SMEs and private enforcement of competition law Rachel Burgess Ph:

What is private enforcement? Private actions allow an injured party to recover damages for the losses they suffer Damages – monetary compensation for loss suffered Two possibilities: Stand-alone actions – brought independently of any decision that is taken (or not taken) by a competition regulator Follow-on actions – brought after a decision by the competition regulator that the law has been infringed

Scenario SME runs a toy shop in Brisbane Competes with a number of large national retailers Has been selling the latest Star Wars toy at RRP Noticed that its main competitors have been selling the toys for $1 less than RRP so SME reduces his price to compete. As soon as he does this, all the main competitors reduce their price further to $2 below RRP. Again SME reduces his price to $2 below RRP but the same thing happens again. SME cannot reduce his price any further so maintains his price. However, SME believes he loses a lot of sales of the Star Wars toys to his large national retail competitors. SME also believes that the large nationals have been colluding to fix the reduced prices.

Options for the SME in Australia Make a complaint to the ACCC Bring a private action for damages before, or regardless of whether, the ACCC investigates Bring a private action for damages after the ACCC investigates and makes a finding of infringement

Complaint to the ACCC ACCC receives a lot of complaints May not have the resource to investigate this matter. ACCC priorities may differ from those of businesses (what SME thinks is big issue, may not be a priority for ACCC) Even if the ACCC finds a breach of the law, there is no direct compensation for the SME

Private actions – Australia Australia: Competition and Consumer Act – ss 82, 83 and 87 are relevant to a claim for damages Can recover the loss suffered as a result of the contravention of the Act Representative actions can be brought in the Federal Court: By the ACCC in relation to certain consumer protection provisions By other groups if conditions are met: 7 persons have claim against same person Claims arisen out of same circumstances Claims give rise to substantial common issue of fact or law

Private Actions – Australia (cont) Actions for damages for breach of competition law have been limited Practical issues include: Litigation is expensive Competition law issues are complex (law and economics) Uncertainty about how to prove loss But these issues are not unique to Australia

Position in US Private actions always been part of antitrust law enforcement Possibility for treble damages Wide powers to access documents Statutory right to use judgments entered against defendant Rules on what damages are payable Public authorities not taken such a central role in enforcement SMEs ?

Position in Europe 2005 Green Paper on Damages for Breach of EC Antitrust Rules 2008 White Paper on Damages Number of issues identified, including: Access to evidence Whether fault needs to be shown Calculating damages Coordination between public and private enforcement (especially in relation to leniency)

Position in Europe (cont) New Damages Directive (2014) introduced in Europe: Finding of national competition regulator is binding on courts in that jurisdiction in follow on action ** Information in files of competition regulators must be disclosed if a national court orders ** Prevents disclosure of leniency application Limitation periods of at least 5 years (with suspension if national regulator commences proceedings) All parties to infringement are jointly and severally liable for infringement. (Exceptions for SMEs) Rebuttable presumption that cartels cause harm ** **Help SMEs

Position in UK Member States need to adopt Damages Directive by December 2016 UK already done so: Consumer Rights Act Voluntary redress scheme: Established by party that breached law to provide compensation to those that have suffered Needs approval by competition authority Payments can be in ‘full and final settlement’ 2.Collective proceedings Enhanced ability to bring representative actions Opt-in or opt-out

Recommendations for Australia Increased private damages actions in Australia would be a positive step forward: Limited resource/capacity of ACCC to respond to every competition law issue raised by SMEs Extra deterrent for businesses considering breach of competition law Help SMEs to enforce their rights What will help SMEs? Private enforcement regime that is more ‘user-friendly’ Better representative action options e.g. UK What lessons can be learned from Europe and the UK? Access to documents Findings of competition authorities Treatment of leniency materials

Thank you