TheThe ComPeTiTion review PrivaTe Private

Competition Enforcement Review

third edition

third Edition

Editor
Ilene Knable Gotts

Law Business Research

The PrivaTe ComPeTiTion review

third edition

reproduced with permission from Law Business research Ltd. This article was first published in the Private Competition enforcement review, third edition (published in September 2010 editor Ilene Knable Gotts). For further information please email Adam.Sargent@lbresearch.com

Contents

The Private Competition Enforcement Review

third edition editor

ilene Knable GoTTs

law business researCh lTd

Contents

PublISher Gideon roberton buSIneSS develoPmenT mAnAGer Adam Sargent mArKeTInG mAnAGerS hannah thwaites nick Barette edITorIAl ASSISTAnT nina nowak ProducTIon mAnAGer Adam myers ProduCtion editor Joanne morley editor-in-ChieF callum campbell mAnAGInG dIrecTor richard davey Published in the united Kingdom by law business research ltd, london 87 lancaster road, london, W11 1QQ, uK 2010 law business research ltd copyright in individual chapters vests with the contributors no photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation. legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of September 2010, be advised that this is a developing area. enquiries concerning reproduction should be sent to law business research, at the address above. enquiries concerning editorial content should be directed to the Publisher gideon.roberton@lbresearch.com ISbn 978-1-907606-04-5 Printed in Great britain by encompass Print Solutions, derbyshire Tel: +44 870 897 3239

AcKnoWledGemenTS
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:Firmnames
Firm names

ArnTzen de beSche AdvoKATfIrmA AS CLiFFord ChanCe edWArd nAThAn SonnenberGS InC ePSTeIn, chomSKy, oSnAT & co ferrAdAnehme lAnnA PeIxoTo AdvoGAdoS lInKlATerS llP mAlleSonS STePhen JAQueS morAIS leITo, GAlvo TeleS, SoAreS dA SIlvA & ASSocIAdoS, SocIedAde de AdvoGAdoS, rL moTIeKA & AudzevIcIuS nIShImurA & ASAhi noerr LLP norTon roSe llP PAul, WeISS, rIfKInd, WhArTon & GArrISon llP PoPovIcI nItu & ASocIAtii , , TAylor WeSSInG turun urA menndez WAchTell lIPTon roSen & KATz yulchon, ATTorneyS AT lAw

Contents

conTenTS

Editors Preface Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13

vii Ilene Knable Gotts AuSTrAlIA 1 Trish Henry, Domenic Gatto and Peta Stevenson BraziL 18 Bruno L Peixoto ChiLe 1 Paulo Montt and Benjamn Mordoj enGlAnd & WAleS 41 Peter Scott and Mark Simpson euroPean union 66 Bernd Meyring FranCe 84 Mlanie Thill-Tayara and Marta Giner Asins GermAny 94 Michael Dietrich and Marco Hartmann-Rppel hunGAry 114 Alexander Birnstiel and Peter Stauber ISrAel 125 Eytan Epstein, Tamar Dolev-Green and Shiran Shabtai ITAly142 Cristoforo Osti and Alessandra Prastaro JaPan 157 Kozo Kawai and Madoka Shimada KoreA 169 Sai Ree Yun, Kum Ju Son, Alexa Oh and Seung Hyuck Han Lithuania178 Henrikas Celencevicius

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Contents

Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18 Chapter 19 Chapter 20

norWAy 190 Thomas Nordby and Steinar Eskild Trovg PorTuGAl 202 Joaquim Vieira Peres and Eduardo Maia Cadete romAnIA 212 Silviu Stoica and Mihaela Ion SouTh AfrIcA 221 Jocelyn Katz and Lara Zetzer SPAIn 23 Alfonso Gutirrez TurKey 246 Esin amlbel unITed STATeS 259 Ilene Knable Gotts, Joseph Simons and Aidan Synnott

