Has the time come to federalize private competition law? The autonomous concept of undertaking in the CJEU's ruling in Case C-724/17 Vantaa v. Skanska : Case C-724/17 Vantaan kaupunki v. Skanska Industrial Solutions Oy and Others,EU:C:2019:204

1. Introduction

The private enforcement of EU competition law has been in the center of scholarly discourse for almost two decades. While the practical relevance of actions for damages has been rather limited during this period, producing more scholarly papers than judgments, the situation seems to have changed recently. This led a good number of references to the CJEU, which resulted in rulings dealing with different questions of interpretation related to the private enforcement of EU competition law. ¹ This process is expected to be accelerated with the adoption and implementation of the 2014 Private Enforcement Directive, ² which brought uniform and victim-friendly rules.

Recently, the CJEU, with its ruling adopted in Vantaa v. Skanska and others, ³ opened a new chapter in the history of EU competition law’s private enforcement. The Court not only answered the specific legal question submitted by the Finnish Supreme Court but brought about a conceptual paradigm-shift. The dispute in the principal proceedings raised the question whether it goes against the requirement of effectiveness that Finnish law does not contain the doctrine of economic continuity in relation to civil liability. The CJEU held that this doctrine, which was derived by the CJEU from the concept of undertaking and developed in relation to liability for the competition fine (that is, public enforcement), is applicable also in actions for damages. Nonetheless, the ruling’s impact goes beyond the issue of economic continuity. The pre-Skanska case law was based on the apprehension that issues related to private enforcement, in essence, come under national law, which is framed by the requirements of equivalence and effectiveness. In these cases, the Court, at times, invalidated national rules because they went against the requirement of effectiveness. However, in Vantaa v. Skanska and others, the Court held that since the right to claim compensation for damages caused by competition law violations is secured by EU law, the conditions of the existence of this right (e.g. causality and the definition of the entity from which compensation may be claimed) are questions of EU law and should be given an autonomous meaning. The judgment is less revolutionary in terms of conclusion, given that the right to claim compensation under Article 101(1) TFEU was pronounced as early as Courage. However, it is revolutionary in terms of conceptualization and, as such, at the same time it is expected to have a considerable impact on substantive issues in the future. This signals the advent of a uniform regime of European ‘private competition law’, which limits the role of national rules to the exercise of the right to compensation.

2. Facts and preliminary questions

The case emerged from a follow-on action for damages concerning a price-fixing and bid-rigging cartel in the Finnish asphalt market. The City of Vantaa brought an action against various cartelist companies, however, the claims were blocked against a few defendants: some of the cartelist companies were wound up as a result of a voluntary liquidation procedure and their commercial activities transferred. The City of Vantaa wanted to enforce its claims against the enterprises who acquired the assets of the cartelist companies; however, under Finnish law, the company acquiring the assets could not be held liable for the wound-up company’s debts.

Finish courts reached conflicting conclusions as to whether the City of Vantaa may claim compensation. The district court applied EU competition law’s economic continuity doctrine developed in relation to competition fines. On the other hand, the court of appeal held that the issue was governed by Finnish rules, under which the claim of the City of Vantaa could not be enforced against the acquirers of the assets.

The Finnish Supreme Court referred the case to the CJEU. It identified two consecutive questions of interpretation. ⁴ First, it was unclear if the question of succession comes under EU law (specifically, Article 101 TFEU) or national law, and if it comes under the former, it was still dubious whether the doctrine of economic continuity applied. If the question is governed by Article 101 TFEU, it has to be given an autonomous interpretation independent of national law. Furthermore, the concept of economic continuity was developed by the CJEU in relation to liability for competition fines imposed by the European Commission. It has to be noted that the case reached the CJEU before the adoption of the ECN+ Directive, ⁵ which, in Article 13(5) extends this principle to fines imposed by NCAs. ⁶ It was unclear whether this doctrine could be applied also to private enforcement before national courts. Second, in case the question is not governed by Article 101 TFEU directly, this provision also has an indirect role: it frames the application of national law. While certain civil law aspects of the application of Article 101 TFEU come under national law, the latter still has to comply with the EU law principles of equivalence and effectiveness. It was questionable whether Finnish law’s ‘fencing’ of the acquirer of assets goes against the requirement of EU competition law’s effective enforcement.

