Georgina Foster and Leanne Rich discuss private competition litigation in Australia, including difficulties associated with the pursuit of private competition claims, possible avenues for reform in the area, and the likelihood of private competition damages claims, including class actions, increasing in the future
1 Are there any particular sectors in your jurisdiction which tend to be a focus for competition damages actions? Why do you think this is the case?
Competition law damages actions have historically not been common in Australia. In Australia, the majority (about three quarters) of competition law litigation has been brought by the regulator, the Australian Competition and Consumer Commission (the ACCC), which has responsibility for enforcing Australian competition law (the Competition and Consumer Act 2010 (CCA)).
Given the low levels of private actions, it is not possible to identify any particular trend in terms of sector focus in relation to private competition law damages claims. However, there are a few trends that can be observed. First, many of the competition damages claims in Australia have been brought as follow-on actions following public enforcement proceedings by the ACCC in respect of the same conduct. Second, most recent competition damages claims have been brought in respect of alleged cartel conduct. While there have been private damages claims for misuse of market power, resale price maintenance and anti-competitive exclusive dealing, such claims are less common.
2 Who do damages claims tend to be brought by in your jurisdiction? (e.g. direct purchasers, indirect purchasers, end consumers?) If claims are not currently being brought by indirect purchasers and/or end consumers, why do you think this is?
The private damages actions that have been brought in Australia have been brought by a range of claimants; some large-scale businesses and some not. Private damages actions in relation to cartels are usually brought by direct purchasers, although some have included claims on behalf of indirect purchasers as well. Claims by end consumers are rare.
In Australia, it is generally regarded as difficult for any purchaser (whether direct or indirect) to bring a damages action on their own, given the cost, complexity and time involved in competition litigation. Other reasons why private damages actions have historically been low in number in Australia include:
The availability of the class action procedure in Australia, together with litigation funding, can assist in overcoming the cost burden and some of the risks associated with bringing a claim from the perspective of the claimants. Most of the major competition damages claims in Australia have been class action claims, and these have all been settled prior to the final hearing, which settlements have included substantial costs awards for the claimant's lawyer’s legal fees and disbursements. Specifically, the major recent cartel class actions have been in respect of cardboard packaging (Jarra Creek v Amcor – settlement of $95 million, plus $25 million in costs), rubber chemicals (Wright Rubber v Bayer AG – settlement of $400,000, plus $1.1 million in costs), animal vitamins (Darwalla Milling v F Hoffman-La Roche – settlement of $30.5 million, plus $10.5 million in costs), and air cargo (De Brett Seafood v Qantas Airways – settlement of $38 million, plus $18.6 million in costs).
There have also been a small number of other significant private damages claims brought. The two most recent notable examples have been a damages claim by a single major purchaser in relation to the cardboard packaging cartel (such purchaser elected to bring its own claim rather than participate in the class action), which was settled on confidential terms, and a damages claim in relation to alleged bid rigging in the context of a sale process for a subsidiary company, which was settled on confidential terms after an appeal was lodged following a damages award of US$22.4 million.
3 What approach are the courts taking to claims that originate from investigations or infringements arising out of the jurisdiction?
Claims can and have been brought in Australia originating from investigations outside the jurisdiction (such as the rubber chemicals cartel class action), as well as from conduct taking place outside the jurisdiction.
Australian courts will exercise jurisdiction over foreign corporations who are alleged to have engaged in conduct in breach of the CCA. However, there are additional procedural hurdles that must be overcome in relation to such claims. First, Ministerial consent is currently required to bring proceedings against foreign corporations for conduct engaged in outside of Australia (although this requirement is expected to be removed). Second, leave of the court is required in order to serve a foreign corporation which is not present in Australia with court proceedings. To obtain leave, a claimant must establish it has a prima facie case for relief. Third, where the relevant conduct takes place outside Australia, the claimant must establish that the foreign corporation carries on business in Australia. This can be difficult to establish as it is not sufficient for it merely to have a subsidiary carrying on business in Australia.
4 Do claimants favour your jurisdiction when they have a choice as to where to lodge a claim? Why?
Notwithstanding some of the difficulties referred to above in bringing damages claims in Australia, there have been a number of significant proceedings brought in Australian courts.
The Australian legal system, and the Federal Court in particular, is highly regarded and offers many advantages, including the availability of disclosure in appropriate cases, whilst protecting legally privileged and confidential documents; a strong emphasis on parties using alternative dispute resolution procedures, including mediation which often results in settlement of the claim; and the ability to bring class actions or representative proceedings, including by utilising litigation funding. Recent reforms to Federal Court procedure is likely to make Australian courts more attractive to litigants as they are intended to ensure that each case is brought to finalisation as quickly, efficiently and inexpensively as possible.
5 In practice, are the courts generous to claimants when awarding disclosure, including pre-action disclosure?
In practice, the Federal Court is generous to claimants in competition matters when ordering disclosure or discovery. This is because of the information imbalance that tends to exist between the claimants and the alleged contravener. While leave of the court is required in order to obtain discovery in the Federal Court and leave will not be granted unless disclosure is necessary for the determination of the issues in the proceedings, this threshold is usually met in private competition law cases.