Appendix 1 Appendix 2

AbouT The AuThorS 281 conTrIbuTInG lAW fIrmS conTAcT deTAIlS 296

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editors preface

private antitrust litigation has been a key component of the antitrust regime for decades in the United States and reflects the societal views generally towards the objectives and roles of litigation. the United states litigation system is highly developed using extensive discovery, pleadings and motions, use of experts, and, in a small number of matters, trials, to resolve the rights of the parties. as a result, the process imposes high litigation costs (in time and money) on all participants and promises great rewards for prevailing plaintiffs. The usual rule that each party bears its own attorneys fees is amended for private antitrust cases such that a prevailing plaintiff is entitled to its fees as well as treble damages. The costs and potential rewards to plaintiffs has created an environment in which a large percentage of cases settle on the eve of trial. Arbitration and mediation are still rare, but not unheard of, in antitrust disputes. congress and the Us supreme court have attempted to curtail some of the more frivolous litigation and class actions by adopting tougher standards and ensuring that follow-on litigation exposure does not discourage wrongdoers from seeking amnesty from the competition authorities. although these initiatives may, on the margin, decrease the volume of private antitrust litigation in the United states, the environment remains ripe for high litigation activity in the near-term, particularly involving intellectual property rights and cartels. Most of the other jurisdictions discussed in this book have each sought to initiate or increase the role of private antitrust litigation recently (in the past few years, for instance, in Brazil and israel) as a complement to increased public antitrust enforcement. In April 2008, the European Commission published a White Paper suggesting a new private damages model for achieving compensation for consumers and businesses who are victims of antitrust violations, noting that at present, there are serious obstacles in most eU Member states that discourage consumers and businesses from claiming compensation in court in private antitrust damages actions []. the model is based on compensation through single damages for the harm suffered. the key recommendations include collective redress, in the form of representative actions by consumer groups and victims who choose to participate, as opposed to class actions of unidentified claimants; disclosure of relevant evidence in the possession of parties; and final infringement

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Editors preface decisions of Member States competition authorities constituting sufficient proof of an infringement in subsequent actions for damages. Commissioner Kroes was unable to achieve adoption of the legislation on private enforcement before the end of her term. Commissioner Almunia plans to enter into a new round of consultations and is likely to combine the initiative with forthcoming legislation on consumer protection. Both proposals will likely contain some form of collective redress. Even in the absence of the issuance of final EU guidelines, however, states throughout the European Union (and indeed in most of the world) have increased their private antitrust enforcement rights or are considering changes to legislation to provide further rights to those injured by antitrust law infringement. Indeed, private enforcement developments in many of these states have supplanted the eUs initiatives. The English and German courts are emerging as major venues for private enforcement actions. Collective actions are now recognised in Sweden, Finland and Denmark. Italy also recently approved legislation allowing for collective damages actions and providing standing to sue to representative consumers and consumer associations, and france and England are currently also contemplating collective action legislation. Some jurisdictions have not to date had any private damages awards in antitrust cases, but changes to their competition legislation could favourably affect the bringing of private antitrust litigation seeking damages (e.g., Lithuania or romania). Almost all jurisdictions have adopted an extraterritorial approach premised on effects within their borders. Canadian courts may also decline jurisdiction for a foreign defendant based on the doctrine of forum non conveniens as well as comity considerations.. In contrast, some jurisdictions, such as the UK, are prepared to allow claims in their jurisdictions where there is relatively limited connection, such as where only one of a large number of defendants is located. In South Africa, the courts will also consider spill-over effects from antitrust cartel conduct as providing a sufficient jurisdictional basis. Jurisdictions also vary regarding how difficult they make it for a plaintiff to have standing to bring the case. Most jurisdictions impose a limitation period for bringing actions that commences only when the plaintiff knows of the wrongdoing and its actors; a few, however, apply shorter, more rigid time frames without a tolling period for the commencement of damages (e.g., Brazil or Canada with respect to Competition Act claims) or injunctive litigation. Some jurisdictions base the statute of limitations upon when a final determination of the competition authorities is rendered (e.g., Romania or South Africa) or from when the agency investigation commences (e.g., Hungary). In other jurisdictions (e.g., Australia or Chile), it is not as clear when the statutory period will be tolled. The litigation system in each jurisdiction to some extent reflects the perceptions of what private rights should protect. Most of the jurisdictions view private antitrust rights as an extension of tort law (e.g., Canada, France, Hungary, Israel, Japan, Korea, Norway, the Netherlands or the UK), with liability arising for actors who negligently or knowingly engage in conduct that injures another party. Some jurisdictions treat antitrust concerns as a defence for breaching a contract (e.g., Norway or the Netherlands), others (e.g., Australia) value the deterrent aspect of private actions to augment public enforcement, while others are concerned that private antitrust litigation might thwart public enforcement and may require what is in essence consent of the regulators before allowing the litigation or permit the enforcement officials to participate in the case (e.g., in Germany the President of

