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Is it simply enough for the claimant to rely on the decision of the Competition Council?

The construction cartel saga has thoroughly disturbed the calm waters of private damages claims in Latvia, in which the EU Damages Directive has so far been relatively unused in practice. However, since public purchasers have been receiving letters from the Prosecutor General’s office, urging them to pay attention to specific decisions of the Competition Council which have entered into force and become uncontested, and to carefully self-assess whether they have a grounded legal basis in recovering state or municipal money overpaid as a result of the cartel, the Court of Economic Matters has been receiving numerous private damages claims.

As a result, specific trends in the case-law can be observed and the main overall conclusions are the following: A well-founded claim for private damages claims is now a rarity in of itself. It appears the contracting authorities feel compelled to comply with their obligation and bring a claim, but do not invest adequate resources in substantiating the claim. The judgments of the courts of the first instance are, however, contradictory. In the same vein, some judgments signal the risk of dangerous precedent-setting.

This article will briefly address the question as to whether it is sufficient for the claimant to simply refer to the decision of the Competition Council in its private damages claim in order to justify the defendant’s unlawful conduct.

In an action for private damages under the general procedure, the claimant must prove all the prerequisites for damages set out in Articles 1635(1) and 1779 of the Civil Code. The obligation to pay damages arises when the following conditions or grounds for damages exist simultaneously: (1) the unjustifiable act of the person who infringed the right, which, where applicable, includes an assessment of fault; (2) the existence of damage; and (3) the causal link between the damage and the tortfeasor’s act.^[1]

Implementing the provisions of the EU Damages Directive[2] into Latvian law, Article 250⁶⁹ has been incorporated into the Civil Procedure Law, the first part of which provides that an infringement of competition law established by way of a decision issued by the Competition Council which has entered into force does not need to be proven from scratch when submitting a private damages claim, including in instances of cartelized procurements.

This provision is undeniably aimed at easing the claimant’s burden of proof. If the judgment of the Competition Council which has entered into force clearly establishes that the defendant has acted in breach of competition law and the claimant has suffered damages as a result, the claimant does not have to prove the breach of competition law.

However, it should be noted here that not all cartel decisions issued by the Competition Council in procurement cases are the same. At least two categories of such decisions can be distinguished.

The first category includes those decisions which clearly establish a cartel in a particular procurement procedure.

For example, the 2015 decision of the Competition Council in the case of AS “Latvijas valsts meži” on the procurement of logging services.[3] In this decision, the Competition Council found a prohibited agreement between several groups of bidders in a specific procurement procedure organised by the contracting authority, identified in the decision.^[4] Following a claim for damages brought by AS “Latvijas valsts meži”, the judgment of the court of first instance rightly concluded that the defendant’s unlawful conduct had been established by the decision of the Competition Council and, accordingly, the first of the prerequisites for private damages claims had been fulfilled.^[5]

Another example, is the 2016 decision of the Competition Council in the case of price surveys for repair works of VAS “Latvijas Dzelzceļš”.^[6] In this decision, the Competition Council found a prohibited agreement in specific price surveys for repair works at various facilities organised by VAS “Latvijas Dzelzceļš”, identified in the decision.^[7] The judgment of the first instance court, in the action for private damages claims brought by VAS “Latvijas Dzelzceļš”, rightly concluded that the defendant’s unlawful conduct had been established by the decision of the Competition Council and, accordingly, the first prerequisite for the recovery of damages had been fulfilled.[8]

In both of these cases, the actions were brought in relation to uncovered cartels in certain procurement procedures organised by the claimants, identified in the Competition Council’s decisions. Therefore, the claimants did not need to further substantiate the first prerequisite for private damages claims and it was sufficient to refer to the relevant decisions of the Competition Council.

By contrast, in the second category of procurement cartel cases, the Competition Council uncovers a cartel which has showed itself as a single and continuous infringement over a long period of time, involving a number of procurement procedures which are not properly identified in the Competition Council’s decisions.

For example, in 2014, the Competition Council fined the importer and dealers of Volkswagen brand cars for collusion.[9] The decision found the dealers had for several years agreed on the conditions for participation in tenders by sending each other emails asking to refrain from participating in this or that procurement procedure. Although the decision is accompanied by a lengthy annex containing extracts from the emails in question, it is rarely possible to identify the specific procurement procedure from the emails. The Competition Council has not carried out any investigative work in this respect and has not included in the decision a list of the procurement procedures adversely affected by the cartel.

