Germany: Class actions – litigation, policy and latest developments
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According to the case law of the European Court of Justice (ECJ) any person is entitled to claim compensation of a damage where there is a causal relationship between such damage and an agreement or practice prohibited under article 101 of the Treaty on the Functioning of the European Union. The ECJ clarifies that the possibility of requesting compensation for a damage caused by a cartel may not be limited to suppliers and customers of the market affected by the cartel. National legislation must rather recognise the right of any individual to claim compensation for loss sustained.
Steps to take to claim damage compensation
To be successful in Germany, an individual claim for cartel damages must meet the following requirements: (i) an antitrust infringement has to be proven; (ii) the culpability of the infringer for such infringement has to be established; and (iii) the claimant must have suffered a damage that was caused by the infringement.
According to the German Act against Restraints of Competition, a claimant does not have to prove an antitrust infringement where there is a finding that an infringement has occurred, as made in a final and binding decision by a competition authority. Where there is no binding decision by a competition authority on the antitrust infringement, however, the claimant will have to prove the infringement itself and the culpability of the infringer.
Even in the presence of a binding decision on an antitrust infringement by the competition authority, a challenging problem for claimants is (i) to substantiate and prove that they have suffered a damage from such infringement and (ii) to calculate and prove the exact amount of this damage. In fact, following one of the fundamental principles of German delict law, namely the prohibition of enriching oneself in consequence of a damage incurred, an award of damages must not lead to overcompensation. Therefore, in principle, incurred damages have to be substantiated and proven by claimants in every single case. For this purpose, complex econometric market analyses become necessary, making claims very time-consuming and expensive. This is aggravated by the fact that representatives of all market levels may claim damages. Regularly, disputes will arise concerning the level at which the damage has occurred and the amount of the damage incurred. Producing proof of a damage will be even more of a challenge for downstream market levels and individual end customers.
Nevertheless, the recent developments in German jurisdiction might indicate some form of relief for claimants in this area. In two recent decisions, the respective courts refrained from taking evidence provided by economic experts and estimated the amount of damage at their discretion and conviction instead, based on their evaluation of all circumstances. In a judgment dated 30 September 2022, the Regional Court of Dortmund awarded damages in the context of the German Rail cartel on this basis. The court estimated the damage primarily based on the type, duration and market coverage of the cartel and on the amount of a contractual penalty that was agreed upon by one of the cartel members in case he would commit an anticompetitive infringement. In a different case, on 12 August 2021, the Higher Regional Court of Celle estimated the amount of a damage caused by the Chipboard cartel. Like the Regional Court of Dortmund, the Higher Regional Court of Celle made its estimation based on the duration and market coverage of the cartel. Moreover, the court compared prices of chipboards published by a neutral body for the cartel period, and the periods before and after this period. A ruling from the Federal Court of Justice in these cases has not yet been rendered. The future will show whether or not the Federal Court of Justice accepts the estimation of damages in cases of competition litigation and, if so, which criteria the courts of instance have to take into account.
Facilitation for claimants also exist in cases involving passing-on elements. In this respect, the Federal Court of Justice has established restrictions regarding the passing-on argument in two decisions concerning the German Rail cartel (judgments of 19 May 2020 and 23 September 2020). The Federal Court of Justice decided that a deduction for the passing-on factor is not indicated where it is unlikely that the representatives of the next market level would also claim damages from the defendant. Whether and to what extent these restrictions surrounding the passing-on argument are applicable to other procedures remains to be seen as, in these two cases, the next market level was the consumer level.
Notwithstanding the described recent developments, the outlined difficulties in establishing proof make it attractive for potential claimants to cooperate with other companies or persons concerned. This is all the more true as the court will, according to the provisions of the German Code of Civil Procedure (ZPO), request an advance payment for the claim itself and, where evidence must be taken, additionally an advance payment to cover expenditures. If the claimant does not prevail in the dispute, they are to bear the costs of the legal dispute including any costs incurred by the opponent. On these grounds, follow-on competition claims are still associated with great expense in terms of time and money and with significant litigation risks.
Despite these difficulties for claimants, the German legislator is reluctant to provide for class or collective actions with the aim of monetary compensation. The German civilian legal system is still alien to collective or class actions and, in principle, any form of punitive or lump-sum damages compensation. Collective interests are traditionally defended by qualified associations, which can bring actions for injunction or the skimming of profits resulting from an infringement against commercial parties in specific areas of law, without, however, resulting in any individual compensation.