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Editors preface the Federal Cartel Office may act as amicus curiae). A few jurisdictions believe that private litigation should only be available to victims of conduct that the antitrust authorities have already penalised (e.g., Spain, until legislation loosened this requirement somewhat). Interestingly, no other jurisdiction has chosen to replicate the United States system of treble damages for competition claims, taking the position that damages awards should be compensatory rather than punitive (Canada does, however, recognise the potential for punitive damages for common law conspiracy and tort claims), neither does any other jurisdiction permit the broad-ranging and court-sanctioned scope of discovery permitted in the United states. only australia seems to be more receptive than the United states to suits being filed by a broad range of plaintiffs including class-action representatives and indirect purchasers and to increased access for litigants to information and materials submitted to the antitrust authorities in a cartel investigation. finally, in almost all jurisdictions, the prevailing party has some or all of its costs compensated by the losing party, discouraging frivolous litigation. Varying cultural views also clearly affect litigation models. Jurisdictions such as Germany or Korea generally do not permit representative or class actions, but instead have as a founding principle the use of courts for pursuing individual claims. In Japan, class actions are not available except to organisations formed to represent consumer members. Jurisdictions that are receptive to arbitration and mediation as an alternative to litigation (e.g., Germany, Hungary, Korea, the Netherlands or Spain), also encourage alternative dispute mechanisms in private antitrust matters. some courts prefer the use of experts and statements to discovery (e.g., in France, where the appointment of independent experts is common; in Japan, which does not have mandatory production or discovery except in narrowly prescribed circumstances; and in Germany, which even allows the use of statements in lieu of documents). In Korea, economic experts are mainly used for assessment of damages rather than to establish violations. In Norway, the Civil Procedure Act allows for the appointment of expert judges and advisory opinions of the EFTA court. Other jurisdictions believe that discovery is necessary to reach the correct outcome (e.g., Canada, which provides for broad discovery, and Israel, which believes laying your cards on the table and broad discovery are important). Views towards protecting certain documents and information on privilege grounds also cut consistently across antitrust and non-antitrust grounds (e.g., no attorneyclient, attorney work-product or joint work-product privileges in Japan, limited recognition of privilege in Germany; extensive legal advice, litigation and common interest privilege in the UK, and Norway), with the exception that some jurisdictions have left open the possibility of the privilege being preserved for otherwise privileged materials submitted to the antitrust authorities in cartel investigations. Interestingly, Portugal, which expressly recognises legal privilege for both external and in-house counsel, nonetheless provides for broad access to documents to the Portuguese Competition Authority. Some jurisdictions view settlement as a private matter (e.g., France, Japan or the Netherlands); others view it as subject to judicial intervention (e.g., Israel or Switzerland). The culture in some places, such as Germany, so strongly favours settlement that judges will require parties to attend hearings, and even propose settlement terms. In Canada, the law has imposed consequences for failure to accept a reasonable offer to settle and, in some jurisdictions, a pre-trial settlement conference is mandatory.

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Editors preface Private antitrust litigation is largely a work in progress in most parts of the world, with the paint still drying even in the United States several decades after private enforcement began. Many of the issues raised in this book, such as pass-on defence and the standing of indirect purchasers, are unresolved by the courts in many countries and our authors have provided their views regarding how these issues are likely to be clarified. Also unresolved in some jurisdictions is the availability of information obtained by the competition authorities during a cartel investigation, both from a leniency recipient and a party convicted of the offence. Other issues such as privilege are subject to proposed legislative changes. The one constant cutting across all jurisdictions is the upwards trend in cartel enforcement activity, which is likely to be a continuous source for private litigation in the future. Ilene Knable Gotts Wachtell Lipton rosen & Katz New York september 2010

Chapter 3

chile
Paulo Montt and Benjamn Mordoj *

OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY

This year saw a landmark case regarding private antitrust litigation for damages incurred as a result of a violation of the antitrust rules. The case concerns a civil lawsuit filed in 2009 by the chilean subsidiary of Philip Morris against chiletabacos, a subsidiary of British American Tobacco, demanding approximately $136 million in damages arising from anti-competitive rebates and refusal to deal. The competition court (TDlc) and, on appeal the Supreme court, had earlier established these practices as abusive and contrary to the antitrust rules.1 in its judgment of January 2010, the civil court denied the claim based on the lack of evidence regarding the damages claimed by Philip Morris. Although the trial is still pending before a court of appeal, this case marks a definite change in Chilean private competition enforcement, as it is one the first cases where a significant claim has been filed for damages as a result of anti-competitive behaviour. This case may also influence the civil claim recently announced against Ca chilena de Fsforos (ccF), the predominant manufacturer of matches for domestic use.2 ccF was ruled against by the TDlc in December 2009 for exclusionary conducts such as anti-competitive rebates and the imposition of exclusivity clauses on retailers. The TDlc decision was upheld in June 2010 by the Supreme court and one of the plaintiffs, canada chemicals, subsequently announced a civil claim for $13 million. Another relevant decision was OPS et al v. Telefnica Mviles, in which the TDlc fined Telefnica Mviles de Chile (Telefnica) for price discrimination, margin squeeze and refusal to deal.3 OPS provided a service known as the celulink system, which converts

