The Italian Supreme Court applies the principles of Directive 2014/104/EU in favour of claimants in a stand-alone case concerning an abuse of dominant position (Cargest)

Introduction

On the 4th of June 2015, the Italian Supreme Court of Cassation (hereinafter referred to as ISC�) overruled a judgment of the Court of Appeal of Rome concerning a claim brought by 52 food distributors against Cargest Srl because of an abuse of dominant position by the defendant.
Cargest is the company in charge of managing the Rome-Guidonia’s Agri-food Center (hereinafter the Center�). Cargest was the only entity allowed to lease the commercial spaces of the Center to distributors. Moreover, Cargest decided the terms and conditions of the agreements.
The claimants sued Cargest because of the imposition of discriminatory clauses and unfair terms in the lease contracts and the infringement of Article 3 [1]. of the Italian Antitrust Law (Law No. 287 of 1990).
The plaintiffs acted to obtain a declaration of invalidity of the unfair contract terms imposed by Cargest.

The judgment of the Court of Cassation
On 8 March 2010 the Court of Appeal of Rome rejected the claim brought by the food distributors. The Court of Appeal stated that the claimants failed to establish the relevant market and, as a consequence, it was impossible to ascertain the abuse of dominant position.
The claimants appealed the decision to the Supreme Court of Cassation. The ISC started its arguments with two premises:
1) The Lower Court was right in stating that it is fundamental to define the relevant market, both in terms of geographical and a product definition. The definition of the relevant market is essential also in order to verify the market shares of the firms and, following this, to establish the alleged abuse of dominant position. Additionally, the notion of the relevant market is important to analyse the supply (and the demand) substitutability of the market and the possibility for consumers to choose among a range of interchangeable goods and services.
2) In order to define a relevant market, it is firstly necessary to complete a factual analysis and, after this, the competition rules have to be applied to that factual situation.
Following these premises, the ISC overturned the approach of the Court of Appeal because of the latter’s insufficient and contradictory motivation.
According to the ISC, the judgment of the Lower Court needed to be overruled because of two main reasons:
i. First of all, the Lower Court stated incorrectly that the claimants failed to compare the Center of Guidonia with other centers, such as the Rome-Fondi Center. In doing so, the lower Court did not complete a factual analysis of the markets, ignoring for instance that the Guidonia Center includes a fish market, while the Fondi Center does not.
Moreover, the Court of Appeal did not consider that for the distributors it is not economically convenient to move to other centers because of high transportation and logistics costs. Therefore, the lower Court was wrong in rejecting the claims by stating that the plaintiffs did not demonstrate that it was impossible for them to switch from the Guidonia Center to another one or looking for substitute services.
To sum up, the Lower Court was wrong because: a) it was not able to identify the relevant markets; b) it confused the market of Cargest and the distributors with the fruit/fish market; and c) it assumed that the claimants should have proved that it was impossible for them to refuse the terms imposed by Cargest.
ii. Secondly, according to the ISC, the Lower Court was wrong in stating that the claimants failed to establish the relevant market and, as a consequence, that the claimants failed in proving the case. In ordinary Italian civil litigation, the plaintiff is obligated to prove the factual and judiciary reasons of his claim. If he fails, he is going to lose (art. 2697 of the Italian Civil Code).
The Court of Appeal of Rome just followed the general rule, without paying attention to the particular features of private enforcement litigation.
The ISC started its argumentation by explaining the difference between follow-on actions and stand-alone actions. The first ones follow from a decision of the Italian Competition Authority or the European Commission. The victims of antitrust violations can sue the infringers to recover damages suffered. In follow-on actions, the decision of the competition authorities can be used as “privileged evidence” (Court of Cassation, Judgment No. 5327 of 4 March 2013). As a result, damages are in re ipsa and it is only necessary to provide a quantification of the harm suffered.
On the other hand, stand-alone actions are commenced without a prior decision of an antitrust authority. The claimants in these cases argue that the defendant have infringed competition law in the form of unlawful agreements among undertakings or abuse of dominant position and then they sue these infringers before a civil court. Given the absence of “privileged evidence”, they are subjected to the burden of proof in this case to show the infringement in fact took place. However, the ISC recognised the delicate role of stand-alone actions. It is very complicated for claimants to prove that anticompetitive conduct took place because of the very high costs of technical and economic analysis. Conversely, public enforcement can use many sophisticated tools in order to discover violations and the authorities have investigation and inspection powers guaranteed by laws. For instance, they can access to the documents of the investigated undertakings. This is not possible for the claimants.
The ISC recalled that the EU competition rules are included in the EU treaties, hence they have direct effect within the national judiciary systems. This means that the Member States have to foster not only public enforcement, but also private enforcements instigated by private citizens or firms. Pursuant to Recital 7 of European Regulation No. 1/2003, national judges have an important role in relation to the implantation of competition rules. This implies cooperation between judges and competition authorities, and the prohibition for judge to be conflicting with authorities’ decisions.
In this context, the ISC referred also to the recent adoption of Directive No. 104/2014, which has to be implemented by Member States by the end of 2016. The European Directive aims to set some general principles which will be mandatory for each Member State. The ISC quoted the Directive, stating that public and private enforcement have to be necessarily complementary to achieve an efficient enforcement of competition rules. According to the Directive, Member States must amend their national law in order to guarantee an effective right to compensation for victims. Given that it is very difficult for victims to prove damage, this right may be compromised or even violated because of domestic procedures.
The Directive also introduces new mechanisms of disclosure, giving to national judges new ordering powers in relation defendants and third parties. The Directive requires that Member States remove the procedural obstacles to an effective application of private enforcement.
In this context, in a stand-alone action, when it is likely that a violation of competition law has occurred, the judge has to acknowledge that there is asymmetric information available as between plaintiffs and defendants, and that as a result it is very difficult for plaintiffs to prove the infringement. To do this, the ISC states that it is necessary for the judges to use and interpret broadly the tools of civil procedure and the judges’ powers. The ISC refers in particular to exhibition orders (art. 210 of the Italian Civil Procedure Code), access to information and, above all, technical consultancy. Without reversing the burden of proof, the judge has to use these tools when the claimant just provides clues of proof.
The Court of Appeal of Rome did not conduct these kinds of investigations; it did not use these powers. As a result, the ISC decided to overrule the judgment of the lower Court because it did not comply with the scope of European and Italian competition law.