Nevertheless, in 2018, as a reaction to several tens of thousands of pending individual claims against Volkswagen AG in the ‘diesel’ context, the German legislator enabled associations to initiate a declaratory model action to which individual consumers could opt in. However, due to the principle that any damage must be calculated individually, this declaratory model action does not result in monetary compensation to the individuals concerned.
In parallel, starting around 2005, a culture of business-to-business (b2b) follow-on competition litigation has steadily developed in Germany. These follow-on claims were mainly brought before the German courts in the form of individual lawsuits (filed against cartel members by companies at downstream market levels). In the absence of pressure or concrete initiatives from the EU legislator in the b2b context, the German procedural system does not provide special instruments for these b2b claims. Nevertheless, with CDC Cartel Damage Claims as a pioneer claimant, follow-on claimants have developed ingenious ways to aggregate several individual claims in one single lawsuit. Currently, aggregated b2b claims are pending at the specialised antitrust chambers and senates of German courts against, among others, participants of the Sugar, Roundwood and Trucks cartels. It is highly disputed among courts as well as among scholars whether such aggregated claims are in conformity with German law. Recently, the German legislator has passed an act destined to provide some guidance on this issue and the Federal Court of Justice has issued judgments in this context as well.
German tradition of association claims in specific areas of law
Even though German civil procedural rules do not provide for US-style class actions or the collective proceedings that have been implemented in the procedural rules of England and Wales or even some continental European jurisdictions, there is a rather extensive tradition of association or interest group complaints in specific areas of law (association claims).
However, for different reasons, these association claims do not play a significant role in the context of cartel damages. Association claims that are only applicable in other areas of law are irrelevant from the outset. Even though association claims in the context of competition law are legally permissible, they do not have a large impact in Germany. In fact, qualified professional and consumer associations have the right to bring claims for injunction against antitrust violations or claims for the skimming of profits resulting from the violation of competition rules. But the legal regime of these association claims does not provide for opt-in or opt-out options for the consumers or professionals concerned. The claims do not halt the running of limitation periods that apply to individual damages claims resulting from the same violation, and the judgments have no legally binding effect on individual claims.
Association claims for the skimming of profits resulting from the violation of competition rules furthermore suffer from the different hurdles an association has to clear for such claims and the lack of financial incentives: while the association bears the burden of proof and the procedural risks of such a claim (including court costs and the defendants’ legal fees in case of loss), the profits will not be distributed to the claimant organisation (or even less to the stakeholders behind such organisation), but will be transferred to the German public treasury. Against this background, it does not come as a surprise that no claims for skimming of profits resulting from antitrust violations have been brought.
Cooperating with a litigation funder is not going to solve the dilemma of consumer associations. The Federal Court of Justice has ruled that a funded claim of a consumer association was abusive and inadmissible because the funder was to receive a percentage of the skimmed-off profits in the event of success.
Declaratory model action
A legal instrument that could be considered a type of collective redress procedure is the declaratory model action (DMA), introduced in November 2018 into the ZPO. The DMA was introduced when tens of thousands of ‘diesel claims’ related to the alleged employment of ‘defeat devices’ in diesel vehicles were already pending in all regional courts in Germany. The model is limited to consumer claims but without any restriction as to the areas of law. It can only be brought by specific large consumer associations with a legally defined minimum number of members and must be filed directly with the higher regional court.
The DMA will be published in the claims register. At least 50 individual consumers must opt-in to allow the DMA to proceed, and consumers can register online and cost-free to the DMA. Registry is possible until the day preceding the first hearing of the DMA and allows the individual consumers to halt the limitation period applicable to their potential claims against the defendant of the DMA. While a consumer is registered, he or she may not file an individual claim. When the consumer has filed an individual claim before registration, this claim will be suspended until the achievement of a final and binding decision in the DMA or until the claimant has opted out from the DMA. Individual claims filed by other consumers or professionals will not be suspended. This might lead to the situation that individual proceedings – initiated years before the DMA – reach the Federal Court of Justice and create legal authority for the DMA even before the higher regional court has had the time to render its judgment or even hear the case.
Even if successful from the consumers’ point of view, the DMA does not result in monetary compensation. The sole purpose of the DMA is to receive a binding decision of preliminary legal or factual questions that are prerequisites of a consumer claim. Therefore, in principle, every single consumer who has registered to the DMA will have to file a follow-on lawsuit in which the prerequisites of the individual claim will be at issue. It is the legislator’s expectation that the decision of the preliminary questions alone will incentivise the defendant to enter into a settlement with the consumers that have registered to the DMA.
Contrary to the legislator’s expected several hundred yearly filings of DMAs, since 2018 only 27 DMAs have been filed in German courts. However, no antitrust follow-on claims were or are pending in form of a DMA in Germany and it does not seem that such DMAs are in preparation by the relevant claimant bar.
