have right of recourse against the other infringing companies, limited by the amount of damage each caused to their own purchasers or direct or indirect suppliers. Costs can also be distributed throughout the distribution chain. There is a rebuttable and conditional presumption that these costs are passed on to the indirect clients of the offender, in order to facilitate the proof of damages.
In relation to the prescription period, there is a 5-year limit, beginning from the moment the infringement ceased and the victim has knowledge, or can reasonably be assumed to have knowledge of: the infringement; the identity of the offender; and the existence of damages. This period can be suspended in case of investigations from a competition authority into the infringement with which the action for damages is related (in which case the time limit only begins to count again 1 year after the final decision); and during out-of-court settlement procedures.
Another aspect in which the Law was innovative was that, not only does it give the effect of an irrefutable presumption of the existence of an infringement to the decisions of the Portuguese Competition Authority and final decisions of national courts; but it also gives the effect of rebuttable presumption to the final decisions of competition authorities of other Member States.
Regarding disclosure of evidence, national courts are given extensive powers to order the disclosure of evidence necessary for damages actions, at the request of the injured people and subject to certain conditions, in particular, that the party requesting it demonstrates that the elements under the control of the other party or a third party (who, in any case, is given the right to a preliminary audience) are relevant to substantiate the claim or defense. There are also other limits: some documents, such as leniency declarations and settlement proposals, can never be disclosed; whereas others can only be disclosed after the conclusion of the proceedings. The Law also provides for means to preserve evidence, as well as early access mechanisms, which are innovations vis-à-vis the Directive, which makes no mention to them.
In addition, although the Directive does not contain any provisions regarding collective actions, the Law includes a provision concerning popular actions. Legitimacy to bring popular actions is given to associations and foundations whose purpose relates to consumers’ defense; and associations of companies whose members have been harmed.
In conclusion, Law No. 23/2018 establishes a new legal regime on damages actions for unlawful acts of competition, by facilitating its interposition and reasoning. Thus, infringing undertakings are now cumulatively liable, when applicable, to fines by the Competition Authority and damages. For all entities involved, non-compliance with the Law implies sanctions, such as procedural penalties, payment of costs and consequences in the assessment of evidence.
Picture credits: Commandment by Pxhere.