* 1 2 3

Paulo Montt is a partner and Benjamn Mordoj is an associate at FerradaNehme. Philip Morris v. Chiletabacos, Case No. 11-04, TDLC, Decision No. 26, 5 August 2005. http://df.cl/portal2/content/df/ediciones/20100605/cont_142787.html. OPS et al v. Telefnica Mviles. Case No. 126-07, TDLC, Decision No. 88, 15 October 2009.

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Chile mobile off-net phone calls into on-net calls. This means that mobile phone calls originating from a mobile network different to the destination network are processed as on net phone calls, thus avoiding the payment of charges for access to the other mobile network. in order to provide this service, OPS had agreements in place with Telefnica and other mobile phone companies. Telefnica raised the prices it charged OPS for their mobile phone plans and OPS complained that the new prices were discriminatory, since it paid higher prices than other users who demanded a lower volume of minutes. The decision against Telefnica was upheld in July 2010 by the Supreme court and, therefore, OPS is expected to file a civil lawsuit seeking compensation for damages against Telefnica. II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT

If a firm is affected by anti-competitive conduct, it can file a lawsuit before the TDLC in order to establish antitrust liability. The firm can also file an administrative complaint before the National Economic Prosecutors Office (FNE), the competent antitrust agency. The FNE has no power to punish anti-competitive conduct, but it can initiate proceedings before the TDLC. If the FNE decides to initiate proceedings, the complainant and other affected firms can either join the trial as interested parties, or file their own complaints before the TDLC. There are many precedents where private parties have indeed joined the FNEs actions.4 The TDLC can determine an antitrust violation and impose a fine on the firm violating the law, but lacks the competence to grant damages to the plaintiff. Damage claims are governed by the general rules of civil law, and only civil courts are empowered to quantify damages. Damage claims should therefore be brought before the civil courts once the TDlc has established an antitrust violation has occurred. According to chilean law, the civil court is thereby obliged to base its subsequent judgment on the decision of the TDlc; it cannot establish itself whether the antitrust law was violated and cannot deviate from the TDlcs opinion of the alleged infringement. civil courts do, however, have broad powers to determine the level of damages for the plaintiff. Damages may be both economic as well as non-economic, the quantification of which is governed by the general rules and principles of civil law. if no damages can be proven before the civil court by the plaintiff, the claim should be dismissed. According to the last amendments of chilean antitrust law,5 the statute of limitations for antitrust claims before the TDlc is three years after the anti-competitive conduct takes place. The law is not always clear on what should be considered the start of this period, and the courts have stated on occasion that, in cases of ongoing conduct, the term starts as of the termination of such conduct. For collusion cases, the statute of limitations is five years, the period of which does not start as long as the collusive

4 5

See FNE v. Almacenes Paris y Falabella, Case No. 103-06, TDLC, Decision No. 63, 10 April 2008. DL 211/1973.

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Chile behaviour still has effects in the market. The statute of limitations for subsequent damages claims before the civil courts is four years after the TDlcs ruling or, in the case of appeal, that of the Supreme court. III EXTRATERRITORIALITY