If one considers the hurdles that a consumer follow-on damages claim has to clear, the insufficiencies of the DMA for the final solution of such consumer claims are evident. Consumers will mostly be at the final market level and can only claim they have incurred damages that have been passed on to them by the upstream market levels. In many cases, they will have to prove that they have incurred a damage caused by the anticompetitive behaviour since the overcharge was passed on to them through all market levels. They will have to calculate and prove the exact amount of this damage. Nevertheless, a DMA might be helpful in solving some of the preliminary questions of consumer damages claims, in particular in stand-alone damages claims where there is no binding decision of an antitrust authority on the antitrust infringement – for example, in a commitment decision. It may also be helpful in halting prescription and thereby building up a certain pressure to settle. Since the potential defendants of a DMA, however, will be aware of the described difficulties, their willingness to settle in the course of a pending DMA might be limited.
Claim aggregation under the existing rules in Germany
Regardless of the limited possibilities for aggregating claims in Germany via specifically created legal instruments, the claimant bar has shown a certain ingeniousness in using the traditional instruments provided by German law to aggregate claims. So far in the field of antitrust litigation, however, this has occurred in b2b claims, rather than on the consumer level.
Particularly in the area of follow-on competition litigation, an aggregation of several claimants is often important for the claim to be successful: claimants will have to substantiate and prove the exact amount of damage incurred. Therefore, they will have to gather a sufficient amount of data for the econometric market analysis required to produce such an analysis. Large market players might have had enough transactions in the relevant period to produce their own market analysis, but smaller enterprises, and more so consumers, will depend on data gathered from an entire group of potential claimants.
Traditional possibilities for aggregating claims include the grouping of several claimants in one case or the assignment of claims of several claimants to a special purpose vehicle that will file the claim. Most claims by special purpose vehicles have been dismissed by German courts for violation of material law. However, the legislator and the Federal Court of Justice show some sympathy towards such claims.
Joinder of several individual claimants in one case
From a procedural point of view, the least controversial possibility for filing aggregated claims is the joinder of several claimants with similar or almost identical claims in one single claim. This occurs if several claimants file their individual claims jointly in one single court proceeding or if the court orders the joinder of different actions that have been brought separately. Evidently, the joinder of individual claimants in one proceeding will find its limits if the number of claimants is too great, since all claimants will have the same procedural rights in the pending litigation – for example, the right to file individual briefs and to participate at the hearing. Since all claimants can freely decide to withdraw or change their claim, to settle their individual claim or change counsel, aggregated action by a simple joinder of individual claimants requires a contract between the involved claimants that will guarantee and sanction some discipline in the joint and efficient pursuit of their claims.
In follow-on antitrust litigation, major customers that form a purchasing cooperative frequently file a single claim against cartel members, profiting from the possibilities an aggregated data pool offers them for the calculation and proof of their cartel damage. However, given the problems associated with claimant discipline set out above, the joinder of several individual claimants in one claim will only prove to be successful if the parties are acquainted with each other, have a history of professional cooperation or at least a bulletproof agreement regulating the terms of their cooperation as joint claimants.
Assignment of claims to a claims vehicle (often backed by a litigation funder)
A more controversial method of aggregating claims in German civil procedure is the assignment of a multitude of claims to a special purpose vehicle. The first vehicle of this kind was CDC Cartel Damage Claims, which in 2005 filed a damages claim for an aggregated amount of €130 million against six members of the Cement cartel. Several companies from the construction materials industry had assigned their follow-on damages claims to CDC. However, after 10 years of litigation, the Higher Regional Court of Düsseldorf ruled in 2015 that the assignment of claims to CDC was null and void because it unethically disadvantaged the defendants. In fact, the court found that CDC, a Belgian company with limited liability and limited funds, substituted itself for the financially more powerful assignors, thereby jeopardising the defendants’ claim for reimbursement of procedural costs – in particular, the defendants’ legal and expert fees. In a second attempt – now backed by a litigation funder – CDC filed a new lawsuit against the Cement cartel and settled the lawsuit in August 2019.
Others have since copied the claims aggregation model consisting of a vehicle assignee of claims and a litigation funder responsible for the financials. For example, the affiliated companies myRight and Financialright have aggregated more than 45,000 claims in the ‘diesel’ litigation context and filed three aggregated claims involving a total of almost 10,000 claimants and more than 180,000 trucks against the Trucks cartel. In all proceedings, myRight and Financialright are represented by the German office of the US law firm Hausfeld and are financially backed by a litigation funder, which – according to public information – invested €15 million into the claim.
