EU aims to make class action lawsuits easier- draft

October 2, 2009

By Foo Yun Chee
BRUSSELS, Oct 1 (Reuters) – Consumers who suffer at the hands of companies that fix prices or abuse their dominant market position could soon find it easier to launch class action lawsuits to seek compensation, according to a proposed EU directive.

European Union antitrust regulators are keen to promote private damages actions in competition cases so that victims can be compensated and companies can be deterred from breaching the EU’s strict rules.

“Although there have recently been some signs of improvement in certain member states, to date victims of infringements of the European Commission competition rules in practice only rarely obtain compensation for the harm suffered,” the draft directive, or legislative act, obtained by Reuters states.

“It is estimated that these victims forego several billions of euros each year in compensation.”

The draft directive lays out the framework for consumers and companies to launch private damage actions for compensation in national courts.

European Competition Commissioner Neelie Kroes is expected to present the proposed directive to fellow commissioners in coming weeks.

Class actions are rare in Europe and much more common in the United States, where individuals group claims into one lawsuit. This gives consumers the incentive to pursue compensation — often for small sums — when it would be costly or time-consuming to take action individually.

Critics say class actions can enable law firms to secure big fees while generating little return for individuals.

Private damages actions may also work against the Commission’s policy of offering leniency to companies that blow the whistle on cartels, said antitrust lawyer Jonas Koponen at Linklaters.

“What is the incentive for companies to collaborate with the Commission and other competition authorities in their investigations of cartels if there is the fear of class actions? There is a fundamental conflict here,” he said.

Consumer organisations have, however, welcomed the Commission’s initiative, saying they would benefit both consumers and rival companies that have suffered because others have infringed EU antitrust laws.

In an attempt to avoid any abuse of class actions, the draft directive underlines that only state bodies or non profit-making organisations appointed by national governments in the EU can bring class action lawsuits in national courts.

A so-called “opt-out” clause means victims would automatically be included in the class action lawsuit unless they had been notified by the appointed body and choose to be excluded from the litigation.

The draft directive would allow victims at least two years to take legal action after a final court ruling on a company’s infringement. They can claim for actual losses and loss of profit.

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