The territorial scope of chilean antitrust law extends to restrictive practices that are implemented in chile. Any person who undertakes or enters into individually or collectively any action or agreement having as its object or effect the prevention, restriction or distortion of competition in the chilean market, may commit an antitrust offence. The relevant factor for the application of chilean antitrust law is therefore the actual effect in the chilean market, taking precedence over the place where the transaction actually occurs. The jurisdiction of the TDlc is, however, limited to the territory of chile. in order to enforce administrative measures against foreign companies infringing chilean antitrust law, it is necessary that these companies have a subsidiary, a branch or other assets in chile. The TDLC is currently dealing with a complaint filed by the FNE against John Malone, an American citizen, because Mr Malone allegedly breached one of the conditions set out by the TDlc when clearing a merger between the two major cable TV operators in 2004, and he has recently filed his plea before the TDLC. However, he continues to deny the jurisdiction of the TDlc before the US courts.6 In turn, the FNE has recently filed an antitrust complaint against two foreign firms, Whirlpool and Tecumseh do Brazil, based on the effects in Chile of an alleged global cartel in the market for refrigeration compressors. The FNE argues that this global cartel affects local manufacturers that use compressors as the main component in the manufacture of freezers and other refrigeration equipment, meaning that Chilean consumers have to pay higher prices.7 The TDlc has also reviewed international mergers having effects in chile. Recently, the national main fuel retailer, copec, announced the purchase of 22 per cent of Terpel, a colombian petrol and natural gas distributor. Since Terpel also owns petrol stations in Chile, Copec has notified the TDLC and committed to quickly sell these stations as a remedy.8 The TDLC and the FNE are therefore empowered to deal with conduct or mergers committed or conducted abroad as long as they have effects in chile; there is no exemption, in principle, provided for conduct by foreign firms or committed in other jurisdictions. however, the extent to which judgments pronounced by chilean courts are

6 7 8

Information available at www.tdlc.cl/DocumentosMultiples/Requerimiento_FNE_C_156_ 08.pdf. Information available at www.tdlc.cl/DocumentosMultiples/Requerimiento%20de%20la%20 FNE%20contra%20Tecumseh%20Do%20Brasil%20Ltda.%20y%20otro.pdf. Information available at www.tdlc.cl/DocumentosMultiples/Consulta%20de%20Copec%20S. A.%20sobre%20los%20efectos%20en%20Chile%20de%20su%20participacin%20en%20la %20propiedad%20de%20Terpel%20Colombia%20y%20medidas%20de%20mitigacin.pdf.

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Chile recognised and enforced in foreign jurisdictions will depend on their own national rules as well the applicable international treaties. IV STANDING

The FNE, as the public agency representing the general interest of society in antitrust matters, can always initiate a case before the TDLC; the FNE does not need to show any direct or special interest. Private parties can also bring a case before the TDlc. According to the general procedural rules, they must show a legitimate interest in order to have standing. Recently, the TDlc ruled that a plaintiff must prove a direct interest in sanctioning the defendant in order to be considered as a legitimate interested party. This decision accepted the defendants argument that a non-profit organisation lacks the standing to bring a case before the TDlc.9 The TDlc decision was appealed by the plaintiff on the basis of an alleged public interest involved in any antitrust action. The Supreme court is expected to pronounce its judgment soon, either upholding the TDlcs criterion or making a different interpretation that allows wider standing in antitrust matters. If there is an antitrust complaint filed by the FNE or a private party with sufficient legitimate interest, third parties can always join the plaintiff s claim if they can show an interest in the case. The TDLC has shown a rather flexible approach towards such third parties, and it seems no specific or personal interest needs to be demonstrated.10 Although it is technically not an issue of standing, there are certain requirements as to the form and content of any complaints brought before the TDlc. The plaintiff should show a certain good faith towards the case in the sense that the complaints should be supported facts and evidence, sufficient to prove the case. The exact position of the TDlc and the Supreme court as to this issue, which is related to the discussion as to whether and to what extent the antitrust courts, in serving the public interest, are obliged to act ex officio in order to obtain evidence, remains, however, unclear.11 According to the last amendments to DL 211/1973, the TDLC may declare a case inadmissible if the plaintiffs do not comply with the formal requirements set forth by chilean law. V THE PROCESS OF DISCOVERY

chilean law does not provide for a discovery system and the submission of documents is governed by the general rules of evidence contained in the civil Procedure code. in principle, all supporting documents need to be presented before the TDlc and, where

9 10 11

Fundacin Chile Ciudadano y RGB Producciones v. VTR BA Chile SA, Case No. 168-08, TDLC, Decision No. 98, 18 March 2010. FNE v. Farmacias Ahumada SA, Farmacias Cruz Verde SA y Salcobrand SA, Case No. 184-08, TDlc (pending). Hasbun v. Copec, Esso y Shell, Case No. 157-08, TDLC, Decision No. 87, 13 August 2009.

