Proposal to Extend Economic Continuity to Antitrust Damages in Finland
The implementation of Directive 2014/104/EU on antirust damages actions took its first step in Finland in June 2015. This is when the Finnish Ministry of Employment and the Economy published a committee report proposing a new Act on Antitrust Damages Actions. In addition to provisions implementing the Directive, the committee proposed certain additional provisions, most notably introducing the principle of economic continuity into the Act. The next step in the process, the draft Government Bill, is expected to be published later this spring.
The principle of economic continuity has evolved in the Court of Justice of the European Union ("CJEU") case law on public enforcement of competition law. It is also applied by the Finnish Competition and Consumer Authority and administrative courts in their duties as public enforcers of competition law. However, Finnish tort law and corporate law do not recognise economic continuity. In this context, successor liability applies principally only to legal succession, such as mergers, with very limited exceptions. Thus, applying economic continuity to antitrust damages actions would clearly broaden successor liability applied in other civil cases in Finland. This raises the question whether introducing such provision is justified.
The committee justifies the introduction of economic continuity into the forthcoming Act particularly as a means to efficiently enforce EU competition rules. However, the committee report does not contain any deeper analysis of the issue. Further, application of economic continuity in antitrust damages actions is by no means established. The CJEU has not considered the issue of economic continuity in the context of antitrust damages, but has only confirmed on a general level that any individual has the right to claim damages for loss caused by a restriction of competition. On the national level, the only case in which economic continuity has been applied thus far in Finland is the Helsinki District Court's judgment in the damages actions in the so-called asphalt cartel, currently under appeal. The author is not aware of any corresponding judgments from other national courts in the EU. Thus, introducing economic continuity into Finnish law appears somewhat hasty.
It should also be noted that the proposed provision on economic continuity differs significantly from that applied in public enforcement of competition law and leaves open many important issues. According to the proposed provision, if the business within which competition rules were infringed is sold, the purchaser of the business is also liable for damages caused by the infringement if the purchaser was or should have been aware of the infringement when it purchased the business.
The provision's wording indicates that both the seller and the purchaser are jointly liable for damages. This clearly deviates from economic continuity applied in public enforcement, where, as a rule, the seller remains solely liable for infringements occurring before the business transfer even after the transfer, unless one of the conditions set in the CJEU's case law are met. However, based on the provision's reasoning in the committee report, it is unclear whether the provision should differ from public enforcement in this respect. According to the reasoning, the provision would differ from economic continuity applied in public enforcement only concerning the awareness requirement added to the provision. This ambiguity in the wording and its reasoning was widely noted in the consultation round and, thus, will hopefully be clarified in the Government Bill.
If economic continuity is applied to antitrust damages, it may actually be preferable to give the claimant a parallel right of action against both seller and purchaser. This arises from differences between the public and private enforcement frameworks. For example, in public enforcement the addressees of a competition authority's decision are determined during the investigation, whereas in private enforcement the claimant must name the parties from whom it claims damages in its application for summons. Without a parallel right of action this difference may cause problems in the application of economic continuity if the business is sold or the seller of the business ceases to exist legally or economically only after the application for summons is filed.
However, a parallel right of action would require considering how to allocate liability between the seller and purchaser if both are solvent when the final judgment in the damages action is rendered. The committee's proposal would make the seller and purchaser jointly and severally liable for damages. This would automatically increase the purchaser's risk. Further, to maintain a proper deterrent it would be justified to make the purchaser liable only if the seller objectively cannot pay the damages. This would also correspond closest to the main rule in public enforcement.
Another clear deviation from economic continuity as applied in public enforcement is that economic continuity would apply only if the purchaser was or should have been aware of the competition law infringement when it purchased the business. The term was or should have been aware is ambiguous and may be problematic in practice. It is unclear whether awareness arises, e.g., based on information on a competition authority investigation in due diligence, after the competition authority finds an infringement, or only after the final infringement decision is adopted.
If awareness arose only with the adoption of the competition authority decision or the final infringement decision, any business transfer effected before the relevant decision would automatically rule out the purchaser's liability for damages. If the seller then ceased to exist legally or economically, the injured party would not be able to claim damages efficiently from the seller either. This would inevitably mean either that the injured party would not recover full compensation or that the other jointly and severally liable parties' share of the damages would increase. On the other hand, if awareness were considered to arise early on, this would significantly increase the purchaser's risk and would likely make due diligence processes more burdensome and may even hinder beneficial business transfers in some circumstances. Thus, requiring the purchaser's awareness of the competition law infringement appears rather problematic.
In conclusion, several unresolved issues exist concerning the proposed provision on economic continuity in antitrust damages actions. As the aim of the proposed provision is to safeguard efficient enforcement of EU competition rules, it would be best to first consider an EU-wide approach to the issue and to ensure that any future economic continuity provision would function well in the private enforcement framework and safeguard the rights of both injured parties and other jointly and severally liable parties. Considering the Directive's implementation schedule, it would seem better to leave the proposed provision out of the forthcoming Act entering into force at the end of 2016, at least for now.
