This country-specific Q&A provides an overview to Competition Litigation laws and regulations that may occur in Australia.
What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?
Australia’s key competition law provisions are set out in Part IV of the Competition and Consumer Act 2010 (Cth) (CCA) which deals with restrictive trade practices.
Part IV of the CCA prohibits:
cartel conduct, including price fixing, restricting outputs, allocating customers, suppliers or territories (market sharing), or bid-rigging (division 1);
anti-competitive contracts, arrangements, understandings and ‘concerted’ practices that have the purpose, effect or likely effect of substantially lessening competition (section 45);
certain boycotts (sections 45D-45E);
misuse of market power (sections 46-46B);
exclusive dealing, which covers certain types of restrictions on supplied or acquirer of goods and services and is only prohibited if it has the purpose, effect or likely effect of substantially lessening competition (section 47);
resale price maintenance, which covers a supplier attempting to prohibit or induce an acquirer not to re-supply the supplier’s goods or services for less than a specified price (section 48); and
mergers and acquisitions which have the effect or likely effect of substantially lessening competition (section 50).
A competition damages claim can be brought under section 82 of the CCA by a person who suffers loss or damage by conduct of another person that was done in contravention of Part IV of the CCA. In practice, claims are usually brought after determination of proceedings brought by the competition regulator, the Australian Competition and Consumer Commission (ACCC).
What is required (e.g. in terms of procedural formalities and standard of pleading) in order to commence a competition damages claim?
Proceedings are commenced by filing an originating application accompanied by a statement of claim or supporting affidavit in the Federal Court of Australia.
The limitation period for commencing proceedings is six years after the day on which the cause of action that relates to the conduct accrued. In competition damages cases, this is six years after the day on which the relevant loss or damage was suffered.
Standard of pleading
The statement of claim must include pleadings showing the causal link between the contravention and the loss or damage suffered.
There are technical rules governing pleadings in Part 16 of the Federal Court Rules 2011 (Cth) (Federal Court Rules). Relevantly the Federal Court Rules require a pleading to:
identify the issues that the party wants the court to resolve;
state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial but not the evidence by which the material facts are to be proved,
state the provisions of any statute relied upon; and
state the specific relief sought.
What remedies are available to claimants in competition damages claims?
The primary remedy for contravention of Part IV is recovery of the amount of any actual loss or damage caused by the contravention.
The court can also:
grant an injunction in such terms as it considers appropriate, where it is satisfied that a defendant has engaged in, or is proposing to engage in conduct in contravention of Part IV of the CCA (including being involved in the contravention, as further outlined below); and/or
make any order that it considers will compensate the claimant in whole or in part for loss or damage suffered or likely to be suffered, or which will prevent or reduce the loss or damage, caused by conduct of another person in contravention of Part IV of the CCA.
The court’s power to grant an injunction is broad, and includes where a person has engaged or is proposing to engage in conduct that would constitute:
attempting to contravene such a provision;
aiding, abetting, procuring or inducing or attempting to induce a person to contravene such a provision;
being knowingly concerned in or party to a contravention of such a provision; or
conspiring with others to contravene such a provision.
What is the measure of damages? To what extent is joint and several liability recognised in competition damages claims? Are there any exceptions (e.g. for leniency applicants)?
What is the measure of damages?
The claimant is entitled to recover an amount of damages which reflects the actual loss or damage suffered as a result of the impugned conduct. Damages are compensatory and intended to place the claimant, as far as possible, in the position in which they would have been, had the impugned conduct not occurred.
A claimant cannot seek exemplary or punitive damages.
The Federal Court can award interest on damages.
To what extent is joint and several liability recognised in competition damages claims?
Joint and several liability is recognised. A person will be liable for a claimant’s loss or damage if their contravening conduct materially contributed to the loss or damage. Accordingly, if there are several defendants involved in the contravention of Part IV which caused the claimant’s loss, each contravener will be liable jointly and severally.
Loss or damage can be recovered against the person whose conduct resulted in the loss or damage and others ‘involved’ in the contravention. A person will be involved in the contravention if that person was aware of the essential facts and matters constituting the contravention and aided, abetted, counselled, procured or induced the contravention, was in any way directly or indirectly knowingly concerned in or a party to the contravention or conspired with others to effect the contravention.
Are there any exceptions (e.g. for leniency applicants)?
No. While the cartel participant who is the first to report cartel conduct to the ACCC may be eligible for civil and/or criminal immunity or leniency under the ACCC’s Immunity and Cooperation Policy for Cartel Conduct (Immunity Policy), civil immunity is restricted to ACCC initiated civil proceedings and will not protect a contravener from a private action for damages.
What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?