Comment
The most interesting point of the above judgment is the attention paid by the ISC to the concrete application of competition rules. In fact, as it already did in other decisions, the ISC argued for a strong protection and safeguard of antitrust victims. The ISC recognised that it is very complicated for the victims of anticompetitive behaviour to prove the damage occurred. Therefore, the judges must play a role in effective application of private enforcement, as a complementary force to public enforcement.
Moreover, in the judgment, the ISC Court of Cassation went beyond its precedents. In fact, it referred its arguments to a Directive which is not part yet of Italian law. This means that the ISC anticipated the (slow) legislative power, settling some general principles in accordance with EU law that could not be ignored by local courts. Sometimes the latter used to be reluctant in applying competition rules, being too anchored to a strict application of the Code of Civil Procedure.
The ISC remedied some gaps in the Italian legislation regarding the application of competition rules and these kinds of decisions increase the protection of consumers and undertakings.
The consequence of this ruling might be very significant, both for stand-alone and follow-on actions. As is well known, Italy is not a common law country, but the ISC’s decisions are very important for the interpretation of law (and in some cases the judgments are mandatory).
When a lower court faces a stand-alone action, it will not ignore the arguments put forward by the ISC in the above decision, even though every judge strictly speaking is only subject to legislation.
in a stand-alone action, when it is likely that a violation of competition rules has occurred, Italian judges will evaluate “the investigative tools and knowledge that the procedural rules already provide, through a broad interpretation of the conditions laid down in the Civil Procedure Code”and they will probably use or order the submission of documents, requests for information and, above all, technical consultancy, even by direct request of the judge, acquisition and evaluation of data and information to reconstruct the allegedly anti-competitive facts (…)”, as the ISC stated at page 22 of its decision.
To conclude, despite the bad reputation of the Italian judicial system, Italian courts have proved to be very attentive to the obstacles that victims of antitrust infringements could face in launching an action for damages for anticompetitive conduct. The Italian courts compensate the less favourable disclosure regime than common law systems with a series of presumptions that alleviate the burden of the proof on the claimants.
This is great news and very helpful for an effective application of private enforcement in Italy and for all the victims of anticompetitive behaviour.