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Chile certain documents are in the possession of the other party, the TDlc may order the production of such documents. In a recent case, the defendants requested that the FNE disclose certain documents in its possession before they presented their reply to the FNEs injunction. However, the TDlc rejected the request, a decision that was upheld on appeal by the constitutional court;12 the court held that the FNE would not be acting unconstitutionally by presenting the documents concerned after the defendants reply. Although the case concerned an injunction issued by the public antitrust agency, there is no indication that the criteria would not also apply in private cases before the TDlc. Following a similar criterion, the TDLC recently denied a discovery request filed by an oil wholesaler regarding certain documents in possession of the state-owned national oil company ENAP.13 Although the chilean civil Procedure code allows a potential plaintiff to ask for a disclosure of certain documents, the TDlc interpreted that this system is not applicable to antitrust trials.14 This decision is controversial, considering that the aforementioned civil Procedure code is applicable to antitrust matters that do not have a specific rule, as precisely was the case on discovery. There are certain safeguards as to the confidentiality of documents to be disclosed. Documents can be presented as entirely confidential, whereby its content will not be revealed to any of the other parties involved, except under reservation, which means that the other parties involved will have access to the document but the document will not be made public. in principle, no restrictions or limitations exist as to witnesses, and any person may appear. each party may present a maximum of three witnesses in relation to the disputed facts in relation to which the TDlc has ordered evidence to be presented. The TDlc has the right to interrogate the witnesses presented and any parties to the case have the right to counter interrogate such witnesses as well. in civil cases, the situation is somewhat different as the submission of documents as well as requests for production of documents by the other party can be made at any stage before the evidence period expires. in addition, each party may present a maximum of six witnesses in relation to each disputed fact. Finally, the procedural rules are stricter regarding the independence of the witnesses, and exclude certain groups such as relatives or employees of a party to the case. VI USE OF EXPERTS

it is rather common practice to present economic reports or legal opinions in the cases before the TDlc. in general, the reports or opinions are used to support the position of one party from a legal or economic point of view, and the authors of such opinions are normally presented as witnesses as well. experts presenting economic reports are

12 13 14

Information available at: www.tdlc.cl/DocumentosMultiples/Tribunal%20Constitucional_Ina dmisibilidad%20de%20Recurso%20de%20Inaplicabilidad%20.pdf. Please note that ENAP is governed by private law rules, as if it were a private firm. Blue Oil v. ENAP, Case No. 201-10, TDLC.

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Chile obliged to submit, in digital form, any formulae and calculations that support their opinion, in order to allow the TDlcs economists to review them. The TDlc may also appoint an expert ex officio. Although rarely used in the past, this practice is now being more common, given the impartiality that an ex officio expert offers to the process. Such experts are generally used by the court to assist on technical issues rather than economic or legal theory. in principle, there are no restrictions on the use of experts to support any damages claims in civil proceedings. As previously explained, damages claims have been rare to date, so there is no established practice in this respect. in the landmark case Philip Morris v. Chiletabacos 15 the plaintiff submitted a number of expert reports on the alleged damages; however, those reports were not enough, in the civil courts opinion, to prove the damages claimed by Philip Morris. VII CLASS ACTIONS

The antitrust law does not provide for collective claims or class action suits in relation to antitrust violations before the TDlc. Subsequent damages claims before the civil courts may also be made on an individual basis because in the chilean system, collective claims are only possible in relation to violations of the consumer protection law. in October 2009, a civil court denied its jurisdiction to deal with a class action suit against the main three pharmacy chains in chile, following a settlement reached by one of the defendants with the FNE in an antitrust case before the TDLC regarding alleged price fixing. The claim was based on violations of consumer protection rights, but the facts and conduct in this case were similar to those disputed before the TDlc. There is another class action suit, still pending before a civil court, based on the same facts, and the defendant has claimed that consumer protection laws are not applicable to conduct that constitutes antitrust violation. The question as to whether anti-competitive behaviour may constitute a violation of antitrust law as well as the consumer protection laws remains open for now. The answer to this question is highly relevant as it may open the floodgates to collective damages claims for certain types of anti-competitive behaviour. VIII CALCULATING DAMAGES claims of damages arising from antitrust violations have been rare, possibly because such claims must be initiated in a separate trial, once the TDlc has already established the existence of an antitrust violation. According to the general rules of civil law, an affected party can claim any damages effectively suffered, including pure economic loss and loss of profits; the burden of proof rests thereby on the plaintiff. Non-economic damages, defined as moral damages, are acceptable in principle, but the chilean civil courts take a rather reserved position to such claims. in a recent case regarding losses resulting from predatory pricing, the Supreme Court awarded damages for operational loss and loss of profits, but denied the

15

See footnote 1.