The limitation period for commencing a competition damages claim is six years after the day on which the cause of action that relates to the conduct accrued (the day on which the relevant loss or damage was suffered).
The court has no discretion to extend the six year time limit. The defendant should plead the limitation period as a defence to a proceeding brought outside the time limit.
Which local courts and/or tribunals deal with competition damages claims?
The Federal Court of Australia has exclusive jurisdiction to deal with claims regarding contraventions of Part IV of the CCA, except to the extent that section 86 of the CCA confers specific jurisdiction on other courts.
The Federal Circuit Court has limited jurisdiction with respect to claims under the CCA regarding misuse of market power, contraventions of industry codes and charging of excessive payment surcharges. The Federal Circuit Court cannot award damages in excess of $750,000.
How does the court determine whether it has jurisdiction over a competition damages claim?
Section 86 of the CCA confers jurisdiction on courts to determine matters arising under the CCA including a claim for competition damages. Each court will decide whether it has jurisdiction to determine a proceeding commenced under the CCA.
The CCA applies to conduct that occurs within Australia. It also applies to conduct occurring outside Australia by Australian citizens or residents and bodies corporate that are incorporated in or carrying on business in Australia.
The prohibitions on exclusive dealing and resale price maintenance extend to conduct occurring outside Australia that is related to the supply of goods or services in Australia. There are also specific provisions in relation to certain conduct that constitutes misuse of market power in the Trans-Tasman market (Australia and/or New Zealand).
How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?
The CCA applies to all competition damages claims in Australia.
The claimant will be required to establish its case on the balance of probabilities. The Federal Court may also take into account the gravity of the alleged conduct under the Briginshaw test.
To what extent are local courts bound by the infringement decisions of (domestic or foreign) competition authorities?
Australian courts are not bound by infringement decisions of domestic or foreign competition authorities.
To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?
The Federal Court has the power to order a stay of proceedings in the Federal Court pending the determination of other proceedings in that or another court. In determining whether to exercise its discretion, the Federal Court will consider the advantages and disadvantages that a stay would confer on the claimant and defendant.
In practice, private damages claims are usually brought after determination of public enforcement action by the ACCC.
What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold criteria have to be met?
Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCA Act) contains a broad power to commence class actions where:
the action is brought on behalf of a minimum of seven people;
all the claims are against the same person;
all the claims arise out of the same or similar circumstances;
the action concerns a substantial common issue of law or fact.
Under the FCA Act, an individual can commence a class action on behalf of others without obtaining consent. However, members of the class are entitled to opt out of the action or bring their own action.
The ACCC can also bring representative action on behalf of persons who have suffered loss or damage (or are likely to suffer loss or damage) because of certain contraventions of the CCA pursuant to an express power in the CCA or under the FCA Act.
Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
Individuals have a defence to competition damages claims where they act honestly and reasonably and ought fairly to be excused from liability having regard to all the circumstances of the case. There is no similar defence for bodies corporate.
It has yet to be determined authoritatively whether a defendant who is facing a loss and damages claim under section 82 has a defence if it is shown that the claimant has passed on all additional costs occasioned by the contravention of the CCA. Given the Australian High Court’s approach to statutory construction, ‘pass on’ may, in effect, be a defence to liability in a private damages claim to the extent that a defendant can show that the claimant suffered no loss as a result of the contravening conduct. If the defendant cannot do so, amounts which it can demonstrate were ‘passed on’ may be treated as a matter reducing the loss or damage that can be claimed by the claimant, rather than a defence to liability.
The defendant bears the burden of proof of establishing any defence.
Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the court or the parties and what duties do they owe?
Expert evidence is permitted in competition litigation, subject to the ordinary restrictions. Expert evidence is only permitted where the evidence:
relates to subject matter that is beyond common knowledge;
is based on a field of expertise; and
the expert has specialised knowledge based on training, study or experience.
The expert must explain the basis for his or her reasoning and must only provide testimony within their relevant field of expertise. Expert evidence cannot be used to answer the ultimate issue in the case.
Appointment of experts
Parties can call their own experts at trial provided that an expert report was first provided to all other parties. The parties can also apply to the court to have an expert appointed.
An expert witness has an overriding duty to assist the court by providing relevant and impartial evidence within his or her area of expertise. An expert witness must not mislead the court or act as an advocate for the party retaining the expert. Expert witnesses must read and comply with the Harmonised Witness Code of Conduct and the Federal Court’s Expert Evidence Practice Note (GPN-EXPT).
Describe the trial process. Who is the decision-maker at trial? How is evidence dealt with? Is it written or oral, and what are the rules on cross-examination?
While the actual trial process can vary by matter, generally the trial commences with an opening address by the claimant which provides a summary of the claimant’s case against the defendant/s and the evidence which is anticipated to be given. This is followed by an opening address by the defendant/s.
