On February 8, the Autoridad Catalana de Competencia (“ACCO”) presented the study “Claim for damages caused to public administrations due to anticompetitive practices.” In addition to encouraging public bodies to claim for damages, it provides them with guidelines on how to obtain compensation. Although some of the proposed measures may raise legal issues, the study could anticipate further moves by public administrations in this sphere.
In the absence of specific national legislation on damage claims from competition law infringements, actions for non-contractual civil liability were brought under article 1902 of the Spanish Civil Code. However, Royal Decree-Law 9/2017, transposing Directive 2014/104 (“Damages Directive”), introduced substantial amendments to Law 15/2007, of July 3, for the Defense of Competition ("LDC"), and to Law 1/2000, of January 7, on Civil Procedure. As a consequence, the legal context is now more favourable to claim for damages arising from anticompetitive conducts.
Nevertheless, the ACCO study points out that the increase in these claims has come mainly from private parties. Beyond some specific cases (ADIF, IFEMA or, more recently, the Catalan Health Service), public bodies rarely bring these types of actions.
According to the study, the reasons for public sector inaction are: lack of knowledge of this possibility or lack of mechanisms to identify this behavior; costs in economic terms, time and effort; uncertainty inherent in litigation; fear of reputational damage; unwillingness to break off cooperation with frequently bidding companies; or difficulty in identifying and quantifying the economic loss.
Objectives of the ACCO Study
Against this background, the ACCO has published this study with several objectives. On the one hand, to stress the public bodies’ duty, in the ACCO’s view, to actively claim for damages arising from competition law infringements. According to the ACCO, this “stems from the observance of the good administration principle governing the action of the Public Administration and goes in line with the constitutional prescription stating that all public expense must follow efficiency and economy criteria (article 31(2) of the Spanish Constitution).” In this regard, the lack of effective competition in the markets in which public bodies operate undermines the efficient allocation of public resources, either due to price increases or a reduction in the quantity, variety or quality of the products or services.
The study also explains the main elements of these claims, thus drawing the attention of public bodies to their right to compensation and the relevant channels.
On the other hand, the study presents financing alternatives to reduce the costs and risks associated with litigation.
Last but not least, the study makes recommendations and proposals aimed at facilitating and promoting public sector claims.
The study of the ACCO
The ACCO gathers estimates from different studies on damages caused to public bodies by anticompetitive conducts based on data from the OECD and the European Commission. It also refers to the estimate made by the CNMC.
As regards the legal elements of damage claims, the study clarifies the legal basis to bring these actions: both article 1(1) of the Damages Directive and article 72(1) LDC entitle any natural or legal person, whether public or private, to bring an action for damages arising from competition law infringements.
Financing and risk coverage
The study is aware that these actions entail significant costs and contingencies, such as legal and expert fees, expenses for the production of documentary evidence, legal costs, economists or even the potential order to pay the costs of the proceeding. Therefore, it proposes the following financing and risk coverage alternatives:
- Pure financing through litigation funds that provide financial resources to plaintiffs, usually in exchange for a success fee.
- Assignment of claims to third parties, who will substitute the public entity as plaintiff in the proceedings in exchange for an economic compensation (either a lump sum or a percentage of the eventual compensation) depending on the circumstances of the case, the duration of the proceedings and the risk involved.
- Insurance. Some insurance companies cover the financial risk of legal costs at different judicial stages. In these insurance policies, the policyholder decides the insured amount. The plaintiff is usually the beneficiary althought it could also be the fund that has assumed the risk of legal costs.
Recommendations and proposals for damage claims
One of the main sections of the study focuses on recommendations and proposals aimed at facilitating and encouraging damage claims by public administrations, in particular:
- Dissemination and awareness-raising on public sector claims from competition law infringements, and public sector legal training.
- Creating bodies in charge of bundling and jointly claiming damages through the assignment of claims or mandate contracts.
- Defining and conferring promotion, advisory, supervisory and other powers upon a public body regarding damage claims from competition law infringements.
- Sanctions by competition authorities should facilitate claims (in this regard, certain proposals seem to go beyond the scope of public enforcement). For instance, these measures include that competition authorities should notify harmed public entities and supervisory bodies of any sanctioning decisions. It also proposed that these decisions should urge the ex officio review of current public contracts for which there is evidence of infringement, and they should also determine the scope and duration of contracting bans (which the CNMC is beginning to do, as we reported in a previous post). The study also advocates for sanctioning resolutions to include damage estimates, even if the CJEU has made it clear that the assessment of the existence of a damage and its quantification —and determination of the causal link— lies within domestic civil courts.
- Measures to take advantage of the participation of competition authorities in judicial proceedings, e.g., by authorizing access to the evidence contained in the administrative file or encouraging their intervention as amicus curiae.
- Finally, public contracts should include clauses to facilitate damage claims.
In short, and despite all the reservations regarding the ACCO study (especially some of its proposals), it seems to be a clear indication of further moves by public administrations in this sphere and emphasises its importance derived from infringements of competition law.
The ACCO study is available here: Damages claims caused to public administrations due to anticompetitive conducts.