Toespraak Eurocommissaris Kroes over collectief herstel (en)
European Commissioner for Competition Policy
Collective Redress - delivering justice for victims
Address at ALDE Conference, European Parliament
Brussels, 4th March 2009
Honourable Members of Parliament, ladies and gentlemen,
It is a pleasure to be here today to talk to you about the collective redress features of our White Paper on private damages actions. This proposal is very dear to my heart because it is wonderful to be able to actively propose a policy that will help both businesses and consumers.
In my mind this White Paper represents the final stage of dealing with competition law infringements. Think of it like a triptych:
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-Stage 1 you find the infringement
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-Stage 2 you fine those who caused it
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-Stage 3 justice is available to the victims
Today we are missing the justice element.
Collective redress is central to plugging that gap. But we know that it is better to step carefully, so our suggestions are indeed cautious, and much improved because of feedback from the Parliament.
This is not a subject that was ever likely to generate an easy consensus. So your feedback has been valuable and the debate has been a reminder that we all need to be pragmatic in order to achieve the main goal of this proposal: justice for the consumers and law-abiding businesses of Europe.
Over the recent months, we have carefully followed the debates on the White Paper in the Parliament's committees, which resulted in the adoption of a report by the ECON Committee this Monday. We welcome this report and look forward to the final Parliament opinion on the White Paper.
Among the most-debated issues in the Parliament was the relationship between the collective redress mechanisms suggested in the competition White Paper and the options presented recently in the Green Paper on Consumer Collective Redress. In this context, several key questions were raised:
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1.Are the two Commission initiatives consistent with each other?
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2.Will they lead to unnecessary fragmentation of national procedural laws and,
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3.Is it therefore better to wait for a horizontal measure to collective redress issues instead of sector-specific solutions?
First of all, let me assure you that Commissioner Kuneva i and I work closely together. Compatibility between our respective proposals is essential in my view. And I think we have delivered on that commitment. Having said that, it is also clear that each of the two initiatives has a distinct focus. They are different cups of tea, so to say, and switching to a horizontal measure will not change that fact. Nor will it deliver better outcomes for our citizens and businesses.
Whereas the competition White Paper is strictly about competition law infringements and seeks to address the problems faced by the victims of these infringements, the consumer Green Paper deals with compensation for a very broad range of issues such as unsafe products, misleading advertising and other consumer related matters.
A major difference between the two initiatives is that whereas the consumer Green Paper only covers redress for consumers, the redress mechanisms suggested in the competition White Paper are designed to benefit both consumers AND BUSINESSES. This is necessary because breaches of competition law regularly cause harm to businesses. For example, cartels often create severe harm in intermediary product markets, where they also affect large numbers of small and medium enterprises. An appropriate collective redress mechanism is therefore essential to make compensation of such scattered damage possible.
I know that ensuring a simple and fair business environment is a priority for you – I truly believe that this system will deliver that simplicity and fairness for business. And deliver it in a timely fashion. In other words: those businesses and consumers would continue to miss out on justice if we took extra time to create and win support for a horizontal measure.
Also, I do not buy the argument that this will be a burden on business. Those who have done nothing wrong have nothing to fear. And those who have been ripped-off can access the compensation they deserve for the harm they have suffered.
It is as simple as that.
Further, while the competition White Paper suggests two concrete instruments of judicial collective redress for use by victims of competition law infringements, the consumer Green Paper presents a wide range of different options, including, for example, alternative dispute resolution (ADR) mechanisms.
While an ADR mechanism can provide a useful alternative to judicial redress also for victims of competition law infringements, it is not much use without an accompanying possibility of court action. This judicial 'stick' is essential to avoid any abuse by the economically stronger party, which can take the form of unduly prolonging proceedings or pushing victims of competition law infringements into unfair settlements.
So the two clear messages I hope I have passed on about these two papers are:
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-It is important to place each paper in its context – there should not be a ‘one size fits all’ approach to collective redress.
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-A targeted approach – which means continuing with a separate measure for competition law infringements - is likely to be more efficient than a horizontal measure. This is, by the way, similar to the approach taken by many Member States which have introduced specific rules – for example, in competition law or capital markets law.