Pre-action disclosure (known as preliminary discovery) is also available in the Federal Court. Preliminary discovery can be sought to enable a prospective applicant to obtain information in order to decide whether to commence proceedings against a particular defendant provided, amongst other things, that there is reasonable cause to believe that the applicant has or may have the right to obtain relief but, after making reasonably inquiries, the applicant has insufficient information to enable a decision to be made as to whether to commence proceedings in the court.
There is, however, a regime – the Protected Cartel Information regime – that was introduced in July 2009, which makes it more difficult to obtain access to documents held by the ACCC in relation to cartel investigations undertaken by it. However, applicants in private proceedings have been able to obtain access to witness statements and other documents relied upon by the ACCC in proceedings brought by the ACCC in respect of the same conduct.
6 How do the dynamics of a settlement really work in your jurisdiction? Is there a mechanism by which a "global settlement" can be approved/enforced?
Settlement of civil actions in Australia is common place, including in relation to both competition and class action matters. Settlements take place by informal negotiations and they can also occur as a result of alternative dispute resolution procedures, most commonly mediation. Australian courts actively promote settlements and it is common for the Federal Court to refer matters to mediation.
Settlement of a class action will generally operate as a global settlement in relation to all class members. In Australia, class actions can be either opt-out classes or they can be closed classes (these tend to be limited to those who have signed agreements with the representative law firm and the relevant litigation funder). The settlement of class actions in Australia requires court approval. In considering whether to grant approval, the court is to determine whether the proposed settlement is fair and reasonable, having regard to the interests of the group members as a whole. This will include an assessment not only of whether the overall settlement is fair and reasonable, but also whether the internal distribution and the amount to be paid to for costs is fair and reasonable. To date, all cartel class actions have been settled prior to hearing with those settlements approved by the court.
Settlement of other (that is, non class action) claims do not require court approval. These settlements (of non class action claims) will be limited to the parties to the settlement and would not operate as a global settlement for all potential claimants.
7 How long do damages actions take? What is the likely range of costs required to defend a claim?
While since 2010 over 90% of matters in the Federal Court of Australia were finalised in less than 18 months, complex matters – such as competition damages claims – will usually take significantly longer to finalise. Cartel class actions to date have taken up to four or more years and, as noted above, none have run to a final hearing as all have settled prior to this.
Competition litigation is regarded as being extremely expensive to run, in large part because of its complexity and potential length. The range of potential costs is dependant on a large number of variables, but for complex cases will usually be at least A$1 million and will often be substantially more.
In relation to costs, it is also important to note that in Australia the losing party is usually required to pay the other party's costs of the proceedings (in addition to its own). However, while the successful party will usually receive an order for costs in their favour, that order will not amount to a full reimbursement of all legal costs.
8 What funding options are available for (i) claimants and, (ii) defendants, in your jurisdiction?
In Australia, third party litigation funding is permitted and its use is growing (including with the entry of new funders into the Australian market), particularly in relation to class actions. Litigation funders usually enter into agreements pursuant to which they receive a certain percentage of the damages awarded and are liable for any adverse cost orders in return for funding the cost of the proceedings.
Lawyers in Australia are permitted to enter into conditional fee arrangements which provide that some or all of the fees and disbursements incurred in an action are payable in the event only of a successful outcome in the proceedings. However, lawyers are not permitted to enter into contingency fee arrangements which would entitle them to a percentage of the damages awarded.
Litigation funding and conditional fee arrangements are usually entered into in relation to the running of an applicant's claim. Such an arrangement in relation to defending an action is not common.
9 Do you anticipate any significant increase in damages actions in your jurisdiction over the next year or two? If so, where and why do you anticipate these increases coming?
There has been a decline in competition damages actions in recent years. However, proposed reforms as a result of the Harper Review – a recent review of Australian competition law and policy – may reverse this trend. The Federal Government has adopted (although not yet enacted) the Harper Review recommendation to enable private litigants to rely on admissions of fact made in ACCC enforcement proceedings and to remove the requirement that a party obtain Ministerial consent before relying on conduct undertaken overseas. Both of these changes once enacted will reduce the complexity and cost of private enforcement actions.
The ACCC continues to focus on cartel and other anti-competitive conduct, and is committed to investigating it and bringing proceedings where warranted, which in turn may lead to more follow-on private damages actions – particularly once the Harper Review recommendations are introduced.
Finally, as litigation funding continues to increase in Australia and both funders and applicant law firms become more sophisticated in their investigation and prosecution of class action claims, it is expected that this will have a flow on effect to private competition litigation. A greater awareness of litigation funders and class action lawyers about the potential of competition law claims, may lead to a greater willingness on their part to branch away from product liability, consumer protection and shareholder class actions.
10 In your opinion, what are the key changes (if any) required in your jurisdiction to improve the effectiveness of private enforcement of competition law?
In addition to the proposed Harper Review reforms referred to above, some other key changes which have been identified as being likely to promote private enforcement of competition law in Australia include:
Greater and easier access to investigative documents held by the ACCC. It is said that this would reduce some of the information barriers faced by potential damages claimants. However, this proposed change needs to be considered against the countervailing policy objective of encouraging immunity applicants by ensuring that the information and documents they provide are protected against disclosure.