The next step is oral evidence. The claimant’s lay witnesses are called individually to give evidence-in-chief and be cross-examined by the defendant/s. The lay witnesses for the defendant/s are then called to give evidence-in-chief and be cross-examined.
Following lay witness evidence, expert evidence is given. Each party will call their expert/s who will deliver evidence-in-chief (usually by tendering an expert report) and be subject to cross-examination. Sometimes, a judge will order that each party’s expert witness be called to give evidence and be cross-examined concurrently (colloquially known as ‘hot-tubbing’). This process allows the judge to hear differing opinions from each expert witness in response to the same issues.
Following the close of expert evidence, the claimant will deliver closing submissions which summarises its case including the applicable law, the findings of fact it submits the court should make and the outcome it submits the court should find. This is followed by a closing address by the defendant/s and a short reply from the claimant.
The decision-maker at trial is a judge of the Federal Court of Australia.
Evidence will be admissible if it is relevant and not subject to an exclusionary rule. The main exclusionary rules are for hearsay and opinion evidence.
Witnesses can provide their evidence-in-chief orally during the trial or by way of written affidavit. Expert witnesses usually provide evidence-in-chief by way of a written expert report (see further above).
Parties are entitled to cross-examine any witness called to give evidence by another party. A party cannot cross-examine or impeach their own witness unless that witness is declared a “hostile” witness. If a party intends to rely on a challenge to another party’s witness, then the ground of challenge must be put to the witness during cross-examination.
How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?
While the time from commencing proceedings to trial varies, this period generally ranges between 18 months and three years depending on the size and complexity of the matter. Class actions relating to cartel conduct are particularly complex and may take over four years to resolve.
There are two levels of appeal from a Federal Court decision. The first appeal is as of right, and is effected by filing and serving a notice of appeal within 21 days of the Federal Court’s decision. The appeal is heard by the Full Court of the Federal Court. The appeal court will generally be reluctant to interfere with any findings of fact made at first instance.
The second level of appeal is to the High Court and requires special leave to appeal, which is only granted in exceptional cases (eg. where the matter involves an important question of law or is a matter of national significance).
Do leniency recipients receive any benefit in the damages litigation context?
No. The ACCC offers immunity and leniency to parties in relation to criminal prosecution, enforcement actions and proceedings brought by the ACCC. However, the ACCC cannot grant a party immunity from private actions for damages under the CCA.
Further, any immunity or leniency recipient is not entitled to withhold evidence that was disclosed in the immunity application process in any subsequent claim for damages. The ACCC accepts oral applications under the Immunity Policy and will, to the extent possible, ensure that written records of oral applications do not prejudice the immunity / leniency applicant.
How does the court approach the assessment of loss in competition damages cases? Are “umbrella effects” recognised? Is any particular economic methodology favoured by the court? How is interest calculated?
There is no settled approach to the assessment of loss in competition damages cases. The Federal Court has indicated a willingness to assess loss by application of a proper economic model which quantifies the effect of contravening conduct on market processes.
In any particular case, the court must do its best to quantify loss or damage, even if a degree of speculation and ‘guess-work’ is involved.
Australian courts have not considered whether ‘umbrella effects’ may influence the quantification of damages. However, to the extent that a cartel results in price increases by non-cartel participants, any loss or damage caused by these increases should be recoverable from the contravener in the quantification of loss or damage caused by the contravening conduct.
There is no power in the CCA to award interest on damages. However, the Federal Court has the power to award interest, which is calculated in accordance with the Federal Court’s Interest on Judgments Practice Note (GPN-INT).
Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?
The CCA does not provide a mechanism for a defendant to seek contribution or indemnity from other defendants in private actions for damages.
If there are several contraveners, each will be liable jointly and severally for the claimant’s loss (see question 4). The Federal Court also has jurisdiction to make orders for equitable contribution.
In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?
Parties to a competition damages claim can reach a settlement of some or all of the claims in the ordinary course before trial.
In proceedings with multiple defendants, a claimant may settle with one or more individual defendants, while the remaining defendants continue to defend the action. In those circumstances, the competition damages claim may be disposed of in part only and the trial will proceed with the remaining defendants.
A claimant can also seek to dispose of a competition damages claim (in whole or in part) by an application:
for default judgment, where the defendant has not entered an appearance;
for summary judgment, if the defendant has no reasonable prospect of successfully defending the proceeding or part of the proceeding; or
to strike out the proceeding, where the pleading does not disclose a reasonable cause of action.
The claimant may also discontinue (in whole or in part) their claim for competition damages. A class action can only be discontinued with the leave of the Federal Court.
What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?