Similarly, in the Construction Cartel decision[10] the Competition Council qualified the cartel as a single and continuous infringement, whereby the parties to the alleged cartel divided the procurement of construction works among themselves over an alleged period of several years. The reasoning for this decision is solely based upon private conversations wiretapped by the KNAB. As in the Volkswagen case, the excerpts of the recordings of the private conversations made public in the decision do not, for the most part, allow for a precise identification of the procurement procedures discussed. Also in this case, the Competition Council had not carried out a full investigation and had not included in its decision a list of the procurement procedures that were adversely affected by the prohibited agreement. However, already after the adoption of the decision, the Competition Council published on its website a defined “list of objects”[11] which identified more than 70 procurement procedures. However, this list does not form part of the Competition Council’s decision – the administrative act – and is for information purposes only. In particular, the possible claimant cannot base its claim on the ‘list of objects’, since the ‘list of objects’ does not have the preliminary effect provided for in Article 250⁶⁹ of the Civil Procedure Law.

Consequently, the question arises whether it is sufficient for the claimant to refer to the decision of the Competition Council in this second category of cases in order to substantiate the first prerequisite for damages.

As it currently stands, the case-law provides contradictory answers to this question.

One path of first instance case-law is that if the decision of the Competition Council does not identify the procurement procedure to which the alleged damages are attributed, the claimant has the burden of proving that the infringement of rights found in the decision of the Competition Council is attributable to the procurement in question, pursuant to Article 93(1) and Article 96(5) of the Civil Procedure Law.^[12] In other words, it is not sufficient to merely refer to the decision of the Competition Council.

In the judgement of the Court of Economic Matters of 23 February 2024 it was rightly recognised: although the defendant’s unlawful conduct – infringement of competition law, has been established by the decision of the Competition Council and has manifested itself as a violation of the Competition Law Article 11(1), where an agreement on the conditions of participation in tenders has been concluded between the undertakings referred to in the decision during a certain period of time, “the court must also determine whether the applicant has proved that it was precisely by means of this infringement that the defendant caused the damage (damage and its causation) to the claimant, i.e. whether the two purchase contracts concluded in the context of the claimant’s two tenders fall within the infringement established by the Competition Council”.^[13] .

However, there are also judgments in favour of the most eloquent of the claimants. In one case, the first instance court held that it is sufficient for the establishment of the first prerequisite for private damages claims that the procurement contract was concluded during the period in which the Competition Council established the infringement.[14] The judgment is based on the finding that, “the Competition Council was not required to investigate the conduct of each particular procurement (…) because the agreements constituted a single anticompetitive agreement and were part of an overall plan with a common objective of market sharing and exchange of information on the terms of participation in the procurement”. [15]

The application of these conclusions – on the scope of the burden of proof of the Competition Council in the context of an administrative investigation – to a civil action for private damages in the context of an adversarial procedure is obviously faulty. The decision of the Competition Council does not provide a concrete basis for private damages claims in specific cases. The decision of the Competition Council provides the grounds for finding an infringement of Article 11(1) of the Competition Law and/or Article 101(1) of the Treaty on the Functioning of the European Union and for imposing a fine. If the Competition Council classifies the agreement in question as prohibited by object, the Competition Council does not need to analyse in detail each of the procurement procedures discussed between the cartel members in order to substantiate its decision. However, in a civil action for private damages, the claimant must substantiate its claim and, if the Competition Council has failed to do so, it is the claimant who has the burden of proof to link a particular procurement procedure to the competition law infringement found.

As a minimum, the claimant should refer to the evidence analysed in the Competition Council’s decision that refers specifically to the claimant’s procurement procedure, provide the court with evidence on the conduct of the specific procurement procedure and the bidders (e.g., whether there were other bidders besides the cartel members, etc.), the price offers and price differences, including the market investigation carried out prior to the procurement and the differences between the prices offered and the results of the market investigation (as this could indicate unjustified overcharging), whether there were withdrawals of bids, whether there were any indications in the bidding documents that the bids were coordinated, etc. It should be noted that the claimant, as the contracting authority, has access to extensive information on the conduct of the procurement in question and has the right to ask the court to request evidence from both the defendant and third parties, as well as from the Competition Council’s investigation file, if the published version of the decision is not sufficient.^[16]

Thus, if a decision of the Competition Council does not identify specific procurement procedures, the claimant seeking to bring an action for private damages for a cartelised procurement is obliged to prove the infringement of competition law found by the Competition Council includes the procurement procedure organised by the claimant and, accordingly, the concluded procurement contract.