Having said that, I am pleased to note that the report adopted by the ECON Committee recognizes that an integrated or horizontal approach to collective redress: (i) does not necessarily require adoption of a single instrument, and (ii) must not delay or avoid the development of proposals and measures identified as necessary for the full enforcement of Community competition law.
Let me now turn in more detail to the competition White Paper.
We have been strongly motivated to pursue collective redress because competition infringements regularly produce huge damages that are scattered across the whole economy. That means a welfare loss for large numbers of individual consumers and businesses. So the scale of the problem is huge, but the ability of victims to obtain justice is in inverse proportion to the scale of the problem. This is not right.
Today, many injured parties simply give up before they obtain justice. The lack of an effective collective redress mechanism in many Member States is a major obstacle in this respect.
Not-withstanding the work of the Commission's public competition law enforcement, the current fragmentation of private collective redress systems rewards law-breaking businesses, and hurts law-abiding ones – not to mention the nearly 500 million citizens of Europe.
According to the impact assessment study accompanying the White Paper, the lack of effective instruments for obtaining compensation may well cost European consumers and businesses more than 20 billion Euros per year.
This brings me to another point some critics raise – that because some Member States are already in line with many of the proposals of the White Paper, no initiative at Community level is necessary.
We welcome Member State action, and some of the White Paper's suggestions are inspired by their experience. But not all Member States have taken action on collective redress - and we can’t leave the Treaty rights of their citizens and businesses unprotected.
Let us not forget that the European Court of Justice has been very clear when it pronounced that the right to damages is a necessary element to guarantee the full effectiveness of the Community competition rules. The Commission, as the guardian of the Treaty, is therefore required to take any action that is necessary to make that right a reality.
What exists now is an uneven collection of mechanisms, full of gaps and low on effective guarantees of justice. We see problems such as 'forum shopping' where victims of antitrust infringements have an incentive to take their case to a different jurisdiction – including the US courts - because they have no effective alternative in their home country. A proper set of European minimum standards would reduce these practices and inconsistencies. I believe that compensation should be an effective right for ALL injured parties across Europe.
At the same time, I acknowledge that some parts of the European business community are concerned. I have been a businesswoman myself and take these concerns very seriously.
The concerns are mainly linked to the perceived risk of excessive litigation, enforcement of claims without merit and so on.
Let me also explain the safeguards our proposal puts in place.
I would like to assure you we are not proposing anything like the US system. Not at all. We are striking a European model that protects against excesses and unmeritorious litigation. While the White Paper seeks to provide the possibility of compensation for harm suffered, it also argues that legitimate interests of the defendants must be fully protected and that procedural rights of all parties must be well balanced.
Indeed we have listened intently to the wide feedback we received on our 2005 Green Paper, on the current White Paper and the discussions with stakeholders on numerous occasions.
What you see in the White Paper is a truly European model that reflects legal traditions of the Member States. Clearly, we do not want an excessive litigation culture.
The White Paper suggests a combination of two complementary mechanisms of collective redress:
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1.opt-in collective actions, in which injured parties expressly decide to combine their individual damages claims into one single action, and
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2.representative actions, which can be brought by qualified entities certified by the Member States on behalf of defined groups of injured parties.
Both mechanisms are carefully designed so as to guard against the risk of abuses and excessive litigation. As regards the collective actions, which can be jointly brought by any injured parties, these are strictly based on the OPT-IN mechanism. As regards the representative actions, these can ONLY be brought by trustworthy entities, which fulfil eligibility conditions set and controlled by the Member States and which represent legitimate interests of defined groups of injured parties. These can be, for example, consumer organisations, trade associations or public bodies such as an ombudsman. In this way, businesses are not at risk of speculative cases against them. We are ensuring that representative actions cannot be brought by any kind of uncontrolled litigation vehicles pursuing their own financial interests rather than truly representing the interests of the injured parties.
Ladies and gentlemen, justice is a core value of our societies: and victims of competition law infringements have been waiting too long for that justice. They are still waiting.
As political figures at a European level we, and our counterparts in the Member States, are under a duty to find a way to ensure full compensation.
I hope that my speech has helped to clarify the advantages of the targeted approach adopted in the competition White Paper and, at the same time, explained the reasons for which the Commission believes that this approach is compatible with other initiatives such as the consumer Green Paper.
I look forward to the panel discussion and your questions.