3. The preliminary questions in the context of the dualist nature of EU competition law’s application

EU competition law (more specifically: Articles 101 and 102 TFEU) has a dual nature. As a general principle, substantive provisions are centralized, while enforcement is decentralized. This dualism follows the notion that while EU law has a uniform interpretation and substance, Member States enjoy procedural autonomy when applying it. ⁷ This procedural autonomy is conceived very widely: as a matter of principle, it embraces not only genuine procedural issues but also legal consequences. In the field of public enforcement, this dualism has traditionally meant that substantive competition rules are centralized and subject to a uniform interpretation, while their application by national competition authorities comes, in principle, under national law in terms of procedure and sanctions within the boundaries set by Regulation 1/2003/EC. ⁸ Of course, when these rules were enforced by the European Commission, procedure and sanctions were governed by EU law. ⁹

A similar structure emerged in relation to private enforcement: Articles 101-102 TFEU set out the basis of legal consequences but, with the exception of the automatic nullity of restrictive agreements provided for by Article 101(2) TFEU, the private law aspects come under national law. In both cases, the application of national law is framed by two fundamental principles: the requirements of equivalence, which prohibits discrimination between the application of EU and domestic law, and the requirement of effectiveness, which prescribes that national rules must not make the application of EU law impossible or unduly difficult. Although this picture changed recently both as to private and public enforcement with the adoption of the ECN+ Directive and the Private Enforcement Directive, the architecture’s dualist nature was not called into question. Member States’ narrowing procedural autonomy has remained a core structural principle.

Skanska has to be conceived in this context, as addressing the borderline between EU and national law and giving the CJEU an opportunity to make a further step towards the ‘federalization’ of EU competition law’s enforcement through elevating a further crucial question to the level of European Union law.

4. Opinion of Advocate General Wahl

Advocate General Wahl conceived the principal question of interpretation as ‘how (and, in particular, on what legal basis) the persons to be held liable for harm caused by an infringement of EU competition law are to be determined.’ ¹⁰ After demonstrating that the case-law had ‘set out the right – of any individual – to claim damages for harm caused by anticompetitive conduct,’ ¹¹ building on the distinction developed by Advocate General Van Gerven in Banks, ¹² Advocate General Wahl pointed to a subtle but important distinction he perceived reading the CJEU’s earlier judgments. He argued that while the Court assessed national rules related to the application of rights afforded by EU competition law (‘detailed rules governing the exercise of the right to claim compensation’) on the basis of the principle of effectiveness (and equivalence), national rules concerning ‘the constitutive conditions of the right to claim compensation’ were subject to a more stringent ‘assessment based on the full effectiveness of Article 101 TFEU.’ ¹³ Conceiving this distinction in the light of the fact that the right itself to claim compensation is created by Article 101 TFEU, Advocate General Wahl went one step further and concluded that ‘the constitutive conditions of the right to claim compensation,’ including the identification of the person against whom this right may be enforced, are enshrined in Article 101 TFEU and, as such, are a matter of EU law and ‘must be uniform.’ ¹⁴ It is only the exercise of this right that comes under national law. ¹⁵

The determination of the persons that may be held liable to pay compensation is not a equestion regarding any details of the concrete application of a claim for compensation or a rule governing the actual enforcement of the right to claim compensation. The determination of the persons liable to pay compensation is the other side of the coin of the right to claim compensation for harm caused by a breach of EU competition law. Indeed, the existence of a right to claim compensation based on Article 101 TFEU presupposes that there is a legal obligation that has been infringed. It also presupposes that there is a person liable for that infringement. ¹⁶

5. CJEU’s preliminary ruling

The CJEU held that, due to EU competition law’s doctrine of economic continuity, the enterprises that acquired the assets and businesses of the cartelist companies should answer for the violations of the latter.

Article 101 TFEU must be interpreted as meaning that, in a case such as that in the main proceedings, in which all the shares in the companies which participated in a cartel prohibited by that article were acquired by other companies which have dissolved the former companies and continued their commercial activities, the acquiring companies may be held liable for the damage caused by the cartel in question. ²⁰

It was probably the first question of interpretation, that is, the scope of Article 101 TFEU, that determined the outcome of the case, given that the concepts of economic unit and economic continuity are entrenched doctrines of EU competition law and there was no valid reason to treat public and private enforcement differently. In contrast with this pivotal role, the CJEU was most laconic in this regard. After reiterating that Article 101(1) TFEU has direct effect ²¹ and its full effectiveness ²² should be guaranteed, it shortly referred to Advocate General Wahl’s distinction between the ‘constitutive conditions of the right to claim compensation’ and ‘exercise of that right’ and concluded that ‘as the Advocate General has pointed out in points 60 to 62 of his Opinion, the determination of the entity which is required to provide compensation for damage caused by an infringement of Article 101 TFEU is directly governed by EU law.’ ²³ The Court stressed that the concept of undertaking has the same meaning irrespective of whether it is applied in the public or private enforcement of competition law. ²⁴ This conclusion opened the way to the extrapolation of the doctrine of undertaking to private enforcement, ²⁵ which, in turn, entailed the application of the economic continuity doctrine. ²⁶

After deducing the applicability of the economic continuity doctrine to private enforcement through purely conceptual arguments, the Court also stressed the public policy function of private enforcement as a consideration justifying a pro-victim interpretation of Article 101 TFEU. ²⁷

6. Assessment

The CJEU’s ruling in Skanska is part of the general tendency of ‘federalization’ of competition law enforcement. Private enforcement and the procedural aspects of administrative enforcement were partially ‘federalized’ by legislative means. ²⁸ The contribution of Skanska to this process is that the Court went beyond framing national private laws’ application and laid the groundwork of an autonomous and independent (more ambitiously: federal) EU ‘private competition law.’