However, the admissibility of such litigation vehicle claims – even if backed by a litigation funder – is disputed. In fact, the Munich I Regional Court dismissed the first and most voluminous (almost €900 million) Financialright claim against the Trucks cartel owing to a violation of the German Act on Out-of-Court Legal Services (RDG). In the court’s view, this act only provides for the possibility to assign claims to non-lawyers for the purpose of out-of-court debt collection and does not allow non-lawyers, such as Financialright, to aggregate claims for the sole purpose of litigation. Further grounds for the dismissal of the claim were the potential conflict between the assignors’ and the litigation funders’ interests and the fact that the different chances of success of the 85,000 aggregated claims could amount to an unfair litigation outcome for those assignors with more promising claims. According to the opinion of the court, this applies all the more due to the fact that the litigation funder has influence on the conclusion of settlements by all assignors. In fact, a settlement that is considered good in terms of the overall amount may negatively affect individual interests. This judgment of February 2020, which was subject to high media coverage in Germany, can be read as a clear statement against the attempts by Financialright and similar companies to introduce some sort of class action in German courts.
Other regional courts have followed the reasoning and dismissed aggregated claims against the Sugar cartel and in the diesel context. However, some regional courts have indicated that they see no violation of German ethical rules by the claimant vehicles.
In another claim against the Trucks cartel filed by a litigation vehicle, the chamber of the Munich I Regional Court, that had dismissed the Financialright claim, pronounced a court order for evidence to be taken with regard to the amount of damage. It is likely that the chamber would not have pronounced that order if there would be a violation of the RDG in its view. It has not become public knowledge the reason why the chamber differentiated between the two claims. Possibly known differences between the claims are decisive in so far as the second claim is based on alleged claims by Deutsche Bahn, Deutsche Bundeswehr (German armed forces) and other companies that have been aggregated to a litigation vehicle named DB Competition Claims, which is not backed by a litigation funder. Furthermore, the composition of the chamber itself is different to some extent.
In a judgment on 13 July 2021, the Federal Court of Justice held that the aggregation of claims in the context of insolvency of the airline Air Berlin for the purpose of litigation did not violate the RDG. The Federal Court of Justice confirmed this decision in a second judgement of 18 May 2022 in the context of alleged claims by tenants due to unfair lease increase. Even though these judgments do not relate to the specific issues raised in the context of follow-on litigation, they might pave the way for vehicle claims in the cartel damages context.
On the other hand, notwithstanding the Federal Court of Justice’s judgement regarding Air Berlin, the Regional Court of Stuttgart dismissed a follow-on claim owing to a violation of the RDG on 22 January 2022. The court based the dismissal primarily on the litigation vehicle’s lack of competence regarding competition and cartel damages law. It remains to be seen whether the Federal Court of Justice will allow the aggregation of claims to a litigation vehicle backed by a litigation funder in the context of cartel damages.
Finally, due to a change in legislation, as of October 2021, the administration has to control whether the business model offered by operators of claim vehicles (such as myRight or Financialright) is in conformity with the RDG before issuing a licence for operation. Once the licence has been granted, civil courts should not be able to rule that claim assignments under the business model were illegal. The German legislator thus wishes to avoid decisions made by courts – many years after the assignment of claims to the vehicle – stating that claims have run into prescription due to the invalidity of their assignment to a claimant vehicle. Both recent developments have the potential to serve as a booster for follow-on damage claims in Germany.
Regardless of the absence of class or collective actions in Germany, and notwithstanding the difficulties in providing proof and calculating follow-on damages, on a European level Germany still is – together with England and Wales, the Netherlands, Austria and Finland – one of the preferred fora for bringing private antitrust follow-on claims. The advantages of German proceedings are their relative rapidity (in comparison with other European domestic courts) and the significant experience the specialised competition chambers and senates of German courts have gathered in follow-on litigation throughout the past decade. The nationality of the persons joining the model actions or the claim aggregation does not play a role. Whether a foreign national can join depends on if the claim could be brought individually against the specific defendant, based on the normal rules of determining whether there is a forum for that specific claim in Germany. This must be verified on a case-by-case basis. As a rule of thumb, this should in particular be the case if either the infringing action took place in Germany or the potential defendant is seated in Germany, or if Germany is a forum for a jointly liable defendant. It is likely that Germany will maintain and even strengthen its position as a preferred forum – provided that German courts improve their IT to enable them to deal in a more efficient way with the aggregated claims and econometric data of several tens of thousands of claimants.
 Borbála Dux-Wenzel, Anne Wegner and Florian Schulz are partners, Michael von Berg is senior associate at Luther.