Hide and Seek: Limitation Periods in Competition Law Damages Claims
The recent judgment in Gemalto v Infineon and Renesas put back into focus the duty of potential claimants in competition damages claims to reasonably investigate potential claims against cartelists when relevant facts emerge.
Secrecy is at the heart of cartels between businesses seeking to artificially increase or maintain prices, allocate customers or protect their market shares in certain geographies. As a result, victims of cartels are often unaware that they have been harmed financially until details of the cartel come to light during regulatory investigations. This information asymmetry between victims and perpetrators in cartel damages claims pervades many aspects of competition law disputes, with defendants often being required to disclose vast amounts of data and documents during such proceedings to establish the economic and factual theories of harm.
Additionally, the secretive nature of cartels raises a question of when limitation periods begin to run for claimants wishing to recover their potential losses from the cartelists. Generally, section 2 of the Limitation Act 1980 (LA 1980) states that "an action founded on tort(1) shall not be brought after the expiration of six years from the date on which the cause of action accrued." However, the law also recognises that where "any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant…the period of limitation shall not begin to run until the plaintiff has discovered the… concealment… or could with reasonable diligence have discovered it" (section 32(1) LA 1980). This provision is typically relied on by claimants in cartel cases.
Given the secretive nature of cartels, limitation therefore often does not begin to run until facts relevant to the claimant's right of action have been revealed. This was often taken to be from the point at which a public regulator such as the UK's Competition and Markets Authority (CMA) or the European Commission (EC) publishes or announces sufficient details of an infringement decision.
However, a recent High Court judgment put back into focus the second limb of section 32(1) LA 1980: the question arose whether a claimant could with reasonable diligence have discovered the facts relevant for it to bring an action prior to the regulator's announcement of an infringement decision.
Gemalto v Infineon and Renesas(2)
On 19 July 2019, Gemalto issued a claim against Infineon and Renesas for damages arising out of an infringement of competition law by the defendants for the supply of smart card chips. The action was based on the EC's infringement decision dated 3 September 2014 (the Decision).(3)
On the basis that the cartelists coordinated their prices between 2003 and 2005, ordinarily, limitation would have expired by 2011. Given the secret nature of the cartel however, limitation was suspended up to the date on which the claimant could reasonably have discovered the essential facts of the cartel. The question put before the judge in a preliminary issues hearing was accordingly whether that date was the date of the Decision, or whether Gemalto, had it been reasonably diligent, could have discovered the facts required for it to plead its damages claim at a date prior to the announcement of the Decision.
The legal test
Before considering the facts of the case, it is worth setting out the applicable legal tests as to the operation of section 32(1) Limitation Act 1980 as summarised by Bacon J. in Gemalto and as derived from a line of case law.(4)
Firstly, the judge established that limitation would run from the moment in time at which the claimant could plead sufficient facts to establish the following constituent elements of a competition law damages claim:
"(i) an agreement or concerted practice between undertakings; (ii) having as its object or effect a prevention or distortion of competition law that is appreciable; (iii) which affects trade between Member States, or within the UK; and (iv) which has caused loss and damage to the claimant."(5)
Secondly, the particular facts that would enable a claimant to plead to (i) and (ii) above are:
"(i) the identity of the undertakings who had participated in the agreement; (ii) the fact that the agreement involved the coordination of market behaviour for [in this case, smart card chips] in breach of the EU competition rules; (iii) the fact that the geographic scope of the cartel extended to the EEA; and (iv) the time period covered by the agreement."(6)
It was conceded by Gemalto that knowledge of these facts would also permit it to infer that the cartel had affected trade between Member States, or within the UK. Based on then knowing that Gemalto had purchased cartelised products, knowledge of loss and damage could also reasonably be inferred.
In addition, as to the requisite level of knowledge, the judge held that the appropriate test was the so-called 'statement of claim test'. In other words, a claimant would require knowledge of facts that would permit it to properly plead its case, benefitting from a judicial acknowledgement of the asymmetry of knowledge of information in competition law damages claims. It is not necessary for the claimant to be certain of these facts: a reasonable belief, on an objective basis, in their accuracy is sufficient.
The judge recognised that the application of the legal tests was a fact-sensitive question. The judgment should accordingly be read as pertaining primarily to the smart card chips cartel and the individual circumstances of the claimant, Gemalto.