Mechanism for collective settlement
Class actions can only be settled or discontinued with the leave of the Federal Court. The Court will only approve a settlement if it is satisfied that it is fair and reasonable, taking into account the interests of the group members who will be bound by the settlement agreement and whether the proposed settlement has been undertaken in the interest of group members as well as the claimant and defendants. Settlements can include parties outside of the jurisdiction.
The Federal Court has emphasised that there is no exhaustive list of factors that must be satisfied in order to approve a settlement. However, the following factors are relevant:
the complexity of the matter;
the duration of the litigation;
the stage of the proceedings;
the prospects of successfully establishing liability;
the prospects of recovering damages;
the prospects of an appeal;
whether any of the group members are opposed to the settlement;
whether the terms of the settlement agreement would have an adverse effect on any group members;
whether any adverse effect is balanced by a proposed benefit;
any adverse effect of funding or other difficulties that was not disclosed to group members;
any conflicts of interest.
The above factors must be considered in light of the ‘best case’ recovery.
Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how are costs calculated, and are there any circumstances in which costs recovery can be limited?
The general rule is that costs follow the event, that is, the successful party can recover its legal costs from the unsuccessful party. However, a successful party will generally be unable to recover the entirety of its legal costs. Legal costs are generally recovered on a ‘party and party’ basis, meaning that only the costs that have been fairly and reasonably incurred in the conduct of the litigation can be recovered. This is usually around two-thirds of the actual costs incurred.
A party can apply to the court for an order that costs be awarded on another basis and the Federal Court has broad discretion to award costs. A successful party who has failed on certain issues may not only be deprived of its costs of litigating those issues but also be ordered to pay the other party’s costs of those issues.
A party may be subject to an adverse costs order or sanction if the party unreasonably rejected a settlement offer but did not obtain a better result at trial.
A claimant may seek an order that they are not liable for the defendant’s legal costs regardless of the outcome of the proceedings. This is commonly referred to as a ‘no adverse costs’ order. Such an order may only be made where the court is satisfied of various matters, including that the issue may also be significant for other persons or groups of persons and the disparity between the financial position of the applicant and the respondent is such that the possibility of a costs order that does not favour the applicant might deter the applicant from pursuing the action.
Are third parties permitted to fund competition litigation? If so, are there any restrictions on this, and can third party funders be made liable for the other party’s costs? Are lawyers permitted to act on a contingency or conditional fee basis?
Litigation funding is permitted in Australia. There are no Australian statutes regulating or limiting the fees and interest that a litigation funder can charge. In the Federal Court, the funder must disclose information regarding legal costs and litigation funding charges to members of a class action. A copy of the litigation funding agreement must be provided to the court and (redacted) copies must be provided to other parties.
Third party litigation funders can be liable to pay the costs of another party. However, such orders are rare as the court will usually order the funded party to provide security for the defendant’s costs.
Contingency and conditional fees
Conditional costs agreements (‘no win, no fee’ arrangements) are permitted in Australia. Uplift fees that are conditional upon success are only permitted provided they do not exceed 25% of the legal costs (not including disbursements).
However, lawyers are prohibited from charging contingency fees calculated by reference to a percentage of the amount awarded at trial or by settlement.
What, in your opinion, are the main obstacles to litigating competition damages claims?
There are practical difficulties and cost associated with proving that loss or damage was caused by a particular contravention, in circumstances where cartels do not often keep documentary records. Key potential witnesses (such as current or former employees) are usually under strict confidentiality obligations and there are real difficulties in accessing any documents held by the ACCC.
The uncertainty in the law and practical difficulty in quantifying damages, in circumstances where no court has articulated a methodology on which a claimant can rely to calculate and establish the damage it has suffered, can act as a barrier to commencing competition damages claims. This is compounded by the fact that the necessary relevant documents are controlled by the contravener/s and their competitors.
The limitation period of six years from the date on which the cause of action that relates to the conduct accrued can frequently be an obstacle to damages claims. Given the difficulties in detection and investigation of potential contravening conduct, most private actions follow actions by the ACCC, which can take the better part of the six years to be resolved. This leaves a narrow window in which a competition damages claim can be filed.
What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?
While the independent review of Australian competition policy, law and institutions which concluded in 2016 led to legislative amendments in 2017 designed to make private actions easier, if recent trends continue, we do not expect to see a large number of private actions brought in the next five years. The two areas where we see development most likely to occur are first, following conclusion of Australia’s first contested criminal prosecution of alleged cartel conduct which is listed for hearing in late 2019 and second, in relation to enforcement of the prohibition of concerted practices (which was also introduced in late 2017). Australian jurisprudence would benefit from at least one private action being commenced and finally determined by the courts as the judgment would provide significant insight into how the courts will approach causation and quantification of damages and assist in resolving some of the uncertainty in this area of law.