The concept of undertaking is an integral part of this system. While the ruling in Skanska refers solely to the doctrine of economic continuity, the reasoning makes it clear that the Court treats this doctrine as part of the general concept of undertaking (economic unit). Put it otherwise: the judgment’s holding embraces the federalization of the doctrine of economic continuity, however, the obiter dicta are very clear about the federalization of the concept of undertaking at large. This implies that it is the economic unit (that is, the group of companies and not the individual company) that breaches Article 101 TFEU and it is also the economic unit (that is, the group of companies and not the individual company) that has to answer for this violation. This has wide-reaching implications not only in terms of group members’ joint and several liability, ²⁹ but also in relation to other issues, such as jurisdiction and forum shopping. ³⁰ If this notion works to the full, victims may sue any company belonging to the undertaking. This implies that all courts where a member of the undertaking has its seat are vested with general jurisdiction, ³¹ which may be extended to other members, if these companies are sued jointly. ³²

Another important element EU ‘private competition law’ is the unitary system of public and private enforcement and the principle that private enforcement’s primary role is deterrence. As noted above, that Court lined up private enforcement along public enforcement and acknowledged its added value in discovering and punishing violations. While this notion has a long history in EU competition law, it has finally received ‘constitutional endorsement.’ It is easy to analogize this stance with US antitrust law’s reliance on private attorneys general. ³³ Although, in the EU, private enforcement does not and cannot have the kind of weight it has in the US, the explicit articulation of its public policy rationale, though stroke root as early as Courage, is a major development. While this finds no reflection in the ruling, Advocate General Wahl went so far as to say that the major rationale of private enforcement is deterrence and the compensatory function is merely secondary to this. While this statement could call for a reconsideration of the prevailing paradigm of compensation and the introduction of super-compensatory damages, such as punitive or treble damages, in my view, these statements do not question the traditional civil law foundations and the principle that the compensation is not meant to enrich the victim but to duly compensate him. Instead, it simply confirms that the main reason why civil liability is so important for EU law is that it also has a deterrent effect.

The application of EU competition law has featured national procedural autonomy as a natural element from the outset. In Courage and Manfredi, the first two cases addressing EU competition law’s private enforcement, the CJEU preserved this structure but stressed the requirement of equivalence and effectiveness. In Courage and Crehan, English law’s ‘in pari delicto’ doctrine was ruled out in relation to claims based on EU competition law, with reference to the full effectiveness of Article 101 TFEU. In Kone, the Court held that customers of companies that were not part of the cartel have the right to claim damages from cartel member, provided they can prove that they suffered damages as a result of ‘umbrella-pricing’ (that is, the cartel price had an impact on the unilateral pricing of companies outside the cartel). Again, the Court took it as granted that the question of causality comes under national law and measured Austrian law along the requirement of effectiveness. Although, at the end of the day, it found that the Austrian rule that disallowed the customers of non-cartel members to claim damages from cartel members is suppressed by EU law, this conclusion was based on the notion that the Austrian rule impaired the full effectiveness of Article 101 TFEU. ³⁴ In none of the pre- Skanska rulings asserted the Court, at least not explicitly, that Article 101 TFEU embeds a set of autonomous European private law rules and the intrusion into national civil law in all these cases was justified with the label of full effectiveness.

Interestingly, while in Kone the question of causality was treated as an issue for national law framed by the EU law requirement of effectiveness, ³⁵ in Skanska the Court seems to have re-conceptualized this, when referring to Kone as an authority for the stance that ‘[a]ny person is (…) entitled to claim compensation for the harm suffered where there is a causal relationship between that harm and an agreement or practice prohibited under Article 101 TFEU.’ ³⁶ This statement of the Court should be read in conjunction with the Opinion of Advocate General Wahl, which asserts that in Kone the CJEU did not take up a position as to whether the issue of causality is an autonomous EU law concept or it is regulated by national law subject to the principle of effectiveness. ³⁷

While EU law still has a long way to go, Skanska signals the twilight of national procedural autonomy and the advent of European ‘private competition law.’ Given that EU competition policy has been the pioneer of the European integration, it was highest time to start off on this way.