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Chile claim for moral damages. in Philip Morris v. Chiletabacos (still pending) the $136 million claimed includes moral damages. The Chilean courts have not accepted punitive damages, as damage indemnification in chile is compensatory rather than punitive; however, in practice, the chilean courts do base their decisions on punitive considerations when awarding moral damages. it is expected that the final decision on Philip Morris will likely become an important precedent in this matter. lawyers fees are governed by general procedural rules. if a party is wholly defeated in trial, it has to pay the others legal attorneys fees unless the court deems the defeated party had good reason to litigate. in reality, each party generally covers its own lawyer and legal fees. IX PASS-ON DEFENCES

The plaintiff has the right to claim only those damages effectively suffered. chilean legislation does not expressly recognise the pass-on defence and there are to date no precedents about this issue in chile. however, since the plaintiff can only claim the damages effectively suffered, it cannot claim for damages caused to subsequent buyers. Since a plaintiff has the burden of proving the existence and level of damages, a pass-on defence may in principle succeed when a plaintiff cannot provide convincing evidence about the damages it is seeking to recover. X FOLLOW-UP LITIGATION

A criminal lawsuit does not preclude the application of antitrust law and vice versa. Therefore, private competition enforcement in principle is not affected by criminal enforcement. Public antitrust enforcement, on the other hand, does affect private enforcement, as a decision rendered by the TDlc has a direct effect on and in fact provides the basis for future private claims. DL 211/1973 provides immunity for those parties who engage into any agreement or conduct in accordance with a decision by the TDlc rendering such conduct lawful. Those parties cannot be brought before the TDlc for antitrust violations and are protected from civil claims unless the TDlc overrules an earlier decision on the grounds of new evidence. This immunity is very important in the context of non-litigious proceedings, since private parties can file voluntary consultations prior to completing transaction or engaging in actions that may violate competition rules. however, this immunity is also applicable to the litigious procedure, since subsequent decisions cannot contradict previous rulings on the same matter. Since leniency has recently been introduced in dealing with matters of collusion, there is no precedent about how leniency may affect private enforcement, especially if there are damages arising from the actions of a cartel. According to the last amendments to DL211/1973, in the recently filed complaint against Whirlpool and Tecumseh do Brazil, the FNE has declared that the party that had collaborated in the investigation would be granted full immunity from fines, but it is not yet clear if it could subsequently be sued for damages before the civil courts. however, in line with international experience,

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Chile it may be expected that leniency provides immunity only in relation to possible fines but does not preclude private enforcement. This situation is less clear in relation to settlements reached with the FNE or any private party in cases before the TDLC. Settlements substitute for the final court judgments and, consequently, no antitrust violation will be established. it seems unlikely that the settling party could be sued for damages following such settlement. It has also been discussed to what extent sector-specific regulation may be a shield against antitrust claims. in OPS et al v. Telefnica Mviles, one of Telefnicas defences was based on the alleged violation of sector-specific regulation by the plaintiff. The TDLC requested the expert opinion of the Secretary of Telecommunications, the national regulatory agency, which decided that OPSs activity was illegal since it sought to avoid the payment of charges for the access to Telefnicas mobile network. The TDlc, however, did not accept such opinion and eventually concluded that Telefnica had abused its dominant position and had carried out a margin squeeze. We can conclude, therefore, that, in principle, sector-specific regulation does not provide antitrust immunity. XI PRIVILEGE

Until recently, antitrust law did not provide a specific protection of lawyerclient work or communications. These aspects were covered by other laws and there has been no controversy regarding professional work in the past. However, as a result of the latest amendments to DL 211/1973, the FNE is now empowered to perform dawn raids as well as intercept electronic communications. The new amendments stipulate that interception of any communications between a client and its lawyer is prohibited and documents in the lawyers possession cannot be seized. As the law expressly refers to materials kept by the lawyer, it is less clear whether this privilege is applicable if the documentation is also in the clients possession. The FNE has not given guidance as to how it will use these new powers, more specifically on the issue of legal privilege, and any precedent on the matter is absent. What is clear is that privilege does not apply when the lawyer is also being investigated for possible violation of the antitrust rules. XII SETTLEMENT PROCEDURES

DL 211/1973 explicitly allows settlement of an antitrust case provided that the settlement does not violate competition law. The settlement must be approved by the TDlc unless it restricts competition. There are several precedents regarding settlements approved by the TDlc16 and, in fact, the Supreme court has encouraged parties to

16

See AES Gener SA v. Electroandina SA, Case No. 66-05, TDLC, Decision No. 36, 31 January 2006; AGIP v. D&S and Cencosud, Case No. 104-2006, TDLC, Decision of 16 January 2007; FNE v. D&S and Cencosud, Case No. 101-2006, Decision of 17 January 2007; FNE v. CCU, Case No. 153-2008. TDLC, Decision of 23 July 2008.