In short, the judge held that Gemalto had sufficient knowledge of the facts of the cartel for it to plead properly to a damages claim prior to the announcement of the Decision on the basis of two key events:
- Firstly, during the EC investigation, Gemalto as a direct purchaser of smart card chips had received two Requests for Information (RFI) from the European Commission in 2012. The RFIs indicated the market – smart card chips – as well as the suspected time period of the infringement and its EEA scope. They also contained specific questions as to the manufacturers of smart card chips, namely Philips, Samsung, Renesas and Infineon. The RFIs were widely discussed within Gemalto.
- Secondly, on 22 April 2013, the EC issued a Statement of Objections (SO) to the smart card chip manufacturers, which was also discussed internally within Gemalto.
While the judge held that the RFIs provided many of the required factual details for Gemalto to plead its claim, it was the issuing of the SO that put Gemalto in a position to reasonably believe that it had suffered loss and damage. As an SO is issued by the EC following a detailed review of the evidence before it and based on a strong belief that the addressees of the SO breached EU competition law, a claim filed after the issuing of as SO would not have been speculative in this regard.
The judge ultimately found that (a) Gemalto had sufficient facts available to properly plead its case and (b) could have been sufficiently confident that a breach of European competition law had occurred by the time the EC issued the SO. Accordingly, the limitation period had expired in April 2019, six years after the SO, and three months before Gemalto's claim was filed in July 2019.
Implications of the judgment
By its very nature, the assessment of whether limitation has started running prior to the publication of an infringement decision is highly fact-sensitive. For example, many prospective claimants will not have been issued with RFIs that provided key information for them to plead their case prior to the adoption of a decision, and cartelists that elect to settle their cases with the regulator will frequently not be issued with an SO. Even where an SO is issued, the announcement will not normally contain sufficient information for claimants to prepare pleadings without the benefit of having been provided with further information during an RFI process. A careful analysis of specific circumstances will always be required.
However, the case serves as a reminder that parties to competition law damages claims should carefully consider whether the limitation period has already started running prior to the adoption of an infringement decision, particularly where claims are filed towards the end of the six-year period following the decision, where there are parallel proceedings in other jurisdictions and where the investigation by the regulator was drawn out. In some cases, a claimant will accordingly be required to either enter into standstill agreements with defendants or to issue a claim and stay proceedings until a decision is adopted to preserve its rights.
Parties should also be mindful of the associated costs of bottoming out a limitation defence: being highly fact sensitive, limitation disputes will usually be determined as a preliminary issue involving detailed witness statements, legal submissions and a hearing.
Lastly, it should be noted that the impact of the judgment is limited to claims arising out of cartel behaviour that occurred prior to 9 March 2017.(7) Limitation periods for cartels that occurred after this date will start running from the date the anti-competitive behaviour ended and the claimant has sufficient knowledge to properly plead its case (as before), but, importantly, will be suspended during an investigation of the cartel by a competition authority, including any subsequent appeals,(8) and during consensual dispute resolution.(9) Going forward, in most cases limitation will therefore run for a period of six years from the date one year after the decision becomes final (i.e. when the time period for appealing the decision has expired or, if the decision is appealed, any avenues for appeal have been exhausted).
(1) Competition law damages claims are often pleaded as breaches of statutory duty.
(2) Gemalto Holding BV and others v Infineon Technologies AG and others  EWHC 156 (Ch) (Gemalto).
(3) European Commission Decision in Case AT.39574 Smart Card Chips dated 3 September 2014.
(4) Including Arcadia Group Brands v Visa  EWCA Civ 883, DSG Retail v Mastercard  EWCA Civ 671, Granville Technology Group v Infineon Technologies  EWHC 415 (Comm) and OT Computers v Infineon Technologies  EWCA Civ 501.
(5) Gemalto, paragraph 24.
(6) Gemalto, paragraph 25.
(7) See Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 of 8 March 2017.
(8) Para 21 of Schedule 8A to the Competition Act 1998.
(9) Para 22 of Schedule 8A to the Competition Act 1998. 'Consensual dispute resolution' means arbitration, mediation, or any other process enabling parties to a dispute to resolve it out of court.