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[1] Please refer to Torgans K. Law of obligations. Second updated edition. Riga, Tiesu namu aģentūra, 2018, p. 210.

[2] Please refer to Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing damages actions brought under national law for breach of the competition laws of the Member States and of the European Union.

[3] Please refer to the decision of the Competition Council of 14 July 2015 On Infringement of Prohibition Prohibited in Section 11 (1) of the Competition Law by SIA Oga G, SIA Amils, SIA RT Kadiķi, SIA AN Priede, SIA Consultation Office, SIA Riveros, SIA Eko burkāns, SIA Roluks, IK LUUX, SIA LK Forest and SIA Davos, available here: https://lemumi.kp.gov.lv/files/lemumu_pielikumi/mwLmgSYSUn.pdf.

[4] Please refer to paragraphs 20, 21 of the Decision.

[5] Please refer to the Judgment of the Court of Economic Justice of 21 August 2023, point 6.1, available here https://manas.tiesas.lv/eTiesasMvc/eclinolemumi/ECLI:LV:ELT:2023:0821.C75014822.2.S.

[6] Please refer to the decision of the Competition Council of 6 October 2016 On Infringements of Section 11(1) of the Competition Law in the Activities of SIA Ogre S, SIA Dinar būve, SIA BTC, SIA Smarts, SIA PVL plussV, SIA Smartbūve and SIA KKT Construction, available here.Article 11(1) of the Competition Law on Infringements of the Activities of Ogre S, Dinar būve, BTC, Smarts, PVL plussV, Smartbūve and KKT Construction, available here: https://www.kp.gov.lv/sites/kp/files/vkwxu0vyj51.pdf.

[7] Please refer to paragraph 13 of the Decision.

[8] Please refer to the Judgment of the Court of Economic Affairs of 24 August 2023, point 5.1, available here: anonymised_nolemums_512761.pdf.

[9] Please refer to the Decision of the Competition Council of 15 December 2014 On infringement of the prohibitions set out in Article 11(1) of the Competition Law and Article 101(1) of the Treaty on the Functioning of the European Union by SIA SD AUTOCENTRS, SIA RIPO AUTOCENTRS, [Applicant]* , SE MOLLER BALTIC IMPORT, SIA MOLLER AUTO KRASTA, SIA MOLLER AUTO VENTSPILS, SIA MOLLER AUTO LATVIA, SIA Lauri Motors, available here: https://lemumi.kp.gov.lv/files/lemumu_pielikumi/pvsnXDKlpn.pdf.

[10] Please refer to the Decision of the Competition Council of 30 July 2021 “On the Application of Article 11(1) of the Competition Law and Article 101(1) of the Treaty on the Establishment of the European Union Paragraph 1(1) of the Treaty on the Functioning of the European Union, the infringement of the prohibition laid down in paragraph 1 of the Treaty on the Functioning of the European Union by the activities of SIA SKONTO BŪVE, SIA LATVIJAS ENERGOCELTNIEKS, SIA VELVE, SIA ARČERS, SIA RERE BŪVE, SIA RE & RE, SIA RBSSKALS Būvvadība, SIA ABORA, AS LNK Industries and SIA MERKS’, available here: https://lemumi.kp.gov.lv/files/documents/21210809_L%C4%93mums_Publiskojam%C4%81_versija.pdf.

[11] Available here: https://www.kp.gov.lv/lv/media/9344/download?attachment.

[12] Please refer to the Judgment of the Court of Economic Justice of 20 December 2022, Case C75012022, paragraph 7.

[13] Please refer to the Judgment of the Court of Economic Justice of 23 February 2024, Case C75017723, paragraph 7.1.

[14] Please refer to e.g., Judgment of the Court of Economic Justice of 29 December 2023, Case No C75015223, paragraph 4.

[15] Ibid.

[16] Please refer to Article 250⁶⁶ and Article 250⁶⁷ , second paragraph, of the Civil Procedure Law.