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Chile reach settlements.17 Third parties can only challenge such settlement before the Supreme court on the basis of restriction of competition. The TDlc has recently approved two settlements involving private parties. The first refers to a lawsuit filed by Codelco Chile the major state-owned mining company against Terquim, a minor port operator. The case started when codelco alleged the imposition of abusive clauses by Terquim. Terquim, in turn, filed a lawsuit against a third party. This case was settled in December 2009.18 The second settlement refers to a complaint filed by the Chilean subsidiary of Mexican company Amrica Mvil against Telefnica in the market for long-distance phone calls. According to the plaintiff, Telefnica had committed several antitrust violations such as predatory pricing, price discrimination, cross-subsidising, abusive pricing, margin squeeze and illegal vertical integration. In January, 2010 the TDLC eventually approved the settlement between both parties, after having previously found that the original drafts of such settlement might have produced anti-competitive effects; both parties were ordered to submit a new settlement, which was approved.19 Finally, it can be noted that private parties can settle a case with the FNE before the latter files a complaint before the TDLC; those settlements must, however, be approved by the TDlc. To date, there have been two settlements of this kind, one involving a regional airport and the other involving the third-largest supermarket chain (non-compete clauses). XIII ARBITRATION The only courts with power to deal with competition cases are the TDlc and, on appeal, the Supreme court. Antitrust law is a matter of public policy under chilean law and can therefore not be enforced by arbitrators. Any clause submitting an antitrust conflict to arbitration is deemed null and void. however, it is completely lawful to submit civil claims arising from antitrust violations to arbitration. Known precedents are scarce, partly given the private nature of such proceedings. XIV INDEMNIFICATION AND CONTRIBUTION Chilean law does not limit the right to seek damage indemnification to the extent that the defendant is liable for an antitrust violation. if such a violation is committed by two or more parties, all the defendants are jointly liable according to the general rules of civil law. The main point of issue in the civil claim is to quantify the damages and determine whether those damages can be directly attributed to the antitrust violation.

17 18 19

FNE v. D&S and Cencosud, Case No. 2998-2008. Supreme Court, Decision of 24 July 2008. Information available at www.tdlc.cl/Portal.Base/Web/VerContenido.aspx?ID=1919. Information available at www.tdlc.cl/Portal.Base/Web/VerContenido.aspx?ID=1812.

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Chile XV FUTURE DEVELOPMENTS AND OUTLOOK

chile has recently joined the OecD and the improvement of antitrust enforcement, especially against cartels, was one of the commitments undertaken by the chilean government. The introduction of leniency programmes was part of such commitments and the recent lawsuit against the manufacturers of refrigeration compressors seems to be one of the first visible consequences of this process. We can expect more interaction and convergence between chilean authorities and foreign antitrust enforcers, especially in the detection and prosecution of cartels. This will probably lead to an increased level of private litigation in the long term, especially in terms of damages claims filed by cartels victims.

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About the Authors Paulo Montt FerradaNehme Paulo Montt is a qualified lawyer in Chile and member of the Chilean Bar. He is a graduate at University of Chile (1999) and University College London (LLM, 2008). He is a partner at FerradaNehme and the head of the litigation department. He has broad experience in competition, civil and commercial litigation and arbitration. He is also a lecturer in civil law at University of Chile and has published several academic works on competition law. He formerly worked at Claro & Ca (1997 to 2006). www.lpglobal.com.br

BenjaMn Mordoj FerradaNehme Benjamn Mordoj is a qualified lawyer in Chile and member of the Chilean Bar. He is a graduate at University of Chile (2005), with postgraduate studies in administrative and economic law at the Catholic University of Chile (2008). He has been an associate at FerradaNehme since 2007. His main practice focuses on antitrust, economic regulation (telecommunications, ports, gas and fishery) and litigation. Mr Mordoj is an assistant teacher of economic law, and law and economics at the University of Chile. He was previously a law clerk at Carey & Ca (2003 to 2005).

FerradanehMe Isidora Goyenechea, #3477, 5th floor Las Condes Santiago Chile Tel: 56 2 652 9000 Fax: 56 2 652 9001 rferrada@fn.cl www.fn.cl